Thursday, 12/12, Market WrapUp (CRB Index, gold explodes. No inflation?)

Financial Sense Online ^ | 12/12/2002 | James J. Puplava

[rohry]

Gold up, commodities up, dollar down...

Maybe Puplava has been right all along?

[rohry]

Market WrapUp is delivered...

[arete]

Maybe Puplava has been right all along?

Yeah, he's been right, but was there ever any doubt? :-)

Richard W.

[shrinkermd]

Commodities are soaring, but with good, smart $100 a month labor in China, price inflation is not likely. Also, remember, we are basically a service economy.

A deflation would be a disaster. Paying back the huge private and public debt with dollars increasing in value would be catastrophically imposible. They will inflate, but the question is how?

Everyone is betting on the Fed and Treasury monetizing the debt by buying back bonds. This may not be the best and this may not be enough. IMHO, we are about to see something that hasn't happended for fifty years --the Fed will buy gold and flood the market with free floating dollars. Then the foreigners and others will want to sell their bonds and those will be bought up with fiat dollars as well.

Other than a big jump in production and productivity, there doesn't seem to be much of an alternative. They will inflate, but again, how is the question. Somehow they have to do it without precipitating a currency devaluation war where there is a cascading rush to the bottom.

[SauronOfMordor]

On another thread, we were discussing indicators that the big boys on Wall Street think that a sharp increase in interest rates lie ahead.

[SauronOfMordor]

On another thread, we were discussing indicators that the big boys on Wall Street think that a sharp increase in interest rates lie ahead.

[SauronOfMordor]

sorry, only the second post's link is real

[RightWhale]

Gold is up and natural gas is up the past few days. Only thing we can figure is instability in South America, Venezuela in particular. That, plus the Iraq crisis continues to bump along and N Kor is being obstreperous with their nuke program, plus Iran again with their massive centrifuge facilities.

[arete]

Well, our very own GW starting talking going nuclear. Now how do you think the world is going to react to that? I'll tell you what I think. I think that it scares the pants off most people.

Richard W.

[Cicero]

There was enormous resistance for gold at $330. It has bounced back down from there numerous times. If this holds for another day or two, it probably means that it's another leg up on the gold bull run.

I'm delighted, because I just picked up a few more gold shares a week or so ago.

Unlike Puplava, I also like the long bond right now.

[ninenot]

On advice of The Daily Reckoning, I have been watching gold for over a year. Was around 240 when I started paying attention...DAMN I wish I had cash for that..

[Soren]

A sharp increase in interest rates would devastate all those who have refinanced their debt to take advantage of low short term rates.

[dalereed]

I do work for a woman on her rentals and she just sold a condo and bought a new home for a rental and was going to get an adjustable rate loan and I told her if she did she was sticking her neck out a mile, the inital rate difference between a 30 year and an adjustable was only 2/3 of a point.

[Soren]

I have trouble seeing much upside in the long bond. I don't know the stats for the long bond in particular, but I have read that foreigners own about 45% of the Treasuries market. With the dollar poised to fall, I'd be worried about foreigners bailing out. Also, FWIW, Jim Sinclair wrote in an editorial today that "there is no question in my mind that my late 2001 prediction of a top in the bond market in November 2002 has in fact occurred".

[Soren]

Good advice. Corporations may be just as guilty. There was an article posted yesterday that seemed to imply states and municipalities were also shifting from long to short term debt, though derivatives were involved and it wasn't clear to me who was actually taking the risk of short term fluctuations. And didn't the federal gov't move to the short end during the Clinton administration?

[dalereed]

"didn't the federal gov't move to the short end during the Clinton administration?"

Sure did, that's partially how clinton was balancing the budget but it's going to really hurt in the long run but what does he care, he won't be in office when the payment comes due.

As far as the states using derivitives to finance their deficit, they are playing with fire and of course only us taxpayers are going to get stuck in the end.

[montag813]

However, the moment one leak was plugged, another one sprung. The minute the stock market was fixed, the bond market began to crater. When bonds rallied, stocks began to plunge.

Uh, earth to poster...Bonds and stocks move inversely to each other. Try reading "Investing 101" next time.

[montag813]

There was enormous resistance for gold at $330. It has bounced back down from there numerous times. If this holds for another day or two, it probably means that it's another leg up on the gold bull run.

Amen. Gold is following Technical Analysis 101...330 resistance breakout. Investors would be wise to let it retest 330 as new support before getting in with fresh positions.

[montag813]

Unlike Puplava, I also like the long bond right now.

Yes, Bill Gross at PIMCO has been trying to talk down the bonds for two weeks now, and they have been steadily rising so as to challenge intermediate highs. A break of the March 30yr bond future (USH3) beyond 112 would lead to fresh all-time highs. Your chance to refinance may not be over just yet.

[steveegg]

Dunno, but it sure looks like it. I also noted that he's advising that those of us with spare cash ready to enter the physical gold (and probably by extension the rest of the commodities) to actually take possession of the gold.