An Investment Demand For Gold Has Arisen
Friday, 14. December 2007, 18:04:17
I. When World Stocks Get A Cold, Japan Small Companies Get Phenomia
Stocks sold off globally, as reflected in the sharp drop of the EFA ETF.
Stocks in the European Union, EMU, sold off.
Investment stalwart, emerging markets ETF, EEM move parabolically lower.
Japan small companies, JSC, are highly sensitive to world trends and developments, and their stock value fell, as investors grew concerned that the U.S. credit crisis is going global, and can't be contained by the Fed and the World Banks.
Proshares UltraShort MSCI Japan traded by EWV, has exploded since the Fed announced that it was cooperating with other world banks to inject liquidity, and provide an auction to buy distressed portfolios, as well as take action to lower the Ted Spread.
II. Everything, except for the U.S. Dollar, traded lower
The Yen traded by FXY which had been increasing in value is now, trading lower.
The Euro traded by FXE is falling today.
Gold traded by GLD has been holding up quite well; I would have though with both the two currencies down, that gold would have been down sharply as well; but it wasn't which is surprising in as much as the dollar was up massively.
The U.S. Dollar $USD blasted higher.
The U.S. Central Bank, The Fed, and those of many other nations cushioned the blow of last evening's Citicorp's announcement that it was taking back onto its books $50 billion of loans that it had sold off to 7 hedge funds. Had the Fed, not did what it did the psychological reaction on Wall Street would have been riotous; investment damaged was pretty much constrained to the real estate and financial sectors, as well as the Russell 2000.
As it was, the markets didn't go negative until 2PM, and that was to data presented in the Consumer Price Index, as total CPI and core-CPI, which excludes food and energy, were higher than expected for November. (Yahoo Finance Briefing.com)
Global bank UBB, suffered the investors ax, as disillusioned investors took flight.
Even, the long government bond, the 30 year U.S. Treasury, turned lower; investors didn't go here; they sold here.
Investor Darling, Intuitive Surgical, ISRG, sold off dramatically
Mining giant Rio Tinto, RTP, turned parabolically lower.
Most stocks simply fell; but John Deere, manifested bearish engulfing; when it falls, those short the agricultural ETF, MOO, will be well rewarded.
The rare shooting star candlestick appeared in Charls Schwab, SCHW.
The dark cloud cover in the the oil company ETF, XLE, communicates an end to rewards from natural resource investing.
I warned many, only to be rediculed, that silver is a speuclative metal; well today, my warnings proved true.
Some stocks such as Colgate Palmolive (a consumer staple) and Evergreen Solar (a hot stock) moved higher on short sale covering.
The Nasdaq 100 were not serverly damaged
There is a consistent theme here; concern over CDOs has caused an ever growing -- ever widening wave of equity dissolution. The Citicorp-CDO bust is causing wealth to be dissolved globally.
III. Even though gold did decrease, "a nascent investment demand for gold congealed today"
Gold traded remarkably stable today: gold did not fall to support at its 50 day moving average of $77; if it does fall below that, support is lower at $75, which is the price and time of the Citicorp-CDO Bust.
An investment demand for gold is confirmed in every one of gold's ratios:
Gold relative to stocks Gold moved higher relative to stocks today.
Gold relative to metals
Gold relative to base metals
Gold relative to copper
Gold relative to silver
Gold relative to long term U.S. Treasury bonds
Gold relative to oil
As Stockcharts.com shows Gold relative to oil has been trending up since November 1, 2007; and gold's stability relative to oil today, is bullish gold
Had one implemented, the long gold and short stock investment strategy that I've been advocating this week, one would had done quite well
Long gold and short the gold mining stocks
Long gold and short a winning stock
Long gold and short a loosing stock
The rewards of investing in the HUI Indexed Precious Metal Mining Stocks are over
The gold mining stocks have disconnected from the price of gold.
