SLV

[capricho]

Some 401(k) accounts allow for individual participants to buy and sell stocks through a brokerage account such as Schwab. I have such a plan.

[Windsurfer]

SLW is the only silver stock I trade.  Good solid company that is over due for a breakout.

[realcoolhead]

Apparently silver is more volatile than gold...

[garyaross]

David,
Any thoughts on the big drop in SLV?

[nullzero]

It looks like a normal pullback, SLV may hit the 50dma and bounce from there. Looking at the market volatility down a little over 3% is nothing.

[tokyopua]

I had SLV on D day Tuesday, it went up in the morning and sold off.  Be a bit careful with this one too, I sold it cause it still seems to act like a stock even though its an ETF....

Yes, Gold & Silver (the metals) have been trading somewhat in tandem with stock market indices. I expect them to decouple and trade based on their value as an alternative financial asset (that is money, as opposed to dollars), but the jury is still out if that is going to happen or not. Perhaps not immediately, this things take time.

Thanks for the warning

I have been even more bullish on silver than gold for a long time, and have been in and out of SLV many times (I bought on the first or second day the ETF was available, I forget exactly).  So I also agree with you that SLV should do well, but when the May correction occured, I got stopped out and watched SLV plummet.  One difference from then is that silver was probably inflated too much as everyone knew the SLV ETF was coming and would reduce supply (this ETF actually holds silver bullion in reserve).  So to some extent there was also a sell the news type reaction back then that should not be a factor this time.

Right now there are 7 weeks up with no red candles on the weekly chart, but one big bearish engulfing candle forming for this week.

http://stockcharts.com/h-sc/ui?s=SLV&p=W&b=5&g=0&id=p94888120487

So a bit bearish looking at the moment.  But you can also see mini cycles forming and so it looks like any downturn wont last too long before an uptrend resumes. 

Agreed with Nullzero in any case that the 50sma could provide support.  I might join in there too, cause I love silver, it has made me lots of money so far     And if you are right about the larger macro picture, Im going to love it even more!   

[David Randolph]

So I also agree with you that SLV should do well, but when the May correction occured, I got stopped out and watched SLV plummet.  One difference from then is that silver was probably inflated too much as everyone knew the SLV ETF was coming and would reduce supply (this ETF actually holds silver bullion in reserve).  So to some extent there was also a sell the news type reaction back then that should not be a factor this time.

I'm worried that I was too early on my $Silver call. Gold and Silver were nice shelters since the beginning of 2002, but they also headed lower between 2000 and 2002. I'm afraid I was looking too far ahead into the future.

Let me try to explain. Silver has an economic driven demand, it is used for jewelry but also for several electronic products, mainly digital cameras. So, a slowing global economy might dampen demand for silver over the short/medium term.

But silver is also an historical store of value (even before the US dollar existed, as everybody knows).

My bullishness on silver comes from its financial role in the global economy. But, for now it seems the metal is still trading for economic reasons, not financial.

Financial reasons to own silver would emerge in a bit apocalyptic scenario of a recession, the FED cutting rates, the US dollar goes down and bonds also go sharply lower, because, after all, dollars are just a piece of paper coming from the FED's printing machine. Bondholders around the world wouldn't want the dollars paid as interest, because the US dollar was going down by the day.

If this were to happen gold and silver would move higher by an incredible amount. No one can print ounces of gold. They're a limited resource. Hence their value.

All this being said, this scenario, although not impossible, is still way too far ahead into the future and maybe will never happen, it depends on the course of events and policies taken. For example, the economy may enter a recession and Bernanke, instead of slashing interest rates to 1% again, keeps them on the 4 to 5% level. That would possibly strengthen the US dollar and gold and silver would head lower.

So, my rationale for buying silver was early, which is the same as wrong. It was a mistake. I need to correct that mistake by taking a small loss today.

