Fear. The. Dollar.
Even I, a hardcore dollar bull for months now, is surprised at how strongly the US Dollar is surging against the rest of the world (excepting the yen). The move in the Eurodollar from 1.51 to 1.36 in just a matter of weeks has been spectacular. It has almost conclusively proven that the decade-long Euro bull is finished. That's one nastly lower high (1.51 vs. 1.60) and the ferocity of this new bear market in Euros (and Pounds) has been surreal. The dollar also put in higher lows vs. the Canadian $, Swiss Franc, Singapore $, Aussie $, Kiwi $, Mexican Peso... the point is, we have witnessed the birth of a massive new bull market in dollars. How long it goes on is unclear, eventually America's problems will come home to roost -- but it appears that Portugal, Greece, Spain, Italy and France will be bankrupt long before that happens.
What's this mean to you? First it means that you really have to get out of, or at least hedge, your commodities. As we saw in the instanteous $3/barrel margin call oil dump earlier this morning, there's no support under the commodity complex. Silver is getting puked up and the gold stocks are getting taken to the woodshed. (But we should buy the dips you're saying.) No, this isn't a dip, this is the involuntary forcible deleveraging of the world's speculators (be it hedge funds, foreigners, or US Investment banks). When our US Banking system is net short a massive load of dollars and long commodities to a major degree, the result is almost inevitable ... we all remember what happened with housing right? Finally, totally forget about budget deficits or other macroeconomic distractors. The world market still perceives our debt as sound, and as long as we have 6000 nukes, it pretty much is. Portugal, Greece, Iceland, Spain, etc. can't pay their bills today, whereas we can't pay ours in a decade. HUGE DIFFERENCE! Trading fundamentals in a wildly leveraged and volatile market in which the majority of the herd is long and worried just doesn't make sense.
Disclosure: GMX is long dollars, he has no position in precious metals or mining stocks at the moment.