Gold, Silver and Other PMs

http://decisionpoint.com/ChartSpotliteFi...

Top 502. Dec 7, 2004 8:55 AM

» Normxxx - WEAK CASH FLOW PRECEEDS PRICE DECLINES IN PMs

WEAK CASH FLOW PRECEEDS PRICE DECLINES IN PRECIOUS METALS STOCKS

When there is weak cash flow into Rydex Precious Metals Fund it is a fairly reliable warning to expect price weakness in the short-term, and sometimes the corrections can be quite severe.

As a general rule we expect cash flow to more or less follow prices -- when prices are going up, cash flow should also be moving up proportionately -- however, when prices rise and cash flow suddenly dries up, it tells us that the sector is losing support. Higher prices are failing to attract more money.

<img Width="520" src="http://decisionpoint.com/ChartSpotliteFiles/041203_RYPMXassets.gif">
Click Here, or on the image, to see a larger, undistorted image.

On the chart we can see four negative divergences between cash flow and price. In the first three instances they resulted in price declines. The current divergence seems to be playing out as expected and a correction in precious metals stocks has begun.

--Carl Swenlin

CAVEAT: Charts featured in Chart Spotlight are intended as examples of how to use technical analysis, not as trading recommendations.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

The content of this message is not to be construed as constituting market or investment advice. It is intended for educational purposes only. Individuals should consult with their own advisors for specific investment advice.

-- posted by Normxxx

Top 503. Dec 10, 2004 3:06 PM

» Normxxx - Head for the exits

Commentary: Head for the exits- Gold has likely topped

By Tim W. Wood, Cycles News & Views | 1:19 PM ET Dec. 9, 2004

GULF SHORES, Ala. (Cycles) -- It's truly amazing to watch the sentiment pendulum as it swings from one extreme to the other.

At the 2001 bottom, everyone everywhere was totally disgusted with gold. When I suggested buying gold I was met with rejection, "Gold is dead" to quote my critics.

Here we are some four years later, gold topped $458 last week - a three year high. On Wednesday, gold fell more than $15 and continues to drop as of this writing. Gold bulls are calling this a "simple correction" but I'm here to tell you that the pendulum is swinging back.

The majority is always right as sentiment swells near the end of a major move. But, the majority is also always left holding the bag at the end of that major move because they never see the turn coming. That turn appears to be at hand.

Let me make it perfectly clear that according to my work, the underlying cyclical structure of gold is now on thin ice. We saw the first sign of trouble yesterday and it's suggesting that gold is now finishing a major move.

The dominant long-term cycle in gold is the nine-year cycle.

Historically, the longest advance ever seen into a nine-year cycle top was 41 months and that was seen during the great bull market advance into the1980 top.

Gold has now entered uncharted waters, so to speak, in that the current nine-year cycle has thus far advanced into its 44th month.

Gold vs.CRB

On the surface this does indeed appear to be a bullish development -- and in fact has driven gold sentiment to record levels. But, when we dig deeper into the underlying performance and technical conditions the story begins to change.

To begin with, the Commodity Research Bureau Index (CRB) has pushed back to the same levels that it was at in January 1980 when gold topped at near $873 an oz.

The fact is that the CRB is back at these exact same extreme levels, yet gold has thus far failed to even move 50 percent of the way back up to its 1980 peak, from the 2001 low at 255. If this run in gold was healthy and proportionally related to the advance in the CRB we would have $800 to $900 gold right now.

Gold vs. dollar

Now examine gold's current performance in relation to the dollar with gold's performance in relation to the dollar during its bull market, which topped in 1980. During this time the dollar index fell from the 1976 high at 107.60 to 84.79 in January 1980, which corresponded with the $873 peak in gold. This was a 21.2 percent decline that resulted in a 760 percent advance in gold.

This time the dollar index has fallen 32.8 percent from the 2001 high at 121.29 to the recent low at 81.55, while gold has only advanced some 80 percent.

