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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: ajtj99 who wrote (87974)	10/8/2008 10:46:35 AM
From: mishedlo	2 Recommendations Respond to of 116555

Global Coordinated Rate Cuts Won't Solve Economic Crisis globaleconomicanalysis.blogspot.com This morning the Fed, ECB, Bank of England, Bank of Canada, and Sweden's Riksbank all cut rates by 50 basis points. Japan is on the sidelines cheering. US Futures that were down as much 4% are now in the green. Short term perhaps the market was due for a bounce, perhaps not as the day is young, but longer term one cannot cure a solvency issue with rate cuts. Let's take a look at some of the Central Bank statements. I have additional thoughts following the Central Bank statements. .... Mish

To: ajtj99 who wrote (87974)	10/8/2008 1:11:58 PM
From: SouthFloridaGuy	Read Replies (1) \| Respond to of 116555

Nice call on the potential low range. Very nice. I am sensing normalization occuring in sectors with good and improving fundamentals: ags, gold miners, etc. We could potentially have an explosive afternoon rally here. I wonder how much of this has to do with Icelandic deleveraging? Second thought: what happens when there is a run on the U.S.? eeks.

To: ajtj99 who wrote (87974)	10/8/2008 2:00:30 PM
From: mishedlo	3 Recommendations Read Replies (1) \| Respond to of 116555

Short Term Eyes on SPX 960 globaleconomicanalysis.blogspot.com Mish

To: ajtj99 who wrote (87974)	10/8/2008 2:32:53 PM
From: Crimson Ghost	3 Recommendations Respond to of 116555

GDX up nearly 13% today. Never have gold stocks been so cheap relative to bullion. Glad I am aboard.

To: ajtj99 who wrote (87974)	10/8/2008 2:51:13 PM
From: SouthFloridaGuy	Read Replies (4) \| Respond to of 116555

To put the current situation in perspective, the Gold:XAU ratio nearly hit 9 yesterday. We could see a 300% gain on the gold stocks if history serves as precedent. This has to be the single best trade I can think of John Hussman: Gold/XAU Ratio Signals Buy for Gold Stocks by: John Hussman posted on: March 13, 2007 \| about stocks: GDX / GLD / IAU Excerpt from fund manager John Hussman's weekly essay on the U.S. market: In the Strategic Total Return Fund, we continue to hold a short-duration investment stance, mostly in Treasury Inflation Protected Securities. The Fund also holds about 20% of assets in precious metals shares. It's worth noting that the fairly simple but generally useful Gold/XAU ratio is now pushing close to 5.0, though it has not breached that level. To reiterate my remarks on the Gold/XAU ratio from the May 2, 2005 comment: “To put some historical context on this measure, since 1974, the Gold/XAU ratio has been greater than 5.0 about 15% of the time. When the ratio has been this high, the XAU has followed with annualized gains of 89.6%, on average – a figure that remains high even if the data is split into multiple samples. When the ratio has been greater than 4.0, the XAU has followed with average annualized gains of 27.4% (though the finer profile of returns has been sensitive to other conditions such as interest rates, economic trends, and inflation). In contrast, when the ratio has been less than 3.0 (meaning that the gold stocks are very elevated relative to the actual metal), the XAU has declined at an annualized rate of -36.6%, on average. “Importantly, the return/risk profile for precious metals shares is strengthened further if the economy is experiencing weakness. For example, when the Gold/XAU ratio has been greater than 5.0 and the ISM Purchasing Managers Index has been less than 50 (indicating a contracting U.S. manufacturing sector), gold shares have appreciated at an average annualized rate of 125.6%. In contrast, when the Gold/XAU ratio has been less than 3.0 and the Purchasing Managers Index has been greater than 50, precious metals shares have plunged at an average annualized rate of -49.9%.” Such strong periods for gold are also generally associated with weakness in the U.S. dollar. Something to think about as the economic picture evolves in the months ahead.