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

To: Wyätt Gwyön who wrote (2318)	11/18/2003 11:25:07 AM
From: ild	Read Replies (5) \| Respond to of 110194

Date: Tue Nov 18 2003 11:03 trotsky (Blind Pilot, 8:39) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i couldn't agree more - this is exactly why the problem we have is actually deflation and not inflation. while commodity prices soar, they actually don't create any pricing power on the part of industries outside of the small commodities producer sector. the conclusion therefore is that margins are squeezed, and that has a deflationary effect in an economy that is entirely dependent on rapid debt growth. still, the next move by the Fed may not necessarily be a cut in rates - but if they DO hike ( as e.g. the BoJ has done when it wrongly believed the end of the first cyclical recession after the bubbble burst required a tighter stance ) they will very likely be forced to cut rates again shortly thereafter. the entire credit bubble edifice is in dire need of those extremely low short end rates, as leverage has been piled upon leverage to enhance returns. not to mention the fact that a truck-load of corporate debt has also moved to the short end of the curve and is in constant need of rolling over. btw., Mr. Mickey 'i'm bullish no matter what happens' Levy , 'chief economist' ( a position akin to the witch doctor in Bantu cultures ) of Bank of America assured us this morning that the recent sharp deceleration in the growth of the monetary aggregates ( actually, growth has gone negative in the past 2 months ) is 'nothing to worry about' - which is a red alert of the first order. a sharp decline in the Ms basically indicates that the Fed's traditional methods of goosing the supply of funny money have stopped working in the wake of an unexpected fall in credit demand. thus we should expect the old threat of 'unconventional measures' to be resurrected shortly - but the bulls and inflationists better consider that neither the Fed nor any other CB is likely to print itself out of power and existence, although it can't be ruled out entirely of course. Date: Tue Nov 18 2003 10:17 trotsky (strat, 8:07) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved all this worrying about the purported 'lack of physical demand' requires a response. on January 21 1980, when gold hit its all time high intra-day price of $850/oz., there were long queues outside the coin dealer shops, as the masses were eager to convert as much fiat as possible into gold. no-one was worried about physical demand at that time, and yet, the prices paid that day have never been seen again since. what analysts of the gold market routinely miss is that the standard commodity supply/demand equation does not apply to gold, due to the large existing stock. the gold price is a function not only of demand, but also the willingness of the current owners of the existing gold stock to part with same - in fact, they are the biggest influence on the price of gold, since they are the by far largest force in the market. among those, we can differentiate between a few subsets, roughly the official sector, the rich guys, and the Indian peasants. the offical sector used to be the biggest force in the market, back when it owned the bulk of the world's already mined gold. its importance has however declined almost to the point of negligibility at this stage, since the fools in that sector ( e.g. Canada and Australia ) have basically sold all of their gold, and the remainder either only TALK about selling ( but don't dare to follow through ) , or are actually looking to buy ( Russia, China... ) . this leaves the rich guys and the little guys - and the only little guys who own any are in India, where tradition actually still sees to it that little of the hoarded gold actually enters the market, in spite of the 'price rise'. thus the biggest actual force in the market are the people who have assets to protect - the oil Sheiks for instance. since it is probably reasonable to assume that most rich guys are well aware of how our money system works, and how fragile its underpinnings actually are ( Ponzi scheme is too kind a term to describe it ) , it would be surprising if they weren't a little alarmed, to put it mildly, at the antics of our supposed monetary guardians, the bureaucracy that mans the printing presses. it is this subset of informed and well-heeled investors that ultimately drives the bull market in gold - if they have it already, they don't sell, and if they don't have it, they eagerly pounce on pullbacks to buy ( see Bill Bonner as an example ) . it is not a question of making a quick buck - it is a question of getting through the eventual crisis of the fiat system in one piece. the speculators at the COMEX whose activities set the day-to-day 'price' are actually only a sideshow in this context. an important one from the PoV of the trader riding the trend no doubt, and the main source of short term price volatility - but not the root cause of the bull market.

To: Wyätt Gwyön who wrote (2318)	11/18/2003 11:51:35 AM
From: russwinter	Read Replies (4) \| Respond to of 110194

<quote from a guy who's never shopped at Walmart> I still think he's right, it's all relative. Here's my latest WMT shopping experience. Found some PJ bottoms with the monopoly guy on them. Only $8, I thought, and "IT'S ME! Looked at label, it said "made in China". Oh well, I'm going to make a impulse purchase here like most Americans do. Besides unlike most, I don't even have to use a credit card for this purchase as I had the cold hard cash on me. So I took it home, wore it for two days and ended up with a four inch hole in my crotch, you know the kind where you can't even go out and get the paper in the morning. And to add insult to injury I had bought a POS disc player and headphones, made in China for "only" $39. It failed to work after three days of light use. The good news is I bundled all this crap up and took it in to WMT and asked for a refund. The $6 an hour clerk asked me why I was returning this, and I said, "because it's Chinese made garbage, like everything else you sell here, and I'm only human, made the mistake of buying it in a weak moment". She actually grinned, sort of nodded her head in silent agreement, quickly gave me the refund, and said, "Have a good day, sir" (and I thought sincerely, as I can usually tell when someone's shining me).