If we apply the 1976 to 1980 gold/dollar ratio to today's situation, gold should have advanced some 1,167 percent, based on the corresponding 32.76 percent decline in the dollar. This would mean that gold would have advanced to over $3,200 an oz.

This simple ratio analysis proves that the relationship between the falling dollar and rising gold is NOT constant.

Nine-year vs. three-year cycle

In addition to gold's poor performance in relation to the CRB and the dollar, I want to point out that there is strong technical evidence suggesting that gold has made its final push into what will likely mark the top for the current nine-year cycle.

Let me explain one such piece of supporting evidence. Historically, the nine-year cycle in gold has topped with the first full underlying three-year cycle within the CRB. You can see an example of this in the chart below.

I've marked the 1976 nine-year cycle low in gold with a "9." The corresponding three-year cycle low in the CRB occurred in 1977.

Notice that gold topped with the first underlying three-year cycle advance of the CRB. This occurred in January 1980 in gold and in February 1980 in the CRB. The point being, that both topped with the first 3-year cycle advance of the CRB within the nine-year gold cycle.

The next nine-year cycle low for gold occurred in 1985 and the corresponding three-year cycle low in the CRB came in 1986. Both advanced out of these lows with gold topping in December 1987 and the CRB in June 1988. Again, the point being that gold topped with the first underlying three-year cycle advance in the CRB.

Another example of this historical relationship can be found with the cycles advancing out of the 1993 lows. This time, gold topped in February 1996 and the CRB topped 2 months later in April.

In our current case, the last nine-year cycle low in gold occurred in April 2001 and the corresponding low in the CRB occurred in November 2001. The three-year cycle in the CRB is now beginning to show signs of this top -- and if this relationship holds -- it will mark the top for the current nine-year cycle in gold.

Additionally, there is technical evidence suggesting that the dollar has made a major cycle low.

I warned of this in the December issue of Cycles News & Views. Wednesday was the final trigger to move gold holdings to cash.

Cash out

Please understand that I'm not just being contrary for the sake of being contrary. I can assure you that it would be much easier to just join the crowd and tell you to buy gold because it's going to the moon and that the dollar is going to zero.

However, the current technical conditions do not support this popular bullish opinion at this time. The current nine-year cycle in gold is now long tired and weak. Therefore, I can't pretend that it isn't.

I do believe that the dollar has much further to fall and that gold has enormous potential in the future. But, my work currently suggests that this will not happen within the current cycles. Nothing moves in a straight line and most things tend to take longer than we think.

There is a time to hold stocks. There is a time to hold bonds and there is a time to hold gold. My opinion is that profits from gold should now be taken and held in cash.

I previously warned my subscribers to dance close to the door in anticipation of unloading their gold positions. Wednesday appears to have signaled that it is now time to EXIT that door.

Tim W. Wood edits Cycles News & Views, an investment newsletter that applies a "quantified approach" to the classic Dow Theory and offers analysis on the stock, bond, gold and dollar markets. (cyclesman.com)

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 504. Dec 24, 2004 9:32 AM

» Normxxx - What's next for the gold market???

What's next for the gold market???

Well, I think a further dip is still in store for the gold stocks. Gold tends to trade opposite the dollar and, right now the dollar is trying to stage a rally.

Next year is going to be a precarious one for the dollar. But at the moment, the dollar appears poised to continue its current bear market bounce above 80. Eighty is a support level that has held for over 20 years on the US dollar index. We are likely to see the dollar continue to rally towards the top of its resistance line in its downtrend channel.

At the same time, gold stocks appear ready to make at least one more leg down. The gold-stock/gold indicator is the price of the $XAU divided by the price of gold. When it rises, gold stocks are leading the price of gold higher and when it is falling gold (the metal) is acting stronger than the stocks. When gold stocks outperform gold it is bullish and when the metal outperforms the stocks it is bearish. When the relative strength of the XAU turned up in August, I got back into gold stocks and I sold in November when their strength faded.

