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Gold/Mining/Energy : At a bottom now for gold? -- Ignore unavailable to you. Want to Upgrade?

To: Bobby Yellin who wrote (1331)	6/30/1998 1:29:00 PM
From: Ray Hughes	Read Replies (2) \| Respond to of 1911

Hi Bobby, I see the end of cold war as driving western governments into policy shifts causing long term cyclical downturn for Asia. Tolerance for corruption, excessive leveraging and unfair trade practices may be ending. US and European Cold War-driven policy was to prop up certain So. American and African and, especially, Asian economies to contain communism. US bent over backwards to accommodate hard nosed Japan on trade issues - gave away US jobs for security. Now, with cold war receding, other issues are coming to the forefront in US and Europe, notably, health care costs. Propping up Asia at the cost of jobs that are needed to service, through payroll taxation, health care is no longer tolerable. Problems at home now take top priority. Thus ends the sheltering of Asian trade resulting in a long term Asian business downturn and, hence, ending of debt bubble. Asian over-leveraged businesses and over-leveraged workers must cut debt causing consumption to decline yielding reduced demand for commodities sufficient to cause deflation, or at least, stagnation in prices. If I'm right investment appeal of hard assets (il-liquid) is reduced and highly liquid financial assets remain in favour. If so supply of lendable funds remains high while demand for funds eases due to debt bubble correction. Net result is pressure to ease interest rates and bonds rally. The last thing western banks, that are on the hook for Asian loans, need is a rise in rates. On a fundamental cyclical plane, Asian economic growth, facilitated by US & European cold war accommodation, caused massive growth in demand for materials in economies then at a very materials intensive stage of their cycles (vs US & European economies at service-based stage). Global materials capacity had been down-sized and chastened materials industries managements were loath to over build capacity after boom/bust 1960s & 1970s. High demand and low capacity growth yielded materials inflation. That induced a new round of materials capacity building. Now, if Asian consumption growth slows, we will enter a long term ample-to-over capacity situation in materials. We've already witnessing strong deflation in metals pricing. Ditto oil, cement, limestone, etc. Bottom line: 1) money would not flow strongly back to Asia if business there is constrained by unwinding of debt bubble, 2) this helps keep commodities pricing subdued, 3) deflation/lowflation helps keep interest rates subdued, 4) financial assets remain in favour, 5) bonds therefore perform well, hence, 6) USD remains strong as USDs remain at home and USD debt and equity are bought, not sold. Just one man's opinions. RH