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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 (43639)	10/17/2005 12:35:21 PM
From: ild	Read Replies (1) \| Respond to of 110194

Date: Mon Oct 17 2005 11:19 trotsky (is inflation a threat?) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved this seems ever more unlikely. not only are year-on-year money supply growth rates down sharply to their lowest in over a decade, but wages continue to deflate in real terms: "Wage pressures are nonexistent. In a separate report, the Labor Department said average weekly earnings fell 1.2% after adjusting for inflation. Real average hourly earnings are down 2.4% in the past year, while real average weekly earnings are down 2.7%, the biggest drop in 14 years." unless money growth and wage inflation pick up, rising commodity input costs will continue to crimp corporate margins and consumer demand alike - and have a deflationary rather than an inflationary long term impact. i agree of course that the government's price inflation statistics are extremely fishy, and that CPI does not reflect CURRENT price inflation properly. however, the question remains, what is supposed to drive future inflation? obviously higher commodity prices can not per se 'create' inflation. rather they are a late stage symptom of PREVIOUS monetary inflation that took place in 2001-2002. unless the Fed begins to monetize the energy price rise and the rising fiscal deficit more vigorously, and /or wage inflation takes hold, it is difficult to see how inflation is supposed to pick up in the medium to long term future. the entire macro-economic data backdrop of recent months suggests that monetary policy is tight and beginning to bite. leading indicators have been declining for months, the annual growth rate of revolving home equity loans has gone negative for the first time in several years, annualized broad money supply growth rates continue to decline ( money AMS is actually contracting y-o-y, and MZM's slowdown to 1.8% p.a. is a new 11 year low ) , the yield curve has flattened, the dollar has strengthened, and the household debt service ratio has climbed to a new all time high of 13.6% of income, while household fuel expenditures have risen to a 19 year high of 9.1% of income, up 50% from 2002. at the same time, the savings rate has actually turned negative. none of this supports the idea that inflation is about to accelerate ( which however seems to be the new consensus of both mainstream economists and the bureaucracy ) . it does however support the idea that the market's current assessment of future interest rate policy is most likely misguided - short term rates are likely to top out and decline much sooner than is generally anticipated ( just as the anticipation that the FF rate would stay at 1% 'forever' turned out to be wrong, the current rate rise expectations will likely turn out to be wrong as well ) . Date: Mon Oct 17 2005 10:45 trotsky (art_vandila) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved "Gold spiked this morning due to the fact that a trading firm went belly up, which caused POG and POS to spike." how do you know that? is there any corroberation of this beyond rumor? even if it turns out that Refco was short the metals, how do you know they didn't simply short them because they thought the market was overbought? or maybe they held offsetting long positions in otc hedge contracts with miners, or maybe they held offsetting physical long positions? in short, there are numerous possibilities that look more credible than the 'Refco is part of the cabal' theory. the fact every little twitch in these markets is ascribed to manipulation by the conspiracy theorists doesn't help their credibility imo. now, i would agree with the manipulation theory up to a point. that point is that the fiat money issuers , more specifically the Western CBs, have a strong interest in 'managing' the gold price's ascent, i.e. they sure wouldn't like to see it spike higher a la 1979. but imo these attempts to keep the price rise in check are likely confined to selling WAG allotments of CB gold at 'opportune moments'. i don't think a gaggle of bureaucrats from 10 different countries is capable of anything more sophisticated or coordinated. what is the long term effect of the WAG type selling? so far, it's a big fat zero, as the monthly gold chart shows: tfc-charts.w2d.com this looks like a prefectly normal, healthy bull market, that has been running for about 5 years now. if anyone ever dug up evidence ( as opposed to rumor, supposition, etc. ) of a manipulative gold price suppression scheme, this chart would say loud and clear 'the manipulation attempt has failed'. Date: Mon Oct 17 2005 10:23 trotsky (@the Rand) ID#248269: Copyright © 2002 trotsky/Kitco Inc. All rights reserved back to square one - the 6.60 resistance has once again rebuffed the brief attempt to overcome it. note though, the more often this level is tested, the more likely it becomes that the Rand will eventually break through. also, the longer it takes to break through, the more technically significant the break will be if/when it occurs. in any event, the multi-year low in Rand/dollar ( i.e., multi-year high in the Rand's valuation ) that occurred intra-week in January of this year at about 5.62 shortly before the big Barclay's remittance continues to look like a long term turning point for the time being. since this euphoric low in r/d was put in place, 3 higher weekly and monthly highs plus 3 higher weekly and monthly lows have been established, the first time such a succession indicative of trend change has occurred since the beginning of the Rand's bull market in 2002. of course if the Rand were to eventually best the 5.62 level on a weekly/monthly closing basis, the bull market would be considered back in force.