They are still showing weakness. Since November, we have yet to see a day in which the gold stocks open to the upside and close on a high. Morning rallies are consistently getting sold into the close.

Despite last week's bearish data on the dollar and the current account deficit, gold stocks went nowhere. [The gold/dollar indicator has been looking pretty peaked also for some time.] On Friday, they gapped up and then closed on their lows while the price of gold itself closed on a high. The weakness in the gold stocks is continuing and is likely to lead to another leg down and the creation of a true mini-panic bottom that will set the stage for a substantial upside move (maybe even a breakout to new highs and a new bull run in 2005) for the stocks.

Right now, the XAU has support at 98, but recent action suggests that this level will be broken before the week is out. If this happens, then 95 will become new support, however, this is simply a minor support level with little strength to it. Ninety-Eight is the number to watch. If that gets broken then we are likely to see the XAU fall to the 90 area or even slightly below. I think this is area is going to be where the next true bottom in the XAU is formed.

A drop below 98 will likely lead to a panic sell-off in gold stocks. A huge amount of volume flowed into the large-cap gold stocks on 12/08 when the XAU gapped down to 96. The big caps are the darlings of institutional investors and hedge fund investors because they provide the liquidity they need to make a big play on gold stocks. Volume on the 8th was huge in these stocks and this tells me that a lot of these players were trying to guess the bottom. If the these stocks fall, causing them to lose their profits, then they will quickly sell out of their positions. This would, in turn, lead to a high volume panic bottom in the XAU.

Such an event would bring fear to gold bulls and shake a lot of people out of the gold market - but it would be a wonderful buying opportunity for the prudent investor. The dollar is likely to break down through 80 next year, this would be a major market event that could catapult gold stocks to heights we haven't yet seen in this gold bull market (or, maybe not).

A buying opportunity like this will be a gift from Santa Claus. We may look back a year from now and see that this next bottom in gold stocks was the buying opportunity of a lifetime. (Or, then again, NOT!)

There's always the nine-year cycle to worry about (see the above post) which pretty much predicted a gold top here in the October - November time frame.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 505. Dec 24, 2004 9:43 AM

» Kirk - Re: What's next for the gold market???

In response to What's next for the gold market??? posted by Normxxx:

The big caps are the darlings of institutional investors and hedge fund investors because they provide the liquidity they need to make a big play on gold stocks. Volume on the 8th was huge in these stocks and this tells me that a lot of these players were trying to guess the bottom. If the these stocks fall, causing them to lose their profits, then they will quickly sell out of their positions. This would, in turn, lead to a high volume panic bottom in the XAU. Such an event would bring fear to gold bulls and shake a lot of people out of the gold market - but it would be a wonderful buying opportunity for the prudent investor.

Interesting in that we just had a rather good breakout from a 20 year resistance level.

I guess you are saying this resistance level will be tested, it will fail, there will be a panic and then you buy?

If so, then the what would your target be, low $300's?

-- posted by Kirk

Top 506. Dec 24, 2004 12:36 PM

» Normxxx - Re: Re: What's next for the gold market???

In response to Re: What's next for the gold market??? posted by Kirk:

If so, then the what would your target be, low $300's?

At the moment, I'll settle for the low $400s, but a lot depends on the dollar action. If you have been following gold, then you know that, until recently, gold has not been in any bull market against the strong currencies, e.g., the Euro. That resistance level is in (rapidly falling) dollars, so I don't put much stock in it. The psychological levels-- the round numbers, especially $450 and $500-- are much more important, in my estimation. Contrary to the belief of many pseudo-pundits, international commodities (such as the natural resources and gold) trade in many markets, in many currencies (which are constantly fluctuating against each other), and so do not form any 'natural' support and resistance levels. Gold tends never to sell below its "cost" of getting to market, probably in the low $300s by now (but around $260 on the last downswing). But gold is the most heavily manipulated of any of the currencies. (But the GATA people are still crazy! Gold has always been manipulated by the CBs-- in fact one theory of how the Great Depression started involves manipulation of gold and interest rates by the US, UK, and France.)

