G Cole: Gold decimated ? & market selloff, election impact...
.... George; Imho - this is not a "flight to safety" but, rather a "move" to safety. No panic... money should move to the US Dollar; out of equities here & it did. It is more trading oriented & positioning, than it is a fundamental shift, or flight.
All this panic anxiety over the US Election is much ado about nothing. - what's the worst case ? Gore wins & we have the continuation of Greenspan & Summers and business as usual ? - if Bush wins; the foreign markets rallied on this news and obviously Bush may be a bit more positive for the markets than a Gore win... but, it matters so little fundamentally - that's it's inconsequential ?
The US is not Indonesia ? We won't have the National Guard roaming the Streets anytime soon ...?
However; the markets will soon revert to the BEAR mode - as they should; they are a bubble & will and should contract much further - my point is this is not related to the election.
The NAZ is a separate issue - we're seeing the beginning of a post holiday season crescendo of dot.com collapses and a very negative holiday season will bring retail down - but, Wal Mart & Home Depot allready warned of this weeks ago.
The NAZ was and still is a bubble; much of the selloff here is earnings & guidance related - it is NOT due to the Election ?
The NAZ has a very good chance technically AND fundamentally of revisiting 2000, or under - that's not chicken little territory - that's STILL a bullish trendline continuation of this entire 10 year bull ~ it's where the NAZ should be... both technically & fundamentally on a valuation multiple basis.
We can't have 6 straight fed hikes, a weak euro which is KILLING US Corporate earnings, $30+ Oil, lower GDP growth and along with lower growth guidance from Tech and still stay anywhere near these valuations, or price levels; the NAZ must and will continue to sell off imo.
Also; the still near record margin levels in the market will and must be removed - Greenspan is clearly on record on this... we are STILL in the process of removing all the liquidity pump from Y2K etc...
George; concerning Gold; it is not an industrial commodity to the extent Oil is & obviously so; but Gold matters and is valuable for more complex & compelling reasons right here & now than it ever has been.
In an era of fiat currencies & near bi-annual Global Market Meltdowns in which the intervening agencies have warned that they can no longer handle another; the system has been leveraged to a degree that the next global crisis may bring home the value of Gold as currency as never before.
Never before in history has the global financial markets reached such levels of complex derivative leverage along with a degree of intervention, stabilization - ie: manipulation. Gold was , is and will allways be a currency; a global currency - as well as the ultimate port in the global perfect storm.
Oil can and is being replaced everyday by alternative fuels - read Big Oil's own take on this subject and look at the investment they are making every day in alternative fuel/power. It's "when, not if" alternative fuels will begin a rapid penetration into the role of Oil. The case for $5 Oil had fundamental reasoning; but it's timeliness and its changeover/conversion costs were greatly exaggerated. Obviously Oil for the near future will be very important; but - throw in a Global recession and $10 Oil once again is far, far from impossible - hell; it's proabably - probable...
The DOE is allready predicting $20 crude by March with a mild winter.
Where the XAU resembles the dark days of OSX 48 during the fall of 1998; is in its technicals & sentiment. Gold right here is the ultimate contrarian play. Historically low valuations AND shareprices, terrible sentiment & market technicals -- but; simultaneously we have an unsustainable situation of the record account deficit & an ultrastrong US Dollar - that are not mutually sustainable. We have the unfathomable short-derivative position in the commodity itself, we have the soon to be "no-brainer" of OPEC having to "hedge" the ultimate simultaneous decline of Oil & the US Dollar it is paid in & they've ALLWAYS hedged via gold - the minute Oil breaks; gold will move - in which it usually does at the end of Oil Shocks anyway... OPEC will sell dollars & US equities & debt and buy some euro-currency, if not the Euro itself and Gold - period; bank on it. They have no choice....
We simultaneously have Gold reaching historic lows in valuations & shareprices & the need to hedge via, or to own Gold due to Global risk - rising exponentially; that is the anomaly sweetspot that should attract contrarian opportunists like bears to honey and it is - in my case...
We are seeing the same infrastructure collapse; the loss in investment/funding capital for the miners that we saw in Oils. We are seeing the bankrupticies, or the very near collapse in the weaker players - just like we did in Oil. We are seeing consolidation at the bottom - just like we did in Oil.
George; imho - the XAU has formed a base here of 43-48 as a technical bottom; however a final capitualtion blow off is surely possible on some "event" - and that is a welcome event as this will surely be the oft-seen "V" bottom shakeout that is needed. Xau 35ish may be that - so position yourself accordlingly on an average-in basis.
Maybe XAU 43 was the bottom, maybe XAU 35 will be ? I'm not worried about XAU 35-43; I'm building longterm positions here all the way down, slowly averaging in; establishing a very attractive historic cost basis - literally my cost basis should be below the alltime lows for the index as well as the individual shares on a price per oz of procuction & reserves basis.
Again; it was not necessary to catch FLC, BJS, ESV, XTO, APC etc at the "exact" bottom - it was only necessary to begin entering & building a position on an averaging in basis during those dark days in the fall of 1998 - to have reaped all these 3-4-5 baggers and my eyes are on the return to XAU 90-120-150; not whether XAU 50, 45, or 43 is, or was the bottom...
The reports of the death of Gold are more than a bit premature...
Now - more than ever ~ GOLD
My position remains the same:
1- ride the last leg to the Oil Bull; but; don't be among the last to leave the party - as it's going to end much sooner and at much lower OSX levels than most think
2- build XAU positions into weakness - average in, slowly & patiently
3- selectively short the NAZ bubble, it's not even close to the bottom
4- Keep a large cash position as both an offensive & defensive weapon |
