Thesis change time? Gold approaching $760

[Uncle Jack]

Re: Thesis change time? Gold approaching $760

As gold falls below the $780 price forecast by the Dollar Ratchet theory, we are exploring three possibilities:

1. The theory of the Dollar Ratchet is incorrect: foreign central banks are not trying to manage the dollar down to prevent a disorderly collapse. The periods of dollar correction and recovery are cause by other factors.
2. The theory of the Dollar Ratchet is correct: foreign central banks are trying to manage the dollar down to prevent a disorderly collapse, but the result in the current instance is a longer and stronger dollar rally than we expected, and thus a deeper commodities correction.
3. The theory of the Dollar Ratchet is correct: foreign central banks are trying to manage the dollar down to prevent a disorderly collapse, but cooperation is failing.

If #3 then this is it, the Big "Ka" disinflation before the "Poom" inflation that collapses the dollar due to capital flight from the US and dollar repatriation by foreign entities. The Big "Ka" is caused by liquidation of assets in preparation for moving money outside the US.

Was thinking of you and that post where either you or EJ, or both, were breaking your arms patting yourselves on the back for calling the "bottom" when it hit 780 and then bounced, only to continue its slide south.

I have no intention of bashing you for that call, but I remember thinking that is was a little premature to be congratulating yourself for the call while gold was still falling.

Cheers.

[FRED]

Re: Thesis change time? Gold approaching $760

Was thinking of you and that post where either you or EJ, or both, were breaking your arms patting yourselves on the back for calling the "bottom" when it hit 780 and then bounced, only to continue its slide south.

I have no intention of bashing you for that call, but I remember thinking that is was a little premature to be congratulating yourself for the call while gold was still falling.

Cheers.

We have a short and succinct word to describe our $780 dollar ratchet price of gold call: wrong.

It calls into question whether in fact central banks are effectively cooperating to manage the dollar and US interest rates.

The big news this morning in the FX markets is that New Zealand broke ranks and cut rates 50 basis points.

We expected the breakdown of global central bank cooperation to begin at the periphery of the system with Australia breaking ranks first due to a change in political alignment toward China and away from the US. Our best guess is that Australia is next.

[Chris]

Re: Thesis change time? Gold approaching $760

We have a short and succinct word to describe our $780 dollar ratchet price of gold call: wrong.

It calls into question whether in fact central banks are effectively cooperating to manage the dollar and US interest rates.

The big news this morning in the FX markets is that New Zealand broke ranks and cut rates 50 basis points.

We expected the breakdown of global central bank cooperation to begin at the periphery of the system with Australia breaking ranks first due to a change in political alignment toward China and away from the US. Our best guess is that Australia is next.

So iTulip think this really might be the "Big one"? What about the next bubble?

[we_are_toast]

Re: Thesis change time? Gold approaching $760

I'm fairly new to iTulip, but one of the things I really like about the site is that the opinions and theories put forth are usually backed by legitimate supporting data. I was rather surprised to read the specific $780 bottom prediction in what is at best a very chaotic market and at worst a market opened to possible manipulation. I never felt there was enough data to support such specific forecasts and never took the forecast to seriously.

However, the arguments and supporting data for the dollar ratchet and Ka-poom models seem to be reasonable. When weather models give a bad prediction for a specific area, the meteorologists don't throw the models out and start from scratch. The underlying fluid dynamics and physics is still legitimate even though all the variables can't be precisely accounted for.

I hope there will not be an overreaction to a specific prediction that probably shouldn't have been made in the 1st place. If there are better economic models or theories out there that have better reasonable data supporting them, I would most certainly be interested in seeing them. If the ka-poom, dollar ratchet theories no longer hold due to knew data discounting the fundamentals of the approaches, I would very much like to see that data also. Economics isn't science! But I have to have something in order to make my investment decisions, and so far, Ka-poom and dollar ratchet are the best things I've seen and I haven't seen a good reason to abandon them.

$.02

[FRED]

Re: Thesis change time? Gold approaching $760

I'm fairly new to iTulip, but one of the things I really like about the site is that the opinions and theories put forth are usually backed by legitimate supporting data. I was rather surprised to read the specific $780 bottom prediction in what is at best a very chaotic market and at worst a market opened to possible manipulation. I never felt there was enough data to support such specific forecasts and never took the forecast to seriously.

However, the arguments and supporting data for the dollar ratchet and Ka-poom models seem to be reasonable. When weather models give a bad prediction for a specific area, the meteorologists don't throw the models out and start from scratch. The underlying fluid dynamics and physics is still legitimate even though all the variables can't be precisely accounted for.

