Fleckenstein: "Test-Driving Gold as an All-Terrain Vehi
1 Mensagem
|Página 1 de 1
Fleckenstein: "Test-Driving Gold as an All-Terrain Vehi
O comentário de Fleckenstein (um urso assumido e grande defensor do ouro) da sessão de ontem é, sobretudo, sobre o ouro.
Ulisses
"Test-Driving Gold as an All-Terrain Vehicle"
By Bill Fleckenstein
Special to RealMoney.com
09/09/2003 06:05 PM EDT
"There was a fair amount of excitement overnight, with Japan partying for a couple percent, and ditto the euro and precious metals (more about that below). Most other equity markets were sagging, however, as New York readied for business. We opened slightly lower, flopped around for a while, and then sold off to the tune of 0.5% to 1% for the major averages. Serious weakness, however, was found in housing stocks and Fannie Mae (FNM:NYSE - commentary - research).
News of the Indices' Ooze: The market didn't waste much time regaining the ground lost in the early selloff, and by midday was back to the highs of the day, which is to say more or less unchanged. But that was it for the upside, as the market spent the rest of the day leaking. It traded back down to the lows with about half an hour to go, at which point I had to leave the action due to a prior commitment. I'm not sure what precipitated the afternoon slide. However, I would point out an ominous Associated Press story that passed on the tape: "Senators Threaten China with Tariffs" (thanks to my good buddy Lance Lewis for forwarding this to me).
Writer Mary Dalrymple reported: "A group of Republican and Democratic senators said Tuesday they will push for tariffs on imports from China if the Chinese government does not take steps toward letting its currency float freely on world markets. 'It's a shot across the bow,' said Senator Jim Bunning. Chinese goods would face a 27.5% American tariff, and China would lose its special trading status under the senators' bill, designed to prod China into changing its currency practices."
Politicos Threaten a Yuan-Two Punch: I kind of doubt that this precipitated some selling, because present-day bulls are adept at ignoring most everything, and I don't know whether the senators' bill has a prayer in hell of passing. But this is exactly the kind of trouble that occurs after periods of bad economic leadership and massive misallocations of capital. It's not surprising that small-minded people would talk about erecting trade barriers. History is replete with examples of that occurring.
However, to pretend that it's not bearish is absurd. Maybe it deserves to be ignored because it's unlikely that anything such as this could happen. But given next year's election, I wouldn't put anything past the politicians, whose only real goal in life is to get elected.
Away from stocks, fixed income was a nonevent, up fractionally. The euro, however, came in explosively higher, up over 1% (before closing up about 1.5%). It was outshined by silver and gold, which were up 3% and 2%, respectively.
Today, in view of some reader emails on the subject, I'd like to take a moment to talk about the Commitments of Traders report, and its impact on the metals. For those folks unfamiliar with this bit of inside baseball, the report is a weekly breakdown by the CFTC (Commodity Futures Trading Commission) of the open interest among small speculators, large speculators, and commercials, the latter being the folks who deal in the physical market. In the last few weeks, something of a fuss has arisen over the fact that the commercials have a rather large short position and the speculators have a rather longer long position -- the implication being that the longs will be forced to liquidate.
Fear of Commitments of Traders: This fear has its roots in the past, when it was "business as usual." Then, only a finite group of people seemed to care about the metals, and when their positions reached a certain size (they tended never to get bigger), the market soon got clobbered. Hence, this report has received so much attention lately. What folks fail to understand is that it's no longer business as usual in the metals market. A real bid appears to have arrived here and around the world (though we can't say for certain who is buying), and that has changed the complexion of the open interest.
The real question is, what happens to the sellers if prices continue to move higher? The answer, I believe, revolves around the ETF (exchange-traded fund) coming out in London, and the planned ETF in the States, once it finally makes its debut. Some sort of delivery process will occur, whereby the longs take the metal, or it finds its way to an ETF, or something similar. I don't believe that the open-interest situation will be resolved by a big washout, or by a mad scramble on the part of the commercials, though I suppose the latter has a higher probability of occurring than the former.
