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Strategies & Market Trends : Strictly: Drilling II -- Ignore unavailable to you. Want to Upgrade?

To: Crimson Ghost who wrote (20940)	10/30/2002 11:53:13 AM
From: isopatch	Respond to of 36161

Thanks for posting that George. Been looking forward to reading more from Hathaway. Isopatch

To: Crimson Ghost who wrote (20940)	10/30/2002 7:23:56 PM
From: Canuck Dave	Respond to of 36161

Thanks for posting that article. Great read. And also answers one of my most nagging doubts about gold, specifically why gold will do well in a deflating environment. CD

To: Crimson Ghost who wrote (20940)	10/30/2002 9:17:10 PM
From: Step1	Respond to of 36161

George, thank you for posting the link. I pulled a few quotes from Hathaway `s article, to serve as a teaser to those who have not made the trip to the link and to also serve as a reminder for the need to establish a position in PMs... I added a comment from a newsletter I received out of Canada, Bob Hoye of institutional advisors: From Hathaway: "First, spreads or yield differentials between credit instruments of varying quality are highly instructive. For example, the spread between Aaa and Baa corporate bonds (see below) indicates that investors are becoming more risk averse. Since the end of last year, this spread has remained stubbornly in excess of 120 basis points, the highest level in nearly a decade. However, the spread is well below the peak of 280 bps reached in the early 1980’s. The second indicator is the price of gold. It is interesting that the previous 1981 peak in gold prices and the quality spread roughly coincided. (my emphasis). The narrowest spread since 1979 coincided with a twenty-year low in the price, the second half of 1999. Since then, the spread and the gold price have been trending higher." >>>> Step1 commments: jive with the prediction for "dislocating spreads in January" below in Hoye`s view. "A sharp fall in the dollar exchange rate, a sudden rise in interest rates, or an inverted yield curve are interrelated possibilities which would reduce the derivative positions of money center banks to financial market ground zero. " >>>> Step1 comments: seems we will be getting at least one of those... "While memories may be short, the instinct to preserve capital is eternal." >>>> Step1 comments: so nothing new under the sun<<<<< " Over centuries, man-made currencies erode while gold maintains value. The story will be no different for the dollar, the dollar based system of credit, and rival currencies." >>>>> Step1 comments : who posted that message from a reader of Richard Russell yesterday on galapagos island thread?<<<< "Pay careful attention to yield spreads, the share prices of money center banks (particularly large derivative players such as JP Morgan Chase), the trade weighted dollar index (DXY), the share prices of housing related GSE’s (FNMA and Freddie Mac), the share prices of mortgage insurers such as MGIC, and the shape of the yield curve." >>>>> Step1 comments: something discussed at large here by many >>>>>>>> and from a newsletter I received out of Canada (Hoye) " - Real long interest rates have declined with all six new financial eras since the first concluded with the infamous South Sea Bubble of 1720. - Following all five previous examples, real rates increased by a typical 12 percentage points over 3 to 4 years. - It has been Mother Nature's way of ending a decade of credit abuse otherwise known as a new financial era. - During the summer, nominal rates declined as the rate of inflation increased. This is a rare condition." and "Credit Spreads: The extreme pressures on most spreads have been expected to ease from early October to early November. Junk has come in from 923 bp over treasuries on October 10 to 863 bp this week. The benchmark ten-year swap rate has narrowed from 696 bp on October 9 to 610 this week. After mid-November, spreads could resume widening to dislocating conditions by early January." End of quoted material Step1