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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (1972)	11/8/2003 10:58:01 AM
From: russwinter	Read Replies (5) \| Respond to of 110194

I don't especially disagree with how you've laid this out. But the big debate among gold bugs (at least the intelligent ones) centers around: To what degree has global dollar based liquidity fueled the rally in gold, other commodities, and the stock markets? And, What is liquidity, and money supply doing now? Is gold a liquidity investment (commodity) or does it have "special" powers of the kind you've laid out? On the first point, I believe gold (and especially the more leveraged gold stocks) have benefited immensely from the "Great Reflation". It's become a favored speculative vehicle of the large hedge funds and speculators. These kind of players can bail out and sell in a heartbeat, and we've already seen some short term examples (in gold and particularly in the last couple weeks in Japan) of what that looks like. And judging from the parabolic trading action of stocks like CAU, the sector has become a play thing of other hot money types. In fact considering how aggressively (currently long 158,938 contracts w options) commitmentsoftraders.com they've tried to push it up, and the amount of fuel they've used up, it's amazing gold is still at only $380. As a pretty decent speculator myself (who bought these stocks at half, or a third, in some cases a fourth, even a fifth of today's prices), I've had to ask myself how long I wanted to stay around at the party, when the guests are starting to not just put on the lamp shades, but are ripping the toilets of the wall? For me discretion is the better part of valor right now. And if I'm wrong about further speculative strength in the sector, oh well, it won't be the first time I've missed out on an uptick. On the second question, what's happening to liquidity now, the answer now seems obvious. Something serious is a foot. Message 19478724 And other countries around the world (including China) are taking actual tightening steps. So if you believe gold and other commodities are beneficiaries of the prior runaway liquidity growth, you'll need to take heed. To get distracted into debates about gold's alternative "special" qualities in this environment is in my opinion (and I could be wrong) a trap. I really think gold stocks will correct big, along with most of the market. A scenario to watch on gold as physical is for it to get flushed out in a sudden spec liquidation. If that were to happen, I think I'd use it as an opportunity to get loaded up on the ETF. The commodity type play in the stock market that still has the biggest upside is energy. If you look at drillers like RIG, NBR and GSF, they've put in long base patterns of the type I love. These stocks can really get hot too. Yeah, I know, everybody wants something that's ALREADY hot, but these are not staid dull stocks, although they look deceptively that way now. And the E&Ps are incredibly cheap. And BTW take a look at the COTs on natural gas. Message 19479854