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goldminingXpert (29.37)

Is this 1980 Part 2?

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August 08, 2008 – Comments (6) | RELATED TICKERS: GG , GLD , USO

While I thought the commodity bubble was coming to a close, I thought it'd get at least one more run. With the dollar setting a long-term bottom at 70 on the dollar index chart, it was inevitable that commodities couldn't run much higher. However, the speed and severity seen in the collapse of oil, nat gas, corn, the euro, and gold makes me think it's all over and we're repeating 1980 where cries of "END OF THE WORLD" were replaced with cries of anguish from gold/oil owners within a year. Gold and oil would both almost immediately lost half their value.

Now, we see the Euro utterly collapsing this week to a mere 1.5. Every goldbug was hollering that we were going to bust through 1.6 the moment the bailout fiasco was signed, but no. The dollar has buyers here for good reason, we are less doomed than our competitors. The US has the world's strongest military and economy while Europe and Japan have a rapidly aging workforce, absolutely unfundable SS programs (making ours look downright conservative) and onerous regulation that stunts business. Clearly the dollar has broken out and is heading much much higher--the amount of short covering that needs to occur on the FX markets is momumental--counted in tens of trillions of dollars. Clearly a skyrocketing dollar drives more stakes into the bedraggled oil/nat gas/corn/gold sector.

We see the reality sinking in faster in the stocks, check out a GG to see how people have suddenly gotten a grip on reality. 52 to 31 in a month! People see the future--and it's lights out for the commodities. Downwithinfidels has sunk from the top 5 to #88 at this writing! And a frequent critic of mine--TMFsinchiruna has seen his score drop from 2300 to 312 and his rating from 99+ to 82. That's the problem with bubbles, you never know when to get out and get left holding the bag. I think gold bounces off 750 or 800 pretty solidly and producely inducing enough false optimism to get you out of your gold/silver plays with a decent chunk of your capital. Oil should find a short-term bottom soon--I thought we had it yesterday than the euro's plunge today took that out--but oil should bounce long enough to get you out of USO around 100 before the down elevator turns on again.

One final note: CAPS player BullmarketN09 has been here less than a month and yet is #20 in the game. He went short oil long financials. He will be doomed by the long financials eventually, but his short oil plays have worked beautifully. It's been interesting watching the goldbugs get unceremoniously thrown out of the top 100 of CAPS while people short oil and long financials have taken their place. 

 

6 Comments – Post Your Own

#1) On August 08, 2008 at 11:17 AM, dwot (42.57) wrote:

I have an underperform on Goldcorp at $23 and I plan to close it positive.

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#2) On August 08, 2008 at 11:21 AM, goldminingXpert (29.37) wrote:

GG is a $15 stock once this mania has ended. I've been short it awhile, I thought that short would never pay, when the stock hit $50, I finally loaded up on October 50 puts... about time for me to be paid and take a trip to the bank.

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#3) On August 08, 2008 at 7:56 PM, Collin757 (< 20) wrote:

niiiice, wish I could say the same about my GG options experience.  Yea that BullMarket guys score is nuts, hes #15 now, after only 3 weeks of playing CAPS I doubt anyone has ever gone up faster, shows you what a predicting sector rise/drops can do for you.  What is a good sell point for gold in the next 3 months in your estimation?

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#4) On August 08, 2008 at 8:35 PM, Tastylunch (29.20) wrote:

So are you changing your mind about JAG then?

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#5) On August 08, 2008 at 11:40 PM, AnomaLee (28.50) wrote:

To answer the question from your title...
- The answer is no...

It would be ridiculous to think otherwise. In 1980, we experienced double-digit interest rates and induced credit contraction by the Federal Reserve which caused a severe recession where the unemployment rate eventually spike above 10%

We are currently in our 5-6th year of rampant inflation. In 1980, rampant inflation had been occuring for more than a decade.(14 years)

At a quick glance at the chart I believe oil has corrected 20% or more at least 6-7 times in the past 10 years.

If the global economy continues to expand above 3% we will begin to experience serious supply & demand constraints within the next decade.  I'd like to emphasize the word serious.

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#6) On August 09, 2008 at 12:34 AM, goldminingXpert (29.37) wrote:

Jaguar's my baby. Best mangagemnt in gold right now. Doubling revenues every year and just turned their first profit. Finding gold by the tonload and yet another mine comes on the scene next year. What you do is short a garbage stock like GG and go long an equal amount of JAG and bag the net gain. Gold up and JAG rises faster than GG. (JAG is up from $2 to $14 before falling back so this would have worked beautifully) while if gold falls, GG gets totally annihilated while JAG trickles down.

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