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 : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (20643)	1/6/2005 9:34:41 PM
From: SouthFloridaGuy	Read Replies (4) \| Respond to of 116555

Mish, I think Heinz is correct about gold's relationship with the yield curve. Gold appreciation is a function of loose monetary policy - which is exactly what we have had since 2001 until rates began to rise. Today it's not tight in an absolute sense, but it's moving there and it is certainly tight in a relative sense given the amount of leverage in the economy and the insatiable need for liquidity. I actually think the Fed keeps rising into this. After all, there is still "growth", apparently housing values are still rising so all is well in Dodge. The economy will show the appearance of strength through the first half of the year. I think Greenspan wants to get enough landscape for the next round of deflation fighting; he may even be willing to accept a steeper recession and raise more than expected just to get the landscape to cut hard and fast. However, it took something like a 500 basis point cut between 01-03 to get the economy rolling after the stock bubble collapse, now he may have 300 bp if he's lucky to fight a much bigger bubble burst in housing, and that is assuming he takes it to 0%. I just don't think he can do it. With regard to the yield curve, we already see what is going in the UK and Australia, deflating housing bubbles, lackluster consumer sales (especially in the U.K.). All it takes is an exogenous event to take us down big. Whatever it is, my bet is that it affects oil big time. Best case scenario is a recession equivalent to the early 90's and a 33% decline in the Dow. Worst case scenario is not worth talking about until we get more color.