mamboni
25th October 2010, 09:25 PM
What if the stock market and Dollar fell at the same time?
October 25th, 2010
by DavidPierre
The biggest “joke trade” is when the the stock market falls and the Dollar rises from what is called a “flight to safety”. This is the way it has been for years and years now, what if this nearly fool proof trade started NOT to work anymore?
Very shortly this is exactly what is going to happen. For nearly 10 years while the Dollar and stocks see-sawed back and forth many times in the inverse of each other. In nominal terms stocks are unchanged over the last 10 years but in real terms the purchasing power has declined by 30-40 percent and in terms of Gold the Dow Jones is down roughly 80%!
The next panic will include both the Dollar and stocks simultaneously… and bonds, were the Treasury market to join in the free fall an all out panic will follow leaving only one thing standing. GOLD!
Without a doubt the finances of the United States are out of control, some sort of default is inevitable. Because the U.S. owes it’s debts in Dollars they will just print what is needed, the world knows this. The current “inverse” trade of stocks moving higher as the Dollar moves lower and vice versa will begin to change as foreigners exit Dollar equity positions. This will also happen with Treasuries and the Fed will not only need to buy current supply but also the offers from disgruntled foreigners.
It really amazes … this far down the road to default without the above scenario commencing because it is so crystal clear where it is headed. Imagine anyone with common sense coming to a different conclusion. it is this very phenomenon that precedes panics.
Martin Armstrong and others have concluded hyperinflation but look back at history, equity panics nearly always precede and concur with devaluations. After several weeks or months THEN the stock market begins to rise but NEVER outpaces the drop in the currency. In other words, you NEVER end up with more purchasing power after a devaluation until years later. THIS is why you need to own the miners!
While they may initially get caught up in an equity downdraft they will be amongst the first to move higher sensing the devaluation. In a very real sense the mining companies will become the new “banks” as currencies become backed by metal in some form or ratio. The majors will do extremely well because they are producing “money” but they must replace their reserves because they are being depleted every year. It will be the juniors and in particular the exploration concerns that will make a very few investors incredibly wealthy.
Many explorers are currently undervalued STUPIDLY!
Many are valued at far less than $100 per proven ounce in the ground. Will it take a crashing Dollar or $1,500 Gold to get the market place to revalue these concerns? Maybe a couple of unexpected takeovers by majors? The juniors and explorers NOW offer a better and more undervalued play than Gold did when it was trading under $300 an ounce 8-10 years ago. These microcap concerns (many valued under $50 Million) will explode out of nowhere and “10 baggers” will be laggards!
The funny thing is that these trade so thinly that a $20,000 trade can move these 10% or more with ease… a 100 share trade moving a $20 stock a full point or more because there will be nothing offered. Mining shares will go into hiding in the same manner that physical Gold and Silver will, the mindset will make 1979-1980 look like blue skies.
The “new banks” (the majors) will have to get product from somewhere and they will be competing with hedgies, pensions, individuals and even governments. The old saying “there is no rush like a Gold rush” is very true because it is fueled by BOTH greed AND fear!
Now for the sad part, many of you who bought into the theory that Gold and the miners were undervalued over the years will take this ride and make money (more money). The fly in the ointment is that this panic will go much further than nearly anyone can now envision. Some will make fortunes but the really STUPID and OUTRAGEOUS money will be made by those who ride the LAST PART of the wave. Many many latecomers will make more than many true and hardened “Gold soldiers”. This is the nature of the beast, the blow off phase will make Trillionaires and Quadrillionaires in Dollar terms. Billionaires will simply be “pikers”.
“What is the exit strategy?”… exiting too soon will cost many, MORE than they had already made. Short and sweet…you have to be in the game while this blow off occurs or you will never forgive yourself!
October 25th, 2010
by DavidPierre
The biggest “joke trade” is when the the stock market falls and the Dollar rises from what is called a “flight to safety”. This is the way it has been for years and years now, what if this nearly fool proof trade started NOT to work anymore?
Very shortly this is exactly what is going to happen. For nearly 10 years while the Dollar and stocks see-sawed back and forth many times in the inverse of each other. In nominal terms stocks are unchanged over the last 10 years but in real terms the purchasing power has declined by 30-40 percent and in terms of Gold the Dow Jones is down roughly 80%!
The next panic will include both the Dollar and stocks simultaneously… and bonds, were the Treasury market to join in the free fall an all out panic will follow leaving only one thing standing. GOLD!
Without a doubt the finances of the United States are out of control, some sort of default is inevitable. Because the U.S. owes it’s debts in Dollars they will just print what is needed, the world knows this. The current “inverse” trade of stocks moving higher as the Dollar moves lower and vice versa will begin to change as foreigners exit Dollar equity positions. This will also happen with Treasuries and the Fed will not only need to buy current supply but also the offers from disgruntled foreigners.
It really amazes … this far down the road to default without the above scenario commencing because it is so crystal clear where it is headed. Imagine anyone with common sense coming to a different conclusion. it is this very phenomenon that precedes panics.
Martin Armstrong and others have concluded hyperinflation but look back at history, equity panics nearly always precede and concur with devaluations. After several weeks or months THEN the stock market begins to rise but NEVER outpaces the drop in the currency. In other words, you NEVER end up with more purchasing power after a devaluation until years later. THIS is why you need to own the miners!
While they may initially get caught up in an equity downdraft they will be amongst the first to move higher sensing the devaluation. In a very real sense the mining companies will become the new “banks” as currencies become backed by metal in some form or ratio. The majors will do extremely well because they are producing “money” but they must replace their reserves because they are being depleted every year. It will be the juniors and in particular the exploration concerns that will make a very few investors incredibly wealthy.
Many explorers are currently undervalued STUPIDLY!
Many are valued at far less than $100 per proven ounce in the ground. Will it take a crashing Dollar or $1,500 Gold to get the market place to revalue these concerns? Maybe a couple of unexpected takeovers by majors? The juniors and explorers NOW offer a better and more undervalued play than Gold did when it was trading under $300 an ounce 8-10 years ago. These microcap concerns (many valued under $50 Million) will explode out of nowhere and “10 baggers” will be laggards!
The funny thing is that these trade so thinly that a $20,000 trade can move these 10% or more with ease… a 100 share trade moving a $20 stock a full point or more because there will be nothing offered. Mining shares will go into hiding in the same manner that physical Gold and Silver will, the mindset will make 1979-1980 look like blue skies.
The “new banks” (the majors) will have to get product from somewhere and they will be competing with hedgies, pensions, individuals and even governments. The old saying “there is no rush like a Gold rush” is very true because it is fueled by BOTH greed AND fear!
Now for the sad part, many of you who bought into the theory that Gold and the miners were undervalued over the years will take this ride and make money (more money). The fly in the ointment is that this panic will go much further than nearly anyone can now envision. Some will make fortunes but the really STUPID and OUTRAGEOUS money will be made by those who ride the LAST PART of the wave. Many many latecomers will make more than many true and hardened “Gold soldiers”. This is the nature of the beast, the blow off phase will make Trillionaires and Quadrillionaires in Dollar terms. Billionaires will simply be “pikers”.
“What is the exit strategy?”… exiting too soon will cost many, MORE than they had already made. Short and sweet…you have to be in the game while this blow off occurs or you will never forgive yourself!