cameroni

Gold to $980 or Bust?

Don't worry Mad Scientist. Lots of guys are calling for a big upshot in Gold at any moment. Suggestions are that technical patterns tell us in no uncertain words to get on board the Gold elevator now. I beg to differ though.

Markets are about to correct down and that will boost the dollar again. Gold will decline and any sharp sell-off in equities will precipitate a reflective rout in gold. I understand the logic behind technical analysis but I also know it is only predictive and not a factual representation of what is actually about to come.

Fall will bring a whole litany of new troubles from housing to employment as summer workforces contract, home buying declines, students return to school and the farm season wraps up. I strongly believe the markets will react rather negatively to news we know is coming. As an aside, if consumer confidence remains tepid to weak leading up to Christmas there will be declining confidence in equities on anticipation of quarterly results ahead.

If anyone can provide good rationale as to why gold will spike above 1000 in this environment (prospects of increasing dollar and a downward equities correction) then I applaud they're gutsiness and contrarian views. I just don't see it though. Not yet anyway and so I will not buy back in unless things change. Gold seems range-bound lately but that could change abruptly and if there is a sudden market sell-off then the lustre will come off gold pretty quickly.

We are still deflating. Until that changes there will not be any good fundamental reason for a Gold spike except investor sentiment.

I do think panic will return to markets and caution others to backstop against losses on a regular basis. In particular I suggest all be wary of 9/9/09. There are a lot of superstitious buyer and sellers out there. End dates are not logical yet they affect markets all too often. Only the Gods know why.

Cam

China and the U.S. Play Ping-Pong over Currency Concerns

China is a very savvy player when it comes to currencies. To stay ahead of the curve they have been obligated to devalue their own currency at a much faster rate than the US. Given domestic stimulus to date it is no surprise that similar stimulus in Asia not only mirrors our efforts but in fact exceeds those efforts.

If China had the guts to hold fast and maintain a strong currency it would be at their peril as exports there would quickly evaporate in the currency differential.

You have to give them credit for for fast action in the face of a major dollar threat.

Gold to $980 or Bust?

So.......

Gold is down 30 bucks since this article was posted. I said it would decline and with no hesitation at all stood by my assessment. Gold is still set for a further decline too. I still stand by those comments.

Do I really need to say "I was 100% right with that assessment"

Guess not. The record speaks for itself. Gold at 980 is a bust for now. Shake your heads. This is not the time for a gold price spike. It will come later. But not now.

Analyst Sentiment Finally Net Bullish: Is it Time to Bail?

What the markets do as opposed to what is actually taking place in the broad economy just leads everyone, including analysts, to the wrong conclusions.

Markets are still thinly traded and the big players have taken the lead in driving prices. Does that suggest a bullish outcome? When I look at figures coming out of Europe for housing, unemployment, GDP growth (real and imagined), their credit crisis etc and then try to apply that experience back to North America I am left with only a single conclusion.

That conclusion is that most of the major Western economies are in a sharp decline and only more stimulus will rescue all of us from the deflation that is on our doorstep. I am talking about Italy, Greece, France, England, Ireland and even (god forbid!) Germany. Of course stimulus will also harm us through the resulting inflation.

The stunningly optimistic IMF growth(?) forecasts hardly do justice to the severity of the reality on the ground. Can any of it be believed anymore? The EU is headed to hell in a hand-basket. Hardly an omen of strength for the North American economies.

So is it time to get bearish and bet against the markets?

Not on your life! I expect a very strong surge in the coming weeks, a Dow that exceeds 10,000 and a lot of new money jumping on the bull train. Just know that I also expect it all to end very, very badly.

So stay alert.

Gold to $980 or Bust?

You serious (and sometimes vociferous, even lunatic) Gold-bugs may not like to hear it but gold is set to fall this season and come September I will be proven 100% right. Just watch. Gold will fall. It is not my fault though so don't take it out on me. That is just how the market functions and I am calling it like I see it.

