Friday, September 28, 2007

Time To Pause And Refresh?

It's the end of September, the end of the Third Quarter, and the end of most Mutual Fund's fiscal year. Time to sweeten those balance sheets and do some sector specific "window dressing" for the the funds share holders.

Window dressing is an arguably shady practice employed by many mutual fund managers. Mutual fund managers typically report to the public on their funds' holdings once per quarter. Managers want to look savvy to impress their existing shareholders and attract new shareholders. Therefore, they'll sometimes sell lackluster investments they've held for a while and buy recent stellar performers -- just so the fund's holdings on the day of record look good.

Wizards of Wall Street resort to "shady practices" to impress their shareholders? This is shocking! Who would have ever expected deceit from such world renowned financiers? That's right, those folks that unleashed an alphabet soup of financial toxic waste upon global investors, as a rule lie to their share holders regularly.

Gold and Silver are two of the smallest markets on the planet, and it is unlikely there is a great deal of assets related to these markets are being put up in many windows this quarter. But then, because the markets are so small, it wouldn't take but a few "windows" to pump up the prices as we close out September.

October, historically, has not been kind to stocks. And I suspect that this October may be VERY unkind to stocks. The Fed induced bounce in the markets is about to turn into a never ending hangover. Recent history has shown that a dumping stock market tends to put a put a cap on Precious Metals. Combine this anomaly with overbought Metals, and an oversold Dollar, and it may be time for a pause in the Metals recent rise and the Dollars recent tumble.

A pause in the Gold and Silver would be welcome, and should be looked at as an opportunity to collect some profits, and or add to our positions at sale prices. Market Psychology suggests too that we should expect a pause, the dollar on the downside and gold on the upside, in the near term.

Please click on the chart above to enlarge.

The US Dollar is clearly oversold here, and may become even more so as we close out the month, but technically the Dollar is due for a bounce. It may be a very short lived bounce, but if it results in some consolidation of it's recent loses down here, Gold and Silver would likely pause in their ascent as well. Remember always, NOTHING goes straight up...or down. Could the Dollar just keep going down from here and Gold and Silver up? Certainly, but one should always prepare for all contingencies when fighting a war. And folks, when it comes to dem Rat Bastids...THIS IS WAR.

Long Term Looks Attractive
Adrian Day

The markets are now due for a pause, the dollar on the downside and gold on the upside; the metal could come off $30-$40, but the fundamental direction is clear. We would expect gold to continue to react very positively to further credit problems, weak economic news, and interest rate cuts.

Going forward, the continued weakness of the U.S. dollar is going to have the biggest impact on gold. That's really what's been driving gold for most of the last couple of years and that's going to continue to be the main factor. There's little doubt that the dollar is going to turn downwards, rather than strengthen.

If you look at gold on a fundamental basis, despite the fact the price has moved up a lot, it's still cheap relative to the dollar. In fact, gold is cheap relative to the money supply. It's cheap relative to stocks and financial assets as well as to oil and other commodities. So, gold remains fundamentally cheap.

I am very bullish on silver. Silver is much more of an industrial metal, and it's also a by-product. When the economy is doing well, we tend to produce a lot more silver than we use, because silver is a by-product of copper, lead, and zinc. The companies that produce it tend to just sell it at any price and hedge it because they're not primary silver producers. But having said that, I think that if the global economy remains relatively strong - and I think it will - silver has the potential to outperform gold on a percentage basis partly because there's so much less of it. Silver doesn't have the huge stockpiles that gold has through the central banks, the IMF, and so on. With gold there is always the potential of some kind of overhang that we don't have with silver.

When I am looking at the balance between the two investments, I think that gold is probably a much surer thing. It has less of a downside, whereas silver, although it has much more upside, is less certain. So, I would definitely balance it between silver and gold.

Lone Anomaly to Ignite Gold
By Jim Willie CB

The USDollar DX index has remained below the key 79 level for almost a full week. My take is that foreigners continue to sell it, while the US ministries buy it with printing press phony money. The implications to higher systemic USEconomic costs are total and complete. Price inflation is locked into the next chapter. In no example of past history has the USDollar fallen a quantum level without a surge in cost inflation. Some call it price inflation. Not me! When wages do not rise in coordination, then the system does not experience price inflation in a general sense. The US$ decline ushers in higher costs for energy, food, materials, metals, and all imported product prices which comprise 16% of the USEconomy. Rising costs without pricing power (even in wages) results in squeezed profit margins and economic slowdown. The USFed will surely fight it with easy money.


If you are long Precious Metals today, sit tight. If you're a trader, maybe book a little profits on some of your positions. If you're looking to buy Precious Metals, they "may" be on sale in October. And if you're short Precious Metals, this may be you last chance to cover and save your precious ass.

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