H. E. Canada

Gold, Oil Majors Revisited

With some BRIC countries, some European nations, some Arab states and some others around the world supporting it, we seem headed in the direction of a "basket of currencies," reflected in the so-called SDRs, and perhaps a new "standard" for currency exchange and more power for the World Bank and other global de facto government entities. Here's an interesting article that seems to me to reflect this movement from a "systemic" standpoint. I'm not saying it's bad or good, I'm just sayin' ...

www.ft.com/cms/s/0/df7...

If you aren't aware of the Financial Stability Board, go here: www.financialstability...

Although I doubt he foresaw such a thing becoming reality on a global scale, Thomas Jefferson knew the natural course that power seeks: “The natural progress of things is for liberty to yield and government to gain ground.” After all, markets are such messy things.

So, Greenspan's statement, which you quote in your posting, foreshadows the obvious. Let's see it, again: "Gold is always accepted and is the ultimate means of payment and is perceived to be an element of stability in the currency and in the ultimate value of the currency and that historically has always been the reason why governments hold gold."

What other action will be necessary, on a global scale, to finally vest all economic, monetary and fiscal power in a supreme, controlling global authority? Banning the private ownership of gold and other precious metals world-wide will have to happen for "global financial stability" to become a fait accompli. The "world" cannot afford to have a precious metals "market" which competes with their "currency." Markets are such messy things.

Ah yes, the utopian world of redistributive change ... the crises provide the impetus for action; and crises are not to be wasted. The stars are aligned.

China Stockpiles TIPS, Anticipates Commodities Bubble

"They say today’s oil comes from primordial swaps and is decayed vegetation."

Just a typo - swaps for swamps - or an unintended revelation that in mother nature and in the nature of man and markets, assets are over-leveraged to the breaking point?

Chinese Gold Moves Set Stage for Price Spike

Genesis - Thank you for your crisp response as to what you know technical analysis "is."

Investopedia explains Technical Analysis
"Technical analysts believe that the historical performance of stocks and markets are indications of future performance."

What Does Technical Analysis Mean?
"A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume. Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity." (www.investopedia.com/t...)

"Other tools" are used by technical analysts, like plotting events in the news, etc, to provide context, as my referenced-BBC chart showed. A chart without context is only half a story.

By the way, did you compare the gold and NAASDAQ charts? Where do they look alike? My gold charts do not look like the NASDAQ's in the late 90s. Do yours? If so, please provide the reference charts the author did not. I'd love to se them and learn from them. Or, did you just take the author's word as true?

You notice the author hasn't bothered to respond to my request to provide charts for reference to the article so I can understand and appreciate his comparison.

Neither did he respond to my question that IF "the longer-term technical chart for gold ... does look remarkably similar to the Nasdaq in the late 90s before it really took off" then does he see a precipitous fall in gold prices in the not-too-distant future, as the NASDAQ fell between 2000 and 2003 which was immediately after the late 90s..

Was this article a technical analysis by the author? I don't think so, so my comments reflected the same sort of other data he spent most of the article discussing, that is, non-technical data, those "other tools."

If this was a technical and not a fundamental artcle, why did he mention all the non-technical data to begin with, and even lead his comparison of the gold and NASDAQ charts with "... by monetizing gold in this fashion, international investors will surely appreciate that a floor is being put under the gold price, with the prospect of upwards only price revision. It is exactly this kind of impossible-to-loose investment scenario that produces price spikes..." How technical vs fundamental is that discussion?

The point I am making is the author used most of the article to discuss non-technical issues and concluded with a technical comparison, with no supporting documentation (charts) accompanying his comparison, and he did not bother to say what happened afer the NASDAQ "really took off" in the late 90s. It cratered in 2000-2003. So what was his point with the comparison? Buy low and sell high? He doesn't need a chart to say that.


On Jun 28 09:27 PM Genesis wrote:

> H.E. Canada:
>
> Technical analysis is technical analysis. It's not fundamental analysis.
> If one chart looks like another chart, that's that. Pure and simple.

Chinese Gold Moves Set Stage for Price Spike

I have no significant disagreements with most of what you say in this article, except for the chart comparison: "the longer-term technical chart for gold, it does look remarkably similar to the Nasdaq in the late 90s before it really took off."

The fundamentals driving technology companies and the NASDAQ in the 1990s are different than drivers in the precious metals. The long term charts for gold reflect significant non-fundamental issues / events / policies which influenced the NASDAQ in much lesser ways, if at all. An chart example can be found at news.bbc.co.uk/2/hi/bu... courtesy of BBC NEWS.

The implications of your chart comparison also would foreshadow a precipitous fall in gold prices in the not-to-distant future, as the NASDAQ fell between 2000 and 2003 (and has yet to recover). Is that what you intended to say?

If my view is incorrect, please provide charts for reference to your article so I can understand and appreciate your comparison.

Disclosure - I own GLD.

PPIP RIP: A Brief Eulogy

John Lounsbury may be right that his "earlier speculation about PPIP was correct. It was not a real proposal, but just a placeholder in the news to buy some more time, and would be implemented only in the direst of circumstatces."

