Minyan Mailbag: The Metals Bull Case
There's usually a bull market SOMEWHERE!
I worked up this thought process before I went to the Precious Metals Conference in Vegas recently, in a manner in which you think about things.
This contains links to some of Frank Barbera's work, along with the recent piece he did in the technical section. Frank Barbera worked for John Bollinger in the early 1980's and did technical analysis for Financial News Network. He sold his tech in February 2000 and called the major HUI bottom in November 2000. He nailed the May 2005 bottom in the HUI Index and has been resolutely bullish on that complex since then (and still is).
I love it when I hear the bear case on metals because it makes me think long and hard about the bull case. If I were a metals bear, I would think long and hard about all these pieces to the metals bull case, especially the ones by Frank. I certainly think long and hard about the metals bear case, with only hindsight revealing the correct view.
METALS BULL CASE:
a) The Fiat Money System By Congressman Ron Paul
b) Warren Buffett on The U.S. Dollar
b) Silver and more Silver.
3) Psychological: The Gold & Silver COT Structures
"Silver has been in an opposite situation compared to gold. Not only has the price action stunk, precisely because of that poor price performance; there has been no deterioration in the market structure. In fact, based upon reported and extrapolated COT readings, silver's market structure is great, with a reading suggesting low risk and high profit opportunity." 8/16/2005 (as per silver expert Ted Butler).
"The most recent Commitment of Traders Report (COT) confirmed expectations of a continued deterioration in the market structure in COMEX gold, and a further improvement in the market structure in COMEX silver. As mentioned last week, we have the unprecedented condition of gold holding at historic negative extremes, while silver sits close to its best readings of the past year and a half. Since this condition has never before existed, it is impossible to offer examples of prior resolutions. It's new to us all." - 8/23/05 (as per silver expert Ted Butler)
Excellent assimilation and one that offers food for thought on each leg of the metal trading table. As you know from your Ojai experience, I offered some follow-up thoughts to my oft-stated opinion that energy and metals are the new tech and financials (a vibe that I've scribed for a few years now). While the "handing of the leadership baton" made intuitive sense to me, however, I can't claim that I anticipated a 20% "wish bone" between the two since we left the mountains in our rear-view.
I'm of the view that one of two things will evolve in the years ahead--either the dollar must devalue (as more greenbacks are printed to buoy the markets) or asset classes will deflate in synch. While we'll likely jockey between the two as the Fed maneuvers the minxy marionette, I would assign a higher probability (75%) that we'll see a much lower dollar when the dust settles in a few years.
That bodes well for our collective belief that the metals are a good long-term vehicle although it isn't without attendant risk. With the world holding dollar denominated instruments, there is an unforeseen tipping point where the potential exists that they'll migrate away from our once proud basis of exchange. If (when) that happens, the stealth bear that is the US Dollar will offer an unfortunate wake-up call for most Americans.
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