Dear TMFSinchiruna: I Was Wrong
I've been reflecting on the past recently. As part of that, I've read through my older blog posts. Honestly, I'm kind of disappointed. I noticed two things. A) I've been quite immature at many times during my stay at CAPS, and B) I'm wrong far more often than I'd like.
My discussions with TMFSinchurina have shown both points A and B to be true quite well.
As those of you who've been here awhile know, I've been bearish on gold for awhile. Since at least the middle of 2008, I'd generally had a negative, or at best neutral, outlook on gold. This despite ever-increasing prices in the metal. I based this belief, particularly since summer of 2009, on a belief in the likelihood of a large dollar rally. I quote myself from September 2009 (comment #45) -- http://caps.fool.com/Blogs/just-marking-time/264283:
"I expect somewhere between 81 and 86 on the dollar retrace. The dollar's fundamental health is continuing to decline, so a rally to a point as high as last year (89.6) would be unexpected. However, the anti-dollar crowd is almost as fervent as last year, so there is a lot of amateur money, particularly in the FOREX market, that is short dollars but will cover/be margined out as the dollar starts moving higher. Basically, I'm calling for a global short squeeze on the dollar -- particularly since it has been used as a carry-trade funding currency, when the dollar starts to rise and the assets purchased with the carry-trade funds (e.g. US stocks) start to fall, you're going to just hammer the plethora of hedge funds running that trade on both directions of said trade."
This indeed happened. We almost reached 89.6 on the US$ index, and we precisely hit 1.17 which was my target for the Euro which I called for in that same post. That said, my calls on the stock market as a whole and on gold in particular were dead wrong.
I didn't forsee the breaking of the correlation between the U$D and gold (or the stock market). It appears that instead of fleeing from all other assets into the U$D and treasuries, investors instead abandoned all assets perceived as risky, and fled to the usual suspects, which did include U$D and treasuries but ALSO included the yen, the commodity currencies, and some of the metals (gold and silver anyway.) I also missed, and it's quite obvious in retrospect, the increasing fears of sovereign default. I should have, but failed to realize that a Euro at 1.17, as I had forecast, would set off panics about the credibility of sovereign debt across the world.
While I was right about the dollar, I missed the broader picture of what a rising dollar would achieve. And being right on one premise (the dollar), I arrogantly lashed out at critics who rejected my misguided conclusions reached from that correct premise. In fact, TMFSinchiruna was right with his calls for gold to keep rising due to various other reasons that did in fact play out. I was wrong and he was right, and I apologize for the arrogance I used in dismissing his spot-on analysis.