IV. Today's stock market action started the first selling in Elliott Wave 3 Major-Down, and Elliott Wave 3 Minor-Down in stocks.
November 29, 2007, marked Elliott Wave 3 Major-Down both in the Russell 2000 shares and in all stocks as well.
December 11th, marked Eliott Wave 3 Minor-Down which has its epicenter in the financial sector and the Russell 2000 companies.
The Russell 2000, IWM, is comprised of United States small companies; being highly dependent upon a functional credit system, it suffered more today than the S&P.
V. Not only is inflation has arrived in consurmer prices; inflation and recession is coming from a rising yield curve and from increasing real interest rates.
The Yield Curve is rising; and will continue to do so to the levels seen in 2002; and then even beyond.
Real interest rates are rising.
Lets examine Treasuries in the futures market, $USB, and Treasuries in the cash market, TLT.
Futures traders are short Treasuries in the futures market, $USB.
They were once long, just take a look at $USB -- they've been there and done that: they have taken futures bond all the way up 100% retracement and now they are short. I certainly don't want to be invested in a market where the futures players have short positions: there is just too much 'prevailing downward pressure'.
Here is a dramatic statement: 'U.S. Treasury Bonds have died"; many will be selling stocks and investing in bonds, but they will be investing in a dead financial instrument.
Said again for emphasis, those with ultra-risk capital are now short the Treasuries in the futures market -- they are short $USB. One reason is that they are aware that Treasuries are dollar denominated asset, and one that investors want more and interest on, because of that dollar denominated risk potential.
The 30 year U.S. Treasury, TLT is in an Elliott Wave 3 Down; it may stop falling for a while; but, I believe that the 30 Year government bond is headed downward into oblivion: down to 8 or 10.
Investors going out of stocks and into Treasuries will not stabilize them. Nothing can stabilize them, as the yield curve is increasing.
You might ask how can the "yield curve increase, when as you suggest that bonds are falling in value"? The answer is simple, the rate on the 30 year will increase at a faster than on the 10 year and than on the two year. This will be very destructive to the value of the 30 year, since values are inverse of rates.
The Fed rate is simply the rate at which banks get credit.
The interest rate dynamic is this: "the Fed controls the rate on the short end; but the market determines the rate on the long end".
Here are the "real interest rates"; these are the "genuine interest rate":
30 Year Interest Rate.
10 Year Interest Rate.
2 Year Interest Rate.
These interest rate charts tell something: "the bond market place, independent of Federal Reserve action has declared an interest rate hike". This is very damaging to one's investments, whether it be in stocks or bonds.
A rising yield curve and higher genuine interest rates are recessionary, inflationary, as well the cause of much global conflict; wise investors will be seeking shelter in the hard asset gold.
The U.S. dollar $USD is a dying currency: it's chart shows that it made up to 77.45 today.
I am certain that the currency traders, eventually, will continue to use the Yen and the Euro to send the U.S. dollar lower again.
In as much as gold trades inversely with the dollar, gold will be going up-and-up as the dollar goes down-and-down.
VI. In times past, investors have turned to gold when political tensions rise.
There is a tremendous budget battle, going on; if unresolved, many government workers will be put on leave.
And while this week, the U.S. Central Bank, The Fed, was able to get cooperation from other Central Banks, this may not be the case in the future.
I look for regional governments to form based upon principles of global governance modeled after the, Security and Prosperity Partnership of North America, the SPP, announced on March 23, 2005 at Baylor University.
I expect regional currencies to replace the dollar as recommended by think tank, Council of Foreign Relations in its white paper Regional Monetary Integration. Arif Sharif and Matthew brown report on December 5th in Bloomberg that: "Gulf Arab nations may revalue their dollar-pegged currencies in the next two months to combat the inflationary affect of a weakening dollar, according to Standard Chartered Plc. The six Gulf Cooperation Council members, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman are restricted in the fight against inflation because their dollar pegs force them to mimic U.S. Federal Reserve monetary policy. Rising import prices caused by the dollar's decline and increased revenue from higher oil prices has pushed inflation to a five- year high in the Gulf region... The Supreme Council of the GCC set out plans to study 'inflation and soaring prices and their repercussions on citizens,' according to the Emirates News Agency yesterday..."