In fact, my bet is that we have probably seen the top in gold and the bottom in the dollar for this cycle (about 9 years for gold-- usually 5-6 years down and 3-4 years up). Of course, the econo-powers could always lose control, and then the gold bugs may well have their day. But not yet, I think. Maybe the next cycle. I think we see a major (world wide) debt collapse induced deflation first. (At the moment, everybody seems to be indebted to someone else-- whatever happened to the creditors?) That Ponzi scheme cannot go on forever!

Like the two farmers who kept selling the same pig to each other, back and forth, but raising the price by $10 each time (but "borrowing" the money and using the pig as collateral). Then one day, the pig died. One farmer says to the other, "Darn! There goes our old age money. Just a little more and we both could have retired!"

Naturally, they both had to declare bankruptcy, since they had run up huge debts to each other trading that pig back and forth-- and he was their only collateral!

Our current experiment with fiat money (and now globalization) is barely 30 years old-- a pittance in the history of money (over 10,000 years?) Lots of room for many exciting things to happen! Remember that old Chinese curse: "May you live in interesting times!"

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 507. Jan 12, 2005 12:21 PM

» Normxxx - Not So Golden?

Not So Golden?

<img Align="Left" src="http://www.bankcreditanalyst.com/public/...">10:32:00, January 12, 2005

The bull market in gold may be reversing, or at least may be headed for an extended hiatus.

Rising real interest rates and prospects for a firmer dollar ahead point to trouble for gold prices. Technically, the market is looking shaky: cyclical momentum (the 52-week rate of change) has diverged from prices in the past year and is on the verge of dropping into negative territory. Such a breakdown would be a first since the bull market developed in 2001 and would signal that the cyclical trend was reversing.

Implication: gold tends to respond relatively early to a shift in liquidity conditions, and lower bullion prices would confirm that the environment was becoming less friendly for financial assets as well.

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

<img Width="520" src="http://www.321gold.com/editorials/ackerman/images/ackerman011305/1.gif">
Click Here, or on the image, to see a larger, undistorted image.

Top 508. Jan 13, 2005 8:17 AM

» Normxxx - Gold Correction Not Over

Gold Correction Is Not Over Yet
http://www.rickackerman.com/

By Rick Ackerman | Jan 13, 2005

Excerpt from the current Rick's Picks (website).

News of November's record-breaking trade deficit sent the dollar tumbling yesterday, but don't be surprised if investors take leave of their senses soon again and the dollar resumes its bear rally. Until Wednesday, the buck was having a pretty good year, actually, with a gain of nearly 5% against the euro. It's a dead-cat bounce, to be sure, but the cat was acting as though it was about to receive new life from dollar shorts grown increasingly nervous about being on the wrong side of the easy money.

However, if a short-squeeze was indeed percolating, word of a record $60-billion trade deficit for the month of November put a lid on it, at least for the moment. This means that goldbugs who celebrated yesterday's bounce in precious metals may have been somewhat premature. I've reproduced a chart of the Philadelphia Gold and Silver index below that shows why. The XAU, which ended the day at 95.05, has a downside target at 86.46 -- about 10% below current levels -- that looks likely to be achieved.

Three Reasons

There are three reasons for this, all of which derive from hidden-pivot rules. First, the A-B impulse leg that in December initiated the current bear cycle was clean and decisive, breaching two prior lows without an upward correction of more than a day. The leg is shown in yellow and extends from 110.76 to 95.93. A second bearish sign is that the midpoint of the prospective C-D leg, 93.89, was breached without generating a discernible bounce. And third, stochastic lows made, respectively, in early December and early January correlate with descending price lows. This non-divergent pattern suggests the trend that produced it - i.e., the downtrend - will continue.