The Race to Debase Abets Metals' Case: In any case, the Commitments of Traders report is just a tool, like any other. The trick lies in understanding the data in the context of the environment. The current environment, I would just note, only bolsters the case for a precious-metals investment, as it features the world's currency stewards, i.e., central bankers, trying to outprint their way to nirvana. In America, of course, money is printed at the drop of an electron. The Japanese, loathe to see their currency lower than ours, do the same, as do the Chinese and (after a fashion) the Europeans. It's been one global quest for the keys to the functional equivalent of a financial perpetual motion machine. Obviously, if it were that simple, countries would have printed their way to prosperity long ago.
Meanwhile, the only questions are which currencies get pummeled the hardest against each other, and how low the dollar eventually goes vs. gold/silver (or, to put it a slightly different way, how high will the price of gold and silver go?)? If it turns out, as I expect, that the economic recovery is not self-sustaining, that will give folks yet another reason to want to buy gold, as they will fear what comes next. On the flipside, if my view is wrong and the economy starts to get a head of steam, then you're asking for real problems on the interest-rate front.
Stronger or rising rates would at some point impede a recovery, should one get started. Of course, there would be rising inflation to go with it, putting us in a period much like the 1970s, where we had a "stop/go" economy. Though I don't particularly expect that outcome, for reasons laid out many times, this type of stagflation would be bullish for the metals, as well.
When Reality Reins in the Rally . . . : Both economic outcomes would also be bearish for stocks, given the valuations. The only thing that's bullish for stocks is the willingness of folks to suspend disbelief and the willingness of the OPM crowd to abdicate any sort of risk control as it participates in the performance derby.
Only in a period in which folks completely ignore problems and scoff at risk can securities, in the aggregate, command these valuations. Once again, this is not to say that stocks have to go down immediately. But they will go much, much lower before this bear market is over. "
(in www.realmoney.com)
Ulisses
"Test-Driving Gold as an All-Terrain Vehicle"
By Bill Fleckenstein
Special to RealMoney.com
09/09/2003 06:05 PM EDT
"There was a fair amount of excitement overnight, with Japan partying for a couple percent, and ditto the euro and precious metals (more about that below). Most other equity markets were sagging, however, as New York readied for business. We opened slightly lower, flopped around for a while, and then sold off to the tune of 0.5% to 1% for the major averages. Serious weakness, however, was found in housing stocks and Fannie Mae (FNM:NYSE - commentary - research).
News of the Indices' Ooze: The market didn't waste much time regaining the ground lost in the early selloff, and by midday was back to the highs of the day, which is to say more or less unchanged. But that was it for the upside, as the market spent the rest of the day leaking. It traded back down to the lows with about half an hour to go, at which point I had to leave the action due to a prior commitment. I'm not sure what precipitated the afternoon slide. However, I would point out an ominous Associated Press story that passed on the tape: "Senators Threaten China with Tariffs" (thanks to my good buddy Lance Lewis for forwarding this to me).
Writer Mary Dalrymple reported: "A group of Republican and Democratic senators said Tuesday they will push for tariffs on imports from China if the Chinese government does not take steps toward letting its currency float freely on world markets. 'It's a shot across the bow,' said Senator Jim Bunning. Chinese goods would face a 27.5% American tariff, and China would lose its special trading status under the senators' bill, designed to prod China into changing its currency practices."
Politicos Threaten a Yuan-Two Punch: I kind of doubt that this precipitated some selling, because present-day bulls are adept at ignoring most everything, and I don't know whether the senators' bill has a prayer in hell of passing. But this is exactly the kind of trouble that occurs after periods of bad economic leadership and massive misallocations of capital. It's not surprising that small-minded people would talk about erecting trade barriers. History is replete with examples of that occurring.
