Finally Seeing the Trade of the Generation

I think we can finally say that this week represented the xTrade of the Generation, which is to Sell bonds and Buy Gold/Goldminers. Thursday for bonds -- before the close -- could be a major sell.

If there is a trader in the universe who has bought U.S. treasuries for reasons of income rather than panic/safe haven, then there won’t be a second. How would anybody expect to make money in the 5-year Treasury yielding 2.09%? The 10-year yielding 3.39% and the 30-year yielding 3.97% reflect only the ridiculous prices as traders have panicked from other assets.

The $XAU goldminers index hit a high of 209 in March-08. Eight months later, the index was often in the 64 to 72 range. Goldcorp (GG) Wednesday closed at 18.62. In late September it was double that. Within a year, this stock will likely be at least +100% higher than the close Wednesday.

Comments

[SW Richmond:]

Bill I completely agree. I've been 50/50 cash and dollar shorts, waiting for a declaration. I've started incrementally moving the cash into dollar shorts. I'm in the process of doubling my miners, adding to TBT and DXO, and of course adding physical. This and other articles make it clear: quantitative easing has started in earnest, monetization of the long end of the curve has begun (or will begin soon). Dollar destruction dead ahead.

Mises predicted this moment decades ago. It has arrived: "There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."

Anyone who wants to move any equity forward needs to get it out of dollars, now. Can capital controls be far off?

2008 Nov 21 07:35 AM

[Smarty_Pants:]

Don't overlook junior mining concerns with solid balance sheets. Some are have market caps below cash in the bank. If/when gold price moves higher, the majors will be looking to buy up any juniors with sizeable proven reserves just to get the ore. Well chosen juniors could skyrocket over the next few years.

2008 Nov 21 09:55 AM

[Chickenpookie:]

Isn't the flight to bonds really a flight to liquidity?

2008 Nov 21 12:41 PM

[drone:]

I'm not so sure about Bill's calls lately. Still, I hold a sizeable stake in Centamin Egypt, a junior coming into production with lots of ounces in the ground.

2008 Nov 23 07:28 AM