I hope there will not be an overreaction to a specific prediction that probably shouldn't have been made in the 1st place. If there are better economic models or theories out there that have better reasonable data supporting them, I would most certainly be interested in seeing them. If the ka-poom, dollar ratchet theories no longer hold due to knew data discounting the fundamentals of the approaches, I would very much like to see that data also. Economics isn't science! But I have to have something in order to make my investment decisions, and so far, Ka-poom and dollar ratchet are the best things I've seen and I haven't seen a good reason to abandon them.

$.02

Ka-Poom Theory is anchored in a concept of cycles of disinflation and reflation, with an eventual final failure of the system in an inflationary process set off by a credit and currency event that sends money fleeing dollar assets. Some said that the dollar at 80 was a threshold below which the dollar goes into free-fall, but we did not buy it. We bought into the notion of a $780 gold threshold as an indicator of dollar support via FCB interventions.

It is indeed risky to set a specific price but one still needs stakes in the ground to use to assess the validity of an investment theory, just as one needs stops to limit losses in trades. If we have to rip the stake out of the ground and move it, then we are really talking about re-formulating the thesis. Is gold $740 or $650 that point? Maybe gold is the wrong marker entirely and we should be focused on oil.

[GRG55]

Re: Thesis change time? Gold approaching $760

We have a short and succinct word to describe our $780 dollar ratchet price of gold call: wrong.

It calls into question whether in fact central banks are effectively cooperating to manage the dollar and US interest rates.

The big news this morning in the FX markets is that New Zealand broke ranks and cut rates 50 basis points.

We expected the breakdown of global central bank cooperation to begin at the periphery of the system with Australia breaking ranks first due to a change in political alignment toward China and away from the US. Our best guess is that Australia is next.

"Broke ranks" is an interesting turn of phrase. I don't actually understand the motivation of the Reserve Bank of New Zealand given that the $NZ has already declined almost 20% against the $US in the last 6 months. You say there is an expectation that Australia may be next, but the Australian Dollar has moved a similar amount against the $US, and in only the past 2 months!

Is iTulip interpreting the interest rate cut on the part of the RBNZ as indication/confirmation that a slowing global economy results in Central Banks "loosening" [under political pressure] thus moving us into a broad-based "competitive devaluation" currency phase [one manifestation of a breakdown in Central Bank cooperation]?

As gold falls below the $780 price forecast by the Dollar Ratchet theory, we are exploring three possibilities:

1. The theory of the Dollar Ratchet is incorrect: foreign central banks are not trying to manage the dollar down to prevent a disorderly collapse. The periods of dollar correction and recovery are cause by other factors.
2. The theory of the Dollar Ratchet is correct: foreign central banks are trying to manage the dollar down to prevent a disorderly collapse, but the result in the current instance is a longer and stronger dollar rally than we expected, and thus a deeper commodities correction.
3. The theory of the Dollar Ratchet is correct: foreign central banks are trying to manage the dollar down to prevent a disorderly collapse, but cooperation is failing.

If #3 then this is it, the Big "Ka" disinflation before the "Poom" inflation that collapses the dollar due to capital flight from the US and dollar repatriation by foreign entities. The Big "Ka" is caused by liquidation of assets in preparation for moving money outside the US.

None of the three possibilities seems to support a true deflationary outcome, so it would appear we can enjoy an interlude of strengthening US$ of indeterminate duration and amplitude, but sure as the sun comes up in the east, there will be a reflation?

[jk]

Re: Thesis change time? Gold approaching $760

fred, i would like to understand why the failure of the $780 call calls the whole theory into question. when the "call" of 780 was made, there was no clear connection to the underlying theory. instead, we were told that ej "just knew" that 780 was the number. how does that number [now failed] relate to the theory? or have we just learned that ej is not as clairvoyant as he claimed.

[Andreuccio]

Re: Thesis change time? Gold approaching $760

Maybe gold is the wrong marker entirely and we should be focused on oil.

:eek::eek::eek::eek::eek::eek::eek::eek::eek:

Jesus, Fred, are you trying to give me a heart attack!

That was pretty much the conclusion of the article here:

http://elainemeinelsupkis.typepad.co...-meinel-1.html

that Rajiv posted in his thread 1931-1933: Our Future (http://www.itulip.com/forums/showthread.php?t=5112).

Oil is the new gold in today's global banking.

She says it and I think, "Oh well, one more opinion." You say it and I think, "Holy Crap! I might be in the wrong commodity."

[GRG55]

Re: Thesis change time? Gold approaching $760

:eek::eek::eek::eek::eek::eek::eek::eek::eek:

Jesus, Fred, are you trying to give me a heart attack!...

"...Oil is the new gold in today's global banking..."

...She says it and I think, "Oh well, one more opinion." You say it and I think, "Holy Crap! I might be in the wrong commodity."

Interesting reaction...

But then we've seen enough around here from iTulip and Finster showing it doesn't matter. It all goes up and down at more or less the same time. And nothing has happened in this current disinflation (iTulip) or deflation (Finster) cycle that contradicts that observation - everything commodity has been slaughtered.

