No good trade lasts forever... The catch is when all Chinese residents have gold under their mattress as they want to hedge inflation. At some point, the trade will be over when the masses have bought all in. Possibly, the Chinese government might try to crack down on people who bought gold, and then the game is really over. Or when short term interest rates rally to double digits. Imaging getting paid 1% for deposits in China with double digit inflation -- of course you will want to hold gold. But if the interest rate goes up, that flow might stop. (Replace China with all countries with high inflation.) Another catch is volatility of the trade. We know that the market goes up in 100 years from now, but the fluctuations stop people from getting 100x levered.
I don't think deflation is possible, but I guess anything can happen. Five years from now, I think Gold would not be higher than what it is right now -- I am not sure if it will be much lower. I happen to agree with many of the views that gold is a bad investment, but I think it is a good trade right now based on demand/supply imbalances. So I am sh**ting in my pants too until it breaks below 50 SMA, and then I would be free from the volatility as I would have taken my gains or losses. It is what it is...
The only deflation indicator in my book is the massively inverted yield curve that usually predicts a recession. http://www.bloomberg.com/news/2011-...hortage-outweighs-inflation-china-credit.html As the government is changing in Q4 2012, I believe that any shift in trend will be prolonged by the existing party as long as possible. Either A) Chinese GDP drops to negative as predicted by inverted yield curve. If it drops below 4%, we will have massive riots, and at 0%, the government will be in trouble; there will be military action. (I am not sure what the trade is...gold is safe, but I guess so is a house in NYC.) or B) Chinese GDP drops to 6%, and we have a technical recession -- real GDP is negative with high inflation, but the official CPI is of course lower so official real GDP is 6%. (Still buy gold?) or C) The inverted yield curve indicator does not work.
as i said it's not VIX per se. it is VIX overreaction to a relatively small move in SPY (considering the prior SPY gains). using only my eyeball here. maybe somebody could prove/disprove my point with some numbers.
SPY pushed Up to 132 AH. Still a lot of fear judging by VIX. what's up with that? Big news expected this weekend? My thinking is that Longs should be rewarded for the risk they take holding over the weekend. This completes our psychiatric analysis of the market for the week. Dr. Shortie Out
market goes down, vix goes up market goes up, vix goes down big deal what is the catalyst that will cause people to buy new highs? its not the vix, I promise you that market is range bound until something pulls it in a direction, GOOG earnings didn't take it up. no job growth, QE3 would do more harm than good, housing flat, who will buy highs? short near range highs, buy near range lows you will see a divergence between sectors, some will be strong, others will be flat, others will be weak. stock pickers market eventually something's got to give.... i think there is more headline risk to the downside than upside...