Five O'Clock Somewhere
G'day. It has been an interesting couple of days since I last put any thoughts out in the public domain. I don't recall what I last wrote about except that there had been the election "gimme" buying opportunity in both precious metals and currencies. I think I may have even said something foolish along the lines of "not below $400 again this decade", a target of $448 may have been mentioned, and that once we went through $450 then it's all guess work as there aren't many reference points of consequence between here and the "all-time" high. No doubt that I will look foolish at many times this decade, but I expect it won't be over the "$400 gold call". Being long and staying long has paid off this move. Many got spoofed out of their strong early long positions. This is a different market to what most have experience in and the answers lie in history books, not Fed discussion papers. Time and patience will be rewarded most handsomely, IMO.
This is not a forum for political discussion and I purposely avoid the topic if at all possible. U.S. politics doesn't do it for me, sorry. A concern I do have though, was a rather pointed critique of my last posting (11/5) following the recent U.S. election, whereby one of the Minyanfolk accused me of insulting his intelligence by my, "blaming George W Bush for the myriad of financial and economic issues that currently confronts the Administration." That anyone could suggest that I espouse such a view obviously hasn't read anything I have written over the past 3 or 4 years. That anyone could think that I blame anyone other than the Federal Reserve System of the past 90 odd years, the Fiat currency and fractional reserve regime and the "policies" of numerous previous governments, offends me greatly because it means that someone has missed my whole argument these past years. I would love to see what I have written, anywhere that lays the blame of what's currently happening with the incumbent President. Sure, some policies have exacerbated the problems, but caused them, not for this little black duck. The current financial mess has been created by people with significantly more intellectual firepower than this President, a long time ago, and for me to countenance, as accused, that he could have created this mess is outrageous. He just ain't that smart! Interpret that any-which way you like.
Whatever I write is open to criticism and discussion and I welcome it. I am happy to cop it on the chin when I screw up factually or my when analysis is obviously flawed or questionable. Many exchanges result from misinterpretation. I expect that someone unfamiliar with my daily scribblings, could somehow interpret what was posted as a "blame GWB". Fair enough. I don't see it that way. The best guide is in the archives, I 'spose.
Lastly on the political side, I was watching the CBS nightly news today and they had a story on the massive underfunded retirement fiasco that is looming large over the U.S. economy. There was talk of trillions of dollars shortfall and of increased borrowings to "fix" the problem. GWB even said that, "If it was easy, it would already have been done." This is, in my opinion, the admission that the serious economic pain is coming. As with many of the economic "solutions" of the past, there have been "easy fixes" that have delayed the paying of the piper. They are out of "easy solutions," the President just said so. The debt solution won't happen at current rates or at current exchange levels either! We, the mugs who fund these deficits via 80% of the world's available capital, will demand higher yields, much higher yields. Tick, tick, tick.
Anyway, we are talking commodities, aren't we? They have been going up pretty much unchecked since Greenspan had a bad case of "straight talk" regarding the dollar, various Central Bankers have agreed with his lower dollar pronouncement and so we see new lows for the dollar against nearly everyone. We had mentioned previously the Chinese, Russian, Indian, Japanese...blah,blah,blah... central banks and their dollar holdings and the desire to get away from dollars. I note even that OPEC had to make a comment that they weren't gunna move to the Euro (Oil is gonna look very cheap at last week's $46 a barrel, soon). Oil for gold is the swap of the century, still (for the oil producers, anyway)!!!!
There certainly must be some pain being borne out there in Reserve Management land. But, the precious metals are not just a dollar story, they are the financial asset / hard money of choice and as such they are performing as they ought to in this environment. This metals bull market will be measured in years, not months or weeks and gold will be priced in 4 figures, not 3. Get used to it but also be prepared for some serious pull-backs which will test the ticker of the most hardcore believers. As always, opinion only.
The physical gold market is happy enough up here around the $450 level with London fixes coping well up here. I do get a little worried that we may head back to $444 on a little dollar pop and some long liquidation, but still see all dips as opportunities to grab more physical (not advice). Maybe a deeper retreat to just under $430 this month, with my "dream" target of $404 looking very unlikely,IMO! The paper gold market hasn't run far enough ahead to concern me and that is looking closer to $500 than where we are currently. I reckon it is 25-75% we see 500 pre-Xmas but reckon by March 2005 it's better than evens.
I note that China is reported to be sniffing around Husky Energy of Canada. Another example of them bailing out of dollars and effectively swapping them for real asset/commodities (whilst guaranteeing physical supply). Plenty more to come I reckon. The decades long "grab an Aussie asset" is in full swing with metal and energy assets being shopped around the market. Pick a commodity, any one, and watch it rise in dollar terms. It just will. It is only a matter of time.
The Amex Gold Bugs Index (HUI:NYSE) is dogging it at present. People must not believe the current price is sustainable and so are reticent to buy although some issues are doing very well. I haven't had a close enough look at the individual stock performances to delve too deeply at this stage although I am surprised that one mid-tier producer is still languishing some 50% of its January highs. I will make some observations on individual stocks in due course, once I know whether this new commodity fund launch is imminent or not. Needless to say I think the 300 HUI level is a magnet for early '05. Just opinion as usual.
Silver is looking pretty nice here at $7.60 although a test back to $7.45-35 appears imminent before a crack at $8 in the new year, maybe earlier. Gotta have a closer look at silver but certainly wouldn't wanna be short these days.
Today's expected ranges as at 10pm Sydney, IMO:
The weather here has turned decidedly summerish. Today was a brilliant 34C and tomorrow the record high for Sydney is expected to be beaten with forecast 42C. That's about 108F for the non-metrically minded. I will be at Manly beach, early in the morning before it gets too hot. Beers are allowed at any time the temperature is above 32C. I reckon first beer will be 9am. I don't make the rules, just follow 'em.
I see the JETS won again (I'm getting a little blasé these days) and some fools in Denver played in the snow. "Some basketballer just belted some guy in the crowd" - I yelled out towards the pool to my little nest of vipers, as I watched Sportscenter over a convivial VB. She's a Yank, likes her sport and understands competitive aggression. She was appalled. I reckoned he shudda got a life ban. She agreed. Hmmmm.
Horses are an up and down game. In the last 2 weeks....
VanessatheUndressa, my smart mare in NZ, raced over a mile in her first race after a good holiday. She ran 2nd, beaten by a head and the racecaller said afterwards that she is looking good for the big Cups in the New Year. Let's hope so.
Danihilate, a colt that I bred and sold down to 2% ownership of, got sacked by his trainer BEFORE he even ran in a race! Trainer reckons he's not good enough. I like the brutal honesty of the man! Good trade.
Maitrisse, the filly, has stringhalt. A nervous tich of the hind legs that is not good. Own too much of this one, but a girl so all is not lost.
Jactris' first colt is a little runt. The farm reckons there are dogs on the property that are bigger than him. Sell him!
The broodmares all did their thing this spring. Jactris (NZ) has just been confirmed as pregnant to Desert Prince (IRE). Ski Lodge (AUS) is confirmed to High Yield (USA). Now just hope they all cook properly and that their siblings all win good races around the world.
Has been a funny old few weeks for me and looks like I am back on deck for the foreseeable future, like it or not. I don't expect any respite from the volatility and think the early 2005 will be a marvelous time in commodities.
Good to be back and am getting back up to speed pretty quickly.
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