Thesis change time? Gold approaching $760

[jimmygu3]

Re: Thesis change time? Gold approaching $760

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

You're right, I think they have been lurking in the public forums. nflation4evr and fnmagoinup.

[GRG55]

Re: Thesis change time? Gold approaching $760

...Put up the Grand Canyon as collateral for the loan...
Jimmy

Wouldn't that just be trading one gaping hole for another?

[phirang]

Re: Thesis change time? Gold approaching $760

Wouldn't that just be trading one gaping hole for another?

Sounds kinky...:eek:

[Guest]

Re: Thesis change time? Gold approaching $760

How about this for a scenario:

After this steep correction in the CRB (and PM's as a subset of that correction), we see a partial decoupling of the PM's from the CRB, and a decoupling of the PM's also from the EURO (the former anti-dollar) and an extended period of robust or rising (comparative) USD and moderately rising PM's? In that scenario, "breaking ranks" among the CB's on interest rates with an extended bias to softening rates in this protracted global recession results (and it's only temporarily paradoxical to longer term macro-iTulip thesis) in a persistently strong relative USD, and a more fluid overall downtrend in all currencies relative to gold. It is a transitional phase prior to gold emerging squarely into the mainstream of global perceptions as having trounced all the currencies combined. The persistence of USD strength may include the USD rising right on up past 83-84 on the dollar index and thus "breaking the back of the former USD breakdown" of that index, which nominally is certainly a very big deal.

GRG55 wrote -

<< 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]?

FRED wrote -

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.

[Tulpen]

Re: Thesis change time? Gold approaching $760

Perhaps. But for me, at this stage, my buildup on gold will be very slow, much slower that oil.
Frankly until oil recovers I will not add any new positions to gold.

Don't try to catch a falling knife!

[jimmygu3]

Re: Thesis change time? Gold approaching $760

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

Just re-read the helicopter speech and it's very clear that Ben has no qualms about printing.

"...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

[doharra]

Re: Thesis change time? Gold approaching $760

What are thoughts on the most prudent short-term moves? Should one remain in PM through this dip because we're in the final countdown to POOM's ski-rope yank (I love that analogy posted here a few days ago). Buy even more? Or exit PMs altogether because the thesis is wrong?

When Fred says:

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.

And follows up with:

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.

are Fred / EJ indicating that they are close to calling POOM?

Is it SHTF time at last?

In any case: Thoughts on what one ought to do this week with PM holdings? What are you senior iTulipers thinking? EJ?

[Guest]

Re: Thesis change time? Gold approaching $760

Tulpen -

As always, just when such sentiments begin to appear you are likely nearing the final bottom. To my lights, a fabulous buy opportunity is straight ahead (soon). Gold at $720 (if you see it bounce strongly off $720 that's your bottom) or if you see it get down to $675 that is the final, final, final low. This has been the big correction of the entire bull market since 2001. What follows this correction is a long uninterrupted run-up, although for the duration of the global recession it's uptrend will likely be muted and that could mean a full couple of years, or even three. So in sum it's been like a dreaded visit to the dentist's - an event which in anticipation has always felt like an ugly cloud hanging over the bull market, but which once gone through, invariably leaves one feeling sunny afterwards as there should be a long period thereafter without the need for further dentist office visits!

Silver is obviously tethered to Gold. When gold bottoms silver will firm up, so the only thing we need watch is $720 gold and $675 gold. One or the other of those should be about it for this go-round.

Perhaps. But for me, at this stage, my buildup on gold will be very slow, much slower that oil. Frankly until oil recovers I will not add any new positions to gold. Don't try to catch a falling knife!

[jimmygu3]

Re: Thesis change time? Gold approaching $760

Just re-read the helicopter speech and it's very clear that Ben has no qualms about printing.

"...the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation."

