Saturday, September 6, 2008

allusions from left field

over at the biiwii blog, Gary has posted some encouraging words about Gold:

Price action is negatively reinforcing you. A little more strength in the USD, to 80+ and I will be prepared to think this may be THE bottom in the gold sector, at whatever point the decline is arrested in the short term.

he seems to be more focused on mining stocks than I am. I'm not a stock guy, period. matters little whether the company mines gold, mills grain, or constructs aeroplanes. for one, I am skeptical that the joint stock company per se, based as it is on majority voting, will survive the historical crisis that we are deep in the middle of. the something-for-nothing principle that underlies Modern Democracy is on the way out and its manifestation in the Modern Corporation shall go with it. perhaps some day I'll present my vision of a viable entrepreneurial organisation for the Post-Democratic, Post-Central Bank Capitalistic Era, but for now I'm content to make the occasional allusion from left field.

plus, specific to resource stocks, what I guess they call 'Political Risks' have always concerned me. but perhaps these risks have been sufficiently discounted by the market at this point to be less of a concern moving forward. doubtful, but possible.

but the case for Gold stocks that Gary has been presenting makes tremendous sense, right now. just because I won't be buying any doesn't mean that others won't make a butt-load of money on them.

as for the Dollar, I'm awfully skeptical that the ultimate top for this rally will be only 80 or even 82. the low 80s are where we find the Fib retracement targets from the 2005 top in the Dollar, but the targets from the Very Top put would put the index into the 90s. but having said that, a major counter-trend rally from near current levels seems pretty likely.

my sense though is that the currency markets will increasingly be viewed less from the vantage point of the Dollar against all challengers and more from the view of problems developing within each currency regime. as crises of varying magnitudes begin to take hold within each regime, speculative forces will attack the target du jour vis-a-vis its various counterparts. and then the violent unwindings of these speculative runs. the actions with the Yen and the Dollar the last couple years may serve as prototypes of these myriad einsturzchens to come.

the Euro is a prime candidate now for one of these 'independent episodes'. and considering that the Euro has by far the largest weighting in the US Dollar Index, that could, in fact, push the USDX significantly higher in short order. you Know, when a Euro Crisis develops. (a question of When, not If.)

back to Gold. I'm comfortable with what I've seen up to now. Silver, on the other hand, has been a disappointment. but then it usually is. except when it isn't.