..... A look into the future of the US Economy.......
- here's a look into the future, it's already happening in England:
business.timesonline.co.uk
August 04, 2005
Bank cuts interest rates to 4.5%
By Andrew Ellson, Times Online
The Bank of England cut the cost of borrowing for the first time in two years today in an attempt to kickstart consumer confidence and revive the flagging economy.
The Bank reduced interest rates by 0.25 per cent to 4.5 per cent after mounting evidence of an economic slowdown.
The decision was widely expected and there was little reaction in the markets with economists looking to next week's inflation report for indications of the future direction of rates.
The City is split over whether today’s move is a one-off or whether the Bank will need to act again amid mixed economic signals.
Recent surveys have shown weakening house prices, falling consumer confidence and a depressed manufacturing sector. Many businesses have also reported a sharp downturn in retail sales while GDP growth has also been lower than expected.
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In my opinion, the Fed has successfully managed to prop up the US Economy and is in a .25 bp race against time, to re-build a cushion from which to ultimately cut rates once again, when reality and the US Consumer meet on the road - dead ahead.
The Fed on this series of Rate Hikes is accelerating the rise of variable rate based payments on Housing, Auto's , Credit Cards and Consumer loans - which are all rising, simultaneous to the following:
Gasoline Prices are ramping.
Property Taxes are going up - thanks to the Housing Bubble.
Utility Bills to Heat & Cool our homes are going up - thanks to Oil Prices.
Fuel Surcharges are being passed on for the Transporation of virtually everything we buy which must be transported...which is virtually everything we buy.
Greenspan has just now acknowledged that Oil prices are finally feeding thru and having a NEGATIVE effect upon the US Economy.
We just hit an alltime low for the Saving Rate in America.
...actually, it is now officially a non-savings rate - as the rate is "0".
Given an unprecedented increase in debt, with no real wage, or job growth...consumer spending, which is 2/3rds of US GDP - which in turn is the Consumption Engine that drives the Global Economy...faces a Wall - dead ahead.
What is happening now in England - lies ahead for America.
...and when "reality and the US Consumer meet in the road ahead" - then the Fed is once again – going to do what they do best:
Cut Interest Rates and Ramp up the Printing Presses !
... and if Bernanke is the new Fed Governor, he's promised to roll out the Helicopters if necessary from which to air-drop all those Fiat Dollars ~
…and that my Yellow-Minded Friends – is where this counter-trend rally for the US Dollar ENDS... if it has not already ended via further collapse from the weight of those massive Twin Deficits.
China’s break from the Dollar Standard will also only accelerate the ultimate resumption of the US Dollar collapse and in my opinion; the level to which the Fed is going to have to inflate to keep the US Economy from collapsing under the weight of an unprecedented Debt & Credit Bubble – is going to be exponential from what we have seen so far and that is going to ramp the next leg of the Gold Price beyond the expectation of most Gold Bulls.
An important component concerning the "explosive" nature of the move that I think Gold will have coming from the next series of the Fed's reflation efforts - is that I do not think that Gold has been allowed to rise to "fair value" here.
Gold is still a price-compressed/supressed - coiled spring.
The Price of Gold, in far less inflationary periods has reached the $500 level.
Given this historic Global reflation and in particular the US Fed's inflationary Fiat Pump.... the fair price of Gold without managed Central Bank intervention - would probably be in the $550-$600 range presently.
In my opinion, the longer the price of something is artificially constrained; the further and faster it's ultimate upside will be - when those chains of restraint are finally broken.
When, not if... those chains will be broken.
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Steve Saville has posted some excerpts from his latest piece at 321gold.com:
321gold.com
Saville has been on record for some time now - in waiting for lower lows, yet to come for the HUI.
He is almost alone here in calling for a continuation of the bullish move for the US Dollar...which is interesting.
I like, read and respect Saville's insight. I'll give him credit above and beyond the vast majority of the other Gold Pundits - as he is not afraid to make fairly specific calls, often against the grain. To his credit, he is not just another Cheerleader for Gold.