CRB Spot Indices Suggest Growth Happening, Inflation Coming

For anyone confused about what the CRB is:.....

The CRB Index is a broad based commodities index developed sometime in the mid 1930's as a response to the lack of general information about the state of commodities markets for investors.

The acronym stands for "the Commodities Research Bureau". The original index included domestic agricultural products like eggs, potatoes, onions and oats as well as foreign products like cocoa, coffee, rubber and sugar. The mix also included metals, scrap, burlap, tin, wool, animal hides etc etc etc.

The modern version of the CRB is very much more trimmed down to match the times and to simplify the ideas embodied in it but is still a very good gauge of real activity in the economy.

I think the author made some good points even if he did not explain just exactly what it was he was talking about.

How Will Agriculture Investments Be Affected by New Deadly Wheat Fungus?

Thanks for the update Sol.

I think this crop disease risk is one very good reason for all producers to start looking seriously at planting alternative grains that may resist rust. Spelt is one very good example of an ancient grain that may be somewhat immune to common rust. Teff is another. There are varieties available that are not in common production now that could help farmers withstand the risks inherent in crop monoculture. Some of our most heavily planted grains are at risk of disease for no other reason than everyone and his dog is planting them.

Does anyone really remember Irish potato blight?

Speculators Ride to Cattle Ranchers' Rescue

Feedlots did not buy less cattle because they don't like the business nor because prices declined that's for sure. Feedlots bought less cattle because there were fewer quality cattle to be bought. The reason there are fewer cattle is because so many farmers have gone out of the business and sold off they're herds because of the recent and past bad years.

Fewer animals, fewer producers and an evolution to easier means to make a buck amongst an aging farm-owner population means that meat will be a tremendous business for investors in the near future.

The owner-operator farmer is aging. He is getting smarter about his investments and he is getting out of losing propositions. Land itself often provides better opportunities. The cattle business has not been all that lucrative for some time now and patience has worn thin. Especially amongst the small and medium sized long-term suppliers.

Those still standing will reap the benefits as cattle prices rise at a time when meat is coming into demand in all our foreign markets. Cattle is an excellent business to position into just now. It will be up to a younger generation to make a go of the new opportunities though.

Gold to $980 or Bust?

I am on the side of the bust "Market Folly". Gold has been overplayed recently and I do think it will correct down in a significant way through this fall. We will see of course. At the moment thought there is no compelling reason for Gold to break the 980 barrier, never mind breaking through 1000. The time is not right. Not yet.

Gold will have it's day but not until the stars line up to make it happen.

A Thought Experiment for Bears and Bulls

Good questions Cam. Very well said. Sane investors will answer your questions honestly and arrive at exactly the right conclusions. The bear in this cave is going to eat well soon.

Ford and the New 'Profitability'

Ryan, can you define the "one-time debt reductions" that pushed Ford back into the black, please. You may know what you mean but it does no justice to your article to make a statement without clarifying the specifics. I like Ford but I don't follow it's business closely so I have no idea what you are talking about. I don't have time to read your mind.


On July 24th 2009 Ryan Avent wrote:

Ford (F) actually lost a little under $500 million on its operations in the second quarter, but taking into account one-time debt reductions pushed the firm into the black for the three months to June.

Are Investors in the Denial Phase?

And then again,...Fools rush in where Angels fear to tread.

Thursday Wrap-Up: Strong Start, Stronger Finish

So stay in cash then. Bigger is not better.

Dollar Boost Short Lived; Gold Resumes Climb

A major jobs deficit in the absence of any inflationary pressures is not supportive of gold prices. I am very doubtful today that the price of gold can long be supported without stimulus efforts being aggressively employed. I would say vehemently to anyone buying in precious metals now to continue to exercise caution. Another serious equities decline will bring both gold (and especially silver) right back to earth.

