Wednesday, October 6, 2010
What Could Possibly Go Wrong?
One chart says it all (chart stolen from Market Harmonics):
There is no need for me to cheerlead in Gold, as everyone thinks this time is different and Gold is going straight to $2,000/oz. here. Perhaps it will. Wouldn't bother me a bit. Perhaps the stock market is going to new highs (that would bother me...). Perhaps hyperinflation has already begun but for the first time in history it is starting with bond yields at record secular lows. Perhaps Wall Street and Ber-spank-me can make stocks go up forever and at will.
But perhaps this time isn't different. And perhaps the market is about to collapse. And perhaps the Dollar is about to stage a massive counter-trend rally that no one expects, just like in the spring of 2008 when everyone knew the dollar was going straight to zero.
I think we are set up for a 1937-style Dow / stock market collapse (chart stolen from sharelynx):
Everyone who though Ber-spank-me and widdle Timmy Geithner and the government would prop up markets forever in 2007 and 2008 now believes they are going to have better success this time around.
I own Gold because I believe we are in a deflationary depression and Kondratieff Winter. When apparatchiks try to "print" their way out (as they always do throughout history), the money simply makes it way into Gold, as there are no good macro-economic opportunities available to use all the money productively. There is always monetary inflation, but at this stage of the cycle, only Gold and Gold miners are poised to benefit from it. Though the rallies in risk assets have been fast, furious and at times relentless, another crash will make everyone remember where we are in the economic cycle. I'm just another guy with an opinion who isn't try to sell you anything, but I think we're set up for another massive market dislocation. Be careful out there.