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

To: yard_man who wrote (22823)	2/3/2005 4:06:47 PM
From: mishedlo	Respond to of 116555

Heinz on the miners Date: Thu Feb 03 2005 12:59 trotsky (pm stocks) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved clearly they've been in a cyclical bear market since early '04. it is probably within the context of a secular bull market, but unfortunately there's no indication as of yet regarding the likely end of the cyclical bear ( i.e., when and at what level it will bottom out ) . there was one major cyclical bear market nested between two cyclical bulls during the 70's - that one lasted about 1 3/4 years , and similarly to the current one took down junior gold stocks by between 60 - 90% from their highs and the majors between 40 - 60% ( obviously, this hasn't yet played out in full here, and it's not certain that it will ) . we SHOULD have seen at least a short term bounce by now, in view of sentiment and positioning as well as money flow data. the fact that it hasn't happened is a further indication of the market's bear character. of course there WILL be a bounce at some point - it may even be starting from today's lows. how the above mentioned data sets behave during the bounce will further clarify likely future ( medium term ) direction. judging from yesterday's FOMC statement, the Fed is bent on compressing the yield spread further ( note that their rate hikes can not force an end to the rally in long dated debt, on the contrary ) . and this remains the sector's major problem. in fact, all the markets that have benefited from the reflation trade are likely to come under pressure if this keeps up - i.e., real estate, stocks and commodities primarily. the economic recovery has been so weak ( the economy has structural problems that can not be solved via monetary and fiscal stimulus ) that the chance remains good that the rate hike cycle will reverse relatively soon. and that seems to be the sine qua non for ending this bear market.

To: yard_man who wrote (22823)	2/3/2005 4:48:32 PM
From: mishedlo	Respond to of 116555

Heinz on Fed hikes, gold, and the real estate bubble Thanks to ILD Date: Thu Feb 03 2005 15:23 trotsky (art_vandila) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i've only taken a quick glance at it, but the man has a point - if they keep hiking, a curve inversion will happen. only i don't think they'll go for that - too risky. but anyway, we're definitely where Japan was anno '93-'94. they had also begun to timidly hike in the belief that the post stock market bubble fall-out had been successfully contained, and promptly caused the dramatic collapse of their real estate bubble, which has left Japan's banking system essentially insolvent. i'm absolutely certain that exactly the same thing will happen in this case, in view of over 60% of US bank assets being tied to the mortgage credit bubble. Date: Thu Feb 03 2005 15:12 trotsky (mozel@Warburton) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved yes, it's money for free for the elite that has access to it - but this doesn't mean that it's really a 'free lunch'. because the central bank directed fiat money system sets off exchanges of something for nothing ( real goods and services for money created out of thin air ) , it continually weakens the pool of real funding. the game can continue until such time as the pool of real funding is exhausted ( i.e., the seed corns are all eaten ) . then comes what tends to happen in third world countries already at an earlier stage when they try to print themselves into prosperity - the systemic collapse. Date: Thu Feb 03 2005 14:52 trotsky (Bleuler) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "Iraq, the war and the “quagmire” are gradually being factored out of the market " i actually don't believe Iraq to be a factor in gold pricing at all, except in indirect fashion. it is only relevant inasmuch as it tends to raise the US budget deficit ( this will continue unabated , so it's unlikely to be 'factored out' ) and also because it spurs Middle Eastern gold demand as investors from the region get cold feet regarding the safety of their US investments. the war as such, or the fact that it has turned into a quagmire isn't all that important. oh yes, it remains a quagmire. every editorial on Iraq over the past few weeks has charged that the violence was aimed at 'derailing the election'. oh well, over 20 people have been killed by the insurgency in the past 24 hours, and yet another oil pipeline has gone up in smoke. so what is it about now? i'm eagerly awaiting the new narrative. be that as it may, the gold price and more importantly, the gold stocks, need a steepening yield curve. it's true that speculator net long positions have shrunk to the point where a rally becomes likely if one looks at the positioning data that have accompanied the bull market to date. but one must consider that if the fundamental backdrop doesn't change, speculators may adjust their positions further. if they become convinced that prices are headed lower, they'll go net short... so the CoT report doesn't really tell us all that much when viewed in isolation. this is not to say that there aren't any positive developments to report. one is surely that sentiment has become very bleak, and the Rydex pm fund continues to level out at less than 50% of peak assets. also, speculative dollar net short positions have been vastly reduced in recent weeks. certainly looks like a good backdrop for at least a bounce, but then again i thought that before. Date: Thu Feb 03 2005 14:34 trotsky (goldfish) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved " I better sell more NOW! " that may be a good anecdotal contrarian buy signal. remember when you were going on about Fed rate hikes ensuring higher gold prices? say, up to $600/oz.? not to worry, gold will rise again - as soon as it becomes clear that the rate hike campaign is ending.