I know several of you bought SLV because of my recommendation and I'm sorry for the mistake, these general market turning points are very difficult to handle and good and bad decisions are made. I want to keep holding the trades derived from what I perceive to be good decisions and get rid of the ones that seem to have been impulsive decisions, derived from the desire of action, this being a stock market trading advisory service.

The trading plan is:

Sell SLV.

[realcoolhead]

I agree silver has economic value in it and probably will be affected by the economic slow down, but shouldn't gold be the investment of choice in distress time?

[David Randolph]

I agree silver has economic value in it and probably will be affected by the economic slow down, but shouldn't gold be the investment of choice in distress time?

It should, it makes a lot of sense to me. But the market disagrees, at least for now, as $Gold has been trading in tandem with economic indicators, not in opposite direction. Maybe this is happening because people are perceiving the value of gold not as a financial asset but as something people buy when they have a lot of money, for example, jewelry 

This is why I think these gold/silver trades were early. First they will suffer due to the economic slowdown. Only when/if the economic slowdown makes people lose faith in paper money, will gold and silver rise. That depends on the FED's course of action. If the FED cuts rates and increases money supply even more, the dollar will lose value and gold will rise. But if the FED stands path and takes an hawkish attitude (which I don't believe it will, not with Bernanke, that would be a great surprise), the dollar will gain in value and gold will go down.

[tokyopua]

I agree silver has economic value in it and probably will be affected by the economic slow down, but shouldn't gold be the investment of choice in distress time?

It should, it makes a lot of sense to me. But the market disagrees, at least for now, as $Gold has been trading in tandem with economic indicators, not in opposite direction. Maybe this is happening because people are perceiving the value of gold not as a financial asset but as something people buy when they have a lot of money, for example, jewelry 

This is why I think these gold/silver trades were early. First they will suffer due to the economic slowdown. Only when/if the economic slowdown makes people lose faith in paper money, will gold and silver rise. That depends on the FED's course of action. If the FED cuts rates and increases money supply even more, the dollar will lose value and gold will rise. But if the FED stands path and takes an hawkish attitude (which I don't believe it will, not with Bernanke, that would be a great surprise), the dollar will gain in value and gold will go down.

I would not be surprised if some of the drop in SLV and GLD happening right now are also the result of the yen carry trade unwinding. 

It appears that the yen carry trade is probably only in Phase I per CNBC, ie. the hedge funds are getting out now.  The slower moving retail investors and institutional investors would comprise further phases.

I am all about watching and learning more about the yen carry trade right now.

[buddjas1]

I agree silver has economic value in it and probably will be affected by the economic slow down, but shouldn't gold be the investment of choice in distress time?

Neither gold or silver would not be prudent here.  Be careful how you define "distress."  What is different about now and other bear markets is that inflation is not a risk this time.  If and when inflation becomes a concern, precious metals will be the place to be. 

[tokyopua]

I agree silver has economic value in it and probably will be affected by the economic slow down, but shouldn't gold be the investment of choice in distress time?

It should, it makes a lot of sense to me. But the market disagrees, at least for now, as $Gold has been trading in tandem with economic indicators, not in opposite direction. Maybe this is happening because people are perceiving the value of gold not as a financial asset but as something people buy when they have a lot of money, for example, jewelry 

This is why I think these gold/silver trades were early. First they will suffer due to the economic slowdown. Only when/if the economic slowdown makes people lose faith in paper money, will gold and silver rise. That depends on the FED's course of action. If the FED cuts rates and increases money supply even more, the dollar will lose value and gold will rise. But if the FED stands path and takes an hawkish attitude (which I don't believe it will, not with Bernanke, that would be a great surprise), the dollar will gain in value and gold will go down.

I would not be surprised if some of the drop in SLV and GLD happening right now are also the result of the yen carry trade unwinding. 

It appears that the yen carry trade is probably only in Phase I per CNBC, ie. the hedge funds are getting out now.  The slower moving retail investors and institutional investors would comprise further phases.