The U.S. dollar: it's continually under attack by the currency traders: it is going to fall at an ever increasing rate; I do not favor dollar denominated investments of any kind.
VII. A credit crisis exists; it is the underlying reason for the bearish charts and analysis in this article; and it directs one to take action to protect one's wealth.
Crises are seldom mentioned in corporate owned media, one has to be like a dog digging in a yard, attempting to find a bone to chew one; and when that dog finds one with some meat on it he takes it into his shed; and consumes every morsel of substance; here is one such bone with some meat on it written by Tom Bawden of the Times On Line: Credit crisis worsens as Alan Greenspan says the Fed is powerless.
Too come to a clear understanding of how things really are, I frequent economist and stock trader blogs.
Economist and blogger Mike "Mish" Shelock does an excellent job of document how financial industry difficulties are pouring over into the U.S. and glboal economy.
Trader, blogger and now book author, Tim Knight in his Cool Water presents this chart of the Russell 2000 which shows the fall of the Russell 2000 since investment concern developed over Citicorp's subprime loans on October 9th 2007.
Since then credit has become very tight; especially for the Russell 2000 companies -- small companies located in the United States: the expense of credit and the dearth of credit reflects in the Russell 2000 stock index.
Tim Knight relates the concept of a 'credit crisis' in these words: "It is my belief that the government has shown it is powerless to stop the unfolding financial catastrophe."
VIII. Gold Is In An Elliott Wave 3 Up
Alf Field in his article Point of Recognition documents that we are in an Elliot 3 Wave up.
I encourage all to wait for a buy signal for gold which will come from its stock chart and its ratios compared to other investments.
When one compares gold to silver one can see that gold is a better investment than silver.
IX. The trading history of Home Depot stock exemplifies the timeliness, and need to personally manage "shorts" -- "sells" as part of one's retirement portfolio.
In as much as the stock market has reached, and is now in, an Elliott Wave 3 Decline, it may fall as quickly as Home Depot has fallen; this suggests an urgency of developing and implement a non-bullish and non-long investment strategy; and to personally exercise daily oversight of those "puts". The days of seeking professional counsel once a year; and casually reviewing a personal finance magazine are over.
X. Conclusion
It was investment concern on October 8th 2007, about the solvency of the subprime loans at Citicorp that created in my words a credit crisis; then what followed was the Industrials and the Transports turning lower, below support, togther as documented by Richard Russell: "A Primary Bear Market"; and Tim Wood: The Dow Theory Update.
Today, the first cold storm of 'Kondratieff Winter' blew over the world's financial markets today.
Wealth now, can only be garnered and accumulated by investing in gold.
The U.S. Dollar could easily move higher to $78; should it do so, gold could easily fall to $750.
Thus, if one is long gold and short stocks using margin, one should go easy on the amount of stocks one is short selling.
Specifically, I recommend that one immediately sell all long positions in stocks and bonds in IRAs, Keoughs, 401Ks and be liquid to replace it with long gold ETF, GLD; and be ready to use margin credit to implement a limited short selling strategy.
I recommend that one immediately transfer a small portion of one's investment wealth to BullionVault.com once gold -- establish a minimal account at BullionVault.com; and wait for the price of gold to stabilize and/or show a buy signal.
In as much as Contrary Investor documented in its December 2007 article 'The "Other" Credit Market' that the 2002 to 2007 stock market gains were generated by the use of margin credit, I recommend that one do some limited short selling using margin credit in the article The Long Gold And Short Stock ETF Investment Strategy; but only with one's retirement assets in the ETF GLD; I recommend that one's investment wealth be at BullionVault.com.
