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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: wsw1 who wrote (7765)	1/21/2008 11:54:31 PM
From: SliderOnTheBlack	Read Replies (1) \| Respond to of 50350

Heads up: an imperfect storm for gold stocks... There are two headline items that are driving markets (and gold stocks) down. -- The U.S. Recession. -- Downgrades/insolvency issues with bond insurers ACA, Ambac and MBIA. And one other factor that is not in the headlines, ... the unwind of the Yen-carry trade. Remember, the unwind of the Yen-carry trade was the primary catalyst to both the May 2006 and August 2007 forced selling/capitulation washouts of gold stocks. Back on November 13th, I talked about how important the Yen-carry trade is to gold and gold stocks, and said to watch the Yen, the Gold:Yen and HUI:Yen ratio's as your primary early warning indicators. Message 24050631 And nothing has changed since... There is a massive amount of leverage in gold, gold stocks, commodities, and emerging markets from the Yen-carry trade. And now, with Yen strong, the Yen-carry trade is getting unwound simultaneous to the U.S. economy rolling over, and the derivatives contagion spreading to the bond insurers. ...that's kind of like having your back against the wall, and getting attacked from the right, from the left, and from straight ahead... with no way to retreat. Gold has held up much better than gold stocks in each of the prior Yen-carry unwinds. If you want to keep some long positions during this correction - you will have less downside in the metal, or in GLD - than in the stocks. It's no mistake that the Fed is dragging it's feet. This was an orchestrated washout... where Main Street USA investors will be folding their hands and tossing in their 401K and mutual fund cards....as insiders are pre-positioned massively short. People thought there would be safety in China, India, Brazil, emerging markets, and in gold? ...but not in the initial phases of a correction of this magnitude.. This is a very explosive and dynamic market. There won't be too many places to hide other than cash, and short term Treasuries for those with low risk tolerances... and shorts & foreign currencies for those with higher risk appetites. There's only 6 trading days until the Fed meeting, and with volatility exploding - puts as insurance, or as a directional trade, are now incredibly expensive. The Fed may step in tomorrow, or they may continue to drag their feet until their scheduled meeting on the 29th and 30th. If they don't act until then... it could get real bloody, real fast. Sadly, this was a brutal trading lesson about staying out front of, and ahead of the market. S.O.T.B.