I am all about watching and learning more about the yen carry trade right now.

Eric Bolling on Fast Money tonight did say that one of the reasons gold fell was indeed the yen carry trade unwinding.  He is still long term bullish on gold, but did say gold is not a hedge against the market, but rather as we all know, its a hedge against inflation.  It may have its day again, as thus silver will, good to keep on the radar.

[guitarman]

Hi guys
I think inflation is a big concern.
Gold and Silver may be going up sooner than we think...
I have learned that the Fed has been trying to hide inflation.
I got this e-letter from a friend that subscribes to this service.
I'm not on board with this guy on energy so much but I am WRT gold and sliver.
I'd be interested to have you guys pick this letter apart.

Best
GMan

 Subject: Blue Chip Update
>
>
> Why SPM's Blue Chip Accounts Make Sense in a
> Changing and Turbulent
> Market
>
> 
>
> Forgive the unpolished nature of this report, but I
> feel it is important
> to get it out and not to skimp on words.  The SPM
> Blue Chip Core Equity
> Composite did better than the market in February and
> I believe are well
> positioned to capitalize on important changes in the
> market that will
> likely develop over the next several years and have
> perhaps already been
> set in motion now with the latest correction in the
> stock market.  I
> believe this is a very important and timely letter,
> so while it is long,
> I hope you will take the time to read it and to try
> to understand my
> thinking. 
>
> 
>
> The Blue Chip accounts were down .8% net in February
> and outperformed
> the S&P 500 which was down 2% for the month, but I
> believe the Blue Chip
> accounts are poised for a strong performance in the
> coming months.  The
> sell-off in the market on Tuesday may be setting off
> a change in the
> investment climate that overall could be very
> bullish for the Blue Chip
> accounts over the next several years.  I have been
> expecting a sell off
> in the market and trying to prepare the portfolios
> for this for some
> time.  In the recent correction, the broad market
> was down more than 3%
> in one day.  Our heavy allocation of consumer
> staples in particular
> weathered the correction very well.  This group
> should continue to do
> well as money managers flock these names given their
> ability to deliver
> strong consistent performance in a weakening
> economy.  Utility stocks
> also have been outperforming and should continue to
> do well given their
> strong dividend yields, solid fundamentals, and
> traditionally defensive
> character. 
>
> 
>
> The big surprise was the sell-off in our gold
> stocks.  While these
> stocks were strong for most of the month, they took
> an unexpected hit in
> the market sell-off and have continued to be weak.
> Gold in the end
> should be one of the best places to invest over the
> next several years
> and this pullback should be a great buying
> opportunity.  In general, I
> still believe gold stocks will be good offensive
> stocks in the coming
> months to rack up strong gains as I explain below.
> As I have been
> writing about, we are likely entering a time of
> economic slowing due to
> a peak in the economic cycle that was set off by the
> bursting of the
> housing bubble and will likely continue due to
> credit tightening in the
> wake of over aggressive lending in sub-prime
> mortgages that are now
> blowing up.  Corporate profit margins have recently
> hit record highs,
> another indication of a peak in the cycle, along
> with rampant liquidity
> as evidenced by a multitude of private equity
> leveraged buyouts, a
> multi-trillion dollar expansion of credit
> derivatives, and record
> expansion and leveraging of hedge funds. 
>
> 
>
> This all sounds extremely negative, but it can be
> very positive for our
> portfolios, and it can be extremely negative for
> those who don't
> position themselves properly.  It is only natural
> for the economy to go
> through expansion and contraction cycles as it has
> throughout history.
> The excesses of the expansion phase naturally lead
> to the contraction.
> The good news is that there are plenty of ways to
> profitably navigate
> these cycles in the stock market.  In the
> contraction phase, investing
> in the right sectors can be highly profitable.  The
> large cap sector of
> the market also tends to outperform, and this is
> where the Blue Chip is
> focused.  Except for very rare panic days in the