Seems to me that the "simultaneous Ka and Poom" from earlier this year, has resolved itself into a definite "Ka", with the expectation that, once it runs its course, will be followed by the usual reflation Poom [unless this "Ka" is "it", in which case it will be followed by "the" Poom?]

[jimmygu3]

Re: Thesis change time? Gold approaching $760

We have a short and succinct word to describe our $780 dollar ratchet price of gold call: wrong.

It calls into question whether in fact central banks are effectively cooperating to manage the dollar and US interest rates.

The big news this morning in the FX markets is that New Zealand broke ranks and cut rates 50 basis points.

We expected the breakdown of global central bank cooperation to begin at the periphery of the system with Australia breaking ranks first due to a change in political alignment toward China and away from the US. Our best guess is that Australia is next.

FRED,

In previous articles EJ has indicated that the Fed will target money aggregates rather than interest rates. Would this hold true as other CBs jump ship and lower rates? Obviously there's not much more wiggle room before rates hit the zero bound. What will the Fed do to keep the dollar from strengthening if other CBs are not cooperating?

Theoretically, can't they just print up a few trillion in FRNs? Bend a rule here and there, whatever. They could get creative and monetize US assets just like J6P pawns his care title. Put up the Grand Canyon as collateral for the loan. I'm wondering how out of the question this really is. :eek:

Jimmy

[Tulpen]

Re: Thesis change time? Gold approaching $760

Put up the Grand Canyon as collateral for the loan.

Heh careful! Don't give Paulson and Bernanke any ideas. ;)

[Andreuccio]

Re: Thesis change time? Gold approaching $760

Interesting reaction...

But then we've seen enough around here from iTulip and Finster showing it doesn't matter. It all goes up and down at more or less the same time. And nothing has happened in this current disinflation (iTulip) or deflation (Finster) cycle that contradicts that observation - everything commodity has been slaughtered.

Seems to me that the "simultaneous Ka and Poom" from earlier this year, has resolved itself into a definite "Ka", with the expectation that, once it runs its course, will be followed by the usual reflation Poom [unless this "Ka" is "it", in which case it will be followed by "the" Poom?]

Yeah, a moment of panic. I've been adding substantially to my PM holdings on the way down. To hear iTulip say that gold, in fact, might not be "the marker", startled me.

[c1ue]

Re: Thesis change time? Gold approaching $760

Well, I am interested to see what happens in the next couple of weeks.

Gold at $743, silver at $10.50

I am definitely not yet ready to throw out the baby(PMs) with the bathwater; perhaps this massive PM drop is liquidation of illiquid assets in preparation for massive depreciation triggered by the upcoming WaMu/LEH failures and/or WaMu/LEH nationalizations.

Or maybe a margin call on those still invested in commodities.

Or maybe a margin call triggering event FOR those still invested in commodities.

NZ cutting rates in interesting in that CBNZ apparently feels the risks of an economic collapse is worse than the risk of a (continuing) currency collapse.

If I understand the direction correctly, then this means China itself may cut rates as well - another dollar strengthening occurrence.

[phirang]

Re: Thesis change time? Gold approaching $760

Well, I am interested to see what happens in the next couple of weeks.

Gold at $743, silver at $10.50

I am definitely not yet ready to throw out the baby(PMs) with the bathwater; perhaps this massive PM drop is liquidation of illiquid assets in preparation for massive depreciation triggered by the upcoming WaMu/LEH failures and/or WaMu/LEH nationalizations.

Or maybe a margin call on those still invested in commodities.

Or maybe a margin call triggering event FOR those still invested in commodities.

NZ cutting rates in interesting in that CBNZ apparently feels the risks of an economic collapse is worse than the risk of a (continuing) currency collapse.

If I understand the direction correctly, then this means China itself may cut rates as well - another dollar strengthening occurrence.

Rumor of 50bps fed cut this pm.

[GRG55]

Re: Thesis change time? Gold approaching $760

Well, I am interested to see what happens in the next couple of weeks.

Gold at $743, silver at $10.50

I am definitely not yet ready to throw out the baby(PMs) with the bathwater; perhaps this massive PM drop is liquidation of illiquid assets in preparation for massive depreciation triggered by the upcoming WaMu/LEH failures and/or WaMu/LEH nationalizations.

Or maybe a margin call on those still invested in commodities.

Or maybe a margin call triggering event FOR those still invested in commodities.

NZ cutting rates in interesting in that CBNZ apparently feels the risks of an economic collapse is worse than the risk of a (continuing) currency collapse.

If I understand the direction correctly, then this means China itself may cut rates as well - another dollar strengthening occurrence.

For the moment it would appear that gold is now trading as just another commodity, not a currency.

I suppose the question is whether that will change once again, in the event of a Lehman bailout or other "necessary" intervention.