-- posted by Normxxx

Top 509. Jan 20, 2005 9:48 AM

» Normxxx - "The Aden Sisters" Speak

Back to the 1970s

Mary Anne & Pamela Aden, "The Aden Sisters" | January 20, 2005
Courtesy of www.adenforecast.com

Gold's bull market is alive and well since reaching a 16 year high in early December at $456. And the decline we've seen since then is normal.

Gold's 16 year high last month reinforced that the current bull market has now clearly outperformed the bull markets in the 1980s and 1990s in both time and price gains. This confirms the current bull market has now been the strongest since the 1970s and it could be similar, eventually reaching $800 or more.

It's not really surprising when you see the similarities compared to the 1970s. The most obvious is the high oil price. It rose over 400% in 1971-1974, which is about the same as the 400% rise oil has had in the last six years.

The budget deficits and an extremely loose monetary policy are also similar, as are the costs to finance an expensive war.

Furthermore, just as the industrialized world now has stiff competition with China and India causing disruption in the manufacturing and service industries, the 1970s had a similar situation with Japan and Korea. In both cases, it hurt the West.

China and India are also keeping upward pressure on commodities due to their growing demand. In the end, it's very possible we'll see rising inflation and slower growth, which would be very good for gold.

GOLD TIMING: On track

<img src="http://www.321gold.com/editorials/aden/a...">
chart 1

Meanwhile, many of you know how well the 65-week moving average has worked in identifying the major gold price trend over the years (see Chart 1). Gold rose above this average in August, 2001, triggering a major buy signal, and it hasn't looked back. This moving average is currently at $408 and gold's major trend is up above that level.

Since August, 2001, the times gold declined to this average was during a D decline, which is precisely where gold is today, since what we call a D decline started last month.

Many times these intermediate moves will tell us if a major change is in the making and so far they're signaling the bull market is solid. The latest "test" was when gold hit a high last month. The previous C rise performed well taking gold to a new bull market high, which is normally the case during a C rise, and that was important for the strength of the major uptrend.

For now, a D decline is underway below $435 and we could see gold stay weak until the end of January to mid-February time period. This would be normal, but if it ends up lasting as long as the previous D decline did, we could see weakness until April. The end of this decline will be the next ideal time to buy new gold positions.

GOLD SHARES: Disappointing

Gold shares have been disappointing. It's been frustrating for investors to see gold shares end the year lower than where they started as they watched gold rise to 16 year highs.

<img src="http://www.321gold.com/editorials/aden/a...">
chart 2a & B

We know that gold shares move with gold (see Charts 2A and B). The vertical lines show how gold shares rose during gold's previous C rises going back to 2001. But another pattern is developing too...

Of the five C rises gold's had since 2001, the 2nd and 3rd ones in the XAU gold share index were similar to the 4th and 5th ones. The best gold share moves took place during the 2nd and 4th C rises when gold shares shot up to new highs, strongly outperforming gold. In both cases, the following C rises (#3 and #5) were lackluster rises in gold shares, despite the strong gold price.

If this pattern continues, we could see the strongest gold share rise take place later this year with gold shares hitting new bull market highs.

<img src="http://www.321gold.com/editorials/aden/a...">
chart

The only thing that bothers us is the big picture on Chart 3. This shows the gold shares to gold ratio going back to 1969. You can see the rise since 2001 has so far been a rebound rise within a major downtrend that goes back to 1969. The peak in the ratio occurred a year ago at the major downtrend. And the lack of strength in gold shares last month was not a good sign because the ratio failed to break above the major downtrend.

The bottom line... gold shares are at a critical juncture compared to gold. If the alternating strong-weak C rises continue, then gold shares will be the better investment. But if gold shares fail to strongly outperform gold this year and the ratio falls below its 2004 low, the alternating trend since 2001 will change and gold will then clearly be the better investment compared to gold shares.

If gold outperforms gold shares this year, however, it won't affect the bull market. Note from 1973 to 1980, the ratio fell sharply as gold strongly outperformed gold shares. In other words, an investor would've wanted to be heavily invested in gold at that time.

