Date: Thu Jun 29 2006 12:48
trotsky (mozel @ tallies) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
i'm really not sure what you are trying to argue about. the point of my mentioning the tally system was only to illustrate that inherently worthless stuff ( be it sticks of wood or pieces of paper ) that would never be accepted in a free market as a medium of exchange can acquire acceptance because the state accepts it for payment of taxes. in the case of tallies, what began as a simple record keeping system evolved into a functioning money market, with time preferences exhibited in the discount at which tallies were traded. the similarity to today's fiat system is that the tallies represented an inexhaustible supply of revenue for the government - they could make tallies as long as there were trees. demand for these normally worhtless pieces of wood was created by making them the means of tax payment. this is precisely what creates demand for today's fiat money as well- otherwise, why would anyone use it?
note that the main reason for introducing the tally system were the crusades - the crusaders took most of the extant gold and silver coins with them and left the king short of funds.
Date: Thu Jun 29 2006 12:22
trotsky (@pm stocks sentiment update) ID#248269:
Copyright © 2002 trotsky/Kitco Inc. All rights reserved
not much change - the XAU p/c OI ratio is at 1.30, with 66,970 puts outstanding vs. 51,696 calls in the 3 front months. this is higher than 83% of all readings over the past 52 weeks.
the cumulative Rydex pm fund CF ratio clocked in at $163,4m. yesterday, which remains a few million below the 2005 low, i.e. we're still at levels last seen in the summer of 2003.
in short, there remains a lot of skepticism in the market. the real test will be how these data develop if we do get a more durable bounce. if skepticism remains elevated, the bounce should be given the benefit of the doubt. note that the mere fact of decreasing skepticism during a bounce is not per se a bearish signal, rather it depends on the speed and intensity of the decrease. often sentiment will become even MORE subdued on a rally, which would be the ideal outcome.
if the market's character hasn't changed ( i.e., if it remains in its long term bull market ) then the current position of these sentiment yardsticks indicates that the correction's price lows have most likely been seen - or alternatively that the ultimate low won't be too far from the recently established one.
note that the Rydex CF ratio high point established in late 2003 was slightly over $300m. - about 45% higher than the current level. as the Rydex fund is a microcosm of gold fund flows in general, this argues that there is a lot of money on the sidelines that could be drawn back in if the market begins trending up again.
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