Date: Thu Oct 02 2003 13:54
trotsky (Apollo@SM) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
a big decline in early 2004, yes, i can agree with that expectation, at least preliminarily.we should probably always clarify in advance which time frames we are looking at. the bigger picture as you have presented it i largely agree with, although i'm obviously more of a bond bull than you are - i don't think the deficit matters much in this case. a 12% of GDP deficit in Japan didn't matter to their bond market either after all, and the US is far away from that.
what i'm looking for in the SM is a final 'blow-off' type rally here, something that really scares the bears and forces them to drop all those massive equity short positions. nothing major in the context of the bigger secular bear, which should resume with a vengeance once this business is taken care of. mind you, 'should'. i will try to remain flexible, depending on how the data develop. obviously it's all just a matter of probabilities, not certainties.
as to 'where have i heard that before' - not necessarily from you, but it seems a widespread article of faith on kitco in general. similar to the 'stock market goes down = good for gold stocks' myth. as i've pointed out before, that view also is largely a matter of time frames. what's true in the longer term is often not true in the short term, and whether it's true at all depends on the K-season one is in and short term herd expectations...currently the ST herd expectation is 'reflation', and that's even correct on a short term, cyclical basis.
Date: Thu Oct 02 2003 13:16
trotsky (bw) ID#377387:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
fortunately it's not that simple. for newly printed currency to have any effect, someone must actually go and 'borrow it into existence'. if it just sloshes about in the money market as it has done in Japan over the past 13 years, it won't induce inflation.
that's another important point to consider: the US debt mountain is the largest in mankind's history, in every respect. at the onset of the last deflationary winter in 1929, total credit market debt to GDP was at 280% - a record that was broken for the first time in 1999. it now stands at 360% of GDP, and thus far keeps rising. but this debt expansion will end, because it MUST end. it simply can't continue forever. and when it ends, the debt bubble will contract - defaults should then eventually outpace new money creation. the essence of deflation....the markets won't allow the debt mountain to be 'inflated away'. |