Stocks sold off globally, as reflected in the sharp drop of the EFA ETF.
Stocks in the European Union, EMU, sold off.
Investment stalwart, emerging markets ETF, EEM move parabolically lower.
Japan small companies, JSC, are highly sensitive to world trends and developments, and their stock value fell, as investors grew concerned that the U.S. credit crisis is going global, and can't be contained by the Fed and the World Banks.
Proshares UltraShort MSCI Japan traded by EWV, has exploded since the Fed announced that it was cooperating with other world banks to inject liquidity, and provide an auction to buy distressed portfolios, as well as take action to lower the Ted Spread.
II. Everything, except for the U.S. Dollar, traded lower
The Yen traded by FXY which had been increasing in value is now, trading lower.
The Euro traded by FXE is falling today.
Gold traded by GLD has been holding up quite well; I would have though with both the two currencies down, that gold would have been down sharply as well; but it wasn't which is surprising in as much as the dollar was up massively.
The U.S. Dollar $USD blasted higher.
The U.S. Central Bank, The Fed, and those of many other nations cushioned the blow of last evening's Citicorp's announcement that it was taking back onto its books $50 billion of loans that it had sold off to 7 hedge funds. Had the Fed, not did what it did the psychological reaction on Wall Street would have been riotous; investment damaged was pretty much constrained to the real estate and financial sectors, as well as the Russell 2000.
As it was, the markets didn't go negative until 2PM, and that was to data presented in the Consumer Price Index, as total CPI and core-CPI, which excludes food and energy, were higher than expected for November. (Yahoo Finance Briefing.com)
Global bank UBB, suffered the investors ax, as disillusioned investors took flight.
Even, the long government bond, the 30 year U.S. Treasury, turned lower; investors didn't go here; they sold here.
Investor Darling, Intuitive Surgical, ISRG, sold off dramatically
Mining giant Rio Tinto, RTP, turned parabolically lower.
Most stocks simply fell; but John Deere, manifested bearish engulfing; when it falls, those short the agricultural ETF, MOO, will be well rewarded.
The rare shooting star candlestick appeared in Charls Schwab, SCHW.
The dark cloud cover in the the oil company ETF, XLE, communicates an end to rewards from natural resource investing.
I warned many, only to be rediculed, that silver is a speuclative metal; well today, my warnings proved true.
Some stocks such as Colgate Palmolive (a consumer staple) and Evergreen Solar (a hot stock) moved higher on short sale covering.
The Nasdaq 100 were not serverly damaged
There is a consistent theme here; concern over CDOs has caused an ever growing -- ever widening wave of equity dissolution. The Citicorp-CDO bust is causing wealth to be dissolved globally.
III. Even though gold did decrease, "a nascent investment demand for gold congealed today"
Gold traded remarkably stable today: gold did not fall to support at its 50 day moving average of $77; if it does fall below that, support is lower at $75, which is the price and time of the Citicorp-CDO Bust.
An investment demand for gold is confirmed in every one of gold's ratios:
Gold relative to stocks Gold moved higher relative to stocks today.
Gold relative to metals
Gold relative to base metals
Gold relative to copper
Gold relative to silver
Gold relative to long term U.S. Treasury bonds
Gold relative to oil
As Stockcharts.com shows Gold relative to oil has been trending up since November 1, 2007; and gold's stability relative to oil today, is bullish gold
Had one implemented, the long gold and short stock investment strategy that I've been advocating this week, one would had done quite well
Long gold and short the gold mining stocks
Long gold and short a winning stock
Long gold and short a loosing stock
The rewards of investing in the HUI Indexed Precious Metal Mining Stocks are over
The gold mining stocks have disconnected from the price of gold.
IV. Today's stock market action started the first selling in Elliott Wave 3 Major-Down, and Elliott Wave 3 Minor-Down in stocks.
