Yesterday's Drop Was a Long Time Coming

Includes: DIA, GLD, QQQ, SPY
by: Adam Sharp

What a schizo day in the markets. I suspect there is a catalyst at play we’re not aware of yet. Something nasty coming down the pipeline.

Does anyone really believe this panic was caused by a simultaneous collective realization that the EU is in deep trouble? Anyone who follows business and has a frontal lobe has known this was coming for the past 12 months (expect a similar American crisis within 2-5 years, with similar levels of seashell collecting until the tsunami hits).

Point is, this can’t be all an EU/Greece scare. Lots of potential issues to ponder here. Off the top of my head, here are four:

  • Banks may actually be forced to bring all those toxic assets back on their books, and they’re not happy
  • Another unknown in the Financial reform bill (possibly breaking up the TBTF crew)
  • Bad Spain/Italy/Portugal news coming soon (hidden debts maybe)
  • German voters reject Greece bailout package

Whatever the cause, it was a hell of a day. Stocks crashed, dollar soared, and gold skyrocketed. What’s wrong with this picture? Gold pops 3% on a day where the dollar is up almost 1%? Not your typical action to say the least.

Pondering Gold’s Future

I think this could be the start of a big move up for gold. Yesterday David Rosenberg made a $3,000 price call, saying it should hit that in the next few years. Targets like that were laughed off just a year ago.

Now even people who don’t follow metals are telling me about $5k gold. Could be a contra-indicator, but I don’t think we’re there yet. I’d guess 95% of investors have zero exposure to gold, through bullion or miners.

Plus, I am convinced that the Fed will be forced to re-start the printing presses very shortly. And when it does, gold’s going to go even higher. Forget about Fed tightening. They can’t/won’t. Too much political risk, as the situation could get ugly temporarily if they stopped pumping. That’s my opinion, anyway. Take it with a healthy pinch of salt.

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