Thursday, March 08, 2007

Gold, Silver and Commodities have grown up and will live their own life in the Bull Marlket while General Market will be busted by recession. CS

Like it was written here before, I really have to repeat it one more time even for myself - if I am right it will continue to be Major Investment Idea of this decade:
"This Grip is weakening, Markets can not be manipulated forever, structural changes are getting worse when cosmetics are applied. The main Idea is that USA is no longer Superpower on its own chosen role of World's Policemen, its cost is too much and it is not respected any more. We have Empire of Debt. Read the book. It could be your best investment this year. The chosen Reserve Currency of Choice US Dollar is No More Good. Local Elites have grown up and would like their Cut, they do not like to do what they told. Power is shifting from Overburden with Debt, stretched in Wars Empire to the new and young Players. While USA was shifting into the Abyss of financial Economy new Tigers were building factories, Consumer in the West is so tired with consumption of Not Needed Things that you have to produce it in China, bring it back, give them money to buy it and then give them to switch to another credit card in order not to pay the interest for a while. Housing Bubble has helped a lot, Home ATM kept juice running all these years, but not any more. We are in Recession yield curve is inverted for months now, Housing Bubble is Bursting, WEB 2.0 Bubble is next. What to do PPT: first to kill the Gold, it is important that USD will still be considered as "Safe Heaven" and money will flow into the Bond market to finance credit account deficit otherwise gold will be 1000 and Death to USD by Thousand Cuts. Second is make Plunge into Orderly Decline, not to make a Snowball effect devastating. What will happen next? The truth is Orderly Decline in USD is in the interest of USA it is the only way to inflate the Debts out. I think it is very vivid imagination to expect any interest rise, some more "orderly decline" in the market and they will need to be cut just to keep things together. Consumer can not help any more: Housing Bubble killed its ability to spend: more and more people are moving into the Negative Equity and Negative Savings territory. Do not believe its is well contained, do you remember Alan? And his fragmented housing market subject to local valuations, why is Subprime mortgage market is busting and he start to use sacred word Recession (possible, probable - respect the confused old man and tell him someone it is already happen). How far the pain has spread if "Goldman, Merrill Almost `Junk,' Their Own Traders Say". With Nominal Rates moving Down and Real Rates moving Up (because of inflation and your need to finance current account deficit you have to give discount on your IOU - higher rates) we will be back in Negative rate territory like in 2002 and Gold and Silver will blossom again. That is why Gold is The Enemy of the State: one look at the price and you can get the idea about inflation and real economy and political health. You can try manipulate it but you can not Outlaw it: Russian are buying it, Chinese are buying, even Arab friends are counting their beans separately. We can expect deep in the Goldies which has already happen with the General Market and then powerful move up from oversold condition and it could happen at any time with Video Game in Persian Gulf. What about Commodities, we are fortunate enough that Earth will not stop spinning around with USA in recession, I do not thing that somebody will put the World into the World War for Resources but there is some risk. Check the number of people on our planet, from 1960 to 1999 Earth's population Doubled! Most of these people are living in emerging markets. Do you remember law of Diminishing Marginal Value it is when your satisfaction feelings of change of a cam with 8 mega pixels to 9 mega pixels can not get even close to the excitement of the sound of First Flushed Toilet in your life in China. If you are building hundreds airports across the country, moving people from the coast into 40 newly build 10 million people each cities you do not need first credit cards, SEO marketing games or Search - you need Cu for your wires, Oil for your engines and Uranium for your Electricity needs. And you need to diversify your 1 Trillion Reserve from Orderly falling USD. And Very important thing: IT IS NOT FREE Market at all! Do not get me wrong China is Great but Markets are still better regulated here. That is why I do not invest in the Dragon but in its food which is made buy Western Standard (for example Tenke Mining). Here is the advantage: if communist China decided to build 40 cities and hundreds airports they will be build, punishment is not bonus taken back, but life spent in prison. Fear is much stronger motivation then Greed. That is why Sell Offs are more sharp and sudden then the moves up."
I have found brilliant article with Megaphone concept which is new to me and is confirming my findings on QQQQ and similar view on Gold and Silver to my understanding.
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