"The New Paradigm Shift."
If you weren't suffering from commodity tunnel-vision earlier this spring, you might have seen the early beginings of a new paradigm shift.
We were warned about the dangers of a collapsing US Dollar, about falling US Equity markets, a Bond Market that had topped, about ramping Oil, about Geopolitical unrest, about out of control deficits and even about how gold and commodities would be a safe-haven from the evils of reckless speculation and leverage in housing and derivatives.
Only the reckless speculation and leverage turned out to be in commodities...as witnessed by the collapse of Mother Rock & Amaranth.
Since May, gold, oil and commodities have collapsed and money has poured out of levered speculations and into Bonds, the DOW stocks, and the US Dollar; which now sits at multi-month highs.
Some of you laughed when a couple of months ago, I said this was the single most important chart in the market (it still is):
These are pretty important too:
And here's something else that's important... the connection between Goldman Sachs and the US Treasury:
One reason this is important, is because when former Goldmanite-Treasury Secretary Robert Rubin speaks... present Goldmanite-Treasury Secretary Hank Paulson listens...
And here's what Robert Rubin...The Father of King Dollar had to say this week:
"Most pressing is the 10-year federal deficit, which most independent analysts project at $4.5 trillion to $5 trillion ... "
"...if the tax cuts for those earning above $200,000 were repealed and the inheritance tax as reformed were continued rather than eliminated, the 10-year projected deficit would be reduced by roughly $1.1 trillion, or almost 25 percent, and the 75-year fiscal reduction would be roughly $3.9 trillion, or approximately equal to the Social Security shortfall.
This course of action would be similar to the income tax increases that were combined with spending cuts in the 1993 deficit reduction program, which some predicted would lead to recession but which, instead, was followed by the longest economic expansion in our nation's history."
-- Robert Rubin
So it was written... so it shall be done -- bank on it.
Both the Old Guard Republicans who have seized power back from the Cowboy Oil Cartel and the Goldman-Twins – Rubin & Paulson realize the fact... that no country has ever depreciated it’s currency to economic prosperity.
And thus we have the catalyst for the New Paradigm Shift:
"Trillions Trump Billions"
Presently, all the pillars upon which the recent massive speculation in gold were built... are all cracking. Gold has always been an investment of choice because of it's negative coorelation to the DOW and the US Dollar.
Unfortunately for gold bugs... the Dow is at a record high and the US Dollar has rallied to 10 month highs.
Dow sets new record high."
The Associated Press/NEW YORK
By TIM PARADIS
AP Business Writer
Stocks close higher as Dow sets record
OCT. 13 5:39 P.M. ET The Dow Jones industrial average inched to another record close Friday to mark the third straight week of triple-digit increases in the blue chip index.
The Dow spent much of a quiet session Friday in the red following a strong surge Thursday in which it broke through 11,900 for the first time to set closing and trading highs. Thursday's advance came amid optimism over the health of corporate earnings and Friday's gain put the Dow 12,000 benchmark within closer reach.
"Dollar hits multi-month highs against yen, euro."
Tue Oct 10, 8:29 AM ET
LONDON (AFP) - The dollar has struck a near 10-month peak against the yen and the highest point for almost three months against the euro as the market forecast a rosier outlook for the US economy.
Then there's the deficits. Even while US Deficits are rising, they are still better than most G-7 countries as a % of GDP...and remember what they said about Regan's deficit spending?
Well maybe, just maybe ... hope is on the way:
"US Deficits are falling and Tax Revenues are rising."
latimes.com
U.S. Deficit Is Smallest in Four Years.
By Molly Hennessy-Fiske, Times Staff Writer
October 12, 2006
WASHINGTON — President Bush got some welcome news Wednesday as the federal deficit for the last fiscal year shrank to $247.7 billion, the smallest in four years, because of a nearly 12% jump in tax revenue.
"Helicopter Ben, Bottoms? Oil:Gold & Nukes."
The other pillar for Gold, is that it has traditionally been the safe haven of choice during times of geopolitical
risk and war.
However, of late...it has been the US Dollar that has become the haven of safety...even with Hezbollah launching missiles into Israel, even with Israel invading Lebanon, even with Iran ignoring US & UN threats over it's nuclear program and even with North Korea exploding a nuke...gold has collapsed and the US Dollar has rallied.
-- whodathunkit?
Gold bugs also vastly under-estimated Ben Bernanke.
Yes,Helicopter Ben... he who was going to send Gold to the moon; who instead of dropping money from the sky...hiked rates 17 consecutive times.
And then there was the Oil:Gold ratio...
Either Gold was going to close the gap to Oil, or Oil was going to collapse.
Everyone bet on the former -- not the later and yet another
pillar under gold collapsed.
-- whodathunkit?
The question for Gold now remains three-fold:
1. Has it bottomed?
2. And even if it has...is it a "buy" relative risk vs. reward?
3. Are there still better alternatives as a safe haven?
Mo later...
SOTB
PS: Sorry for being late and short tonight...we'll catch up on the rest of the story...(and that big fat Investment Banker Pie -- called Social Security) later in the week.
...always follow the (big) money.
PPS: How bout' those Tigers! |
