Dan, et al,
Thank you for your update of Russell's view. I agree that a bear market rally appears in the cards near term and that Russell may be correct in his view that we are in a secular bear market possibly lasting for years. I can also agree we haven't begun to unwind the excesses that have built up during the past few years. However, Barron's carried an article this past week in which both bear and bull arguments were summarized. It reminded me that the nominal PE ratio is dependent up interest rates and that they are a lot lower that the long-term average. It was noted that, taking the low rates into account, suggests that the PE ratio of the S&P isn't excessive. However, it was observed in another article that Bill Gross, who has very good record of forecasting market action, sees bond rates near a low. He is not bullish but he does see the economy turning around in mid to late 2002. This seem to me to be consistent with the view that the market isn't going to move much in either direction in the next few years as interest rates increase and the economic growth rate is less than robust. This could be a basis for a rebound in base metal prices and increase in money supply of the past couple of years could support increased inflation and an easing of the value of the dollar. This, in turn, would support a move by PMs. With the excessive shorts in the market, the moves could be dramatic.
Butler's comments about silver remind me that Armstrong was very bearish on silver in 99 (he was accused by many of making the argument to protect his short position but this was never proven). He claimed that there were massive supplies in warehouses in the London area that were unaccounted for (he also argued that an accounting should be required). His response to my queries concerning his claims were nothing but arm waving. I asked why someone would buy at price A, pay to store it, and then sell at a lower price. However, he never mentioned the leasing game, which could pay for the storage and result in a larger rise in the price once there was a real shortage. Butler may be more right than he claims.
Now, back to the world of fact from the world of opinion: FWIW, I didn't notice any significant mentions of PMs in Barron's this week or last. I apologize for forgetting to post last week's GMI data but I will post both this week.
The GMI/POG ratio:
On 10/18, the Barron's GMI was 304.86, up from the previous week's value of 296.82. With the POG down to 279.15 (10/19), the ratio was up to 1.09.
On 10/25, the Barron's GMI was 302.86, down slightly from the previous week's value of 304.86. With the POG down to 277.25 (10/26), the ratio was unchanged at 1.09.
The ratio a year previously was 0.86, essentially an all-time low.
Cheers,
Larry |
