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

To: Square_Dealings who wrote (21032)	10/30/2004 7:48:36 PM
From: Carlos Blanco	Read Replies (2) \| Respond to of 110194

that's my point. sometimes the majority is right i've been thinking about contrarianism as a philosophy...it seems to me that its effectiveness is directly proportional to how closed a system is. i.e. if the number of players & bets is finite and fixed, then positional extremes do in fact predict tops and bottoms. the comex is a fairly closed system wrt. fixed players and capital, and that's why positional extremes in gold/silver have signalled tops & bottoms (so far). arguably the goldbug universe itself has been a similar kind of closed system--most of us frequent the same web sites, read the same articles, hold the same stocks, and new players and analysts are added very slowly. contrarian analysis in the gold space is likely to start failing when a large supply of new players finally comes onboard. this is what happened in the 90s with the general stock market via the massification of online brokerages and 401Ks--that huge mass of dumb money has permanently deformed traditional topping and sentiment metrics to this very day: VIX @15, P/Es in the 25s, 50%+ bullish consensus, 1% dividends, etc. i think the arrival of the gold ETF is crucial in terms of opening up the gold system to the masses and breaking the COT/sentiment trap. but, your phrase was about the dollar, and there i see a very different picture and agree with your intuition. it can change into a much larger and more open system in the blink of an eye. ownership of dollars is very broad and there are billions of dollars hidden in mattresses worldwide. polling N analysts or looking at COT forex trading positions is kinda meaningless with all that money on the sidelines potentially losing faith with each new downleg. if those holders start getting antsy, sentiment indicators and technical analysys will be completely useless in front of the selling avalanche. we could see see 99% bearishness for years while the gigantic dollar overhang gets cleared or the fundamental deficit problems are addressed.