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Strategies & Market Trends : 2026 TeoTwawKi ... 2032 Darkest Interregnum -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (2229)	11/18/2005 11:15:58 PM
From: regli	Read Replies (1) \| Respond to of 217738

This is from Suttree on Russ' thread. I think it is a nice response to your blog: Snooze And Loose or No Balls No Babies FXA Plants Corner 11/18/2005 fxa.com 6:00 AM New York time. There… I finally used the Rocky and Bullwinkle Fractured Fairy Tales cartoon two-title system. I’m sure very few of you remember them. The title pertains to gold and my reluctance to put that third unit on, thus missing this last move in a size that would be almost George –like (relative to my portfolio size… 300% invested). Still at least I was patient and didn’t bail on the other two. I’m sure many participants are blaming this last move on the World Gold Council’s recent demand statistics. Ok… fair enough. But let me pass along some observations I have made from my seat at FXA. I think most of the big macro guys pooh-pooh gold. They may have some on in token small size, but I am amazed at how little credence it gets as an alternative to paper… and many of these guys remain long-term dollar bears. You would think dollar bears would be all over this trade. Yet, all I hear is the same standard line you get from finance officials, that gold is just another market indicator of inflationary pressures. And now that oil has returned to pre-hurricane season levels… well gold is probably even more of an aberration. Readers may have a different perspective based on whom they talk to. But this is mine and if true, I find it the height of market arrogance. To say that gold is no longer a store of value in our modern financial world is to forget all our lessons of financial history and its core cyclic nature. It boggles my mind that virtually no one I talk to sees it. Gold bulls are still considered bugs and looked upon as a fringe element in finance. Fine. I just know this. Its those things that nobody looks for, ideas that seem outlandish at first, but gain traction over time, that come back to bite us on the ass. If just one Fed official would come out and say he (she) was worried over the rise in gold prices I would calm down. If talk of the gold rally would start going around the hedge fund community (and filtering into us) I’d calm down. But no one has and it doesn’t. And THAT is the greatest indicator of all. The US financial community watched the bond market rally for two years before actually caving in to the view that foreign capital was flowing back into Treasuries. Economists fought tooth and nail before they would acknowledge that these flows were big enough to distort price action and thwart the Fed… causing the “conundrum”. Now that “theory” is the standard line, and you get Steve Liesman on TV tearing pages off a big display pad (yesterday’s show) to explain to the viewing public how the whole recycling of dollars works. So now EVERYBODY knows. And yet those same people, from the top down, watch gold prices make BIG new highs, without the dollar, without oil, without any help from anywhere other than the flows of capital from somewhere to maintain it, and could apparently care less. Let me tell you my view. Those flows are damn important! And we had better pay close attention to them and where possible, try to find out the where’s and why’s. Because if those sources of capital turn out to be the same places that sent money to the bond market, then we need to understand that ever higher gold prices and higher bond prices are not two ideas that tend to get along well together over time. Nor will higher gold get along well with a continually rallying dollar. I say this again for the umpteenth time, and I will say it again for as long as I live. Markets seek out vulnerability. They are the peacetime mechanism by which the strong prey upon the weak. If your financial system has something to hide or a weak underbelly, rest assured it will be found and exposed. I don’t know (as I never do) where all this is headed. What I do know is that the move continues while the big names in finance try and ignore it. Meanwhile money keeps pouring in. Those two forces will ultimately collide. THAT is the general rule and what I DO know.