But are these direst of circumstance out of the realm of possibility? I would not be too quick to bury the PPIP plan; this "safety valve and price discovery mechanism" might be revived by the administration if, indeed, "Roubini and the IMF is right," because "this WILL haunt us for some time." (Emphasis mine.)

If the too big to fail banks run out of credibility in the capital markets, and "the legacy assets and securities sit on bank balance sheets depreciating with each release of Case Schiller," their balance sheets may once again prompt a PPIP-like scheme to emerge.

Two Scenarios for Economic Recovery

Old Trader - many who are players in the markets today and many players in the US administration didn't "experience" the US stagflation of the 1970s, as they were too young to be involved in the economics and business of the country then. They are not truly cognizant of the situation and have no personal experience of how bad that situation was.

What is even more worrisome is that we have compounded the possiblity/liklihood of stagflation with unprecedented debt and nearly unimaginable monetazation of the same. Combined with terrible demographics for Europe, Japan and to some extent, the US, the coming stagflation could quickly morph into a sharp depression scenario.

Haryy Dent certainly is predicting something like this sooner rather than later. Although we can all argue with some of his conclusions and predictions in his book The Great Depression Ahead (www.hsdent.com/tgca_pr...), the demographics are compelling for long-term planning.

The Graying of the Great Powers (www.csis.org/media/csi...) underscores the significance and severity of the demographic picture for today's financial capitols.

U.S. Hyperinflation: Is Faber's Prediction Realistic?

Maybe we will not the see the hyperinflation levels of Zimbabwe or the WiemarRepublic (and I pray we do not), but let's be real about what hyperinflation is. From Dictionary.com: "Hyperinflation:
Extremely rapid or out of control inflation.

Investopedia Commentary

There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless."

With this perspective in mind, we could experience hyperinflation by the mere fact that inflation becomes uncontrollable. Is that possible? Yes. Is it worth hedging against? You bet.

We are in unprecedented monetary and fiscal territory. What we are seeing done with our nation's money supply and debt ratios will produce unintended consequences we cannot yet define. "We don't know what we don't know" - and that truth is undeniable.

Will Gold Continue to Shine? A Bullish Option Strategy

All of the option strategies discussed here have some merit if one believes BIG inflation is coming in the next 18 months, that the US dollar will lose relative value, and that interest rates won't be high enough to draw investors away from Precious Metals.

As Whippet says, one could wait to implement some of these or all of these strategies when the 2012 LEAPS come out later this year, if one prefers a longer time horizon. Then again, since none of us can predict what will happen when, one may ladder their LEAPS using these strategies for both 2011 and 2012 and perhaps mitigate some of the timing risk, as is often done with investments in Certs of Deposits, etc.

Yes, physical assets are a part of a good plan, and, yes, LEAPS provide a reasonable and limited risk, as leverage also has an appropriate role when managed correctly. Know you exits before you enter the trade, keep your eye on your tolerable loss limits (using stops where appropiate), work your plan, and don't let emotion overrule logic.

Commodities: Opportunity During Recession

I refer you to an earlier post by Tim Iacono, 2/20/2008, with a chart of what stocks, bonds and commododities returned, on average, in the various phases of the last seven U.S. economic cycles since 1959: seekingalpha.com/artic...

IF one believes this chart is a rough guideline of asset performance in this recession then the important question is, where are we in the cycle, i.e., on this graph today?

IF we are in the late recession stage, 50-year history says commodidites are not the assets where one would expect to see high returns.

New Bull Market or a Bear Market Rally?

Hmmmm. Did an Inverse Head and Shoulders start 11/05/2008 on the daily S&P 500 charts? Will we see a retest of the Nov 2008 lows in about three months, then S&P 500 back at 1000 in September? And if all that comes to pass, it probably means the stimulus is working, the banks are not failing, the market is looking ahead to a general recovery in 2010 and a move of SPX to 1300+ by EOY2009.

And if all that works out, then I think I can predict the outcome of the mid-term elections.

Why Our Credit Crunch Mirrors the Weimar Hyperinflation from 1919-1923

Mr. Goodman, thanks for your analysis as you try to interpret the history of significantly different political, economic, and financial situations and draw predictive conclusions.

I'm not so sure that the current "credit crisis" - or whatever you want to call it - is like anything the world has seen before. There are substantial differences between our circumstances and post WWI Germany's. Many of the posts before mine point those out. But the question of whether we are heading to hyperinflation is legitimate.

In his monthly Investment Outlook posted at www.pimco.com/LeftNav/... Bill Gross says "The future of the global economy will likely be dominated by delevering, deglobalization, and reregulating."

Gross goes on to say: " ... it is important to recognize that the aftermath of an economic and investment bubble transitioning from levering to delevering, globalization to deglobalization and lax regulation to reregulation leads to an across-the-board rise in risk premiums, higher volatility and therefore lower asset prices for a majority of asset classes ... and ... "Investors should therefore favor stable income as opposed to speculative growth or the subordinate liability structures of most private market balance sheets."

