Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Box-By-The-Riviera™ who wrote (6127)	5/20/2002 7:32:39 AM
From: John Pitera	Respond to of 33421

Hi Joel, good comments. Inflation is not bullish for stocks, it's not the best place to have much of your assets in an inflationary environment, such as the 1970's, unless you are in resource stocks like Gold and oil stocks for example. Hyperinflationary environments such as the Wiemar Republic of Germany in 1922-23; Japan in the post WW II 1946-47; or Argentina this past year, are reasonably rare. But they do occur periodically. If inflation rates surge to 30, 50 or even over 100% annualized, Investors are best served by being in hard assets, real estate and commodities. Stocks do not perform as well on a relative basis compared to the asset classes mentioned above. Equities do outperform cash and long dated bonds. In the 1970's investors made much more money in hard assets, such as real estate, oil and Gas LP's, and in commodity funds that enabled them to participate in the 7 to 10 fold rise in many commodity prices over the course of the 1970's. Crude Oil was about $3 a barrel at the start of the 1970's. It went to 40 by 1980, a 13 fold increase. Gold was at $35 an ounce and went to 875. It increased nearly 2000% over the decade of the 1970's. Let me find one of my bullish posts on Gold on this thread from last summer and fall. I'll post it in a minute, because it's helpful to help remind us of how the macro economic cycle is very likely shifting the past 2 and next few years. John

To: Box-By-The-Riviera™ who wrote (6127)	5/20/2002 7:52:22 AM
From: John Pitera	Read Replies (3) \| Respond to of 33421

My Sept. 2001 missive- Why you have to have some money in Gold and Gold shares. And also some of the reasons why I'm expecting A continuing significant decline in the US Dollar. also read the post That follows the post at the very bottom of this page. --------------- Message 16393457 I agree with Jonathan Hoenig's thinking regarding Gold. This is a brilliantly written article.. It's vastly underowned, and the market capitalization of all of the gold mining stocks is only around 30 billion or so. In my long term Macro Model of the World economy, after the era of financial assets (stocks and bonds) outperform for a number of years, they then go into longer term bear markets, we have a period of economic weakness and generally declining prices of just about all assets, stocks, real estate, hard assets, commodities bonds, etc. some currencies benefit some are hurt). This can last for a few years and in our current cycle could continue into 2003 or so. Then as the Central banks reinflate the economy and stem the deflationary trends (since few people have any interest in deflation, there is a cry for higher prices. As steps are taken to create more liquidity, and expand the monetary aggregates, this means that there is more currency out there, so it will flow to some asset classes, and investors who have been badly burned by tech stocks and stocks in general will go to the latest "smart investment". This smart investment will be what has been doing well the past few years. It always works that way. Why did people buy tech stocks and internet stocks in 1999 and the start of 2000? because they were going up, and there were reasons for them to go up more. GOLD stocks have ALREADY outperformed the SPX for the past 2 Years, when Gold stocks have outperformed for the past 4 or 5 years, even Rukuyser of Wall Street Week will have a Gold Analyst on his show. He's made so much fun of Gold the past 2 years, and made lots of fun of everyone who was not long stocks. This is the classic way in which Market Psychology works. Life is cyclical in Nature, So is the Macro Economic cycle. War and periods of upheaval are also cyclical in nature. What's interesting is that with this War on Terrorism, which the Administration is now saying may last 5 years or more, they are, in one sense, writing a blank check to a new Paradigm. We could/should have a fractured world, divided into different factions, The Pro US; The terrorists, Arab sympathizers who feel that Islam is being mistreated, and those countries and groups who want to stay neutral, as it will seem safer. I'd highly recommend watching the 1980 movie "Rollover" staring Jane Fonda and Kris Kristofferson In the Movie, He is a banker and she is a wealthy widow, who has inherited a large company she is running. Over the course of the movie they realize that there is a conspiracy to move funds out of the US Dollar, and US Assets and into Hard currencies, Gold and other Safer Assets. Of course, they only make movies with the most popular actors starring, when a trend is so well known that the end of the trend is certainly not far off. No one's making movies about this now. cnbc commentator Bill Griffith just commented that the US Dollar typically seen as a safe haven, is not seen as a safe haven recently. Not only are they moving out of the US Dollar, but out of the Euro to and into the Swiss Franc. A continuing significant decline in the US Dollar, which I've been expecting and continuing to expect is very possible fundamentally, due to several international groups that want to move out of US Dollar denominated Assets, get out of US Stocks, and out of both US GOVT , Agency, and Corp Bonds and Notes. This cyclicality would play out even without the horrific terrorist attacks on the World Trade Center and the Pentagon. History shows that a wide variety of fundamental developments can occur when the Mass Mood has shifted against and out of a country that has had a Financial Mania. We need to look no Farther than the Japanese experience of the 1990's. I would like to point out that I was calling the US Dollar the KingBuck, due to it's strength the first 6 months of this year. Several posters on the Clown Free Zone, had taken to calling the US Dollar the ClownBuck, this past year and I was in agreement with the Mighty MythMan that the Greenback was no Clownbuck rather the MightyKingBuck....Hey it's all good as long as it's going up. And the US Dollar was still trending up, until July. As have all been shown in the past several years, markets can have large divergences from fundamental reality for fairly lengthy periods of time, this is due to the Herd-Trending tendencies of Investors. I'm highly confident that this will be the case far into the future. my missive is long enough that I'm posting Jonathan Hoenig's article on "All that Glitters"in the next post. John ------------- Message 16393461