Thursday, September 16, 2010

Black Swan

Tonight I was doing my 1 hour "homework" as per Jim Cramer's instructions, and I came across this. I can't believe I didn't see this earlier!
$VIX - Daily Candlesticks: "


It's amazing to see the kind of mass hysteria (sugar high) a wave "E" produces:
It seems like everyone is in love with this rally, and the gold trade, and convinced that the dollar is weak, and inflation has returned, regardless of the facts.
$USB - Daily Candlesticks: "

I'm tired of the deflation/inflation debate, so I'm going to put it to rest.

Fact - Home prices are falling. That's a no-brainer.
Fact - Wages are not rising, because there is more demand for jobs than workers. that amounts to 0 wage inflation.
Fact - There is a high demand for dollars, even though interest rates are low. Try getting a loan lately, or re-financing your mortgage? Just wait until Joe developer goes to refinance the ARM, on those strip malls he's been robbing Peter, to Pay Paul for. Commercial ARM resets peak later this year, and we're only in the 3rd inning, because construction projects planned years ago are just now being started. Where will the demand for future projects (retail and residential space) come from, when there's already a vacancy on every corner?

Some $50 trillion dollars have been destroyed in this crises, and the minuscule amount of money that has been artificially pumped into the system can't make up for that.

Nations, and individuals have been borrowing beyond their means for the past 50 years, since the gold standard was done away with by the Nixon administration. If Canada, the US, France, Greece, Italy, Ireland, India, Japan, Switzerland, the UK, and Germany are going to re-inflate their debt bubbles, where are the 100's of trillions of dollars going to come from?

When there's a demand for dollars (like anything else) it's value goes up.

So why is gold up? The same reason Oil went to $145.29 as the economy was falling off a cliff. The same reason Jones soda stock was pumped to $30. It's because the stock market is a crooked casino where valuation means little, but as long as there's a sucker born every minute we will continue to see the same 'ol pump and dump play out over and over again.

[updated April 2012]
After successfully calling the [top in gold] in august of 2011, I've since removed my bearish stance on gold. In 2012 I see Gold going to all time highs, with an upside target over $2000.00, however I don't suggest chasing gold until you see my gold chart. Become a member of and you receive access to my long term gold charts, as well as alerts to any necessary revisions to my long term forecast. 

No comments:

Post a Comment