trotsky (art@cycle) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
we have evidence that the normal progression of the gold cycle ( i.e. the bear market translation of its skew ) of the past 20 years has changed into a bull cycle. iow, there should be more up than down years within one iteration of the cycle from now on.
Date: Thu Jan 13 2005 12:38
trotsky (art_vandila@yield curve) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
if it flattens further there won't be any joy in the pm stocks. otoh, there's some reason to suspect that weakening economic data will force the Fed to abandon the rate hike cycle. note in this context that the cycle is already about to reverse in countries with an economic cycle that slightly leads the US cycle, like e.g. the UK.
we're definitely closer now to the point when the flattening of the curve comes to an end.
but that definitely needs to happen for the pm stocks to revive imo.
Date: Thu Jan 13 2005 12:30
trotsky (Mooney@DRD insiders) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
obviously my point was that if the directors were prepared to pay that much, then the current price is a gift.
maybe i should have phrased it differently, like e.g. 'they never failed to make money with their purchases in the past'.
the timing of insider buys is not always perfect. i still remember e.g. EPEX when it was trading between $4.50 and $5 and the directors bought a lot of stock. it subsequently fell to about $3 at first, but a year later it was trading close to $20.
Date: Thu Jan 13 2005 12:23
trotsky (Hambone@bonds) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i admit that the dollar, and the fundamental backdrop weighing on it, is a wild card that could upset my expectations.
you're quite right about the differences with Japan, but i tend to think that foreign selling will be outweighed by domestic demand in the bond market's case. note also that the same developments that would tend to support the bond market would also tend to reduce the trade deficit and lead to an increase in the savings rate - a recession, which would without a doubt eventuate if the RE bubble falters, would have a strong effect on these imbalances. in fact, i happen to think a recession is necessary to cure them.
but again, a currency crisis would be another matter. such a crisis could e.g. happen if the treasury failed to roll over some of its debt successfully. this danger seems small right now, but it is bigger than it used to be - on account of the shortening of maturities of the public debt-mountain. similar to corporations, the treasury has used the ultra-low ST rates of recent years to shift the maturities of its debt downward to save some money. this is exactly the strategy that has been a hallmark of a number of currency and debt crises in the past.
Date: Thu Jan 13 2005 12:10
trotsky (mugwump@FNM) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
is it a short? i would say yes, it is. i don't think that what we have heard thus far re. accounting problems there is all there is to it.
and even if no new indiscretions come to light, it simply has not enough capital to deal with all eventualities. iow, it's not equipped to deal with a sharp downturn in the housing market. the sheer size of the increase in outstanding mortgage debt in recent years testifies to the fact that a lot of corners were cut in terms of assessing the creditworthiness of borrowers - who can, and will, walk away from their obligations when they're under water equity-wise.
in case FNM gets into trouble, shareholders will imo be sacrificed. the govt. may well act to protect holders of FNM's debt, but not shareholders.
Date: Thu Jan 13 2005 11:54
trotsky (@DROOY) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
probably one of the best buying opprtunities in the entire sector right now - the stock is discounting a complete disaster, and the market totally ignores the profits it makes from its overseas assets, or alternatively, accords a negative value to its SA assets ( i.e. not even an options premium anymore ) . cash flows from Porgera and Tolukuma over the past two quarters were likely excellent...and the SA ops. have been restructured. it's imo not a problem that they can't make a profit right now - treading water is fine. the Rand isn't going to remain a one way street forever.
besides, the directors have been buying shares between $1.56 and $1.78 - and if one looks at their past dealings in the stock, they've never failed to judiciously time entries and exits.
name another gold stock with insider buying...it's quite a rare event in the sector.
Date: Thu Jan 13 2005 11:36
trotsky (mugwump) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
"FANNY MAE STOCK ( FNM ) SERVES AS THE CANARY IN THE BOND COAL MINE. WHEN IT GOES INTO DECLINE, BE PREPARED FOR A BOND BEAR MARKET."
does anyone think printing it in caps makes it more true? this is imo nonsense - the opposite is likely to happen. right now, US commercial banks hold over 60% of their assets in mortgage related paper and loans - once trouble in real estate land becomes obvious, quite a bit of those funds will most likely move into treasuries. iow, a financial accident at FNM would likely give the bond bull market a significant shot in the arm.
not to mention the fact that pension fund and insurance money currently parked in equities and corporate bonds ( and quite oblivious to the risks in both ) would likely also be shifted into treasuries should TSHTF.
the only potential danger i see on the horizon for the bond market is the possibility of a dollar crisis - otherwise this bear-infested bull market will do just fine and surprise everyone with new all time lows in yields.
if there's any market nowadays where there is a broad consensus, it's the bond market...practically everybody is bearish on it. it would be understandable if it had actually gone down, but it sits only a few points below new all time highs.
one only needs to look at Japan and what the collapse of their real estate bubble ( which by the way was not as big as the US,UK and Australian ones are now ) wrought. it launched a 10-year mega bull market in JGBs.
why should it be different in the US? the housing bubble is the achilles heel of the bond bears - for their view to be correct, it must continue unabated. but if that were to happen, higher bond yields would ultimately kill it anyway. so the only question is really if bonds will or won't have a correction before resuming their bull market.
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