interesting post from SI board....Natural Resource Stocks
To: Fillmore Hagan who wrote (25689) 6/9/2005 12:19:37 AM
From: SliderOnTheBlack Read Replies (1) of 25748
re:["I am not surprised that bonds rallied in the wake of the "capitulation" by Gross and Roach"]
I am sure there was significant short covering and that was part of the Hedge Fund mini-crisis, but I don't believe that was the major reason for the move and I'm not sure "capitulation" is the fair term... perhaps they've merely morphed from being idealists to realists ?
Consider what has quietly unfolded in the global economies and markets:
Great Britain, Australia and New Zealand now have Inverted Yield Curves.
The German 10 Year Bund Yield is below our falling 10 Year Yield.
German unemployment ranges from 10 to 20% depending on the State. All of Europe is slowing... No Votes on the adoption of the Euro Constitution.
Housing Bubbles in Great Britain, Australia and the USA... 2 of the 3 have already started to rollover.
GM just laid off 25,000 workers.
Downgraded Debt - just massively flooded the Junk Market.
The last Employment Numbers from the BLS were entirely the result of Birth/Death Rate Adjustments...literally Bogus.
No one has to remind threadsters here of the incredible Debt & Credit Bubble that has unfolded over the last few years.
There is no inflation...but, yet everything from Home Prices, to the Taxes & Insurance and Utility Bills that come along with a Mortgage, or Home Ownership - are all rising.
A huge hidden Tax Increase has evolved from Property Taxes escalating as a result of the Housing Bubble.
The Average American is neither buying, or selling his home... his wealth on paper has went up...but that is "paper" wealth and his realworld expenditures have ramped. Government Inflation Models use "rents" versus Ownsership costs... absolutely bogus and a classic "GIGO - garbage in = garbage out scenario.
Ramping Gasoline Prices hammer the working poor and the Middle Class. Heating & Cooling Bills are ramping as well with rising Energy Costs.
Food... everything from Milk, to Coffee, to Meat has increased rapidly... but, yet Inflation is firmly under control...
Pay no attention to the little man behind the curtain ~
Welcome to Fantasyland led by the Wizzard of Oz-span.
...just remember that it only took an inflation rate of 4%... yes, 4% was all it took to get the last Gold Bull rolling & we've got to be double that right here - right now... if the numbers weren't manipulated.
FNM is a Derivatives Ticking Time Bomb - still offloading $15 Billion each & every Month...the Fed can NOT raise rates much higher or FNM could trigger a Derivatives Daisy Chain Meltdown.
We allowed FNM to delve into SubPrime which was insane... and now as Greenspan "talks" about pricking the Housing Bubble... FNM is allowed to buy 40 Year Mortgage Paper !?!?!
That's like helping a Heroin Addict thru withdrawl by giving them Cocaine instead of Heroin.... they'll both ultimately kill you dead... and dead is dead.
FNM is Enron-Walking...
They're offloading $15 Billion a month in Old $hi^ Paper made up of Reckless Underwriting, Qualification Standards and Inflated Appraisals out the backdoor - while now buying 40 Year Paper & Subprime thru the Front !?!?!?...all the while Greenspan plays lip service to the Housing Bubble... ?
Greenspan has no intention of popping the Housing Bubble...because he knows he can't afford to.
He can't allow FNM to implode and trigger a Derivatives Crisis and the Housing Bubble and continued Refinance Activity is the key to sustaining Consumer Confidence and Spending... and given Consumer Spending is 2/3rds of GDP; with no "real" Job,or Wage Growth and a "0" Savings Rate... sustaining the Housing & Refi Bubble is the only thing keeping the Good Ship Bubbletop afloat.
Look to Japan to see how low Rates can go... "0" and what they call "Quantative Easing."
Japan increased liquidity from Y 5,000bn in 2001 to Y 30-35,000bn presently....and yet the Nikkei has cratered.
Let the Dow catch a little Nikkei Deja Vu -Flu and Bill Gross's Dow 5,000 Call may look irrationally exhuberant before it's all over.
The World is awash simultaneously with Mountains of Bad Debt and Massive Liquidity. It is trying to manage historic paradigm shifts in Manufacturing, Industrial Growth, Commodity Demand and Currency & Political Alliance Shifts... throw in a War on Terrorism, Nuclear Tensions vis a vie Iran & North Korea; China Sabre Rattling Taiwan and Japan...and the odds of the World getting it all right - are rather slim.
China is the ultimate conundrum.
In a race to show off the New Modern China Miracle to the World at the 2008 Beijing Olympics...it still possesses massive corruption, a cratering Stock Market, a 3rd World Banking System with up to 50% non-performing loans and a social revolt building with a population that is multiples of the entire US population - still left behind and not too happy about it...
That the Fed can't raise rates past 3.5% tells us how damn fragile this economy and the markets really are.
- THAT is an important message.
I don't think Greenspan can raise rates if he wanted to... the Bogey Men in the Dark are just too Big... too Big too Fail and too Big to be bailed out.
Greenspan is also haunted by the memory of him going too far, for too long and triggering the last recession...which is being constantly refreshed via the media almost daily - so there is a lot of pressure for Greenspan to keep the markets happy and ease off the brake after one more .25bp hike...which may leave the door open for the winds of inflation.
Hence... rates will stay low and may go even lower yet in my opinion.
I've always thought of a 5-10% Position in Gold and/or Gold/PMstocks as a minimum "core" position... in this environment - that should probably be increased.
I sold a bit of what I've bought recently into stength and got stopped out of a bit here of late...but, am still calmly holding the majority of what I bought and am always looking for bargains and remain a Strong Buyer in this environment. I don't think we'll see HUI 150.... it's not impossible, but unless Gold breaks $400 -it's improbable. I think the bottom is in...and we're basing for a very significant run here.
I think the stage is being set for a run to $500 Gold before years end...and given what is unfolding in the World... HUI 350 within 12-15 months in in the Cards.
Don't be caught in less than a core position.... given Gold Prices there is still plenty of "value" out there... let alone if one looks at historic Dow:Gold Ratio's, or Oil:Gold ratio's.
I saw in that NY Times Article on Gold, that James Sinclair is a "marksman" (that makes 3 of us Roebear)...we should give credit where credit is due... I think he's got the Crosshairs on the Right Target for the next wave down in the US Dollar and the next Leg Up in Gold.
Watch the Foreign Central Bank Treasury Buying.
Carribean Hedge Funds don't & won't cut it...
Rogue