Saville: [" Below is a daily chart of the Dollar Index covering the past five years. Resistance at 92, which is clearly evident on this chart, is our long-standing target for the FIRST upward leg in dollar's bull market (our view is that the dollar is in a cyclical bull market within the context of a long-term bear market). However, the longer the dollar spends consolidating in the high-80s the greater the chance that the first upward leg will exceed this resistance."]
.... I would agree that the longer the USD spends consolidating, the greater it's chance for penetrating resistance will be.
However, given China's move away from the US Dollar Standard and the ongoing unwinding of many derivatives positions - many of the ultimate effects of the ripples China created in the Global Financial Market Pond have yet to be felt...the potential for a market "shock" type of event still remains very high.
I think watching not just the US Dollar Chart, but also Gold relative to other foreign currencies is paramount here.
I'd agree that the Price of Gold is going to have a difficult time penetrating resistance in the $443-$456 range, unless we see the USD rollover, or see a USD Negative-Market "shock/event" unfold.
I think our roadmap to the US Dollar resuming it's longterm descent has already shown it's hand in what is happening in England - vis a vis the article above.
It's only a question of time.
The US because of greater Fed intervention and manipulation - has lagged what is occuring with England's Economy. However, the gap in that lag is going to be closed rapidly by the Fed's ongoing Rate Hikes.
Saville: ["Gold and silver are rebounding from near the bottoms of their respective consolidation ranges, which, as noted in last week's Interim Update, was the highest probability outcome. We wouldn't be surprised if these rebounds took gold as high as $440-$445 and silver as high as $7.50-$7.60 (the tops of the consolidation ranges), but we would be surprised to see gold and silver move significantly above the aforementioned levels at this time.
The consolidations in the gold and silver markets that have been in progress since early this year will, in our opinion, end via downside breakouts, but we could still be a month or more away from any breakout. " ]
....once again, Saville has been on record for waiting for lower lows for the Goldstocks. I think he missed an entire move here...but, maybe he considers this recent 40 point Trade up off of the HUI bottom as a mere speedbump - on the way to his quote:unquote - "downside breakout...that could still be a month, or more away"
As both Gold and Goldstocks are right on their respective resistance lines... one can not rule out downside resolution and a re-test of earlier lows found at HUI 150 and even potentially 120.
I don't think we'll see that... as I think the HUI double bottom at 160 was significant, the washout in Investor Sentiment was severe and the HUI:GOLD ratio reached an extreme divergence level...so I think this recent bottom will hold.
If Saville's downside breakout to lower lows is to be seen - it will take a significant rally in the US Dollar and a corresponding massive rollover in the Price of Gold for that to happen...maybe something on the order of the US Dollar rallying thru 95ish and looking to be headed back towards 100.
THAT would send the price of Gold tumbling and we very well could then see Saville's price targets come to fruition.
So far, I have been surprised that we have not as yet had even a decent retracement off of this move from HUi 165-205.
I honestly think it would be healthy (if not inevitable) to retrace at least half of this move to the HUI 185ish range...and from there launch a move that finally penetrates this overhead resistance.
...our job is to watch the US Dollar and other currencies relative to Gold - like a Hawk... and to manage our money and protect our profits accordingly.
The average trader imho, over-focuses on making top, bottom and market timing calls, often in the absence of an equal focus on Profit Protection and Portfolio & Money Management.
Profit isn't really profit - untill it's taken.
And the only way it's taken - is to sell and put the money in the Bank.
Top Total Returns - require an equal focus on market timing and Portfolio Management.
If Saville is ultimately correct on his breakout to the downside and lower lows for the HUI - call.... and he may well be...only time will tell.
Then the Porfolio Management Portion of the Total Return Equation will become paramount and those that haven't recognized the shift between Risk:Reward here and safely banked profits...may be giving much of it right back...
Given that both Gold and the HUI are right at key resistance levels... it won't be boring ~ and it won't take long to resolve.
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