Friday, August 20, 2010

Ireland - First PIIG to Break Down

As the disintegration of paper continues, leaving shiny Gold holders with their wealth intact, it looks like Ireland is leading the so-called "PIIGS" into the next leg down in the bear market (see prior post here). This morning, it's stock market broke below it's spring lows.

Here's a 60 minute intraday chart of the action of the past 6 months in the Ireland stock market (using $IEDOW as a proxy):

Fellow squiggle watchers on this side of the Atlantic are making a mistake if they think this isn't relevant. The panic will likely again come out of Europe, which may cause another nasty round of deleveraging in equities and cause the U.S. Dollar to do another zombie death rattle higher. This time, I think Gold holds the line better than in 2008 and I wouldn't be surprised to see it go higher (with potential nasty volatility along the way).

Greece is already at the March 2009 Armageddon lows and threatening to go deeper into the abyss. The rest of the world will follow. I am staying long physical Gold and short the U.S. stock market. The Dow to Gold ratio will reach 2 before this mess is over and we may go below 1 this cycle.

Though it may seem at times as though I am rooting for bad things, I am simply pointing out the natural cycle that mainstream media won't ever tell you about. We must cleanse the rot in the system before a new cycle of prosperity can begin. We have a long ways to go in the "cleansing" cycle when it comes to "traditional" financial assets like stocks and real estate. In the mean time, Gold will flourish and Gold stocks will provide a speculative vehicle for bulls seeking higher risk (and its associated higher potential rewards).

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