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[Semitela]

Dear Mr. Bernanke,

As a follow-up to my most recent letter, I once again want to say thanks. I was so relieved on Wednesday when you announced your decision to keep short-term rates low for an “extended period of time." How kind of you to not take the market's punch bowl away.

I also want to congratulate you for doing such a great job of pumping up and propping up the stock and bond markets. Your bubble-blowing actions have allowed Wall Street insiders to make tremendous gains selling their inflated stocks to the unsuspecting public. It’s starting to feel like 2007 all over again. You remember -- the time right before investors were led to the financial slaughterhouse. But maybe that’s just me.

Here's the bad news for this propped-up government-stimulated economy: Greedy CEOs and Wall Street bankers -- those primarily responsible for getting us into this financial mess -- will be receiving millions in Christmas bonuses while average people on dollar Main Street will be looking at a lump of coal in their stockings come Christmas morning. I suppose you can’t please everybody. I’m sure you'll be receiving bales of Christmas cards this year from these newly enriched CEOs and greedy bankers across the globe as a thank-you for your efforts in bailing their sorry asses out. Enjoy the moment, Mr. Bernanke, because you remember what happened to the last Fed Chairman who was celebrated as the hero who saved the world. Be sure to enjoy your newly created bubbles while they last.

Speaking of bubbles, how about that bond market? After all that buying (quantitative easing) you did to prop up bonds, they're still at levels well below the beginning of the year. It sure looks like smart-money bond traders have been quietly hitting your bid and now your quantitative-easing bid is gone. Bonds are what I call a Gomer Pile market of “supply, supply, supply."

Now let’s talk about the stock market. Wow -- you certainly would have made the Federal Reserve of the early 1930s proud. Heck, they may have even blushed a little bit when you consider the size and scope of your heroic efforts. They were only able to generate a 48%, five-month rally, after their famous 47% crash in 1929. You however, were able to produce a 55%, eight-month rally, after your 54% slow-motion crash. (Let’s not talk about the two and one-half year, 86% crash, that followed the 1929/30 rally).

How about that dollar? By telling the world you're going to keep the party going for an extended period of time, shorts are piling on the dollar like never before. Since recent sentiment polls showed that 99% of the public are dollar bears, and 97% of traders are in the bear camp too, you've created the carry trade of a lifetime. Now I know you want the dollar lower, but I’m afraid this short dollar bubble is going to blow up in everyone’s face. As investors across the globe short the dollar, giant speculators then go buy inflated higher-yielding assets like global stocks, foreign currencies, bonds, commodities, you name it. Once you're forced to hike rates, this short squeeze won't work in your favor like the short squeeze in the stock market did. This squeeze will unravel assets of all kinds, from all over the globe. Remember that 99% bears on the dollar effectively equates to 99% bulls on the stock market, since those markets are inversely correlated to near perfection.

That brings me to another question: How in the world do you plan to unravel the most aggressive fed liquidity injections ever witnessed without a complete dislocation of foreign markets, which are tied to complex unregulated derivative contracts? I’m sure that question is literally keeping you up at night.

Back to bubbles. How about the biggest Ponzi scheme in the history of the world -- the one that even Bernie Madoff is marveling at? You know what I’m talking about. What do you plan to do with the US government’s credit bubble? You must be seething as you think of how well China is duplicating the US government’s Ponzi scheme. As we buy their cheap goods, living well beyond our means, China recycles the lion’s share of those dollars back here through the purchase of our debt. This enables us to continue buying their cheap goods. This buying of our government bonds keeps the whole game alive, and allows China to pile on wealth as we pile on gargantuan amounts of debt. They're taking our excess dollars and buying up the natural resources of the world, as we pile up the largest debts and deficits ever seen. It seems to me that China has the better end of the deal here.

As our government continues to announce wasteful bailout after wasteful bailout, the supply of bonds you'll need to float is growing completely out of control. Another 445 billion in bonds is soon to be offered, so get those printing presses ready. It’s a very good thing you printed and pumped so many trillions of dollars into near-failing banks. That little maneuver has enabled them to help you out of your mess by buying your ever-growing avalanche of government bonds. Since you’ve been given the nod for reappointment as Fed Chairman, I trust you’ll be doing your part in supporting the madness in Washington as a desperate Congress continues to authorize the printing of massive amounts of new cash to devalue the currency. By running the printing presses nonstop, you've been able to increase US exports and inflate away a debt burden that's beyond imagination.

But you must remember Iceland’s recent currency lesson: You can’t devalue to prosperity! CEOs get that message, and that’s why they're selling their stock in their own companies and buying gold. My partner Denny Lamson and I call this the "gold versus paper" trade, which is getting closer to the dreaded ABC trade -- Anything But Currency -- where governments and wealthy individuals will all trade their currency for anything real. China is the leader in this game, but soon it will be a worldwide event.

In summary, since the Fed is so involved with trying to paper over this economy by propping up markets of all kinds, maybe I can be of some help. I’d love to do my part assisting you in saving the United States from a coming economic and market meltdown. We're launching our Grail ETF & Equity Investor newsletter with Minyanville today. You can sign up for our two-week free trial and maybe we can help you time some of your next manipulations of your favorite markets.

But then again, as a bewildered mega-investor once said to me when I showed him what our grail timing indicator had to say about the coming price direction on some stock charts: “Charts? We make the charts!” Well, Mr. Bernanke, we both know who’s been making the charts since March 2009. You've bet the world that you can continue this activity indefinitely. Those of us following the footprints you leave are hopeful you can pull it off, but we all have our doubts.

Sincerely,
Ron Coby

PS -- I haven’t received my bailout yet.

http://www.minyanville.com/articles/ber ... ex/a/25327