Jim L - Gold has a virtual "win-win-win..." scenario building...
Inflationary,or deflationary ? - I say stagflationary....
Under what scenario's could/would the price of gold rise you ask ?
hmmmmm; let's see -
If the Euro rises - gold rises.
If the dollar goes down - gold rises.
If we enter a recession - gold rises.
When, not if; the manipulated Gold Carry Trade short derivative positions are forced to unwind - by any scenario - gold spikes - not merely rises.
If the Fed Cuts rates due to a non-soft landing - gold rises.
If Crude spikes thru $40 - gold rises.
If Crude spike thru $50 - gold spikes.
If War breaks out in the Middle East; or anywhere else - gold rises.
The CRB put in a classic double bottom in 1999 - coming off a 13 year bear; broader cycles are more powerfull than norrow ones and if commodities continue to rise - gold rises.
The US account deficit is at historic levels that have nearly allways led sooner, or later to a flight from a countries currency; if/when that happens - gold rises.
US Treasuries have been in an inverted yield curve; this traditionally has been a precussor to a recession; in which case - gold rises.
US employment "costs" have shown the greatest increase in 9 years; if this continues it is inflationary and - gold rises.
Consumer spending is outpacing the allready historically inflationary hot income gains growing at a 5% annual pace of $3 in consumer spending for every $2 gain in consumer income; if this continues - gold rises.
If the true facts of the amount of derivatives that Chase, Citicorp, JP Morgan & Deutsche possesses & the amount of Gold physically owed to the bullion dealers & CB's becomes public knowledge - gold spikes.
If it becomes public knowledge that the ESF/Exchange Stabilization Fund sold Gold short in Sept 1999 to quash the Gold Spike breakout rally to stop inflationary fears & that they ballied out a couple of US Banks that are allready over their head in derivates - gold spikes.... (PS; one major US Bank moved its entire Gold Derivative Dept to Europe; evading domestic oversight - shortly after the Sept 1999 Gold Rally- Stamp out/Bail out).
Money supply is out of hand; Japan infused historic amounts of money into their system in the last few years & the Global Fiat Money Presses have virtually guaranteed that Gold just like Oil; will correct dramatically to the upside; equally as it had to the downside of late. - the legacy of Rubin & Greenspan imho - years from now; will not be what it is today.
... why Gold; why now you ask ?
Technically; Gold Mining stocks are trading at a 6 year low multiple-wise.
On a price per ounce of gold in reserves; the Gold Mining Majors are trading at a 11 year low; multiple-wise.
Gold has had nearly a perfect 7 year cycle; rallies in 1977-79; 1985-87; 1992-93 - when the XAU doubled in 1993; and guess what's due in 2000-2001 once again (VBG) ?
In that 1993 XAU double; some of the small cap - very leveraged names like one of my fav's (that I added to with my GLBL profits) - DROOY went from $2 to $15 for a 7.5 bagger... near dot.com-esque performance prior to the dot.com era. I added DROOY friday at $1 1/32nd by the way...
The upside leverage to some Gold Mining stocks is significant. DROOY went from $2 to $15 with a Price of Gold move of only $330 to $410 - an $80 move in the POG is all it took to make DROOY a 7.5 bagger.
Danger Signs ?
The birth and then unparalleled explosion in non-conforming/subprime lending has created the most dangerous debt portfolio in US banking history - riding atop historically high employment, wage growth, alltime high consumer spending & sentiment and an equity asset bubble; should any, let alone all of these return to historic means - the performance of this unknown debt portfolio could bring a collapse to those who have significant exposure to this arena. (who just bought Associates ?) - what happened to First Union that bought the Money Store & what happened to Conseco that bought Greentree Financial ? Where is Dan Phillips' First Plus Financial; where is Cityscape Financial, Mercury, et al ? - remember the S&L crisis that was built upon shaky commercial lending ? - the subprime debt portfolio's vastly overshadow the S&L crisis in potential $ losses.
US Equity markets "still" at bubble/mania-esque valuation multiples; if the S&P merely returned to it's historic 1990's PE multiple; the S&P would be cut in half. - should the US Equity market return to historic valuations - which would mean a bear market collapse; the dollar would implode & gold would spike.
In an age of 28 year old Fund Managers making over $1 Million per year - only a few years out of business school; who are NOT even "1 7 year Gold" cycle out of high school in some cases - who have made their entire living playing with "OPM/other peoples money" in a purely momenteum oriented historic bull market run; where monekys throwing darts were doubling money every 18 mos - how can anyone with any degree of financial sobriety; not expect this purely momenteum market valuation-fiat money led equity bubble to bust ? - and what asset among all other assets will spike into the face of that bubble pop ?
... hint; it aint "Black Gold"
Clock's tickin' & it aint pretty out there...The $lide hasn't gone insane, hasn't turned into a conspiracy-theory, parnoic-chicken little.... far, far from it; the $lide is merely respectfull of history, mindfull of the XAU/Gold 7 year cycles, enticed by the fundamental valuations based on Gold Ounce Reserves, NAV's, and the XAU technical double bottom along with the CRB having just put in a classic double bottom off a 13 year bear; along with all the global dynamics - let alone what a spike of $40-$50 Oil will do to Global Equity Markets that are atop a historically unprecedented Bull Market Run & still at Bubble-mania valuations ... and where is the Price of Gold/Gold stocks ?
Pigs get Fat & Hogs get Slaughtered...
I've got that taped atop my Computer Monitor.
It truly amazes me that after Warren Buffet refused to partake of the bubble, after Julian Robertson, Stanley Shopkorn, George Soros et al - exited & spoke to the irrationality of today's equity markets; that as we sit at this precarious turn; with crude oil only one catlyst event spike away from rocking the global equity markets and given that we are weeks away from a US Presidential Election of dramatic consequence to the Oil Producers; that so few here are seeing the risk that is overhanging this market.
I've got tight, tight stops on everything I own; on a moments notice I have absolutely no qualms, or hesitation to moving to 100% cash; or 50% Golds & 50% cash. In fact I am basically poised at any moment to do just that & my gameplan is to continually take Oilpatch profits off the table & to rotate those Oil $ continually into any sub 50-55 XAU.
History is going to teach us a lesson soon, very soon... and it is not in the vested self interest of the media, the market mavens, or the government to do anything to warn us... paranoia, scepticism & healthy respect for history; along with being mindfull of the "Pigs get Fat, but Hogs get Slaughtered" mantra will allow some to walk away... some, but few... no more than those who existed to talk about how they "sold too soon" and missed the early 1929 market peak as well...
Black October anyone ? |