November 29, 2007, marked Elliott Wave 3 Major-Down both in the Russell 2000 shares and in all stocks as well.
December 11th, marked Eliott Wave 3 Minor-Down which has its epicenter in the financial sector and the Russell 2000 companies.
The Russell 2000, IWM, is comprised of United States small companies; being highly dependent upon a functional credit system, it suffered more today than the S&P.
V. Not only is inflation has arrived in consurmer prices; inflation and recession is coming from a rising yield curve and from increasing real interest rates.
The Yield Curve is rising; and will continue to do so to the levels seen in 2002; and then even beyond.
Real interest rates are rising.
Lets examine Treasuries in the futures market, $USB, and Treasuries in the cash market, TLT.
Futures traders are short Treasuries in the futures market, $USB.
They were once long, just take a look at $USB -- they've been there and done that: they have taken futures bond all the way up 100% retracement and now they are short. I certainly don't want to be invested in a market where the futures players have short positions: there is just too much 'prevailing downward pressure'.
Here is a dramatic statement: 'U.S. Treasury Bonds have died"; many will be selling stocks and investing in bonds, but they will be investing in a dead financial instrument.
Said again for emphasis, those with ultra-risk capital are now short the Treasuries in the futures market -- they are short $USB. One reason is that they are aware that Treasuries are dollar denominated asset, and one that investors want more and interest on, because of that dollar denominated risk potential.
The 30 year U.S. Treasury, TLT is in an Elliott Wave 3 Down; it may stop falling for a while; but, I believe that the 30 Year government bond is headed downward into oblivion: down to 8 or 10.
Investors going out of stocks and into Treasuries will not stabilize them. Nothing can stabilize them, as the yield curve is increasing.
You might ask how can the "yield curve increase, when as you suggest that bonds are falling in value"? The answer is simple, the rate on the 30 year will increase at a faster than on the 10 year and than on the two year. This will be very destructive to the value of the 30 year, since values are inverse of rates.
The Fed rate is simply the rate at which banks get credit.
The interest rate dynamic is this: "the Fed controls the rate on the short end; but the market determines the rate on the long end".
Here are the "real interest rates"; these are the "genuine interest rate":
30 Year Interest Rate.
10 Year Interest Rate.
2 Year Interest Rate.
These interest rate charts tell something: "the bond market place, independent of Federal Reserve action has declared an interest rate hike". This is very damaging to one's investments, whether it be in stocks or bonds.
A rising yield curve and higher genuine interest rates are recessionary, inflationary, as well the cause of much global conflict; wise investors will be seeking shelter in the hard asset gold.
The U.S. dollar $USD is a dying currency: it's chart shows that it made up to 77.45 today.
I am certain that the currency traders, eventually, will continue to use the Yen and the Euro to send the U.S. dollar lower again.
In as much as gold trades inversely with the dollar, gold will be going up-and-up as the dollar goes down-and-down.
VI. In times past, investors have turned to gold when political tensions rise.
There is a tremendous budget battle, going on; if unresolved, many government workers will be put on leave.
And while this week, the U.S. Central Bank, The Fed, was able to get cooperation from other Central Banks, this may not be the case in the future.
I look for regional governments to form based upon principles of global governance modeled after the, Security and Prosperity Partnership of North America, the SPP, announced on March 23, 2005 at Baylor University.
I expect regional currencies to replace the dollar as recommended by think tank, Council of Foreign Relations in its white paper Regional Monetary Integration. Arif Sharif and Matthew brown report on December 5th in Bloomberg that: "Gulf Arab nations may revalue their dollar-pegged currencies in the next two months to combat the inflationary affect of a weakening dollar, according to Standard Chartered Plc. The six Gulf Cooperation Council members, Saudi Arabia, the United Arab Emirates, Kuwait, Qatar, Bahrain and Oman are restricted in the fight against inflation because their dollar pegs force them to mimic U.S. Federal Reserve monetary policy. Rising import prices caused by the dollar's decline and increased revenue from higher oil prices has pushed inflation to a five- year high in the Gulf region... The Supreme Council of the GCC set out plans to study 'inflation and soaring prices and their repercussions on citizens,' according to the Emirates News Agency yesterday..."