> market at large, as we
> saw recently, there are certain sectors of the
> market that can do
> extremely well overall in the contraction phase.  We
> have mentioned a
> few, consumer staples and utilities.
>
> 
>
> But in this downturn in the business cycle in
> particular, we have
> another very powerful force that is not only helping
> to create the
> downturn, but is creating what I believe one of the
> greatest
> stock-investing themes of our country's history.
> This force is
> inflation and is a consequence of years of pent-up
> easy monetary policy
> combined with high debt and deficit spending.
> Pent-up and likely
> increasing inflation I believe is perhaps the single
> most important
> macro-economic factor in the market as relates to
> investing
> opportunities and risk.  People, this is something
> that I think you
> absolutely have to get right in order to prosper or
> perish in the coming
> investment climate. 
>
> 
>
> Inflation has already been running much higher than
> the government
> reported statistics acknowledge.  Just consider the
> rise in health care
> costs, college education, food, energy, and housing
> over the past
> several years which have been rising around 8 to 10%
> per year,
> coincidentally the same rate of increase in the
> Federal Reserve's
> broadest money supply measures.  But through a
> series of material
> adjustments to the Consumer Price Index, our
> government in an effort to
> keep the entitlement cost of living adjustments
> (COLAs) down, has been
> dramatically under-reporting inflation via the CPI
> since 1996 when
> Congress adopted economist, Michael Boskin's
> recommendations for
> recalculating it.  These measures have completely
> changed the way CPI is
> measured by the Bureau of Labor Statistics.  Since
> 1996 the BLS has
> instituted a number of legislated and predominantly
> arbitrary ongoing
> adjustments which include: 1. a change in the
> weightings of items in the
> CPI to put a lower weight on the items that are
> moving up the most; 2.
> hedonic adjustments (arbitrary reductions in prices
> due to "quality"
> improvement in goods); 3. substitution (for instance
> if beef prices go
> up, they will substitute chicken if chicken did not
> go up as much), 4.
> seasonal adjustments (used as an excuse to adjust
> CPI down if price
> seasonally go up, but when they seasonally go down
> they are not adjusted
> back up); and 5. a separate calculation and focus on
> the "core" rate of
> inflation which excludes some of the prices which
> tend to rise the most,
> energy and food. 
>
> 
>
> Please stay with me and don't glaze over at this.
> The sad truth and the
> opportunity is that probably 95%+ of the investment
> community has
> completely glazed over at this and has absolutely no
> clue about these
> adjustments and still takes CPI at face value.  The
> social cost to the
> average American is another very sad truth.
> Probably 99% of Americans
> do not understand the implications and consequences
> of these differences
> between true and reported inflation.  I believe it
> is absolutely
> critical to understand
>
> 
>
> In terms of investing, keeping up with and beating
> inflation is an
> extremely important factor to maintain and increase
> one's wealth and
> standard of living.  Those relying on COLAs to do
> this, as I have shown
> above, are not getting enough, and will continue to
> get screwed as our
> government will be forced to find a way to reduce
> these liabilities.
> Those relying on traditional financial assets in the
> stock and bond
> markets could also be in for some more ugly
> surprises.  Rising inflation
> can wreak havoc on bonds and on certain stocks. 
>
> 
>
> Out total government debt including the present
> value of the future
> costs of entitlements even with a projection based
> on understated COLAs
> is $50 trillion as of September 30, 2006, an
> increase of about $4
> trillion over September 30, 2005.  This comes from
> our own Treasury
> Department's latest financial statements, which now
> include GAAP
> accounting for entitlements in the footnotes.  This
> is up from $20
> trillion as of September 30, 2000.  Just our
> government liabilities
> translate to a current burden of about $170,000 per
> American or
> approximately $440,000 per household.  When you add
> personal and
> corporate debt to the per capita figures, it becomes
> clear that our
> country would be bankrupt if it had to truly had to
> pay off these
> liabilities at their present value.  The bottom line
