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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 (33080)	5/24/2005 3:06:46 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Tue May 24 2005 14:31 trotsky (@pm stocks) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved you may recall, i remarked last week that strong relative performance of the SA gold stocks boded well for the sector as a whole...mainly based on the idea that they have led all major intermediate term moves. SA's miners still have very low margins to contend with, not to mention upcoming labor negotiations, but the fact remains that the bulk of the world's in situ gold reserves remain in SA - even if it is more difficult and less economic to dig them out at present compared to the past. actually, GBN's Burnstone deposit proves that even in terms of exploration, SA is far from finished. anyway, this sub sector should be on everybody's radar as a potential early warning indicator of trend changes. further, the question whether the recent low in the XAU was 'the' low remains open...conceivably there could be a few weeks worth of rally followed by antoher drop - mainly depending on how soon the Fed is forced to abandon its rate hike campaign. the sooner, the better, although it probably makes no difference in terms of the long term outcome. if the bounce now underway gets legs, the evolution of sector-specific put/call open interest ( rising or falling ) will also be an important indicator of the rally's durability. at present this indicator still is in neutral territory by and large ( i.e. it is not yet confirming the rally ) . Date: Tue May 24 2005 13:45 trotsky (RIP) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved i believe that's right...the insurance industry is behind the seat belt and helmet laws. that adds a layer of complexity to the debate which i hope we won't explore in detail... Date: Tue May 24 2005 13:31 trotsky (@the Rand) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved like i said, the next target seems to be the line of horizontal support in the 6.70 region...if that falls, the next zone of support is between 7 and 7.50. if that falls, it'll be on its way to the origin of the wedge on the weekly chart ( about 8.50 ) . lots of 'IFs' - similarly sized corrections have happened before after all ( but they coincided with a better fundamental backdrop for the Rand ) . Date: Tue May 24 2005 13:24 trotsky (@UN tax) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved all you need to know is that the US income tax started at a 1% rate, and was at the time considered to be 'no big deal'. then you know where this UN tax thing is headed. Date: Tue May 24 2005 13:20 trotsky (frustrated@ 'several recessions') ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved very likely actually. secular bear markets are usually attended by a string of recessions with cyclical inventory build-up recoveries in between. the current recovery cycle is already long in the tooth, which is confirmed by the 4 month old down trend in leading indicators ( not only ) . Date: Tue May 24 2005 13:12 trotsky (also) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved the 1970's 'sideways' market really was a catastrophic decline in real terms. in fact, the 1972-1974 bear market leg was just as bad as the 1929-32 debacle adjusted for inflation ( not to mention the fact that the indices actually masked the damage to a large extent due to their 'survivor bias' and the flow of money from small to big caps during the worst bear legs. the vast majority of stocks suffered far worse declines than the Dow ) . yes, inflation expectations were rising, and the bond market reflected that. but WHY? what was the reason? why did inflation expectations constantly decline barely 10 years later, in spite of money supply growing far faster and budget deficits expanding at a far faster rate as well? should not inflation expectations have risen at a faster clip as well? the answer is probably the longwave phenomenon...and if it is operative, interest rates are bound to come down a lot more, and stocks and real estate will come down right with them. deflationary era bear markets are not worse in real terms than inflationary era ones, but they sure are worse in nominal terms. for instance, the Nasdaq's first down leg in the secular bear market was over 80% down from the highs this time...and generally, the C-wave, or second down leg is worse in percentage terms than the first ( Japan's Nikkei index is a good example for this phenomenon ) . Date: Tue May 24 2005 13:02 trotsky (P.Yorkie) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved " You seem to assume the next significant move in interest rates will be up." absolutely not...where did i say that? i think interest rates will decline further, and possibly dramatically so. my current best guess is that the ultimate low in long term rates is 7 to 10 years away. and again, i don't think that the coming denouement of the housing bubble depends on rising interest rates. people have the cause-effect vector confused. it is thought that 'this and this will happen because rates are coming down', but the better way to look at it is 'rates are coming down because this-and-this is happening or about to happen'. no-one is buying long term US govt. bonds because they aim to prolong the housing bubble. they're buying those bonds becasue they fear that the popping of the housing bubble will unleash a flood of demand for bonds and notes , and they want to get in before it happens.