The U.S. dollar: it's continually under attack by the currency traders: it is going to fall at an ever increasing rate; I do not favor dollar denominated investments of any kind.
VII. A credit crisis exists; it is the underlying reason for the bearish charts and analysis in this article; and it directs one to take action to protect one's wealth.
Crises are seldom mentioned in corporate owned media, one has to be like a dog digging in a yard, attempting to find a bone to chew one; and when that dog finds one with some meat on it he takes it into his shed; and consumes every morsel of substance; here is one such bone with some meat on it written by Tom Bawden of the Times On Line: Credit crisis worsens as Alan Greenspan says the Fed is powerless.
Too come to a clear understanding of how things really are, I frequent economist and stock trader blogs.
Economist and blogger Mike "Mish" Shelock does an excellent job of document how financial industry difficulties are pouring over into the U.S. and glboal economy.
Trader, blogger and now book author, Tim Knight in his Cool Water presents this chart of the Russell 2000 which shows the fall of the Russell 2000 since investment concern developed over Citicorp's subprime loans on October 9th 2007.
Since then credit has become very tight; especially for the Russell 2000 companies -- small companies located in the United States: the expense of credit and the dearth of credit reflects in the Russell 2000 stock index.
Tim Knight relates the concept of a 'credit crisis' in these words: "It is my belief that the government has shown it is powerless to stop the unfolding financial catastrophe."
VIII. Gold Is In An Elliott Wave 3 Up
Alf Field in his article Point of Recognition documents that we are in an Elliot 3 Wave up.
I encourage all to wait for a buy signal for gold which will come from its stock chart and its ratios compared to other investments.
When one compares gold to silver one can see that gold is a better investment than silver.
IX. The trading history of Home Depot stock exemplifies the timeliness, and need to personally manage "shorts" -- "sells" as part of one's retirement portfolio.
In as much as the stock market has reached, and is now in, an Elliott Wave 3 Decline, it may fall as quickly as Home Depot has fallen; this suggests an urgency of developing and implement a non-bullish and non-long investment strategy; and to personally exercise daily oversight of those "puts". The days of seeking professional counsel once a year; and casually reviewing a personal finance magazine are over.
X. Conclusion
It was investment concern on October 8th 2007, about the solvency of the subprime loans at Citicorp that created in my words a credit crisis; then what followed was the Industrials and the Transports turning lower, below support, togther as documented by Richard Russell: "A Primary Bear Market"; and Tim Wood: The Dow Theory Update.
Today, the first cold storm of 'Kondratieff Winter' blew over the world's financial markets today.
Wealth now, can only be garnered and accumulated by investing in gold.
The U.S. Dollar could easily move higher to $78; should it do so, gold could easily fall to $750.
Thus, if one is long gold and short stocks using margin, one should go easy on the amount of stocks one is short selling.
Specifically, I recommend that one immediately sell all long positions in stocks and bonds in IRAs, Keoughs, 401Ks and be liquid to replace it with long gold ETF, GLD; and be ready to use margin credit to implement a limited short selling strategy.
I recommend that one immediately transfer a small portion of one's investment wealth to BullionVault.com once gold -- establish a minimal account at BullionVault.com; and wait for the price of gold to stabilize and/or show a buy signal.
In as much as Contrary Investor documented in its December 2007 article 'The "Other" Credit Market' that the 2002 to 2007 stock market gains were generated by the use of margin credit, I recommend that one do some limited short selling using margin credit in the article The Long Gold And Short Stock ETF Investment Strategy; but only with one's retirement assets in the ETF GLD; I recommend that one's investment wealth be at BullionVault.com.
WIDGETIZE