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Monthly Digger - August 2009


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AEM is neutralized between one year old highs and lows. It's building cause between 45 and 63 and waiting on the crowd to give it the big push when they all realize inflation is the next bubble. For now, it's content to go sideways where buyers or sellers are just marking time. The old shorts are probably giving up in small amounts in the last month ready to release it from it's doldrums.

 

http://www.StockSharePublishing.com/ChartL..._1249083699.png

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Thanks for explaining

I think the larger declines are over if you mean way below 900 $

perhaps, i see a major correction in the broad market in the oct/nov window, that coupled w/the long term cycles due to bottom in oct/november leads me to believe we have a larger correction in gold.

dharma

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RECESSION + INFLATION = S T A G F L A T I O N

 

And yet more “RECESSION + INFLATION = S T A G F L A T I O N” as evidenced by the US “Inflation Component” Manufacturing Sector ISM Prices Paid chart (posted below) which just hit 55 from 50. (50 and above indicating inflation. And of course none of the taxes and fees that in some cases have doubled over the past year are accounted for in the hedonically adjusted CPI.) This is the second straight month that the ISM Prices Paid has risen since the 8-month drop. And as evidenced by the 12th straight month that the US July ISM remains below 50 indicating that the Manufacturing Sector has remained in contraction for one year now.

 

However, in sharp contrast to USA’s year-long ISM in contraction, China’s PMI has continued advancing for the 5th straight month to 53.3 indicating its continued economic expansion.

 

Yet more ongoing confirmation (as I’ve been posting since the bottom) of my conclusions during the market mayhem last Fall concerning China’s economy and its impact on commodities, gold, etc. Turns out this “Dummy” had it right, while the resident Contrary Indicator gripped with fear and ignorance, wrong. This same “Dummy” in the Spring of 2008 posted at this site that commodities would make a cyclical peak in the first week of July. And then correctly posted in Nov/Dec of the imminent bottom. Who would’ve thunk it? :lol:

 

Any wonder the “Over Valued” US Peso has continued its melt down despite the occasional invisible hand that “manages” it? As I’ve continued over the years to chime in with a few others, to the extent the US Dollar is debased, predictably, hard assets will continue to rise in price. As explained earlier, once the dollar had resumed its downtrend, all assets (including stocks) could continue to rise, but the “Inflation/Debasement” beneficiaries (especially Gold/Gold Stocks) would outperform (as they have done since I posted a series of “HUI:SPX” charts last Dec/Jan?).

 

Some deflation! Even sugar “deflated” its way up to a new 25-year high.

 

Commodities hit peak for 2009

 

"Commodities prices hit their highest level for the year on Monday, with European’s oil benchmark Brent trading above $73.50 a barrel, buoyed by positive economic data and a sharp weakening of the US dollar.

 

Other raw materials that hit a 2009 peak included heating oil, copper, aluminium, zinc, lead, nickel, rice, sugar, rubber and iron ore."

 

http://www.ft.com/cms/s/cc8dba54-801d-11de....asp%3FID%3D483

 

The following charts reflect that the fundamentals were correctly interpreted last Fall as posted.

post-2021-1249335659_thumb.png

post-2021-1249335667_thumb.png

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As I’ve continued to say, so much for Bernanke’s touted “Exit Strategy” from the Fed’s “Helicopter Drop” US Peso printing business.

 

At least if you believe St. Louis Fed’s James Bullard:

 

“If you permanently double the money supply, you will eventually double the price level. So it might take some time, but the money supply would go up—stay up at this higher level—and the price level would follow behind.”

 

And speaking of the the money supply:

 

The New York Fed’s William Dudley predicts the new asset purchase programs mean that the Fed's balance sheet will likely grow to $2.5 trillion, 'somewhat above the peak reached last December.'

 

Macroeconomic News

Monday, 3rd August 2009

 

US FED: FRB NY's Dudley Dismisses Inflation Fears

 

“But Dudley nonetheless said the pace of recovery will be slow, in part because real income is expected to fall as factors such as lower gas prices and reduced withholding taxes disappear, but also because of the effect of the housing collapse on consumer spending and ongoing strains in the financial markets that will constrain credit availability.

 

'If the recovery does, in fact, turn out to be lackluster, the unemployment rate is likely to remain elevated and capacity utilization rates unusually low for some time to come,' he said. 'This suggests that inflation will be quiescent. For all these reasons, concern about 'when' the Fed will exit from its current accommodative monetary policy is, in my view, very premature.'”

 

http://www.lse.co.uk/MacroEconomicNews.asp...inflation_fears

 

Anyone (read the market consensus ignoramuses) who still thinks the FED will shrink its balance sheet taking back the money created out of thin air used to bandage the enormous “capital black-hole” in the banking system, deserves to get it wrong precisely at the opportunities presented at the bottoms and tops of the various markets affected.

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