Headlines...

NEW -> Contingent Buyer Assistance Program
<p>WINEX - Just for arguments sake. Are you saying the dollar is reacting to gold? If you are, that would go against everything I have learned about gold. I have learned that gold is a tiny, tiny market when compare to the Forex, or dollar market. It is kind of like saying the tail is wagging the dog. The Forex is the largest market in the world; trillions every day of which the USD is the largest part. And the gold market, including futures is but a pitttance compare, although I do not have numbers with me.</p>

<p>I would tend more to agree with the second thought. <em>"Bennie and the Inkjets aren't printing money as fast as toxic loans are vaporizing it."</em> Somebody out there needed some USD to cover some large positions, margins, CDSs, or something and the dollar is reflecting that position. And then gold is just reacting as it does to a dollar move.</p>

<p>Whaddya think?</p>
 
<p>awgee- </p>

<p>I think what Winex was trying to say is that gold is reacting to the dollar, indicating that the deflationary pressures are building. Remember that the dollar index is relative to other currencies in the basket, which is where I think the real story is unfolding. The problems with RBS and the ISM report being released (when european markets were still open) both contributed heavily to the relative strengthening of the USD. Or, if you wish, foreign currencies got weaker on their own bad news, leaving the dollar nowhere to go but up.</p>
 
<p>Down 326 now. Nothing about a rate cut. They better do it fast, if they want to do it before the end of the day.</p>

<p>The hub keeps saying that if the price of everything goes down, then the price of gold will go down too. I said I bought the pitifully small amount of gold we have for survivalist purposes, not to make money.</p>

<p>Years and years ago we bought a couple of 100 oz bars of silver, which are now worth something, for the same reason.</p>

<p>What is gold at now anyway</p>
 
<p>Subprime Markdowns Reach U.S. Central, Credit Unions (Update1) </p>

<p>http://www.bloomberg.com/apps/news?pid=20601087&sid=a6VxzezfX8ew&refer=home</p>
 
<p>The FED isn't going to be cowed into cutting rates again to stem a slide. Ben has made it clear he isn't trying to prevent losses, but will do whatever it takes to stem panic. 350 isn't panic, 3500 is.</p>

<p>Silver is currently at $16.35 per Troy ounce, Gold is $890 and change</p>
 
<p>CDO Ratings to Fall as Losses Trigger Fitch Overhaul (Update5) </p>

<p>http://www.bloomberg.com/apps/news?pid=20601087&sid=aSijYfUOxynU&refer=home</p>
 
Nude - I think you are right about WINEX's thoughts. What did RBS do today? Or maybe I will do a search. You think the ISM made the USD go up? That was my initial thought, but I could not understand why? I was kinda wondering if there was not some failure and someone was grabbing at cash to cover. Maybe not. I dunno.<p>


I tend to think the major factor in all markets for the next couple weeks will be the disposition of Ambac, MBIA, and the CDO ratings. Will Wilbur Ross be sucessful in getting the government to subsidize his takeover of Ambac? If he isn't, then what? If he is, will that stop the hemorraging? Permanently? Temporarily? And how long?
 
Hat tip to Barry at the Big Picture...





<a href="http://bigpicture.typepad.com/comments/2008/02/shiller-histori.html"> Shiller: Historic Housing Bust.</a>





<embed></embed><object width="425" height="373">

<param value="http://www.youtube.com/v/z-on2j12c84&rel=1&border=1" name="movie" />

<param value="transparent" name="wmode" /><embed width="425" height="373" wmode="transparent" type="application/x-shockwave-flash" src="http://www.youtube.com/v/z-on2j12c84&rel=1&border=1"></embed></object>
 
Awgee, yes Nude is correct.





But just to add a little clarity about my thoughts - I have seen people in this forum state that because gold doesn't have industrial value like silver or platinum, the only value is for use in jewelry. Quite frankly, statements like that ignore the entire history of mankind.





Gold is money.





As money, you can convert it to other currencies, or convert other currencies to it. As I write this, in the overnight spot markets, you can trade 889 US dollars for one ounce of gold. As the dollar gains value, you can exchange less dollars for one ounce of gold. As the dollar gets weaker, you have to give more dollars for that same ounce of gold.





As you correctly stated, the size of the US currency market dwarfs the size of the international gold market. Gold moving the dollar would be a case of the tail wagging the dog.





When you look at the dollar relative to other currencies (both other nations and gold), you will see something unusual in recent time periods. Although Benny and the Inkjets are working overtime, the dollar isn't printing new lows against other national currencies. It has printed recent new lows against the monetary value inherent in gold, but those lows were printed on declining volume and gold and difficulty maintaining that value against the dollar despite 125 basis points of easing in the Fed funds rate in the past two weeks.





The value of an ounce of gold is only about 4% off of the all time high as expressed in dollars. If you are interested in making some money, the important question to answer is whether this drop is just noise, just a small breather after a good run over the past few months, or if it is indicative of something else.