Meanwhile, until the trend clarifies, it's best to keep half of your portfolio in metals and half in gold shares. Then as it becomes clearer, we'd adjust and go heavier into the strongest area. For now, keep your gold coins, gold contracts, gold mining shares and the new gold ETF, GLD.

Mary Anne & Pamela Aden
info@adenforecast.com
The Aden Forecast

Mary Anne & Pamela Aden are internationally known analysts and editors of The Aden Forecast, a market newsletter providing specific forecasts on gold, gold shares and the other major markets.

For more information, go to http://www.adenforecast.com/

The contents of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx

Top 510. Feb 3, 2005 3:45 PM

» Normxxx - Don't Confuse Brains With A Bull Market

Don't Confuse Brains With A Bull Market
Or, in this case, a bear market.

Chip Hanlon, Delta Global Advisors | February 3, 2005
email: Chanlon@deltaequity.com

The title of this article is a great old Wall Street adage that popped to mind a few days ago when discussing the heyday of the internet boom with a couple of friends. The travel, the extravagant lunches, the signing bonuses and, of course, the options... oh, those options.

Personally, I was rolling up on age 30 at that time, climbing the ladder of the investment firm that employed me and was even making a bit of a name for myself as a technical analyst. Things were pretty good and getting better all the time, but I was no internet rock star, which was made abundantly clear by a couple of friends who were living the technology dream; I recall being truly amazed while calculating along with them how much their options were supposedly worth.

Well, we all know how that story ends. In the case of those two friends of mine, they weren't among the lucky few who walked away with some of the winnings.

How about the typical Silicon Valley employees who were a part of that whirlwind- were they geniuses? More likely they were honest, hardworking people and there just occurred a raging bull market right where they happened to be standing.

It's this lesson that continues to bother me about the market's general opinion of the U.S. Dollar today. Despite its rally over the last few weeks, most people I come across still speak with certainty about the Dollar and its pending decline.

Sure, a look at the dollar chart suggests our currency may be a little overbought in the short-term and could be due for a small pullback.

...but I suspect that any pullback will continue to see this asset hold at or around the all-important 80-level on the U.S. Dollar Index.

Why? It just looks to me like we're witnessing a bubble in dollar bearishness.

Who's more popular today than Dollar bears? Predict the Dollar's going to be cut in half and you'll be quoted in the Journal. State that it's about to become worthless at any moment and you'll be even more widely-touted.

Look, I'm no Pollyanna here; I have written many times about the long-term challenges facing the Dollar and, until my December 8th article stating that there were far too many dollar bears for my taste, I had been a loud, longtime Dollar bear myself. That being said, I wanted to write this piece to warn the readers of this site: many of these dollar doomsayers aren't new, many of them have been here for-no joke-10, 15 years and then some, literally predicting the same exact thing regardless of investment environment all that time. Now, they're simply having their day in the sun... their internet boom, if you will.

These people aren't geniuses, they're extremists. Fanatics. I'm not talking about the thoughtful commentary of people like Steve Saville (with whom my opinion currently jibes), John Mauldin (with whom I don't think it does, at least not with regard to the Dollar-and who, amazingly, writes lengthy, thought-provoking articles every week), or a small handful of others.

Many of you know the types I'm talking about-the stopped clocks. If you don't know these dollar perma-bears, however, you had better be careful to look into the long-term backgrounds of that newfound commentator/advisor you like so much... if he or she promised the end of paper money and the demise of America throughout, say, the entire 1990's, then that person could be hazardous to your health. Period.

I've said it before and I'll say it again: the following is the chart of the year:

There are three key takeaways from the chart above:
1) The Dollar's fall is not new; it is now fully 3 years old
2) 80 remains an important level of support on the Dollar Index.
3) Dollar perma-bears were simply on the right side of a trend in their favor.

Geniuses? You be the judge.

