You could be right... Adam Hamilton March 21, 2003 The recent pullback of gold has been causing much consternation amongst investors. Yet, exciting buy signals for gold are once again approaching The past six weeks or so have been quite challenging for gold and gold-stock investors as the anticipated normal bull-market pullback has been underway in earnest. The psychological landscape in the gold world is quite different today than it was back in early February. Six weeks ago gold and gold stocks were flying high and greed reigned supreme as folks salivated at the tantalizing prospect of $400 almost in reach. As a maverick contrarian speculator, I am not ashamed to admit that the gold euphoria was making me nervous at the time. In fact I wrote the original âGolden Bull Buy Signalsâ essay on February 7th to warn our clients and subscribers of the gold greed. It feels like ancient history today, but six weeks ago gold was approaching $380 and the popular HUI unhedged gold-stock index was trading above 150. Earning undying hate and endless malicious flames from the gold fanatics who will brook no resistance to their plans for utter world domination, I dared to utter the following heresy⦠http://www.zealllc.com/2003/goldbuy2.htm The economy is still on shaky ground, and wars are usually money pits. Eventually we may see much higher grounds, but is gold still a safer bet for now? Josh
It seems biased on the bearish side, but has some good points. long article but worth it. excerpts: WHICH JAPANESE (OR CHINESE) OWNS YOUR HOUSE? Having been purchasers of an astounding $150 billion in Governments and Agencies over the last year, primarily Agencies, these two nations, accumulating surpluses with the U.S. of well over $10 billion per month, are indirectly becoming the creditors for the marginal U.S. residence.... ...HOW ELSE DO THESE ENTITIES EXPAND AT 20-30% WHEN NEEDED, DOUBLE IN FIVE YEARS AND ALWAYS FIND WILLING TAKERS OF THEIR PAPER? For those who still cavil at the thought, we commend the archive available âT-Accountâ explication by Doug Noland of Prudent Bear. If this does not satisfy, we recommend another try at Accounting 101 or better yet, take up some profession such as massage. Another fascinating benefit to the United States of having dual credit creation mechanisms is that the burden of Government Debt is drastically understated and misperceived. This is not the only such deception pursued, the entirety of the eventual debt burden attributable to Social Security and Medicare is also understated and misperceived. Looking at the actual Government Debt, only the âon the booksâ $3.7 Trillion actually shows. Add in the âDebtâ issued to Social Security and Medicare and we go north of $7Trillion. Throw in the GSEâs and FHLB as well as Ginnie and we are well over $10 Trillion. Thatâs about 100% of GDP, usually the number marking the basket cases of the planet. For example, bankrupt Uruguay comes in at 85%. The Mortgage Bankers Association reported March 12 that ârefinancingsâ as a % of total mortgage applications reached nearly 80%, a new all time record. Purchase volume is actually declining slightly. The refi number is up an astronomical 20% this month.... ...THE UNITED STATES DOES NOT SAVE 15% OR ANYTHING NEAR IT AND MASSIVE AMOUNTS OF GOVERNMENT DEBT AND QUASI GOVERNMENT DEBT (THE GSEâS) ARE HELD OUTSIDE THE COUNTRY. WE THEREFORE CONCLUDE THAT THE LIKELIHOOD OF THE 0% INTEREST RATE SCENARIO WORKING AS THE ULTIMATE WAY OUT FOR THE CREDIT BUBBLE IN THE U.S. IS HIGHLY UNLIKELY! To us, the most ominous aspect of the $32 trillion in credit washing around the United States credit system is the complacency abounding. We happened to be in the office of a trading firm the morning LTCM was crashing. Panic was clearly evident in the marketplace. The traders could not believe the quotes. As we all know, a multi-billion dollar bailout orchestrated by the New York Fed temporarily (at least, in our opinion) solved the problem... ...THE MAGNITUDE IN STRUCTURED FINANCE IS SO GREAT THAT THE INEVITABLE BURSTING OF THE BUBBLE CANNOT BE CONTAINED. THE ONLY POSSIBLE RESULT OF THE CURRENT COMPLACENCY IS THAT THE EXPANSION OF THE BUBBLE WILL CONTINUE TO THE POINT OF GREATEST POSSIBLE DAMAGE! We believe that THE MINDLESS COMPACENCY we are witnessing is due to our Long-stated position that the Structured Finance/Derivatives megalith created over the last couple of decades has a number of characteristics/advantages over previous credit mechanisms permitting expansion without apprehension or comprehension... http://www.prudentbear.com/archive_comm_article.asp?category=Guest+Commentary&content_idx=21553 Josh
there is some short term event risk in gold since the end of the invasion stage is near, but longer term it looks very good.
