in my longer term investments (totally different from trades fwiw), i kind of like a contrarian philosophy, combined with a regression to the mean philosophy. iow, a good part of my holdings are buying what everybody hates, and/or has been beaten down for a long time, and accumulate in this phase. bearing that in mind, i can't help being (and having been) bullish on Gold, gold stocks (XAU/Spot gold ratio is historically low), and the Nikkei
Spot $563+ The guy who started this thread is getting closer to being insolvent. Let me know when you file for bankruptcy newbie-trader-who-sells-because-the-price-seems-high
gold's been in a range for almost 3 months now... funny, no, for sthg that seems so cheap to so many people... now with US rates round 5% and potentially heading higher, LT rates fairly low indicating that institutionals are not that worried about inflation, because they have a different understanding of how the money / credit expansion shld play out into the system... equity mkts all over Europe, Japan etc bullish since mid-2005 and US equity mkts not so bad at all trend-wise, rates going up worlwide on 'inflation upside risks' type excuses, the US housing mkt slowing down gently so far from 2004-05 peak activity caused by earlier patch of low rates and too much money sloshing around looking for returns, the UK one still going fairly well, Japan's bouncing a bit at last... just scratching my head here but... why would i want to believe that gold is where the upside is in 2006-07, vs say Japan real estate?? what is going to stop a couple of CBs from selling to cash in on some of their gold at current valuations (washington agreement or not...)?? someone help me out here plse....
XAU trouncing spot metal today. recall what i said about regression to mean gold/metal stox have been lagging the metals spread opp's abound
I'm going to be a contrarian here. Everyone in the world is long Gold and I mean everyone. All the trend funds are long gold in size. All the Gold bugs are long. Most macro funds are long Gold in size. And now we have the gold ETF. At some point, these positions are going to be unwound, and when they do, back to 250 we go on Gold. Keep in mind this is a very illiquid contract and there are finite supplies of gold in the world. If the whole world where to sell Gold, there is no liquidity to support the selling. Besides, I don't see inflation being the driving risk going forward, I see deflation as the real risk. Not necessarily this year but in the big picture. When China comes on board and becomes the largest and most powerful economy in the world, it will cost $20 bucks to buy a computer. We could have massive deflation if and when they become the economic leader. I would not want to be long Gold in this scenario. Mind you 250 might seem like a low target, but I think Gold tends to overshoot in both directions. The fair value for Gold might be the low 400's but it could easily over shoot down to 250. Personally, I see more value in Silver then Gold. If you really want to make a long shot bet, get long China, not Gold.
Excellent thesis - I have to say that it will never happen while the US is a democracy in its current form. One varriable you failed to consider is, at its core, the US govt is a business. If China begins exerting pressure on the US economy by way of deflation, up go the tarrifs. (edit: I wholey understand the issues a tax war with china will cause - however - tarrifs will be little more then a milestone in the jockying of superpower economies we pay uncle sam for.) We will not see a 20 $ computer unless there is some other product, that has a similar saturation/use profile as a computer, that is priced appropriately to income as computers are priced now. Regards, krazy