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

To: rubbersoul who wrote (12004)	9/25/2008 8:34:59 AM
From: SliderOnTheBlack	6 Recommendations Read Replies (1) \| Respond to of 50526

re: ["Slider, What do you make of this?"] I think this one picture (chart) was worth a thousand words. As well as many thousands of dollars, because if you knew what you were looking at, and didn't have on your permabull blinders, you avoided 250 HUI points & $250 in Gold to the downside: Money supply contracted from March to May, and again from July to September, and gold followed that track. Remember a couple of months back when I re-posted that Money Supply chart that some permabulls still saw as “ramping money supply” and asked them to take another look at it, and asked what they saw? And people wonder why I asked: "Would you even know it if you saw it?" Because most permabulls wouldn’t know it – if they saw it, because none are so blind – as those who will not see. That was an easy chart to read. But, yet the permabulls saw only what they wanted to see. Just as they hear – only what they want to hear. Look at that chart. Gold tracked it near perfectly. And there were other indicators that gave the same reading. Permabulls ignored them all. They even ignored the economic fundamentals of a slowing global economy, and the deflationary forces of the financial asset collapse. And now, many of them are jumping on the deflation bandwagon. While deflation may win in the end… this sure looks like a nearterm INFLATION trade to me. Last year, we had an easy forward view. The Fed was clearly going to be inflating over a long period of time. The global economies were still strong. China was roaring, and going long & strong gold and commodities, was an easy longterm call. Well that “longterm” lasted from August to March. Because in March, the Fed was near the end of it’s rate cut cycle (and the market had priced that in), and the global economies started to slow. At that time, the permabulls trotted out the “disconnect” argument. They said that China, India, Brazil, and Europe were still strong and that they would disconnect from a slow down in the US. Well that didn’t happen. There was no disconnect. And the credit crisis just accelerated deflationary forces already gaining traction within the global economies. Yet again, permabulls trotted out longterm M1,M2, MZM, and the reconstructed M3 charts of John Williams at Shadow stats and stayed long & strong gold, just as the global economy and commodities rolled over and died. While the longterm trend in Money Supply was up – they missed, ignored, or under-estimated the impact of the contraction from May to July, and the one we are seeing now. They also underestimated the impact of the collapse of the Shadow Banking System's credit creation machine which fueled hedge fund leverage and commodity speculation. And they also under-estimated Bernanke & Paulson, thinking that they were just going to stand idly by and watch oil soar to $200 and Gold past $1,000 without utilizing any “tools” to bring them to heel. Not anticipating intervention was the height of hubris among the permabulls. I talked about this in my posts on how prescient Larry Kudlow was in his real role of being an inside the beltway gossip columnist & talking points mouthpiece vs. being an economist. When Kudlow did his "180" from poo-pooing gold, and from cheerleading the benefits of a weak dollar, to screaming for Bernanke & Paulson to do something about gold, and to bring back King Dollar -- permabulls should have listened. Permabulls had every sign, and multiple chances to avoid this correction. But, they didn’t know a Money Supply contraction when they saw one. And they underestimated Bernanke & Paulson. And they ignored, and failed to anticipate the use of the tools of intervention and manipulation. And they ignored the impact of a slowing US economy, as well as the likelihood of there being no disconnect to the global economy. And they vastly underestimated the impact, and deflationary forces of the continued collapse of credit and financial markets. Permabulls were in a “greed” mode – when they should have been in a “fear” mode. And now, they are in a “fear” mode – when they should be in a “greed” mode. --- whodathunkit?!? SOTB PS: This is NOT as easy of a trade as was the trade last fall. Last year the longterm (6 months forward) view was pretty clear. Presently, it is not. This market has much to work out. Dynamic is an understatement. As such, we narrow our horizon, and stay on our toes. And now, more than ever... you'd better be watching the right indicators... and you'd better - "know one, if you see one." And you'd sure as hell, better be ANTICIPATING the tools of intervention.