There are a number of reasons for my pessimism. Firstly, with equities sharply rising that should adversely affect the strength of gold prices. Secondly, we are not yet suffering any significant negative stimulus effects and in particular inflationary pressures that would warrant further large price rises in gold. Third, there is a general downtrend in commodities. Fourth, investment demand for gold has been waning recently in the belief that the economy may be improving or will improve based on remarks from the IMF and other sources. Fifth, any serious turn of events on overall markets will bring declines in precious metals. (The idea that Gold will shoot up above 1000 on news the overall market is crashing is just plain silly). Sixth, overseas buying of gold and in particular the purchases being made by Arab states and China have largely already been factored into todays prices. Seventh, gold is still not widely accepted as a better alternative to dollars in the mainstream and this is very important. Investor sentiment is still firmly rooted in "Dollar denominated investments" and in Dollars themselves.

There are other reasons to respect the vulnerabilities and limitations of gold and silver in the near future but they are all too boring to write about.

But before getting all wound up in the myriad of compelling reasons to buy gold and nothing else you should give your head a shake and try to understand the fundamentals at play at this very moment. Real investing is long term of course but that does not mean you can't lose your shirt short-term. So stay focussed.

I am an admitted gold-bug but I won't allow myself to get stupid about gold as an investment until more of the "real" reasons to invest in gold become apparent. That time is not here quite yet.

Stocks Are Overvalued and Overbought

I think you have a good point Susan. Seasonality is one of the most important considerations right now as we assess the sustainability of the real estate market. Looking overseas we can already get a taste of what is to come as European countries are already experiencing sharp declines in rental prices and increased vacancy rates. The problem of course is the same there as it is here. Overbuilding and overpriced homes.

I monitor employment rates. That is the key in my opinion to understanding economic strength and how robust a recovery we may have. At the moment those rates tell me beyond a shadow of a doubt that the economy will contract in almost every sector for the foreseeable future.

Sustained, growing and continuing high levels of unemployment will deprive us of a rebound in residential prices and no recovery is imminent. High levels of unemployment will further weigh on consumption and suppress the driving force behind not just US GDP but global economic activity.

Furthermore, reductions in real wages and salaries, reduced working hours and persistent structural employment issues will hamper Government virtually all growth predictions.

I do not put any stock in the rosy predictions from the Gov't, Fed, or IMF. Those messages are designed to instill confidence in a public familiar with institutional good-will messages. But only a foolish investor will believe that poppycock.

Virtually every indicator is still in decline and the picture will only worsen as fall approaches and investment begins to drop off for the winter season. We only have Christmas and 3rd quarter earnings to look forward too.

With the very high level of domestic savings now (and much reduced spending) we can assume Christmas will be a bust. This will be the season to start shorting commercial real estate too as the new message and reality starts to sink in and more malls go bust.

We should brace ourselves now for a few very high profile retail bankruptcies and some dizzying losses on the commercial property side. These have long been predicted but that day will soon be at hand and I foresee a major reckoning of accounts before January 2010 is over.

Only a major release of stimulus can reverse the carnage but of course we all know already that stimulus will simply release a whole different nasty damage as serious inflation kicks in. We will not get out of this dilemma unscathed in any case.

If the employment picture does not improve we are headed for hell in a hand-basket. So take cover while there is still time and use your own head when listening to the rosy picture painted by the powers that be.........


On Jul 23 03:44 PM Susan Weerts wrote:

> Stocks are definitely overvalued and overbought in the short term.
> If a lot of people expected a V-shape recovery (which I doubt), some,
> a.k.a, the buy and hold, might argue that it might not be the case
> in the long run.
>
> Many cited tiday's housing resale number as one of indicators of
> economics recovery. Did anyone know whether this number is season-adjusted?
> The housing market trends up in March and peaks in June and July,
> as many people try to move before the new school year. If the number
> just compared to previous months, it really didn't tell much.