Hambone@pm stocks and the broader market -- trotsky, 15:03:12 04/25/07 Wed
actually, they are still following it seems to me - they're only held back by gold getting weaker recently.
there will at some point also be an inflection point when they decouple, but my guess would be that this will only come AFTER both the market-at-large and pm shares suffer a downleg together (essentially the 2000 template - yield curve inversion ends, and then you have a period of all market sectors declining together, and the first short term low marks the inflection point). also, i would guess that DXY close to 80 is creating some trepidation in the gold market, since that level has held declines since 1978.
lastly, a point about the Rydex sentiment indicator that i often cite: when cash is constantly flowing out of this fund (which stands as a proxy for pm sentiment in general), it only creates the potential for a rally. the actual rally itself requires an unwinding of this bearish sentiment, i.e., outflows must turn into inflows. in the most recent rally, that simply hasn't happened (there was only one day with significant inflows throughout).
i note though that a very similar situation recently pertained in oil and oil service stocks - they began to rally without the support of inflows into their Rydex sector funds, but eventually inflows began to slowly resume.
# silverrain@dollar magazine cover indicator -- trotsky, 14:27:10 04/25/07 Wed
i think your detractors could be in for a surprise if DXY 80 holds again. currently, the daily sentiment index on the dollar is at 11.7% - a near all time low. this is to say that about 89% of forex traders are currently bearish on the dollar. at the same time, the speculative net long position in euro futures is at an all time high, and those in other non-dollar currencies (except yen and swiss franc) look similarly stretched.
that said, if DXY 78-80 doesn't hold, things could get dicey. however , that's improbable for the simple reason that everybody is already positioned for the breakdown.
also, the idea that other fiat currencies are superior isn't supported by the facts such as relative money supply growth data (for instance, the Russian Rouble has been strong recently, but over the past year, Russian money supply has expanded by 48%. it follows that Rouble strength will be temporary).
@Spain's housing bubble -- trotsky, 13:07:09 04/25/07 Wed
the Spanish housing bubble (which is huge even by the standards known elsewhere - construction provides 20% of all jobs in Spain) is apparently the first euroland housing bubble on the edge of deflation. this means that the bursting of the US housing bubble is now spreading elsewhere - imo it will eventually infect the whole world.
there is probably a threshold point at which the fact that subsets of the greater global credit bubble are coming unstuck will lead to an unwinding of the entire enchilada. various credit markets and financial asset markets are all interdependent and intertwined - if too many sectors lose their ephemeral 'liquidity' at once, a massive and sudden unraveling of the malinvestment orgy could follow.
this will put the 'Asian decoupling' storyline to a severe test - imo it's not going to work that way - once consumers in the developed countries retrench, it'll be all over for a while. the main reason is that the credit bubbles in the surplus countries are fed by the trade deficits of the deficit countries (chiefly the US) , and without this enabler of money supply growth the credit induced booms will end everywhere. |