> is that the overall
> debt in the economy is at such a high level that the
> path of least
> resistance to reduce this burden, as is the lesson
> of history with
> highly indebted nations, will continue to be
> inflation, and for as long
> as they can get away with it, the government's
> agenda, as with the CPI
> adjustments, will be to promote secret inflation. 
>
> 
>
> Because foreigners are willing to finance our debt
> and deficits at
> unbelievably low interest rates, we will continue to
> take advantage of
> them through further increases in borrowing.  Then,
> by gradually
> devaluing our currency through inflation via
> continued easy monetary
> policy, increasingly more likely as it will be
> necessary to fend off
> recession, we will devalue these foreign liabilities
> in order to reduce
> our debt burden.  All sings that I can see point to
> continued high and
> secret inflation, which will start to become less
> secret and more widely
> understood by the markets.  As this develops gold
> and other scarce
> commodities will continue to rise sharply.
>
> 
>
> 
>
> The bottom line is that inflation reduces the value
> of our liabilities,
> and because our government through the Federal
> Reserve has access to a
> printing press, printing money will continue to be
> the policy tool to
> deal with our financial worries as it has in the
> past.  Because of these
> factors, we are likely in the early stages of one of
> the biggest bull
> markets for gold and commodities that this country
> has ever seen.  Given
> that we are also likely facing peak oil around the
> world, another issue
> that most of the investing world seems oblivious to,
> the opportunities
> for investing in gold and energy stocks as well as
> other commodity or
> basic material stocks, is probably one of the best
> that this country has
> ever seen.  As you know, this has not gone unnoticed
> in my stock
> quantitative picking model which analyzes the
> relative fundamental
> prospects of more than 8,000 stocks.  In fact, it is
> in trying to
> understand why commodity and energy stocks have been
> scoring so well in
> my model in recent years that I have explored
> further the fundamental
> macro-economic forces behind these stocks.  I
> believe it is critical
> that one position their portfolios toward gold,
> scarce commodities, and
> energy related equities in order to capitalize on
> these fundamental
> macro-economic forces and to beat what will likely
> be sharply rising
> inflation in one's portfolio. 
>
> 
>
> One of the most important investing questions needs
> to be, "How am I
> going to stay ahead of inflation?"  And that is
> where the Blue Chip
> Managed accounts come into play.  Stocks have
> traditionally been a great
> place to beat inflation, but one has to be in the
> right stocks.  In the
> Blue Chip Managed Account, I have a model that not
> only helps identify
> major macro-economic themes as I have discussed, it
> also helps pick the
> right stocks to take advantage of these themes. 
>
> 
>
> The bond market right now, on the other hand, I
> think is one of the
> worst possible places to put money.  We are likely
> at the peak of a
> 25-year major secular bond bull market.  Rising
> inflation and likely
> rising interest rates will do damage to bond
> portfolio which can go down
> in nominal as well as real values under rising
> inflation.  We are likely
> in the very early stages of a serious secular rise
> in inflation, which
> will be the consequence and the natural unwinding of
> the debt and
> bond-market bubble.   
>
> 
>
> As people are only starting to wake up to true
> inflation, I believe the
> bull market in gold and energy that has developed is
> still in the very
> early innings.  With oil, we have another major
> factor.  We are about to
> hit peak world production and may already be hitting
> it.  Again I think
> the world is largely ignorant on the issue and its
> implications.  For
> us, we can create and intelligent investment
> strategy to capitalize on
> these themes rather than be harmed by them.  My
> quantitative investment
> model in particular should help us find the very
> best stocks in which to
> make money on these themes. 
>
> 
>
> The combination of a slowing economy and rising
> inflation is nothing new
> but it has been a while since we have experienced
> this type of
> investment climate.  We need to think back to the
> 1970s when it was
> known as "stagflation".  It is hard for most people
