GOLDBUGS AMEX Goldbugs Index (GOLD)

[bob3]

Here's some of what Coxe had to say this week:

"But remember as we've said over and over - in bull markets the financial stocks trade off the earnings statements, in the bear markets off the balance sheets. And we have had nothing but further evidence that you've got to be disbelieving the balance sheets of a lot of the major financial institutions. That the valuation figures they're using for these Jurassic Park creations are wrong. Because what they were based on was the assumption that the Triple AAA component within them was such a big percentage and those were the ones that were taken by the more conservative institutions.

But what you're seeing is the valuations of these in the index that follows them - the ABX - is taking a huge haircut off them. Now either the ABX index is being driven by panic, or what it's saying is that there is gigantic overvaluation spread right across the financial system.

Well I don't know - let's say the answer falls somewhere in between - we're still talking about a hit to equity of the kind that's going to take these financial stocks down a long way from where they are.

It doesn't mean the system is going to go down. That won't happen. But, what it does mean is that, you know, you've got roughly 21% of the S&P that's in financials, so when you're told that the group that most relies on its balance sheet for its business, that its balance sheets are so prettied up as to make Enron's or Fannie Mae's look actually honest, if you've got that kind of situation, it's not the stuff of a bull market.

So you look at what it is you need to do then. All of this is bad news for the Dollar but it's good news for gold. So whatever else you do...don't...sell...your gold...or your gold stocks in this."

Courtesy... TheSlowLane @ SI

Don Coxe: Fridays weekly audio program.

http://events.startcast.com/events/199/B0003/#