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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 (25852)	2/4/2005 12:27:28 PM
From: ild	Read Replies (2) \| Respond to of 110194

Date: Fri Feb 04 2005 12:05 trotsky (@Greenspan) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved well, LOL. the blah-blah of the chief monetary bureaucrat tends to really move markets - usually for the duration of exactly ONE trading day. remember his 1996 'irrational exuberance' speech? besides, the guy is one of the worst economic forecasters the world has had the misfortune to encounter....whatever he forecasts, the chance is 99:1 it won't happen. a mere week before the worst bear market since the 1930's began in 1973, he announced that 'rarely can one be as unqualifiedly bullish as now'. examples of this extraordinary sense of timing abound...e.g., when he finally embraced the idea that the stock market bubble wasn't a bubble after all, and may be 'justified' on account of the new era, the bubble promptly popped. so when he says not to worry about the current account deficit, and waxes bullishly about the US economy's prospects, it's high time to batten down the hatches. Date: Fri Feb 04 2005 11:54 trotsky (strat, 8:02) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "How about those interest rates....looks like they're not done going up. Higher rates = lower gold. " huh?? treasury bonds and notes are having yet another wild rally day....we're recording the lowest yields in over a year ( as expected by yours truly ) and i for one have little doubt that new all time lows in interest rates across the maturity spectrum are in store in the not-too-distant future. the ONLY rates that are indeed rising are the ones on the very short end that the Fed directly controls, as well as that part of the yield curve that is closest to those rates. if it were up to the market, those rates would without a doubt be falling as well. also, the simplistic "higher rates=lower gold" is simply not true...the decisive factor is the spread between short and long term rates, not the absolute level of rates. also, nominal rates shouldn't be considered either, it is the real rates ( nominal minus inflation ) that count. all that said, what is happening IS negative for gold and gold stocks, since the continued rally in the long end of the curve keeps compressing the yield spread. we're closing in on an inversion, which if it happens will cause a recession ( actually, chances are very good that the recession begins well before the curve inverts ) - then the cycle begins afresh ( i.e., the yield curve goes back into steepening mode on frantic Fed rate cuts, and gold and gold stocks soar ) . the only question is who will blink first...hint: it won't be the bond market.