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Hope Vs. Fear



Apologies, Minyans, for the absence of posts, but I've been especially busy this morning just trying to work my way up to slacking off speed. I wanted to toss out just a few quick thoughts before the post-lunch, keyboard face plants kicks in.

First, I ran into this little tidbit from a front-page story in Sunday's New York Times. The story, "Business Spending Helps Offset Lag in Refinancing," also touched on mortgage refinancing. To me the most interesting aspect of the story was this description of the money flow from a recent mortgage refinancing: "He refinanced his home 15 months ago, increasing his mortgage but not his monthly payments while pocketing $45,000 in cash. That paid for a Dodge Dakota, new fencing for his home and an upgraded sprinkler system. He had planned to refinance again, expecting to extract $17,000 more from the rising value of his home." While my hope is that this type of money flow from a refinancing would be atypical, my fear is that it is actually the norm.

Also, this morning I noticed Toddo mentioned his view on gold's potential in the coming years. I wanted to post a longer-term chart of the Philadelphia Gold & Silver Index (XAU). This chart (5-point scale) is too long-term to be of use for traders, but I think it does show why the prospects for gold (in a longer-term sense) have been favorable for several years now. The basing action since 2000 demands attention, as does the fact we are approaching a significant test, for this index anyway, in the 90 area. This long-term chart also helps highlight the important of correctly choosing your timeframe. The XAU could pull back to the 70 area, and from a long-term investment standpoint that would be little more than an exhale. The chart would still show a very positive long-term basing activity.

Similarly, if you can find a longer-term chart of gold, you can see that it is actually still in the early stages of the violation of a 20-year plus downtrend line.

For those looking for positive longer-term investment themes, gold is an obvious contender. Meanwhile, by extension, the implications of a bull market in precious metals for other asset classes (equities, bonds, dollar) should be considered as well.

As the XAU nears the important longer-term resistance area around 90, I wonder if Jason has any comments on the near-term sentiment for gold.

No positions in stocks mentioned.

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