Toll Brothers: orders down 33%

Looks like the Fed has the nation on steroids. And it's not only the Fed, it's the central banks of the world. You see, nobody wants an "over-priced" currency, because everybody wants to sell to the US. And it's a very competitive world (think China and India and Asia), so if you want to sell to the US you have to compete, and that means you have to have a competitive currency. How do you keep your currency cheap against the dollar? Easy, you churn out a load of your own currency and with it you buy dollars. This keeps the dollar up and in comparison, your currency remains competitive.

Of course, when you're manipulating like this, there are always problems. One problem, if you want to call it that, is that there is one hell of a lot of paper money swishing around the world. In fact, you can say that the world economy is floating on an ever-rising ocean of paper money.

Well golly gee, isn't that inflationary? You bet it is, and the inflation is starting to hit full force. First it hit world real estate and housing, then it hit raw materials and oil, and now it's hitting everything consumers use -- such as food, transportation, college tuition, medicine -- well you name it.

You think gold is going up because of Iran or Iraq or because of less production from the gold mines? Forget it, gold is going up because it's reflecting and discounting coming inflation. You can call gold "real money" or you can call it the "golden barometer of inflation." Either description is accurate and either one will do. When the world goes mad, men seek the protection of gold. It's as basic as that.

What we're seeing now in gold and silver is the biggest story of the year and probably the biggest story since the great bull market since stocks topped out in 1980. Only the public, the crowd, the masses, don't see the story yet. But the markets see it. And I see it, which is why I keep writing about it. I've been on this story for about five years -- pushing, urging, cajoling my subscribers to "get with the story," and, of course, the story is the coming inflation and the revival of gold.

Toll Bros., the nation's largest builder of luxury homes, just announced that second quarter orders for homes dropped 33% as customers waited to see whether a glut of homes on the market would lead to lower prices.

I continue to believe that Bernanke's biggest worry is that the home-building boom will cave in, thus turning consumers bearish and halting their buying spree. This was, I believe, the reason why Bernanke talked about a possible halt to the Fed's boosting of short rates. However, with inflation now heating up, Bernanke is caught between a potential housing slide and rising inflation. What will he do? Will he halt his rate boosts or will be keep raising? That's what the market is wondering about.