Currency, Debt and Stock Markets Point to 'Interesting Times'

Gary Tanashian submits: Currency markets, debt markets, stock markets and sentiment indicators all point to now, as in today - yield curve closed UNinverted Tuesday for the first time in a year and has turned up from a bottom that looks similar to the one in 2000, an interesting year I think we would all agree - being an interesting time.

As markets and trends tend to do, it appears the grand experiment in money creation (with resulting rising asset prices) has created a rock solid mythology that global Central Banks are in "inflate or die" mode and will remain so.

This will keep most people on the asset (stocks & commodities) side of the boat. The USD and Yen are largely forgotten.

But the charts loudly beg the question "What's the risk? What's the reward?" with respect to positioning from this point forward.

We have "gone bearish" the broad stock market, become focused on the USD & Yen and hold positions in both to partially deflect short term turbulence in our gold stock holdings. Speaking of gold stocks, we have been trading around a core and have been pleased to pick up favored gems as they are regurgitated by those making no differentiation between plays on liquidity and plays on contraction. The Yen Carry Trade is over bought as is the "USD is toast" trade.

The chart of HUI shows potential ultimate lows in the near term (off of mini potential H&S noted on chart), but not shown is a long term chart with major support in the 250-270 area to keep in mind in the event that times become very interesting.

We have stated that "cash is a position" and that for many, that may well be the place to be. For our purposes however, as stated we will hold our core gold miners and add the mayhem because charts usually don't lie, they just take a while to come to fruition. And the charts say that things are lining up for a contraction (at least before the next inflation fueled expansion) and the one asset class that benefits first and foremost in this environment is the gold stocks, as their product either rises or drops significantly less than their cost inputs.

There is of course more to the story than what is presented in this report. On the blog, indicators such as the gold-silver ratio, the VIX and Vixen and put/call ratio are followed routinely. They presently paint a picture of a crowded sunny side of the boat. Over on the shady port side we see turbulence on the horizon.

Disclosure: Long gold miners such as GG, GFI, MRB, MFN, etc. Long USD via cash, SHY and RYSBX. Long Yen via FXY. Short the stock market via DXD & QID (and looking for more shorts). We also continue to hold minor positions in copper (NOC.TO, CPY.V, MRB) and airlines (JBLU).

Comments

[LeeCarlson:]

FOR WHAT IT'S WORTH,...I COULD NEVER SEE THE WISDOM IN BUYING GOLD OR GOLD STOCKS.
ONE CAN'T GO INTO A GROCERY STORE AND BUY BREAD WITH A GOLD COIN ! AT LEAST NOT YET !
IT'S PURELY GAMBLING !... BUYING COPPER, SILVER, PLATINUM, ETC. MAKES SOME SENSE BECAUSE THEY ARE COMMONLY USED IN MANUFACTURING . GOLD, LIKE THE STOCK MARKET IN GENERAL, HAS ALWAYS BEEN A GAMBLE TO A CERTAIN EXTENT, BUT STOCKS LIKE THE UTILITIES, ENERGY, ( OIL AND GAS ) AND THE RELATED INDUSTRIES, PIPELINES, REFINING, ETC. ARE ALWAYS GOING TO BE STABLE,
AS MUCH AS COCA COLA !
UNFORTUNATELY, INVESTORS HAVE A "HEARD" MENTALITY AND WHEN THEY GOT BURNED IN THE LATE 90'S STOCK MARKET , ..THEY TURNED TO HOUSING, BECAUSE THAT'S VERY STABLE, ..RIGHT ?
IT'S "RIGHT" WHEN THEY BUY PROPERTY THAT WILL GIVE THEM A RETURN ON THEIR INVESTMENT, BUT THEY OVERPAID TREMENDOUSLY AND TRIED TO "FLIP" PROPERTIES LIKE THE REAL PROS. AND THEY ALL GOT BURNED, REALLY BAD IN MOST CASES ! NOW THE MARKET IS TRYING TO RE-ADJUST TO REALITY
AND THERE IS SO MUCH REAL ESTATE ON THE MARKET NOW THAT IS STILL OVERPRICED,..SO MUCH SO THAT IT WILL TAKE YEARS TO REALLY RE-ADJUST !
TAKE IT FROM ME, AFTER 26 YEARS IN THE BUSINESS OF REAL ESTATE SALES, BETWEEN MORTGAGE BROKERS LOW INTRODUCTORY RATES, .. THE OVER PAID PROPERTIES ARE GOING TO TAKE A LOT OF INVESTORS DOWN ! WAY DOWN,....! THE DEMAND IS VIRTUALLY GONE ! MAKING THE PROBLEM EVEN WORSE IS THE FACT THAT THE HIGH PRICES PAID FOR REAL ESTATE ALSO DROVE UP TAXES AND INSURANCE MAKING IT EVEN MORE DIFFICULT TO "DUMP" THE BAD INVBESTMENTS.
INVESTORS NEED TO TRULY RESEARCH THEIR INVESTMENT STRATEGIES BEFORE MAKING THOSE INVESTMENTS.
FINALLY,..GOVERNMENT POLICIES OF TAX AND SPEND HAVE REACHED THE POINT THAT THE DOLLAR IS BECOMING VERY WEAK, MEANS THAT FOREIGN INVESTORS ARE GOING TO BE THE NEXT GROUP TO INVADE THE COUNTRY. THEY WILL START OWNING EVERYTHING AND WILL FORCE OUR DOMESTIC COSTS UP AGAIN ! OUR ONLY HOPE IS A RADICAL CHANGE IN GOV. POLICY THAT WILL INSIST ON "FAIR TRADE",..NOT JUST A TRADE POLICY THAT FAVORS EVERY COUNTRY BUT OURS !
DON'T BELIEVE ME ??,..JUST LOOK AT THE VALUE OF THE EURO AND THE CANADIAN DOLLAR, AS COMPARED TO 5 YEARS AGO. THAT'S OUR FUTURE GUYS !!!
SINCERELY,
LEE CARLSON, SPRING HILL, FL

2007 May 18 11:48 PM