Wednesday, 29 August 2007

Goldrunner's ripost - touche

Again, taken from the G.E. site, Goldrunner steadies his sword with some of his finest analysis since May. North's post is worth reading, too, over at G.E.

Sorry, Half_Monty................
(goldrunner) Aug 28, 21:50

....But I certainly am not buying that So, you are a trader, now?....LOL.

IMO, we are certainly not in any kind of extended Wave II after having moved to new highs. Wave III commenced at HUI 165 and ran to new highs. This sideways movement will only define the coming runs higher in the rest of Wave III as "even higher than expected." You mentioned the deflation/ inflation scare cycles, but those are exactly what I have talked about all along as having created the fractal relationships that have appeared in the HUI index all along. I might have termed then in relation to "liquidity cycles", but effectively it is the same thing- a massive deflationary backdrop intertwined with massive dollar inflation by the Fed.

While the HUI had moved basically sideways the fundamentals for the PM sector have climbed steadily on all fronts. It is only the "psychology of the market participants" that has run down the illogical road, IMO, over a short-term course of time. This has certainly been helped by the Fed cloaking M3, messing with the CPI numbers and the CRB index, in fact, the Fed has openly discussed "the perception of the markets" because that has been their focus. Yet, those things do not change the facts and fundamentals of the PM sector in this Historical PM Bull Market.

There has been absolutely no PM crash, only the expected drop in the HUI from the 400 levels down to what I was suggesting would be to around 320ish long before we ever reached those 400 levels. Thus, the HUI has only moved in a sideways band while the Fed has printed dollars out the wazzu, pointed to the "Cayman Islands" buying the US debt, and changed the CPI and CRB indices around to affect market psychology as best it can while it tries to support the general markets........and that does not even mention the apparent monetization of this real estate/ subprime mess, spelled "D-e-r-i-v-a-t-v-e M-e-l-t-d-o-w-n."

In fact, the general markets have topped, and I still expect the general markets to rollover all the way into 2008 with the usual rallies along the way. The general market topped and dropped while the HUI has been moving sideways- a sign of strength if you will, if not of outperformance. Every single one of those PM companies still hold the ounces in the ground that they held, before, and as the smell of "paper burning" eventually inundates the olfactory senses of mass psychology of the market participants, the PM sector will be the small "Island of Safety" that investors have left to seek.

I find it curious that you have "bought" the Fed's line at this time like the average Joe across the board.......Goldilocks, eh? Well, a tidal wave of inflation might keep the general markets from completely melting down, in fact, might support them in the long run, but if so, then the PM sector will look like a rocket heading for Venus.

So, why the Fed assault on M3, the CPI, the CRB, market perception, monetization, this time? Well, that is quite obvious since the next run on the upside will be to new historical highs in Gold which will set off alarm bells and whistles all over the world.......Stagflation City. The Fed can twist arms and stall things out because people get caught up in all of their distractions, but they have already created the fundamentals of what is to come.

Will the PM stocks sell-off as the general market falls deeper into September/ October? I guess that all depends on how many investors pee their pants and sell off their PM holdings that common sense and the fundamentals suggest they really need to protect them into the future. The truth is that the Fed has not control over anything at this time except for the minds of investors. In reality, the "Fed has no clothes." In reality, the rubber band of PM fundamentals just keeps getting stretched farther and farther. There can only really be one result to all of this........SNAP!.....AND ONLY THE PMS WILL PROVIDE YOU WITH SAFETY.

The only question remaining will be "Physical only, or a combination of Physical and PM stocks?" If pure deflation was the answer, then holding only physical Gold and Silver would be the answer. If the Fed is going to continue to fight the deflationary backdrop with massive dollar inflation, then it seems to me that a combination of physical and PM stocks is the better route to take. There is little doubt in my mind that the Fed will continue the massive dollar inflation to protect "their own" while they burn the dollar down. Thus a combination of physical and PM stocks will be my choice for the immediate future. Or, as old Ed Hart used to say on the old FNN station, "We might be going to hell in a handbasket, but by GOD, we are going to trade our way, there."

All of the above is only my opinion, of course, but we shall certainly see what happens. The HUI has rock solid support between 250 and 260.


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