Based on available data, I personally have discounted the first of the three possibilities.





This leaves the question of whether a small breather/correction is taking place, or if it is the beginning of a change in trends.





At this point in time, I can't assign a probability to either scenario. And without being able to get a feel for what is going on, it would be foolish to put money on the continued downside. (In my opinion, it does make sense to take profits if your gold holdings are in a liquid form like GLD as opposed to physical holdings, but that is just my opinion) If gold doesn't hold support at $850 an ounce, then I can see it quickly falling to support at $780 an ounce. In my opinion, that is a decline that is worth betting on. But you can't intelligently make that bet until/unless support at $850 is violated.





But enough of technicals, and on to fundamental explanations for what *MIGHT* be happening.





I can see a scenario in our economic future where the vaporization of hundreds of billions of dollars (or possibly even trillions of dollars) results in a deflationary spiral. (As I have said in the past, if inflation is in our future, you want to invest in gold, silver, and a shovel. If deflation is in our future, you want to invest in ammunition)





Well, the next thing you want to ask yourself is what happens in a deflationary environment.





The real definition of deflation is that of a monetary illness that results in an imbalance between the supply of money in an economy and the available goods/services in that economy where there is not enough currency to purchase/support price levels of goods and services.





In a deflationary environment, the dollar will become stronger. (The same dollar will buy more goods and services)





I'm not ready to call deflation yet, but it is worth noting that the ECRI's US Future Inflation Gauge printed a 31 month low in December with an annual growth rate of -4.4%, and was close to that low in January with an annual growth rate of -3.0%.





In addition to viewing gold as money, I also view it as the most sensitive indicator of inflation our deflation in our economy. While the 4% drop from our highs is more of a reason to take some profits off the table than it is to run around screaming that the sky is falling, in the current macro environment, it's never a bad idea to keep an eye open just in case the sky does start falling.
 
graphrix,





I guess you didn't see Sundays post: <a set="yes" linkindex="7" href="http://www.irvinehousingblog.com/2008/02/03/shiller-on-house-prices/" rel="bookmark" title="Permanent Link to Shiller on House Prices">Shiller on House Prices</a>
 
WINEX - It seems we have common reading material. I think differently on only two thoughts. First, I am not so sure that monetary deflation, asset deflation, and price deflation will look exactly like it has in the past. And I think it possible our financial systems will experience some asset deflation while experiencing some price inflation at the same time.<p>




Second, gold has been money for most of the last 3000 years. Gold may be money in the future. But, I don't think gold is money now, nor has it been since 1971. Very few people use gold as a store of wealth and even fewer to almost nobody uses gold as a medium of exchange. If someone wants to exchange gold for a good or service, they will first convert the gold to a fiat currency which most use as money. Popular use determines what is and isn't money, not theory. IMO<p>


I stopped trading precious metals a few months ago and will not try to sell the highs or buy lower. At this juncture, I think there is a high probability that any exit will result in being left out of the parabolic moves.
 
<em> I guess you didn't see Sundays post.





</em>I'm a bad IHBer, I totally missed that. A great post, and I hope Kirk responds to my comment.


<a href="http://www.marketwatch.com/news/story/toll-brothers-reports-preliminary-1st/story.aspx?guid=%7B9257A53E%2D8F9F%2D4E01%2DB0AF%2D7026B5EAFBFF%7D&dist=TQP_Mod_pressN">


And... we have some great Bob Toll quotes</a>...





<p><em> Robert I. Toll, chairman and chief executive officer, stated: "The housing market remains very weak in most areas. Based on current traffic and deposits, <strong>we are not yet seeing much light at the end of the tunnel.</strong> </em></p>

<p><em>


"We ended our first quarter with approximately $950 million in cash and more than $1.2 billion available under our multi-bank credit facility, which matures in March of 2011: We believe we are well-positioned as opportunities arise from the <strong>current turmoil in our industry</strong>. </em></p>

<p><em>


"The Fed's aggressive interest rate reductions shows its determination to reverse the economy's current downward momentum and help provide a solution to the bond and credit crises. This action, in addition to several policy initiatives now under consideration in the Economic Stimulus bill in Washington, should be helpful to our industry's recovery." </em></p>

<p><em>


Joel H. Rassman, chief financial officer, stated: "With conditions still weak in most markets, we expect to continue to face challenging times ahead. We are still in the midst of finalizing our first-quarter impairment analysis; however, we currently estimate that pre-tax write-downs in FY 2008's first quarter will be between $150 million and $300 million." </em></p>

<p><em>


Robert I. Toll continued: <strong>"Based on the demographics, improved affordability and interest rates near historic lows, customers should be attracted to the abundance of standing inventory at the aggressively low prices being offered by builders. However, buyers seem to be hiding. We think that the market's problem is a lack of confidence, not just regarding the direction of home prices, but, more broadly, in the direction of the overall economy and the state of the nation.</strong> </em></p>