Yes, your assessment may very well be correct. Real Rates and Gold 4 While the recent gold pullback frightens investors, real interest rates in the US remain massively negative, an immensely bullish omen for gold. excerpts: ...Similarly, in the last couple decades gold rallied dramatically whenever real interest rates dropped significantly, approached zero, or even plunged negative as today. Conversely, when real interest rates were stable and healthy gold tended to fall as savers were quite comfortable in cash-type investments and saw no need to flood into gold. Yet today real interest rates are once again massively negative as Alan Greenspan has chosen to artificially manipulate short-term interest rates far too low in order to vainly try and reignite the late 1990s equity mania. These artificially low short-rate environments have caught savers in the crossfire and helped accelerate a new bull market in gold... ...The bottom line is that the gold bull is almost certainly regrouping for its next awesome upleg after a healthy pullback. With todayâs real interest rates massively negative, investment demand for gold from savers worldwide is only bound to increase regardless of the timetable or outcome of the Iraq war... http://www.zealllc.com/2003/realgold4.htm Some nice links/charts in there too. If gold breaks out the 400 range, possible runaway train in the cards? Josh
.....Yesterday the Associated Press announced that Federal Reserve Chairman Alan Greenspan "was confronting new fears of recession and refining an emergency economic plan." As part of the "emergency" plan, the Fed chairman reportedly is considering further interest-rate cuts (12 increases didn't do the trick) and putting the printing presses into overdrive, dumping truckloads of cash into the banking system. A further possibility mentioned by the central bank is to purchase long-term securities held by banks, rather than the customary shorter-term Treasury securities. One Wall Street insider questioned the anticipated actions, wondering, "Is the Fed playing the market now? Is it intending to manipulate the stock and bond markets to subsidize corporate investment? Why isn't Greenspan being more specific? Are the securities he's considering purchasing U.S. Treasury securities, non-U.S. Treasury securities or does he mean bonds, options, stocks and derivatives?".... more: http://www.insightmag.com/news/415878.html Has PPT been working full time lately? hehe Predictions for the 2003 year - Bear Claws - http://www.321gold.com/editorials/willie/willie012703.html Long article with some interesting stats and predictions. Maybe we should revisit it at year's end and see how close they came to pass. Josh
Good stuff Josh. Since the following seems to be under the radar of everyone I thought I would bring it to your attention: http://www.jsmineset.com/s/NewsArchives.asp?ReportID=60293 And if you really want to cure that insomnia, read what Ben "printing press" Bernanke had to say today in New York: http://www.federalreserve.gov/boarddocs/speeches/2003/200304242/default.htm (hint: not good news)
Good links Babak. Thanks. Yes, a lot of undercurrents are going unnoticed. Another very interesting issue may immerge if OPEC members, start asking for payment in gold pegged currencies, or straight gold. Both Euro and Dollar may suffer greatly. Iran gets Euro's for their oil, so has Iraq, at least so far.. The rest get Dollars, and Venezuela gets commodities in trade. Eventually fiat money backed by more debt and some future promise to pay it back may not be enough....Time will tell. Josh
The whole USD/Euro for oil is a red herring. I don't think it makes any sense. But here is something interesting to those that preach doom and gloom (Prechter et al.) If the Iraqi situation stabilizes and they are friendly to the US, it will mean it is the first time in the history of OPEC where the US will be (in defacto) sitting across from those who formed the organization for the express purpose of stealing from the US (and the rest of the world)! Think of the irony! So here is my line of thinking. Lets say that this new arrangement makes OPEC, for all accounts, a sham. The price of oil is pushed to around $15 or high teens as a thank you gesture to the US from the Iraqis within 2-3 years. Do you have any idea what kind of stimulant effect that would mean for the world economies? Japan, US and Europe? Think about it. Everything is touched by the price of oil. Transportation of goods, plastics, consumer goods, etc... It will be like a MASSIVE tax cut for the whole world!! Somewhere in the TRILLIONS. If this scenario does occur not only will it make the recent debate about Bush's tax cut laughable (arguing over a measly $350 Billion!!) but it will mean that there will be a sudden shift in the forecast 'Kondratieff winter'. It will be terribly, terribly stimulating to the economy. And then, out go the negative projections for the market, the economy and the hopes of gold bugs. (I am a gold bug but I think this has a chance of happening)
Babak, It has been my belief all along that Bush & Co know that if they are to have a booming economy the price of oil has to stay below $20 a barrel for at least two years. The boom in the Clinton years had nothing to do with him. He just lucked out with cheap energy. In theory Opec says they need high prices for oil to lift the standard of living of their populations meanwhile virtually none of this money trickles down to them. For the future prosperity of the West and more importantly for the SECURITY of the West, OPEC must be CRUSHED. The other thing it is impossible to establish democracy under Islam. It will be a crime if Islam is allowed to rule Iraq. Those brave American and British soldiers will have died in vain.