Natural Gas has not been acting right at all or has it? The persistent weakness in this commodity should be a clear sign of the deflationary pressures I have been speaking about.
It can only really be telling us one of two things.
One: Every asset class out there when looked at in terms of Nat Gas are completely overvalued.
Two: Nat Gas is the buy of the century.
Given analysis of other factors in the economy I would be inclined to go with option number 1. I will say I believe Nat Gas has indeed run too far too fast to the downside, but buying Natural Gas would only be a good idea if you where hedged correctly across the entire commodity complex and other asset classes as well. However I think it would be dangerous, as it has been, to attempt to bottom fish this commodity on pure price speculation.
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Thursday, July 9, 2009
Wednesday, July 1, 2009
Predictive Markets Part II
In the first article I was mainly focused on the the stock markets predictive powers according to conventional wisdom. Now lets take a look at GOLD when considering future inflation or deflation.
If you follow the pundits and experts today on mainstream TV you would be led to believe that $900-$1000 GOLD prices must be signaling inflation or hyperinflation going forward. Well lets think about that for a minute. If that was really true then what was $800 an ounce for GOLD signaling 27 years ago when it first happened? Surely it wouldn't have forecast an 18 year decline in the prices of GOLD and disinflation, but that's exactly what we got.
Now with prices high again the pundits are back and so is GOLD fever. I have learned time and time again the crowd never discovers buried treasure together and when everyone and there mothers are starring at that mythical pot of GOLD (excuse the pun) its probably not really there. As we are the counter party to private corporations and the Federal Reserve we are the source from which wealth is transferred from and not too.
If you look at the facts: Diminishing institutional lending capacity, reduced consumer credit, increasing savings rates, massive de-leveraging of the financial system as a whole, increasing reserve requirements, etc,... all of these things are 100% deflationary not inflationary. Although the FED has turned on the money spigot with its Quantitative Easing, it is replacing money in the system that is vanishing at a greater pace than they are creating due to the unwinding leverage in the financial system.
Lower consumption, lower consumer confidence, higher unemployment, low consumer spending, people are hoarding their dollars, combine that with reduce credit facilities and this all will translates into dollar shortage or dollar scarcity. None of the above is considered inflationary. Now the mainstream media is selling us on buying an asset that has risen in price over 300% in the last decade. When was the last time buying something after it rose 300% was a good idea? They usually call that missing the boat!!!
Don't believe there is dollar scarcity yet..... Take a look at California's predicament and tell me, what are they short of right now? They are about to issue IOU's....simply put they are short money.
If you follow the pundits and experts today on mainstream TV you would be led to believe that $900-$1000 GOLD prices must be signaling inflation or hyperinflation going forward. Well lets think about that for a minute. If that was really true then what was $800 an ounce for GOLD signaling 27 years ago when it first happened? Surely it wouldn't have forecast an 18 year decline in the prices of GOLD and disinflation, but that's exactly what we got.
Now with prices high again the pundits are back and so is GOLD fever. I have learned time and time again the crowd never discovers buried treasure together and when everyone and there mothers are starring at that mythical pot of GOLD (excuse the pun) its probably not really there. As we are the counter party to private corporations and the Federal Reserve we are the source from which wealth is transferred from and not too.
If you look at the facts: Diminishing institutional lending capacity, reduced consumer credit, increasing savings rates, massive de-leveraging of the financial system as a whole, increasing reserve requirements, etc,... all of these things are 100% deflationary not inflationary. Although the FED has turned on the money spigot with its Quantitative Easing, it is replacing money in the system that is vanishing at a greater pace than they are creating due to the unwinding leverage in the financial system.
Lower consumption, lower consumer confidence, higher unemployment, low consumer spending, people are hoarding their dollars, combine that with reduce credit facilities and this all will translates into dollar shortage or dollar scarcity. None of the above is considered inflationary. Now the mainstream media is selling us on buying an asset that has risen in price over 300% in the last decade. When was the last time buying something after it rose 300% was a good idea? They usually call that missing the boat!!!
Don't believe there is dollar scarcity yet..... Take a look at California's predicament and tell me, what are they short of right now? They are about to issue IOU's....simply put they are short money.
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