And here the pot discusses the inferior color of the kettle (emphasis mine):

First, as you know, Japan's economy faces some significant barriers to growth besides deflation, including massive financial problems in the banking and corporate sectors and a large overhang of government debt. Plausibly, private-sector financial problems have muted the effects of the monetary policies that have been tried in Japan, even as the heavy overhang of government debt has made Japanese policymakers more reluctant to use aggressive fiscal policies (for evidence see, for example, Posen, 1998). Fortunately, the U.S. economy does not share these problems, at least not to anything like the same degree, suggesting that anti-deflationary monetary and fiscal policies would be more potent here than they have been in Japan.

Methinks things have changed since 1992. Prepare for the helicopters.

Jimmy

[FRED]

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.

To be clear, not calling into question either Ka-Poom Theory or the Dollar Ratchet Theory but fall in the gold price below what the Dollar Ratchet Theory indicates raises the questions I mention above.

[Andreuccio]

Re: Thesis change time? Gold approaching $760

Tulpen -

As always, just when such sentiments begin to appear you are likely nearing the final bottom. To my lights, a fabulous buy opportunity is straight ahead (soon). Gold at $720 (if you see it bounce strongly off $720 that's your bottom) or if you see it get down to $675 that is the final, final, final low. This has been the big correction of the entire bull market since 2001. What follows this correction is a long uninterrupted run-up, although for the duration of the global recession it's uptrend will likely be muted and that could mean a full couple of years, or even three. So in sum it's been like a dreaded visit to the dentist's - an event which in anticipation has always felt like an ugly cloud hanging over the bull market, but which once gone through, invariably leaves one feeling sunny afterwards as there should be a long period thereafter without the need for further dentist office visits!

Silver is obviously tethered to Gold. When gold bottoms silver will firm up, so the only thing we need watch is $720 gold and $675 gold. One or the other of those should be about it for this go-round.

Luke,

Yesterday, on this same thread, you posted this:

Waysouth gets it right. Prepare to see all your PM inflation proofing investments locked up and non-performing for a couple of years. Maybe even longer.

(http://www.itulip.com/forums/showthr...46954#poststop)

Which is it, fantastic buy opportunity or locked up non-performing assets? :rolleyes:

[Guest]

Re: Thesis change time? Gold approaching $760

Andreuccio - Think about it once again carefully. It's both. The bottom in gold and silver will be in - but they will be "locked up", for a year or two or three thereafter, and "locked up" means as in "very slow performance". They should still drift up 15% a year with the general inflation underlying the global recession, but not the rocket ride of recent years. A "fantastic buy opportunity" does not have to mean it's a speculator's orgasm of a buy with a V shaped metals recovery immediately thereafter. That is neophyte investing. It means this will mark the low price for the next five years - great trade for those who like to trade once every couple of years.

Clear enough for U now?

Luke, Yesterday, on this same thread, you posted this: (http://www.itulip.com/forums/showthr...46954#poststop) Which is it, fantastic buy opportunity or locked up non-performing assets? :rolleyes:

[Tulpen]

Re: Thesis change time? Gold approaching $760

The bottom in gold and silver will be in - but they will be "locked up", for a year or two or three thereafter, and "locked up" means as in "very slow performance". They should still drift up 15% a year with the general inflation underlying the global recession, but not the rocket ride of recent years.

That is not my scenario, I am getting into gold and oil to make a killing on the rebound.

[FRED]

Re: Thesis change time? Gold approaching $760

"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!

We thought they'd be first for that reason. We don't know why New Zealand caved. Maybe EJ's Business Day article :eek:

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]?

After consulting with contacts today, including John Serrapere, that appears to be the case. The last holdouts will be Japan and the EU, but there are a lot of players in between who might join NZ.

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?

Deflation is a political choice to cause wage earners to absorb the impact of debt deflation. The Germans did it in the 1930s as did the US and the UK, but not France and other EU nations. Governments learned that deflation leads to unseemly outcomes. So does inflation, but not as unseemly and not as quickly, if it is properly managed.

[jtabeb]

Re: Thesis change time? Gold approaching $760

Frankly until oil recovers I will not add any new positions to gold.

Don't try to catch a falling knife!

Unless there is a significant risk that the knife WON'T be there when you are ready to reach out and "catch it".;)