To view things another way, take a look at just one foreign currency, the Pound:

Now where the heck is that chart going? Higher? OK, maybe... anything can happen in the market, of course. I do know, however, that Britain's yield curve is inverted; here, that happens to simply be the best predictor of looming recession. It also happens that central banks tend to lower interest rates when recession hits, which doesn't tend to be supportive of the underlying currency.

This isn't an over-arching case for the Dollar nor does it explain away the fact that we still spend too much and save too little, but our paper currency's attractiveness may just be ready to increase vs. that of other paper currencies (this highlights another area of frustration for me: these perma-doomers constantly decry the lack of a commodity backing such as gold to our currency, yet they have no problem falling in undying love with other fiat currencies).

Analyzing currencies, then, is simply an ongoing process of comparing one to another. Because we're in what may still be the early stages of a tightening cycle and foreign central banks are likely at the end of theirs (among many other factors, which I'll have to write about later), the Dollar may just become more attractive than others in coming months. If that occurs, it will make holding non-Dollar assets pretty darned uncomfortable for awhile.

Look, writing this column isn't particularly beneficial to me, personally; my firm specializes in precious metals, alternative investments and trading directly in international markets, so we benefit most from the falling dollar trend.

I also know this opinion will be unpopular, particularly in some of the places my commentaries are often featured. That, however, is where I like to be; over time, I've found that my "thing" is making calls that are exceedingly contrarian, turning point-type predictions.

I was unpopular on April 8, 2004, when I said silver would pull back from above $8/ounce to $6, literally 2 trading sessions before it happened. At the time, the consensus was that the metal would soon be at $10.

I was unpopular in mid-June of last year when I stated on national TV that the rise in interest rates was a head-fake, that they would surprise and head lower.

And I was unpopular when I first wrote in early December, 2004, that it was time for a Dollar rally, so I'm fine being unpopular now. In fact, check your own sentiment: are you itching to write me a nasty e-mail explaining all the things I don't understand about the market/economy/life? That's not a good sign for your case-your sentiment is too strong and your emotions may be dictating your investment decisions.

Speaking of sentiment, what's another one of the most interesting sentiment indicators I've seen recently? The weakling dollar on Saturday night live? The disappearing dollar making the cover of The Economist?

No, here's my favorite: it's the story about the sidewalk money changer in some far-flung Chinese province and how he's no longer accepting U.S. Dollars. Perma-bears take this as the big sign, their "Ah ha!" moment that the Dollar's demise is at hand.

I see it as the rough equivalent to getting a stock tip from your cab driver; by the time that guy stops taking dollars, the currency's move has got to be nearing its end.

Anyone want to bet that same money changer had a "no Euro" policy 3 years ago?

Remember, the extremists have always existed, and they have always been screaming the same thing. What worries me is that investors, in their search for fresh commentary on the subject of currencies, have stumbled across some of these dollar bears without realizing they've been saying the same things from time immemorial.

Let me put this one other way: was Henry Blodget a genius? Likewise, beware today's Dollar bears, who just experienced a bull market in gloom and doom... be sure you're not listening to a stopped clock.

And don't confuse brains with a bull market.

-Chip Hanlon

P.S. For a terribly interesting take on the interest rate environment, I strongly encourage investors to read, "Things Change," by Gary Carmell, President of CWS Capital Management, a highly successful real estate investment and management company located here in Newport Beach.

I'm fortunate enough to call Gary a friend and am familiar with his powerful grasp of macro economics as well as his knowledge of interest rate history. You may not agree with what he has to say, but I can tell you he understands the risks to our global economy and he has been awfully right for a long time. I'm glad he's finally been persuaded to make his commentaries known/available to a wider audience - perhaps you'll even start seeing his essays included here at 321gold on a regular basis. If so, don't miss them!

The content of this letter/report does not necessarily reflect the opinions or viewpoint of normxxx. They are provided for informational/educational purposes only.

-- posted by Normxxx