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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: macavity who wrote (5556)	2/11/2002 12:07:49 PM
From: John Pitera	Respond to of 33421

Thanks to all the posters over the past week, there have been a number of very thoughtful and insightful posts. It's great to be able to ponder some of these Macro type issues. Mac, I agree with you that The US Dollar has been the beneficiary of this "outlook" that there are not really any viable alternatives. I'm not really a gold bug. I do believe that on a global basis the economies of the world will sustain enough macro economic damage and pain over the first 3 to 5 years of this millenium, that something will need to be done by the central banks. The large corporate debt levels, implosion of junk debt coupled with the massive destruction of wealth through shrunken equity market capitalizations, seems to be creating some deflationary tendencies. If we do not have a fair quick and sustained US economic recovery, we could find that much of the US has a housing price bubble on our hands. If we see a meaningful decline in housing prices this will demoralize US investors and consumers. Indeed, many economist and strategists who have been interviewed the past few months, point to the still robust housing market and saying that the consumer is still feeling pretty good financially due to the value of their primary asset; their house. Since a prolonged period of deflation is politically too painful for the masses to experience, we should hear a clarion call to re inflate the economies, through expansive monetary and fiscal policy. There is always some chance that the FED and other central banks could find themselves "pushing on a string" which the Japanese monetary officials know only too well. I'm going to hope this does not occur. If we assume that the most realistic way that the FED can alleviate the Debt problems, it's probably by aggressively expanding the monetary aggregates. That should lead to a multiyear generalized price inflation. I don't think it a question of if we'll see another generalized price inflation, merely a question of when. I'm more a believer that Gold will perform in line with the types of increases that we'll see in other commodities and hard assets. The US has experienced very inflationary periods during the American revolution, The 1860 greenback era. The 1917 to 1920 time period, and as many remember the late 1960's through 1980 was also a period of high inflation rates. I'd argue that The movement into Gold and mining issues is simply some longer term investors and asset managers trying to peak around the next corner or two and contemplating this type of macro period in the coming decade or so. Obviously if we saw widespread debt defaults, over the next year or two that would also explain some of this interest in Gold. So there are surely several motivating factors among the "Gold bugs" John ps... was James Dine really the first Gold Bug? -g- John