Fillmore re: Bill Gross vs. Roach et al.............
We have a very interesting if not somewhat unique market environment here.
The Fed is in a Classic Trick-Box. It must raise rates to cap asset bubbles and inflation, but if it does... ....if it continues to raise rates; the Bond Market see's Deflation and we have an inverted Yield Curve and hello Stagflation...and 1980 Deja Vu all over again...and the Market Collapses and Derivatives Crack.
We have significant deflationary pressures from China and an unprecedented Debt, Credit & Derivatives Bubble overhanging the Global Markets...while on a global basis; commodity's have ramped in price and money & liquidity were poured into the Global Markets like never before. We've went from "King Dollar" to a collapsing has-been posterchild of all things wrong with the Fiat System.
Whether Bill Gross's Dow 5000 call contained 100, or 1000, or 2000 points of hyperbole, or was a measured call; matters not...
The most important theme from Gross's commentary over the last couple of years - is consistant with Volker, Roach, Buffet et al.
...and that is; that we are poised for a prolonged period of low, to negative total market returns (stocks + bonds).
That in my opinion is THE perfect environment for a steadily rising Gold Price.
That is the point of the work of Bob Hoye, Peter Palmedo and many others - anyone investing in Gold, or thinking about investing in Gold, or who thinks Gold is irrelevant needs to read their work... search Google, search SI and READ. They also need to get the free CD on GOLD from Monex done by James Sinclair.... GET IT AND WATCH IT - TAKE NOTES & STUDY THE LATE 70's/1980-1 GOLD CYCLE....listen to those who were there and trading it.
Simply send an email to:
mc@monex.com
Ask for the FREE Gold CD done by James Sinclair - given them a name & an address and you'll have it within a few days...you can't beat FREE people !
Sinclair explains his $1650 Gold target and recounts the environment that led to $887.50 Gold then and his $1,650 target now... GET THE CD... it's free !
...and send the email request link to 10 friends, or family members. People should hold Gold/Goldstocks at a minimum level of 5% of Liquid Assets in this Market Environment. They need not & should not be "traders"...but, as Sinclair suggests; should hold a 5%minimum position as Financial Insurance - that not unlike Life Insurance; they hopefully will never have to collect upon... hard to argue against as part of a prudent modern financial portfolio.
The only real threat to Gold's nearterm future is if the US would do a "180" and dramatically slash spending, exit Iraq, raise taxes, not hike interest rates any futher, turn off the printing presses, deflate the great global reflation & the Housing Bubble, balance the budget and take a Strong Dollar Policy to the Markets.
...none seem likely in the nearterm.
Gold can rally and move to new highs on many catalysts and in many environments.
Gold can go higher on a further rising deficits and a weakening US Dollar - whose underlying negative fundamentals belie it's recent bounce. Gold can move higher on inflation...upon either the classic definition of an increase in money supply, or along with commodity's in a longterm hard asset/commodity cycle. Gold can go higher on deflation...on a derivatives crisis, on a debt/credit implosion, or upon significant Geopolitical Events.
I think Jim Sinclair has identified a significant tipping point for the US Dollar, which will launch Gold - re:
Monday, May 16, 2005, 7:30:00 PM EST
I view the following statement (also mentioned in the DVD) as THE critical timing component of this gold bull market.
"Nothing has become as important as the TIC figures in terms of their impact on the US Trade Deficit. The reason for this is that the TIC provides an indication of the ability of the US to continue to finance itself from international sources. Should the TIC figure fall below the US Trade Deficit numbers then the market will be on a razor's edge waiting to see the following month's figures. Both sides of the question will begin to speculate on how this will play out. That could well be gold at $480 and the USDX at say, .7800. Should the second month confirm the TIC is trending below the Trade Deficit, then the dollar will encounter severe selling pressure and huge spin to hold it. That well could be .7600 on the USDX. If the spin fails for the third consecutive month, then all hell could break loose and one could expect .7200 on the USDX and gold at $518-$529."
James Sinclair
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216.187.82.180
Thursday, May 19, 2005, 10:45:00 PM EST
Gold and Dollar Market Summary
Author: Jim Sinclair
Dear CIGA:
Hickory Dickory dock, the mouse ran up the clock. In this case the mouse is the US dollar but the TIC will catch up to it and the mouse will get squished.
This dollar rally as I see it is nothing more than a short squeeze. The flaw in the plan to bully China into floating its currency is that the management of the US dollar is doing nothing policy-wise to change the direction of the ever expanding triple deficits.
The plan is to force others to make market adjustments that will make their products more expensive and therefore act to correct the US Trade Deficit thereby placating the dollar bulls.
That plan, along with a rollover of the US economic recovery, would have some positive impact except for one significant mistake. The US is dependent upon the purchase of US Treasury instruments in order to finance both the Trade Deficit and Federal Budget deficit. China, India and Japan represent 33.3% of all those purchases.
