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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: gregor_us who wrote (13332)5/7/2004 7:26:59 AM
From: russwinter  Read Replies (2) of 110194
 
The value of the John Hathaway essay lies more in the here and now. I've always felt he does the best seminal work on gold as an asset class. Here's the essay list: gold-eagle.com

He lays out an excellent workable theory for relating gold's value to negative real rates. He states (sounds like my commentary) ,

"A core deception of the moment is the notion that a few up ticks of 25 to 50 basis points in short term rates will be sufficient to arrest the forces of inflation set in motion by the most aggressively accommodative Fed in history.

He goes on,

To preempt inflation fostered by four years of aggressive ease, the Fed must drive a sustained and politically untenable rise in real interest rates. Increases cannot be tepid or token.

He finishes his point by saying in effect, that "I knew Paul Volcker (John Kennedy), Paul Volcker was a friend of mine, and Alan Greenspan, you ain't no Paul Volcker."

Then he goes on, suggesting that gold will play well, as "credit spreads widen and safety becomes paramount." I think that this aspect explains why POG is still under $400. Credit quality spreads are still very narrow, but as they widen, then gold will reveal a different face.
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