> who only understand
> the bond bull market of the last 25 years, but the
> pendulum has swung
> completely the other way from where it was in 1980
> when Paul Vocker had
> to jack up interest rates to 22% in order to put the
> kibosh on
> inflation.   Back then, no one trusted the Federal
> Reserve.  Now, it is
> the complete opposite, and our Federal Reserve
> chairman, Ben Bernanke,
> and former chairman Alan Greenspan walk on water.
> This is a major
> imbalance because it is really a time when they
> should be least trusted
> and they are the ones in fact who have created the
> major pent-up
> inflationary pressures.  The imbalance in perception
> of our Fed relative
> to the realities underlying it, are what is creating
> what I believe is
> an incredible investing opportunity now for gold and
> other scarce
> commodities.  Mark my words, as the pendulum swings
> back the other way,
> and it is only beginning, from trust to disdain of
> our Federal Reserve,
> gold will be the primary barometer.  The stage is
> set I believe for a
> major bull market in gold.
>
> 
>
> Both Greenspan and Bernanke have already sown the
> seeds for perhaps the
> biggest inflation this country has ever seen,
> certainly they have
> already created much more inflation than the market
> has recognized.
> This is perhaps the single most important thing to
> understand about
> where we are in the economic cycle.  Berananke has
> assured us that when
> we hit another economic or financial crisis, the Fed
> will deal with it
> by lowering interest rates, and blasting more
> liquidity at the market,
> i.e., printing more money.  Bernanke has said that
> he can drop dollar
> bills from helicopters if need be.  In the past, the
> Fed has already
> established pattern of using inflation to fight
> battles.  When the stock
> market bubble burst in 2001, the Fed lowered rates
> substantially and in
> the process created a new bubble in housing.  Now
> that the housing
> bubble is bursting and leading the economy into a
> downturn, the Fed will
> almost certainly use easy monetary policy again to
> try to rev up the
> economy and keep attempt to keep it growing.  Where
> will all the
> liquidity go this time?  I believe it will go into
> commodities and in
> particular gold and energy related commodities.
> Very simply, the Fed
> will be going to the well one too many times and the
> markets will be
> inevitably getting wise to the inflation it is
> creating.  It will most
> importantly get wise to the inflation that it has
> already created and
> which can't be undone via past irresponsible
> borrowing and deficit
> spending of our government.  Our country's savings
> rate is already
> negative and trade deficits have been negative for
> years.  There are two
> ways to crawl out from under our debts. The first is
> a severe belt
> tightening: prudent spending and investment,
> dramatic cutbacks in
> spending and increases in savings and investment
> rates.  The consequence
> of this path would be declining consumption spending
> and lower rates of
> economic growth, possibly even deflation.
> Remarkably, some people
> actually think this is a viable path.  The other
> path is to inflate our
> way out of our troubles, to make everyone continue
> to think that the
> economy is growing by secretly leaking more and more
> dollars into the
> economy, by continuing to manipulate the CPI so that
> real growth rates
> appear higher than they really are, by making people
> think that they are
> better off by having more dollars in their pocket,
> or in other words,
> business as usual.   
>
> 
>
> In reality, these two paths lead to the same
> consequences in the end in
> terms of overall economic pain that must be endured
> to make up for the
> excesses of the past.  But under the inflationary
> path, we can hide the
> true reality of this past.  Most importantly, under
> the inflationary
> path, we can export a large fraction of this pain
> onto foreigners. That,
> my friends, in the nutshell is my "proof" of why we
> are headed for
> inflation, not deflation, as a means to deal with
> our economic
> imbalances.  Through inflation, we can externalize
> the pain from our
> excesses onto others who are willing to buy our
> debts, and then to
> devalue those debts through inflation.  It is simply
> too easy and too
> tempting.  It is the path of least resistance.  This
> is critically
> important for the health of your investment
> portfolios to understand.
