-- Posted Wednesday, 19 April 2006 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Wednesday, April 19, 2006
For investors who’d rather be smart than lucky
The canny investor had just one thing on his mind yesterday: how all of the other bozos would react to news that the Fed may soon stop tightening. The fact that Wall Street has been anticipating exactly this news for umpteen months did nothing to mitigate the irrationality of those who stampeded to discount it yet one more time. Stocks zoomed higher because loose money is like crack cocaine for the economy. The dollar fell because savers and foreign lenders neither share nor countenance America’s addiction to crack. Bond prices rose because a mere whiff of crack is enough to make the yield curve turn lubricious. And of course precious metals soared knowingly, sensitive as always to the fact that we will ultimately pay a stiff price for getting high.
Seven years of mostly tedious markets might have induced a few cynical tape watchers to ho-hum yesterday’s glimpse of light at the end of the tunnel. What light? Specifically, Helicopter Ben was reported top have said at last month’s Fed meeting that “the end of the tightening process was likely to be near.” But calm is the last thing in the world an investor should want to be when thousands of tape watchers are poised to hit the panic button whenever there’s a hint of easing in the air. And there is – more than a mere hint, actually – although we remain skeptical that the end of tightening will prove to be a cure for $70+ oil and an already collapsing housing bubble. So how long will the celebration last? A day or two at most, is my guess. With gold and oil as a reality check, meaningful new highs in the stock market seem most unlikely.
Notes from the Edge II
I’ll leave you today with a fine rant from a deflationist compadre, Erich Simon, whom some of you may recall as my avian flu expert. Like so many of us, he sees signs nearly everywhere of an impending Mother of All Tops.
Erich writes as follows:
“People on both sides are getting very anxious as we head into six months of seasonal weakness. I am normally a year early in my major predictions, and things are stretched past my tolerances. The blowoff today, now so alarming to even the small fry traders, who are unable to identify it for what it is: a mega-top; characterized by all the emotion and pandemonium and mixed signals that precede a mass exodus; this top is now all around and is no doubt being discussed at the Fed-level right now behind closed doors. The best anyone can hope for now is a ratcheting up of the propaganda machine to knock a leg out from under all of this irreverent speculation; and after that, an emergency intermeeting rate increase.
‘Perfect’ Timing
Here’s the frustrated market-timer:
I am struck today by my wire having gotten into a bear fund a day before a triple digit increase in the Dow. I have been noticing a growing volume on the bear side. Metals today are spiking. Oil now comfortably above seventy. How interesting. How bizarre. It seems that the players are trying to shake out the shorts on the equity side, and trying to shake out the longs on the precious metals front. And oil... it all has the markings of a final blowoff across the board, head fakes, bluffs, and cross signal media manipulation like the last hand in a game of mega-stakes Texas hold 'em. The outcome is unavoidable and it would appear that a deflationary adjustment is coming on the next reshuffle... in everything.
And the anxious gold-bug:
Yeah, the yellow dog and white metal breakout... did all my buying at 462.50 and under 8. Got into BEARX today for 12g's... three weeks of stress and I'm still not done arguing my case; I should have gotten the Monday pre Bernanke interest rate increase quote on the fund, now some 30cents higher per share.
Rates Bound Higher
I stepped away from gold and silver with the other 8g's I was gonna put into Tice's other fund, hedged with metals against a collapsing dollar. I agree that the metals are headed higher short term and justifiably so. Fair price on gold is around at least $643, but when I buy physical, it's for my retirement, not the fast trade. And I think rates are headed MUCH higher and there's a lot of fast money in the metals, the mining issues and everything else. So I went forward with my latest investment play... on the short side... and I have to say, although the fund/bank is run by idiots, BEARX has always been my pick for the broad spectrum.
When was it now, I think maybe early last year, after a $425 buy-in with some physical investor cohorts, they pressed me about $500 gold, which I had predicted the end of 2004. I told them that the future looked bright and cited a record futures contract that had come into the market for some 63 tonnes of the yellow ore. The second largest order was 23 tonnes. The strike price was $445 and I don't know if delivery was taken, or who placed the order, but it was a BIG player to say the least. My suspicion was the government, of course. We have to distinguish between the players and the keepers. I'm a keeper when it comes to physical. The players buy and sell. Sixty-three tonnes is a lot of overhang.
Passbook Mentality
And if the market is inundated with players as I have concluded, given my observations of trading behavior of the past ten years, then the metals, liquidity driven, are gonna sell off. Most people are resigned to keep their money in the banks, the establishment has seen to that brainwashing. And lugging around a suitcase full of gold and silver is a measure of stress in its own right. So the players are out there and the sudden rotation into the metals would attest to that. Also, all the equity markets are levitating, Dax, Hang Seng, Nikkei, ... copper... all of it. So what do gold and silver have about them, an expensive fragrance in a department of perfumes.
I for one believe that interest rates are going much higher. What Ben says and what he means are two different things. I don't think he cares much about the housing market... when the housing market tanked in 84-85 if memory serves, ushering the S&L crisis, gold went down for the ride, but came back strong after a 12 month slide... while housing did not. I think he cares about domestic tranquility but not about the masses, or the equities markets. And precious metals equities are about as stretched in the PE department as any issue I've ever seen, Crisco and Scamazon notwithstanding. I feel that the ultimate line in the sand is bond market preservation and orderly reduction of dollar value (international tranquility) and weaning the masses of unsustainable excess after the EZ Al national credit party holiday, and to that end interest rates or the rumor thereof will continue to climb. And down will come gold, cradle and all.
Grizzly Paw
If, on the other hand... and this is a heavy other hand, a real Grizzly paw (no pun intended)... this rally in gold is the real deal, over and above a quick move up into (predeflation?) equilibrium reflecting rampant inflation... then it would be a signal of the beginning of the end game, and that indeed we have breached the gate. The Middle East is shaping up for the Third World War per Richard Mayberry's prediction some years ago if we invaded Baghdad, reflecting eighty-eight separate tribal factions guaranteeing a civil war that would in time engulf the region... highlighted by the fall of America's puppet House Of Saud and knighting of thousands of martyrdom warriors into the fray (Ben Ladin might be spilling family blood on this front right now judging by oil production sabotage).
But world war pales in comparison to my continuing monitoring of H5N1. Out of a universe of over 2,500 bird flu genomes identified and mapped to date only two contain the extra protein tag that makes slaughter of human beings, viral strains H1N1 with its 5% kill rate in 1918 and 'kissing cousin' H5N1 with its best case scenario, ameliorated 50% kill rate. Gold will explode but it won't count for much if H5N1 comes to town because in 2-7 days the pandemic will be on every continent and there aren't and won't be any vaccines. Ergo the reason behind all the media silence. What's the point?
For whatever the reason, if the gate has indeed opened then the current account adjustment rubber band will soon snap the Greenback under 80, and any of a list of assorted inflection points will change business as usual into metamorphosis forever. The gold price will be valid only in so much as there will be a market to trade it.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 19 April 2006 | Digg This Article | Source: GoldSeek.com
