US Treasury (Bond) market is ready to submit to the inflation
argument, the gold price is about to reveal a physical
shortage of gold as well as a crumbling global monetary
order, the strong dollar policy is about to have the rug
pulled out from underneath it, the blue chip end of the
stock market is now precariously close to the precipice,
and commodity prices appear to be revved up for another
good leg. That is the point we've arrived atů but it's
really quite quiet out there.
Forget about the managed slowdown hypothesis, or a return
of the goldilocks theme, or a resumption of the new economy.
Let's consider the now discredited "V" shaped recovery.
wouldn't last week's Fed inspired Dow Industrials reversal,
for instance, foretell a reversal in fortune for the US
economy? Well, first, the rally itself is not likely a reversal.
It was a clear-cut buying panic in a bear market. A buying
panic in a bull market is one thing - it is usually motivated
by the fear of missing out on a good thing. But that isn't
what seemed to occur here, last week.
one, since it is a bear market the panic buyers were probably
the professional shorts, hedge funds, and fund managers
either locking in profits, preventing an erosion of capital,
or liquidating their risk insurance, respectively. The point
being that they were motivated by the fear of capital loss,
not of not making enough of it. Nonetheless, a panic is
a panic, and it is more often followed by reversal than
continuity. Besides, since when does a government intervention,
alter the primary market trend?
what if the market is beginning to discount changing underlying
fundamentals that are already turning bullish for the US
economy? Indeed, what if the economy is picking up momentum
now? But where would it come from? The consumer is showing
signs of fatigue, the business sector appears to be over
invested in the wrong places, which might account for the
rapid slow down in capital expenditures that the FOMC refers
to in its last policy statement, and lastly, there must
be a drag on the US economy through trade - due to a strong
(expensive) dollar, by this point.
discuss 4 possible recovery scenarios but whether recovery
arrives or not, the higher inflation rates will force
the Fed to consider a reversal of policy, which is what
the stock market neither wants nor expects. Accordingly,
raises the stakes... forget about 2000, are you ready
for a 3000 point tumble in the Dow Industrials next month?
bears got railroaded this month, and it started even before
the surprise rate cut last week. The oil stocks index
suggests big things ahead for oil prices, and oil prices
are confirming... meanwhile, gold prices and the XAU...
Bulls have reached their technical objective and now sit
vulnerably at a primary resistance point near a two-year
high at 125. They are overbought, and the focus is now
on the fiscal developments in the US Treasury bond market
as well as the Japanese Government bond market. The latter
has been outperforming the former in recent days.
a critique of recent analysis from the World Gold Council
titled, World Gold Council; Gold in the Official
Sector, Issue 15, April 2001, we take issue with their
explanation (or lack of one) for higher lease rates. And
to add insult to injury, wait until you read about Robert
Skidelsky's dinner speech at a WGC function in November...
Goldenbar renames the World Gold Council to the World
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Edmond J. Bugos
The GoldenBar Global Investment Climate is not a
registered advisory service and does not give investment
advice. Our comments are an expression of opinion only and
should not be construed in any manner whatsoever as recommendations
to buy or sell a stock, option, future, bond, commodity
or any other financial instrument at any time. While we
believe our statements to be true, they always depend on
the reliability of our own credible sources. Of course,
we recommend that you consult with a qualified investment
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in your legal jurisdiction, before making any investment
decisions, and barring that, we encourage you toconfirm
the facts on your own before making important investment