Gold Update: The small trade within the big trade

[bart]

Re: Gold Update: The small trade within the big trade

Donka. Illustrates your point about currencies all tending to decline nicely. Moreover, seems pretty safe to say that if we did "take things like CPI+lies into account", the US Dollar would look a little less like gold and the Swiss Franc, and little more like the German (Wiemar) Mark and the French Franc ...

As Valley girls used to say - fer shure, fer shure...

[Verrocchio]

Re: Gold Update: The small trade within the big trade

...part 1 of the "solution" is to continue understating inflation.
part 2 will be means testing social security and medicare.
part 3 is that other currencies also lose value, cushioning the appearance of the dollar's drop in purchasing power.
step 4, at some point the fed raises rates to support the dollar, perhaps while buying long paper

JK, the Wikipedia list of government techniques to disguise the rate of inflation (below) is an elaboration of your part 1 (above):

• Outright lying as to official statistics such as money supply, inflation or reserves.
• Suppression of publication of money supply statistics, or inflation indices. An example of this in the United States is the discontinuance of M3 money supply.
• Price and wage controls.
• Forced savings schemes, designed to suck up excess liquidity. These savings schemes may be described as pensions schemes, emergency funds, war funds, or similar.
• Adjusting the components of the Consumer Price Index, to remove those items whose prices are rising the fastest.

None of these actions address the root causes of inflation, and in fact, if discovered, tend to further undermine trust in the currency, causing further increases in inflation.
--------------------
Perhaps we shall also see Bullet 3 and Bullet 4 before too long.

[rabot10]

Re: Gold Update: The small trade within the big trade

i'm not sure you want "gold" newsletters. one question you need to ask yourself is whether you want to trade, or buy long term positions based on a more macro approach. do you want to accumulate over time, or do you need to deploy a larger amount all at once? i subscribed to doody's letter for a year, and it is very good, but i decided i didn't really want to own gold stocks, i wanted to own the metal [albeit in paper form - gld and slv - though i am mulling over the wisdom of that].

so first think about the big picture and how your own situation might determine what kind of information is going to be of most use.

Fred J/k what a weird planet we live on!! If ya figure it out let me know PLEASE - I haven't

[Slimprofits]

Re: Gold Update: The small trade within the big trade

Is it on?

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[metalman]

Re: Gold Update: The small trade within the big trade

Is it on?

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either that or it's a wave up in a series of waves down. too early to tell.

the theory here is that a bear market is a like a tide going out... each new series of price rises is less than the last one. a bull market is like a tide coming in. i like that analogy. now where the hell is it? itulip needs a bookmark function :mad:

[krakknisse]

Re: Gold Update: The small trade within the big trade

Anyone read Jin Sinklair's last update on May 16th? What is he alluding to? I was puzzled at the sudden jump in gold on Friday at New York open, as I was expecting a leg down. Perhaps it is nothing.

Posted On: Friday, May 16, 2008, 10:48:00 PM EST. A Heads Up From Jin. Author: Jin Sinklair

Dear CIGAs (Comrades In Golden Arms), 50 years of trading markets and building companies combined with outrageous good fortune has given me a reliable sense of timing and value. I suggest that you cancel all sell orders at any price in precious metals immediately so that no orders exist when Asia opens. Sometimes Bert and Jesse trusted their years of experience to guide them free of any tools at major points of change. The hairs on the back of my neck are standing up at attention. Not a pretty sight. That is what happened at $400 in the 70s and $600 recently.

Bert Seligman is Jin Sinclair's father (?). Jesse Livermore is a famous trader and a friend of bert..

[phirang]

Re: Gold Update: The small trade within the big trade

this is why the rip:

http://www.bloomberg.com/apps/news?p...Pkw&refer=home

[grapejelly]

Re: Gold Update: The small trade within the big trade

I took major positions in junior mining equities this past week. Methinks the elevator is headed up. The biggest bull leg to date in the ongoing secular bull market in everything gold and silver...along with uranium, natgas and base metals.

[Nicolasd]

Re: Gold Update: The small trade within the big trade

Jim Sinclair is with you on this one

http://www.jsmineset.com/ARhome.asp?...41&T_ARID=6196

[sadsack]

Re: Gold Update: The small trade within the big trade

I'm so late to the party it's not even funny; that being said, purely for PP preservation, is this the time for significant (30-50% of total assets) PM allocation?

FYI - I'm halfway there (25%) already, plus about 5% in DRIP CanRoyals.

Besides that, I've accelerated any needed purchases of durable goods (within the 1-5 year timeframe). Word on the ground - anything that involves imported raw or finished materials (given the parlous state of US industry, practically any durable good satisfies the aforementioned criteria) is headed for a 15% increase come July 1.