His conclusion is that the asset classes that went up during our recent super-leveraged, globalized, lax-regulation environment will suffer the most. Of four asset classes that he mentions, he mentions the dollar first. "The Dollar – As the center of structured finance and the shadow banking system, the dollar was bolstered as it sold paper to the rest of the world. To date, its recent strength seems counterintuitive. Weakness may more accurately describe its future."

If he is correct about the dollar weakening, then some type of inflation should be an increasing possibility as dollars lose value. Whether or not we get to hyperinflation, is yet to be determined by more factors than just the printing press.

Skype: Selling the Company Back to Its Founders

Perhaps it would be a good move for both Ebay and the Skype founders if the franchise were sold back. I have to say, however, that I think you have over-genaralized on the entrepreneurs-in-charge issue: "Big companies mostly mess up entrepreneurial companies when they buy them ..."

Many times the best long-term strategy for a nascent company and its founders is for a larger and more competent organization to take control. While this may not be the case with the Ebay-Skype scenario, and an undoing of that arrangement could well serve all parties, I expect a better marriage for Skype and its founders would happen in the not too-distant future.

Your example of Jobs and Apple ignors the fact that under Jobs' early "my way or the highway" leadership, Apple did not grow as fast as many thought it could. Jobs' vision has always been magnificient; his early record at running a competitive company less so.

After his return to Apple, Jobs made better and smarter strategic moves, including cooperative agreements in 1997 with Microsoft to accomodate their market-dominant application software on Apple computers. This was something he refused to do in the past, and it restrained the growth of Apple for two decades.

Let's hope for a better home for Skype than Ebay has been. Following Jobs' more recent model of cooperation with a dominant competitor, perhaps Skype could find themselves in a position to be another visionary, entrepreneurial company that cooperatively leverages their competitors' strengths. That's a proven successful strategic plan.

More Evidence That the Market Low Is Behind Us

Steve in TN - I reference an earlier post of mine that lends some support your contention of the 3 month opportunity:

"RBC Capital Markets has an interesting table comparing entering into the market 3 and 6 months before "the bottom" versus 3 and 6 months after. The apparent argument for waiting for the turn impresses me. Find the table here: lh4.ggpht.com/_Iz4sLjj... "

The question is: Is this time different due to unusal and unprecented circumstances? The answer we can't know until after the fact.

Where We Stand: A Look at the S&P 500

Interesting technical analysis, especially regarding the rubber band analogy. But your stated resistance levels were not / are not exactly mine. I'm using TOS for the S&P 500 daily charts.

Resistance levels were, heading into the weekend, in the areas of 825 - significant resistance, 850 - small resistance, and 875 very important resistance. The trendline drawn from the intraday highs of 11/4 to 2/9 intesects the 825 area on 3/23 - which was been tested 5 times since 3/23 and held. RSI also topped out as well.

850 levels of resistance go all the way back to October, and the impossible-to-ignore V-shape of the (now topped-out) bounce clearly indicated the 875 area of resistance.

Fibonacci retracements appear to me to be 50% at about 750 (which is also near the 20 day MA) and 62% at about 730. Guess what ... at 730 the market will be about 25% below it's 200 day MA - just like that!

Given the over-bought MACD and Stochastics we have seen for a couple of weeks, we were due for retracement, and I think we will see the 62% retracement. If we get to that retracement, will the market bounce again? I'm yet to be convinced.

Big Banks: Pulling Off the Ultimate Bait and Switch

When the enormity of the problems in the credit markets were finally grasped, after balance sheet after balance sheet began to implode, the US government decided that AIG, Citi, and their like had to be rescued (or merged into other entities); otherwise the whole casino structure of the derivatives markets could collapse and take down the normal credit markets and the international financial system as well.

The government mandated that banks participate in their efforts to repair the markets. Banks are expected to be saved by and benefit from the PPIP as well, so being the bankers they are, they will look for every opportunity to improve their balance sheets.

The governments' gambit has been to reflate the credit markets so quickly that further balance sheet implosions would be forestalled and bank, insurer and government collapses contained at levels low enough that they would not take down the international financial system.

The balance sheet assets lost within the financial system were, to a great extent, phony to begin with: foamy leveraged assets (sort of a credit market fiat money) and not backed-up by any normal credit market recourse to real assets. Now that lost money is being replaced by the government's fiat money, most of which is "only on the books" of the banks and insurers, and not really in circulation (yet).

Considering how many $Trillions have disappeared from balance sheets around the world, governments are still scrambling to replace these $Trillions with government debt, and monetize it as needed. The governments are NOT concerned, at least at this time, with inflation. They believe they are playing a zero-sum game in the near term, or at least they are trying to convince us of that.

Because betters and insurers in the Casino Derivative became indistinguishable (each owning either side of many, many different derivative bets), the Treasury now wants government regulatory and receivership rights over all the players, not just the banks. Will that include every entity that owns or issues a credit derivative instrument? Perhaps.

If this power isn't granted, the government cannot adequately control, limit, or fix systemic problems that might occur, or so claimed Secretary Geithner in his latest testimony before Congress.