Now that the US is brow-beating China using statements by administration officials and a supportive business media, all Asian currencies are moving higher with little intervention as the feeling is that some readjustment (but probably less than desired by the US) will occur.
The error then is two fold:
1. Assuming the Chinese do revalue, it will not be enough to seriously impact the lower cost of goods from in China and reduce the deficit in trade between the US and China.
2. The appreciation of the Chinese Yuan would cause the unimpeded upward valuation of the currencies of all the trading partners of China. As a result, these countries would not have to defend their currency rate and therefore any need to buy US dollars in the international currency market would be curtailed.
So the tradeoff between any benefit to the US Trade Deficit versus the fall-off in the purchases by non-US entities of US debt will be completed without any offsetting balance. Consider 1/3 of the TIC simply not participating in the purchase of US Treasuries versus a possible 3% improvement in the US Trade deficit. I am convinced that the decision makers are not as stupid as the above would indicate.
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Monday, May 16, 2005, 9:51:00 PM EST
Gold and Dollar Market Summary
Author: Jim Sinclair
Dear CIGA:
Chinese and Japanese holdings of US Treasury instruments declined in April. Someone should tell the US media because this development is earth shaking in a financial sense.
Clearly the most important news of the day got little play in the financial media. The Treasury International Capital (TIC) report reflects the ability of the US to finance its Federal Budget, Trade Deficit and therefore the Current Account Deficit - all of which are out of control. Everything most certainly hangs on the TIC figures including the future of the dollar and therefore the price of gold.
March Treasury International Capital data reported that foreign net purchases of domestic securities amounted to US$60.1 billion, down from a net $98.1 billion in February. This was way below the forecasted consensus of $72.0 billion. Foreign central banks sold a net $14.4 billion, down from net purchases of $18.7 billion in February.
Most important was the fact that Chinese holdings of U.S. Treasuries declined for the first time in a year, while Japanese holdings fell for the second time in the past three months.
The report from the NY Fed economic index returned the worst number since 2003. This is another piece of evidence that the USD recovery is rolling over. That puts the Fed directly in between a rock and a hard place.
That being said, I believe you can take to the bank that the decision between the Fed acting to hold up the equity market or the dollar favors the equities while damning the dollar.
You have heard now from Reuben and Volcker but hey what do they know compared to charts and star gazing?
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We are now entering a period of uncharted territory vis a vie what I'll term - "Experimentius Insaneous Maximus Fiat Printing Presses Gone Wildous".
The Europeans are holding a mock financial crisis exercise...as noted recently here in the news.
re: China Re-Peg ... be carefull what you wish for indeed.
The Europeans are getting prepared.
Let's hope those holding the bag on Trillions in Derivatives are as well...
$`
Here's a few historic quotes on Gold:
"The fate of the nation and the fate of the currency are one and the same."
Dr. Franz Pick
"For more than two thousand years gold's natural qualities made it man's universal medium of exchange. In contrast to political money, gold is honest money that survived the ages and will live on long after the political fiats of today have gone the way of all paper."
Hans F. Sennholz
"Gold was not selected arbitrarily by governments to be the monetary standard. Gold had developed for many centuries on the free market as the best money; as the commodity providing the most stable and desirable monetary medium."
Murray N. Rothbard
"Even during the period when Rome lost much of her ancient prestige, an Indian traveler observed that trade all over the world was operated with the aid of Roman gold coins which were accepted and admired everywhere."
Paul Einzig
You have to choose [as a voter] between trusting to the natural stability of gold and the natural stability and intelligence of the members of the government. And with due respect to these gentlemen, I advise you, as long as the capitalist system lasts, to vote for gold."
George Bernard Shaw
"Civilization can only revive when there shall come into being in a number of individuals a new tone of mind independent of the one prevalent among the crowd and in opposition to it. A new public opinion must be created privately and unobtrusively. The existing one is maintained by the press, by propaganda, by organization, and by financial influences which are at its disposal. The unnatural way of spreading ideas must be opposed by the natural one, which goes from man to man and relies solely on the truth of the thoughts and the hearer's receptiveness of new truth."
Albert Schweitzer
"If you don't trust gold, do you trust the logic of taking a beautiful pine tree, worth about $4,000 - $5,000, cutting it up, turning it into pulp and then paper, putting some ink on it and then calling it one billion dollars?"
Kenneth J. Gerbino
"There can be no other criterion, no other standard than gold. Yes, gold which never changes, which can be shaped into ingots, bars, coins, which has no nationality and which is eternally and universally accepted as the unalterable fiduciary value par excellence."
Charles De Gaulle
"Deficit spending is simply a scheme for the 'hidden' confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan
"Put forth thy hand, reach at the glorious - GOLD."
William Shakespeare
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