[Nervous Drake]

Re: Gold Update: The small trade within the big trade

.

[sadsack]

Re: Gold Update: The small trade within the big trade

Pretty sure this isn't the end of the world and you will have plenty more time to time your entry points. $12-$15 oil is probably not going to happen in an instant but over time just as oil jumped to 3 bucks a gallon around 2005 and now heading to around 5 bucks for another year or two and then probably 7 bucks after that etc etc.

Thanks for the feedback.

I'm covered in the near to intermediate term - I have a 5 mile commute. Although I'm a renter, I have financially stable landlords, not to mention a big back yard which has, in prior years, been enriched and used partially for garden produce.

My greater concern is the 2-10 year horizon.

[Chris]

Re: Gold Update: The small trade within the big trade

Can anyone explain why the Hussman fund are continuing to unload their precious metals?

In precious metals, the Strategic Total Return Fund has less than 2% of assets invested in this sector, which is about the lowest allocation since the Fund's inception. While we may see a bit of further strength in precious metals, downside risks have increased, and given the high volatility of this sector, the return/risk tradeoff has finally become insufficient, at least for now, to carry the 15-25% exposure that has been typical for us in recent years.

http://hussmanfunds.com/wmc/wmc080527.htm

[Jim Nickerson]

Re: Gold Update: The small trade within the big trade

Can anyone explain why the Hussman fund are continuing to unload their precious metals?

http://hussmanfunds.com/wmc/wmc080527.htm

Hussman has been selling PM stocks. To my knowledge he has not held physical gold or silver in his fund. Finster, I believe it was, somewhere here presented arguments, charts showing that PM shares moved on average as the general equity markets moved.

Hussman apparently thinks the general market is more likely to go down than up and the same for commoditities themselves, and thus has shed commoditiy related stocks. That is how I see it. May not be correct.

[FRED]

Re: Gold Update: The small trade within the big trade

Can anyone explain why the Hussman fund are continuing to unload their precious metals?

http://hussmanfunds.com/wmc/wmc080527.htm

EJ writes in:

PMs tend to perform poorly in an an environment of rising bond yields and falling bond prices, and well during bond bubbles when inflation is running well above yields. At the inflection point of recessions, inflation tends to fall followed by yields. Bond yields have not been this low going into recession in more than 40 years.

The question is whether the current bond bubble, as indicated by a 2.5% spread between a year-over-year change in CPI and the 10yr bond, will persist until it reaches the level 5.5% spread experienced at the early part of the 1974 recession or will retreat as recession cuts demand and, presumably, inflation. Since the CPI understates inflation, the true spread is likely already in excess of the 5.5% level experienced before the 1974 recession.

Referring to the chart below, note that 10 year treasury bond yields tend to peak coincident with or soon after a peak in year-over-year change in CPI inflation early in recession. We expected a nominal GDP recession to start Dec. 2007. Perhaps it did, and we will not know for certain until revisions of the Q1 GDP numbers come out later this year, but unlike previous recessions since the 1970s inflation has been allowed to rise considerably in an environment of high energy costs and liquidity injected to fight the disinflationary impact of the credit contraction.

At this point in the current recession cycle, as indicated by the red outline, PMs at these prices make us nervous, too. However, the ongoing credit crunch, structural weakness in the dollar, and the steps governments are taking to counter these, including a flood of funds that continue to hold down bond yields, make us even more nervous. This combined with competition for constrained energy supplies has created a unique and uniquely treacherous investment climate.

The enormous bond market bubble gets far less attention in the press than the so-called bubble in commodities, now reaching hysterical proportions again as occurred during periods of rapid appreciation every year since 2004. Funds in PMs look at charts like the one above and worry. Old timers who were heavily invested in PMs during the 1976 to 1980 period who subsequently neglected to take the hint that a Fed pushing bond yields 9% over the rate of inflation is serious about fighting inflation, worry that a new Paul Volcker is waiting in the wings, ready to leap out at any moment and slam the economy into a disinflationary recession, sending commodity prices tumbling along with stocks. Our sources continue to indicate that the political will is not there, and as the credit crunch spreads and intensifies a policy of rising rates amounts to financial system suicide.

The Fed has been attempting to focus liquidity on specific credit markets, via TAF and other tools, to limit spill-over into commodity and other markets; this is as good as it gets. Meanwhile, it hopes that the recession will reduce inflationary pressures so that rate hikes are not needed, because they cannot hike rates.

All we can do at this point is keep watching for signs that recession is indeed lowering inflation expectations. It is with respect to homes and used cars, especially big ones, but the price of food and other goods affected by high energy costs shows no signs of abating. At this time a secular decline in inflation and bond prices, with a corresponding rise in yields, may be on the horizon but our Over-the-Horizon radar has not yet picked it up.