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

To: ild who wrote (17646)	8/12/2004 4:53:12 PM
From: ild	Respond to of 110194

Date: Thu Aug 12 2004 16:33 trotsky (Steve@Rand rates) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved you are correct in principle, but note that SA's rates were ( and still are ) way too high without invoking oil ( which i agree is really a bad reason to lower rates ) . the SARB would have been more credible had it cited the sharp slowdown in SA's inflation rates and the contraction in bank credit. Date: Thu Aug 12 2004 16:29 trotsky (tyrant1) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i wouldn't bet any money on the supposed gold/oil correlation. looking at it historically, it seems that the extent of correlation depends on the economic era one is in. thus there was a relatively close correlation in the 70's, but very little ever since. monetary yardsticks such as the steepness of the yield curve are far more relevant to the gold price. one could claim an indirect correlation, as the rising oil price is at least partly the result of the monetary inflation of the past few years coming home to roost. Date: Thu Aug 12 2004 16:14 trotsky (P. Yorkie) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved well, the sharply rising price will lead us into the 'plateau' period, since it will lead to SOME fresh supply entering the market ( previously unprofitable production can be activated ) plus eventually a dent in demand, especially if prices go much higher. but the longer term depletion story will remain in effect imo, and a good argument can be made that THE peak has already passed. the longer prices stay high, the longer the plateau period will last...if a global recession leads to an intermediate term price crash, the plateau period could be cut short. what's scary is the 'post plateau' scenario, a.k.a. the fall off the cliff. Date: Thu Aug 12 2004 15:55 trotsky (RIP@Greenspan mojo loss) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved that day isn't far off - unless he retires in time. i sure wouldn't want to be in the shoes of his successor.... Date: Thu Aug 12 2004 15:53 trotsky (strat) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this particular fight for oil sure backfired badly, as evidenced by the erratic supply emanating from Iraq. there's every reason to believe that other oil grabs currently in the planning and formulating stages ( i.e. Iran for example ) won't fare any better. in any case, depletion is becoming a serious issue very fast now - the UK is about to become a net importer, and Indonesia ( an OPEC member ) has already become one. Venezuela and Norway are in steep decline, and even Saudi Arabia's capacities have become doubtful. iow, this whole thing could very well be already out of anyone's capacitiy to control it. Date: Thu Aug 12 2004 15:47 trotsky (Aurum) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved if i may interject: taxes should be abolished altogether and be replaced with voluntary contributions so that services deemed essential can be financed, if the citizenry insists on having a 'state' at all directing the rendering of such services. there's good reason to believe that this is entirely unnecessary ( i.e., it would do no harm whatsoever to simply dissolve the state ) , but we'll never find out in practice of course. Date: Thu Aug 12 2004 15:40 trotsky (@crude oil) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved there can be no doubt whatsoever that crude trading above 40 is the pin pricking the 'recovery' bubble. it's the precursor to the consumer recession, just as crude spiking to the high 30's in 2000 was the precursor to the business recession. it is THE most important price in the economy. Greenspan's talk about its 'transitoriness' notwithstanding. one would do well to remember that he has an economic forecasting record ranking right down there with the worst forecasters of all time. in 2000 he failed to see the oncoming train in several respects...oil was deemed 'unimportant' then too. he didn't even acknowledge that the Nasdaq was in a bubble when it was trading at an average p/e of roughly 300 ( not counting the loss makers ) . and he kept raising rates when the recession and the collapse of the bubble were already getting into gear. if there's one thing that can be relied upon it's that his forecasting powers haven't improved any. i say the coming downturn is OBVIOUS - ECRI's leading indicators have declined for 8 months running already. he thinks it's 'transitory'. he was wrong last time, and will be wrong again this time. prepare for the 'zero boundary' - it's coming. Date: Thu Aug 12 2004 15:22 trotsky (Goldfish) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i've become convinced that the Fed is not 'behind the curve' as is popularly alleged, but way ahead of it. they seem to think they have the deflationary K-winter licked - wrong. it can't be stopped by a puny central bank. the liquidation of the debtberg is coming - whether they like it or not. Date: Thu Aug 12 2004 15:17 trotsky (@SA rates) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved the repo rate was lowered from 8% to 7.5% today ( i.e. the rate at which the SARB lends short term funds to the banks ) . it is to be expected that prime rate and deposit rates will follow suit. the Rand's reaction meanwhile offers some tentative proof that i was right after all: it is not so much the gold price that determines the Rand's external value, but rather the level of the rate differential. furthermore, the South African yield curve is important. today's lowering of the repo rate steepens the SA yield curve, which is bearish for the Rand. a caveat here is that this will only continue if the market becomes convinced that the rate cut cycle is likely to continue. with inflationary pressures in SA currently well under control, and bank credit having contracted for quite a long period now ( over a year ) , chances are good that that is the case. Date: Thu Aug 12 2004 11:05 trotsky (IAG/GFI) ID#377387: Copyright © 2002 trotsky/Kitco Inc. All rights reserved there seems to be a lot of confusion here about that deal. to wit: Moregold opines: "GFI will own 70%, and I guess that makes it just another SA Gold stock... Stupid move IMO. Yes IMG holders must vote. Meanwhile they are losing millions on this stupid chit." this deal is in fact a great boon for IAG, as is evidence by the sharp rise in its share price since it was announced. it is less clear whether it's such a good deal for GFI, but obviously there are synergies, and the market seems to like it. this is the arbiter of whether a deal makes sense or not: if the market likes it, and sends the share prices of both the target and the acquirer up, it definitely DOES make sense. as to the 'it's now just another SA gold stock', that's of course nonsense. the only conncetion to SA is the fact that SA based GFI will hold 70% of the share capital. in every other sense, it is NOT an SA firm. none of its assets are in SA, its main listing won't be in SA, and neither will its headquarters. for GFI this was a great opportunity to split its non-SA assets technically off from its SA operations. the new company, GFI International , is in every important aspect outside of the jurisdiction of SA. a rerating of the company's valuable assets has already begun, and will probably continue. as an aside, GFI has what IAG has never had: strong operational management. its among the best in the industry as it were. IAG shareholders can consider themselves supremely lucky that this was the choice for White Knight - they couldn't possibly have gotten anything better. needless to say, it beats the pants off the originally proposed WHT merger by a margin so wide you can drive the entire Grasberg mine truck fleet through.