<p><em>


"We did see, however, for the first time in recent memory, the New York Times suggests that now <strong>might</strong> be a good time to buy a home. <strong>Perhaps </strong>this signals the beginning of a change in public sentiment in recognition of significantly improved housing affordability, low mortgage rates and a supply imbalance making it a <strong>buyer's market.</strong>"





</em>Too bad Ivy Zellman won't be on the conference call, otherwise... Bob would have to answer what flavor of Kool-Aid he is drinking again.</p>
 
Awgee, obviously we are talking about events that haven't occurred yet, and there are multiple paths the future can take. However, when thinking about the impact of future deflationary forces, I personally believe that it makes sense to look beyond the borders of the United States. The spread of toxic paper is about as well contained as the "subprime problem" itself. The Germans certainly were fond of our financial products. And for years we had a deal with the Chinese where they shipped us toxic toys and we shipped them toxic paper in return.





As for parabolic moves, while they are always fun to ride, typically they are a topping pattern, not a continuation. Can I assume by your answer that you feel the top in the 5 year run that we have had is nearing? If not, what does your crystal ball show?
 
<p>My crystal ball says - The Fed has only just begun to inflate. Whether the Fed can keep up with deflationary forces, I dunno. I doubt it. But, inflate they will, and eventually they will print and print and print until the general populace realizes what a federal reserve note is actually worth.</p>

<p>I don't think gold is anywhere near a topping pattern. My guess is that it is at the beginning of wave 3 in a 5 wave Elliot pattern. I am not a big Elliot wave fan, just trying to give some semblance of timing. I think gold will top at somewhere near one ounce of gold = one share of the Dow. Yea, that sounds insane, but look at history. In terms of dollars, my crystal ball has no prediction for gold, as my crystal ball thinks the dollar and all other fiats are doomed.</p>

<p>Heck, CDSs are not even in the MSM lexicon yet, and my guess is that CDSs and the discovery of their balance sheet values will have the greatest influence on our economy, currency, and gold for the next few years. And I would give better than 50/50 that silver will out shine gold in percentage increase. Too bad Buffett didn't hold on to his silver. It seems he sold right before it started moving up. At least he got into Euros. And everyone said it was a bad move. he-he.</p>

<p>On a side note. I am not personally a fan of gold as an asset. It makes me nervous and I much prefer real estate.</p>
 
>But, inflate they will, and eventually they will print and print and print until the general populace realizes what a federal reserve note is actually worth.





You don't need a crystal ball for that. A newspaper works fine.
 
<p>Wall Street Throws a Tantrum:</p>

<p><a href="http://www.newsweek.com/id/107571">http://www.newsweek.com/id/107571</a></p>

<p>"Giving in to a tantruming child just reinforces the demand," says Dr. Wendy Mogel, a clinical psychologist in Los Angeles and author of the wildly popular parenting tome "The Blessing of a Skinned Knee." And each time you cave to a screaming child, it buys you less quiet. The Federal Reserve's latest attempt to calm the market's tantrums—the half-point interest-rate cut on Wednesday—bought about 90 minutes of market silence. Within hours, as poor economic news continued to materialize, the clamor for further rate cuts began to rise. Mogel puts it in starkly financial terms: <strong>"Indulge tantrums and you get short-term gains and long-term loss."</strong></p>

<p>-SCHB</p>
 
<p>WINEX - Very funny. I guess that just goes to show you how bogus my crystal ball is.</p>

<p>You got me curious. I have stopped TAing gold when I stopped trading it, but here is my TA analysis of gold.</p>

<p>The tradable trend right now is an up trend channel with the under line defined by the bottoms on Aug 18 and Dec 23. The upper line is a parallel line to the under line touching at the top on Nov 10 and confirmed by the top on Jan 18.</p>

<p>Major support is about 800 and given great deference due to the triangle and the subsequent breakout. Minor support is about 871 and <strong>IF</strong> I was trading gold I would wait for a bounce off this support to buy. There is also minor support at about 905, but I would ignore it for buying and just watch for it to become possible resistance if the price actually went under 905. Major resistance is the top on Jan 28-30. If it breaks out of the top, I would hold on to my ______ and let 'er rip. There is no other resistance after 933 until inflation adjusted previous highs at over 2000. If it broke below 871, I would sell and wait for a bounce off 800.</p>

<p>But, like I said, I'm not trading gold.</p>
 
<p>Warren Buffet glad he avoided the Kool-Aid: <a href="http://www.reuters.com/article/businessNews/idUSN0631767220080207">Buffett: Bank woes are "poetic justice"</a></p>

<p> <http://www.reuters.com/article/businessNews/idUSN0631767220080207?feedType=RSS&feedName=businessNews></p>
 
<p><a href="http://www.forbes.com/2008/02/05/hollywood-economy-housing-biz-media-cz_dp_0206realestate.html">Housing down-turn even affecting celebrities</a>. The high end is not immune.</p>
 
You must log in or register to reply here.
Back
Top