> Do you really believe that our government is going
> to dramatically
> change its spending habits, especially at a time
> when foreigners are
> willing to fund them?  We are a spoiled nation.
> Because foreigners are
> willing to buy our debt now at ridiculously low
> interest rates
> (considering the true level of historical and
> impending inflation) we
> will continue to cram it down their throats. 
>
> 
>
> Other countries are not completely stupid and they
> have printing presses
> too.  In fact, all countries have abandoned the gold
> standard backing
> their currencies.  Therefore we are facing what
> economists call a
> "prisoner's dilemma", a unique situation in which
> the outcome is
> virtually assured due to mal-incentives built into
> the system.  The
> behavior of China gives us a way to understand this
> dilemma and how it
> works in the current world economy.  China has kept
> its currency largely
> fixed or "pegged" relative to the dollar.  China,
> like other countries,
> wants to have a strong export economy to the US, the
> largest consumer
> economy in the world.  Therefore they want to keep
> their currency weak
> relative to the dollar in order to stimulate
> exports.  As a result, if
> the US is printing money and devaluing its currency,
> China is also
> forced to print money in order to keep its currency
> in line.  It is not
> just China, but every major world economy that is
> trying to manage its
> exchange rates and export business relative to the
> US.  Thus, the US
> incentive to cheat through inflation is met by other
> countries similar
> incentives.  This is the prisoner's dilemma, a term
> derived from a
> prisoner's incentive to rat on his partner in crime,
> if he will get
> immunity.  In the end, all prisoners rat out their
> accomplices and all
> prisoners go to jail. 
>
> 
>
> This is why we are not facing just likely facing a
> "dollar crisis", but
> "global fiat currency crisis" that will be extremely
> bullish for gold.
> Gold has thousands of years of history as a store of
> value, a measure of
> wealth, and a means of commerce, a much longer
> history of money than any
> fiat currency in the world today, and a much better
> track record as a
> store of value.  I can only conclude that we are
> likely in the very
> early stages of major bull market in gold that,
> given the record size of
> our debt and deficits relative to GDP, should be the
> biggest bull market
> in more than a century for precious metals and for
> scarce commodities in
> general.  The pent up forces that have already been
> set in motion are
> likely beyond Bernanke's ability to handle.  He
> himself is caught in a
> prisoner's dilemma.  If he is too restrictive on
> monetary policy, he
> will be responsible for a major depression.  He will
> be forced to keep
> the economy going at all costs.  He will have no
> choice but to take the
> path of inflation.  He will however continue to try
> to fool the world
> for as long as possible that inflation is not as bad
> as it seems.  We
> can simply expect more of the same in that regard. 
>
> 
>
> Other countries will not remain completely stupid in
> terms or soaking up
> our debt though.  Sooner or later, and the risk is
> sooner, they will
> wake up to the fact that their dollar holdings are
> being devalued.  When
> they do, we can expect a sharp rise in gold and a
> sharp rise in long
> term interest rates in the US markets, and more pain
> for bonds and
> non-inflation hedged stocks in the US.
>
> 
>
> In conclusion, this is why the Blue Chip accounts
> own and have owned
> gold and energy stocks.  These stocks also score
> very well in my model.
> By investing in the companies that deal in scarce
> natural resources we
> can capitalize on a new secular cycle of rising
> inflation and both
> substantially beat the market and beat inflation.
> We can also use the
> model to identify companies that are beneficiaries
> of the current
> slowing economy, as well as inflation, such as or
> consumer staple and
> utility stocks.  Certainly there will be new areas
> that my model will
> identify as well as time goes on.  I am always
> willing to change my
> outlook as new information develops.  But for now, I
> hope you can
> understand why we are positioned the way we are, why
> our positions could
> ultimately translate into large gains for us, and
> why the current
> volatility unfolding in the market is something that
> we intend to
> capitalize on rather than be a victim of.