Mixed Messages

I know that the U.S. economy is in financial trouble and in the midst of the worst credit crisis since the Great Depression, I know that the Dollar is overvalued considering its overburdening liabilities, I know that the Stock Market is overvalued on an immediate term basis, I know that gold, silver and commodities are in a long term bull market, and I know that many are delusional in the sense that they believe that housing and credit conditions will come roaring back bigger and better than they were.

Meanwhile…

Gold has plummeted
Yet lease rates remain low and even negative. This shows that the interest still stands on the buyers side. Gold can fall as low as 820-850 and still remain in its bullish long term trend. More so, while silver has fallen almost $2, the Silver ETF has boosted its holdings to a record 201 million ounces. As Ted Butler mentioned, we may simplt be seeing the run to physical metal and the end to the paper short position.

Stocks have taken off
Have they? It seems that the rally does not represent the genuine strength often seen prior to secular buying. It may just be more “stupid” money coming in after the policy-induced short covering panic.

Oil has tumbled
I can’t seem to find anyone who is bullish on oil. And that excites me as a contrarian anlayst. If there are no buyers, then the slightest worry can send prices into an upward spiral and we just might blow straight through 150. Oil has seen many a pull back in the rally that began in 2001 and there is nothing to suggest that the trend has eneded. Not in fundamentals, trends or sentiment.

Interest Rates are Steady
The Fed has announced that they were slightly concerned over declining housing prices and rising consumer prices but didn’t feel the necessity to raise or lower rates, and that rates would probably stay the same for a while. At first glance this seems reasonable consdiering recent pullbacks in oil and commodities but they may be blind to the built-in inflatrion rush that is not yet priced into the system.

Nothing has changed except for the greater desperation of those who have already lost the game.

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