However, to pretend that it's not bearish is absurd. Maybe it deserves to be ignored because it's unlikely that anything such as this could happen. But given next year's election, I wouldn't put anything past the politicians, whose only real goal in life is to get elected.
Away from stocks, fixed income was a nonevent, up fractionally. The euro, however, came in explosively higher, up over 1% (before closing up about 1.5%). It was outshined by silver and gold, which were up 3% and 2%, respectively.
Today, in view of some reader emails on the subject, I'd like to take a moment to talk about the Commitments of Traders report, and its impact on the metals. For those folks unfamiliar with this bit of inside baseball, the report is a weekly breakdown by the CFTC (Commodity Futures Trading Commission) of the open interest among small speculators, large speculators, and commercials, the latter being the folks who deal in the physical market. In the last few weeks, something of a fuss has arisen over the fact that the commercials have a rather large short position and the speculators have a rather longer long position -- the implication being that the longs will be forced to liquidate.
Fear of Commitments of Traders: This fear has its roots in the past, when it was "business as usual." Then, only a finite group of people seemed to care about the metals, and when their positions reached a certain size (they tended never to get bigger), the market soon got clobbered. Hence, this report has received so much attention lately. What folks fail to understand is that it's no longer business as usual in the metals market. A real bid appears to have arrived here and around the world (though we can't say for certain who is buying), and that has changed the complexion of the open interest.
The real question is, what happens to the sellers if prices continue to move higher? The answer, I believe, revolves around the ETF (exchange-traded fund) coming out in London, and the planned ETF in the States, once it finally makes its debut. Some sort of delivery process will occur, whereby the longs take the metal, or it finds its way to an ETF, or something similar. I don't believe that the open-interest situation will be resolved by a big washout, or by a mad scramble on the part of the commercials, though I suppose the latter has a higher probability of occurring than the former.
The Race to Debase Abets Metals' Case: In any case, the Commitments of Traders report is just a tool, like any other. The trick lies in understanding the data in the context of the environment. The current environment, I would just note, only bolsters the case for a precious-metals investment, as it features the world's currency stewards, i.e., central bankers, trying to outprint their way to nirvana. In America, of course, money is printed at the drop of an electron. The Japanese, loathe to see their currency lower than ours, do the same, as do the Chinese and (after a fashion) the Europeans. It's been one global quest for the keys to the functional equivalent of a financial perpetual motion machine. Obviously, if it were that simple, countries would have printed their way to prosperity long ago.
Meanwhile, the only questions are which currencies get pummeled the hardest against each other, and how low the dollar eventually goes vs. gold/silver (or, to put it a slightly different way, how high will the price of gold and silver go?)? If it turns out, as I expect, that the economic recovery is not self-sustaining, that will give folks yet another reason to want to buy gold, as they will fear what comes next. On the flipside, if my view is wrong and the economy starts to get a head of steam, then you're asking for real problems on the interest-rate front.
Stronger or rising rates would at some point impede a recovery, should one get started. Of course, there would be rising inflation to go with it, putting us in a period much like the 1970s, where we had a "stop/go" economy. Though I don't particularly expect that outcome, for reasons laid out many times, this type of stagflation would be bullish for the metals, as well.
When Reality Reins in the Rally . . . : Both economic outcomes would also be bearish for stocks, given the valuations. The only thing that's bullish for stocks is the willingness of folks to suspend disbelief and the willingness of the OPM crowd to abdicate any sort of risk control as it participates in the performance derby.
Only in a period in which folks completely ignore problems and scoff at risk can securities, in the aggregate, command these valuations. Once again, this is not to say that stocks have to go down immediately. But they will go much, much lower before this bear market is over. "
(in www.realmoney.com)
-
- Administrador Fórum
- Mensagens: 31013
- Registado: 29/10/2002 4:04
- Localização: Aveiro
1 Mensagem
|Página 1 de 1