LIVE Gold Prices $  | E-Mail Subscriptions | Update GoldSeek | GoldSeek Radio 

Commentary : Gold Review : Markets : News Wire : Quotes : Silver : Stocks - Main Page 

 GoldSeek.com >> News >> Story  Disclaimer 
 
Latest Headlines

GoldSeek.com to Launch New Website
By: GoldSeek.com

Is Gold Price Action Warning Of Imminent Monetary Collapse Part 2?
By: Hubert Moolman

Gold and Silver Are Just Getting Started
By: Frank Holmes, US Funds

Silver Makes High Wave Candle at Target – Here’s What to Expect…
By: Clive Maund

Gold Blows Through Upside Resistance - The Chase Is On
By: Avi Gilburt

U.S. Mint To Reduce Gold & Silver Eagle Production Over The Next 12-18 Months
By: Steve St. Angelo, SRSrocco Report

Gold's sharp rise throws Financial Times into an erroneous sulk
By: Chris Powell, GATA

Precious Metals Update Video: Gold's unusual strength
By: Ira Epstein

Asian Metals Market Update: July-29-2020
By: Chintan Karnani, Insignia Consultants

Gold's rise is a 'mystery' because journalism always fails to pursue it
By: Chris Powell, GATA

 
Search

GoldSeek Web

 
Bank Loans Gently Bottoming?



-- Posted Tuesday, 4 January 2011 | | Source: GoldSeek.com

By Gary Tanashian

The January 2nd edition of Notes From the Rabbit Hole, NFTRH117 opened the new year with a review of a successful 2010 and a look ahead to 2011.  We reviewed the precious metals, commodities and broad markets.  Risk is quite high in the broad markets now, even as they pump higher this morning, as I write this intro.  

Stock market sponsorship is represented by the absolute dumbest money on the planet as measured by several metrics (AAII out front).  This is money that wants in on the party and wants to repair the indignities of first being fleeced in 2008, and then sitting in Treasury bonds watching the party from the outside.  


While I expect a significant correction before too long, the analysis in the 'Wrap Up' segment of #117 left me feeling a bit less bearish for the entirety of 2011.  Let's see how things develop.  Manage risk (which means manage bear instincts as well as bull ones), keep perspective, and you will do fine in 2011.

NFTRH117 Wrap Up (Bank Loans Bottoming?)

Upon finishing the report, I find myself feeling a bit more bullish on the immediate term than I was before I started writing. If I had to take a guess, I would lean toward continued bullish activity in most everything outside of the USD, which sports a chart that does not look very good. But at some point there should be a strong reversal and with any luck at all, we will be able to find some negative divergence somewhere to indicate its impending arrival.

Of course, a strong candidate will be the Gold-Silver Ratio, which remains pinned in a nose dive despite some positive MACD and RSI divergence. Junk bond to relative quality bond ratios may provide a clue. Gold in relation to industrial metals maybe. Or perhaps the thing will just reverse one day when most people least expect it.

Well, NFTRH will expect it no matter how high our gains go in the interim, because NFTRH is in high risk mode and will remain so until the risk parameters clear. Meanwhile, I guess it’s party on Wayne, party on Garth.

If Wayne and Garth are going to party well into or through 2011 however, the inflationary policy must translate to the economy. Below is a graph from the St. Louis Fed (updated 12/30/10) showing what could well be a bottoming out in bank loans to businesses.

Deflationists promote the ‘velocity of money’ argument as they predict economic implosion. While current events indicate speculative momentum and froth subject to reversal, bank loans look to be gently bottoming into a pattern I would normally buy. We must consider that this could be one of the diminishing returns (in relation to huge commodity and precious metals upside) of intense inflationary policy, post-2007.

This would argue for inflation effects (price increases) to become more prominent in 2011 and for treasury yields to continue to rise, which would of course put major pressure on the economy. An unwinding of non-governmental credit brought on the most recent deflationary crash in 2008. The next crash might well be brought on by revulsion toward Treasury credit.

But if the graph below is indeed bottoming, an argument could be made that any coming near term correction of frothy markets could be a healthy resetting of excess on the way to a more extended – albeit inflationary – recovery. As with the cycle from 2003-2007, I would expect the real gains in said recovery to be in the most productive economies and valuable resources.

Then again, maybe I am reading too much into a fledgling bottoming pattern on a graph. Best to let events unfold and monitor weekly, and not impose bias on the proceedings.

Here is a long-term view of business loans. Deflationists argue that they are right in the big picture, but as we have noted previously, they will only be right in the final deflation. All others, since the last monetary system ties to gold were severed have just been deflation ‘events’ along an inflationary continuum. The trend as they say, is up. So will the tiny hitch below turn into a real bottom, signaling that money is indeed getting out into the economy now that banks have fed at the trough of pigs for two years? If so, do not be a deflationist.

Best wishes for a prosperous 2011 to all readers.

Gary Tanashian

Biiwii.com

Biiwii.blogspot.com


-- Posted Tuesday, 4 January 2011 | Digg This Article | Source: GoldSeek.com




 



Increase Text SizeDecrease Text SizeE-mail Link of Current PagePrinter Friendly PageReturn to GoldSeek.com

 news.goldseek.com >> Story

E-mail Page  | Print  | Disclaimer 


© 1995 - 2019



GoldSeek.com Supports Kiva.org

© GoldSeek.com, Gold Seek LLC

The content on this site is protected by U.S. and international copyright laws and is the property of GoldSeek.com and/or the providers of the content under license. By "content" we mean any information, mode of expression, or other materials and services found on GoldSeek.com. This includes editorials, news, our writings, graphics, and any and all other features found on the site. Please contact us for any further information.

Live GoldSeek Visitor Map | Disclaimer


Map

The views contained here may not represent the views of GoldSeek.com, Gold Seek LLC, its affiliates or advertisers. GoldSeek.com, Gold Seek LLC makes no representation, warranty or guarantee as to the accuracy or completeness of the information (including news, editorials, prices, statistics, analyses and the like) provided through its service. Any copying, reproduction and/or redistribution of any of the documents, data, content or materials contained on or within this website, without the express written consent of GoldSeek.com, Gold Seek LLC, is strictly prohibited. In no event shall GoldSeek.com, Gold Seek LLC or its affiliates be liable to any person for any decision made or action taken in reliance upon the information provided herein.