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XMFSinchiruna (26.54)

Please Don't Shoot the Messengers



May 21, 2009 – Comments (5)

This article is an homage of sorts to the brave voices that resonate above the cacophony of mainstream financial analysis to offer their honest perspectives without the expediency of unfounded optimism nor the insult of sugar-coating.

I know full well what it's like to be attacked for your ideas, rather than debated on the merits of one's argument. This is a reminder to Fools that we all win when we remember to debate perspectives on the merits rather than shooting the messenger. 

For the past several weeks, I have grown increasingly incredulous of this rally in the face of deteriorating fundamentals from the range of bellwether industries that I cover. Trust me, such negative assessments are no more fun to write than they are to read, but I felt duty-bound to report my findings and perspectives without adjusting for the understandable desparation among investors to believe that perhaps things were looking better.

We have reached a watershed moment in the equity markets, and I sincerely believe there has been no more crucial moment since before theonset of this crisis for Fools to consider the perspective of these three financial sages. The subject matter is not uplifting, and frankly we've all had enough doom and gloom over the past couple of years to last us a lifetime, but that does not change the facts.

The dollar is severely impaired, and the break in the USDX below 82 and then 81 without so much as a blip of support is disconcerting even to this Fool. Fools with no allocation in equities designed to provide some level of defense against a long-term deterioration in the purchasing power of the dollar are quickly running out of time in which to do so, in my opinion. I recommend gold as the best possible dollar hedge, although silver may outperform even gold.  I do not recommend leveraged ETNs or any such vehicles at this stage of the crisis, since often those are based themselves on the very derivatives that lie at the core of the problem. Any "core" commodity ... the things people can't really live without, will provide some measure of defense, which is why Jim Rogers is such an advocate for agricultural exposure here. Some of the others, like natural gas, coal, and copper... could experience some real volatility in the short-term as this rally unwinds and we get perhaps even another forced liquidation event where hedge funds sell out of recently established long commodity positions. Of course, gold and silver could move around a lot in the short-term as well, but the past couple of days provided a significant technical break-out that could just as easily continue unfettered to the $1,050 mark or so.

I promise to always write what I see based upon the evidence that I spend 18 hours per day uncovering. I apologize in advance for the less-than-positive nature of much of the material I'm presenting, but if my perspective and that of the individuals highlighted in this article can help Fools to prepare accordingly, then perhaps we can erase some of that negativity. This continues to be a labor of love for me, because I know I'm skilled at processing large volumes of information and discerning patterns that reveal elements of the macroeconomic trends underway. I hope some Fools will heed my caution and gain some precious metals exposure, and I hope that Fools will continue to prioritize being well-informed over being reassured. Thank you, as always, for reading and sharing your perspectives, and for goodness' sake please be careful out there!!





5 Comments – Post Your Own

#1) On May 21, 2009 at 6:56 PM, chk999 (99.97) wrote:

Only 9 more blog articles and you knock LordZ out of the top ten! The over/under is June 5th..

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#2) On May 21, 2009 at 6:58 PM, XMFSinchiruna (26.54) wrote:

From Jim Sinclair today:


I bring to you the following with the specific permission of Alf Fields.

I have suggested to you often in the past that once the price of gold reaches into its maximum potential it will not repeat the fall of the 1980s.

I foresee gold re-entering the system in a new and unique form that does not include convertibility. It will not be tied to interest rates as it once was in its previous form.

I have written to you various times about the Federal Reserve Gold Certificate ratio, modernized and revitalized, which now may well be associated with an SDR form of an International Central Bank. The tie between the ratio and gold would be a measure of international liquidity considered zero or 100 on the day of adoption.

The following is Alf’s statement yesterday, with his permission to post:

“Gold cannot decline from its highs as it will be incorporated into the national and international monetary systems at that time.”
–Alf Fields, May 20, 2009

Now do you have any questions why Fund Wizard Paulson just got long a few billion dollars worth of Gold ETFs and a few major gold producers?

Finally a major event has taken place that is a US dollar milestone.

The financing and extremely important event is the arrangement between China and Brazil displaces the dollar as China becomes the major trading partner with Brazil. Since then the Rial has been celebrating and the dollar has been depressed.

This is a once in approximately a century replacement of a trading currency that has always meant a dethronement of the deposed and coronation of a new currency king.

The last time this happened was when the US dollar supplanted the British Pound as the major trading currency and entity with Brazil 79 years ago.

It took the Brits 300 years to supplant the Portuguese Escudo with the British Pound.

Only twice has this occurred in 379 years. This is obscure to most but not to Mr. Paulson the hedge wizard. Obscure to most, but not to our gang at JSMineset.

The dollar died in Rio and that means everywhere.\

The dollar is in for a very cold winter.

There is one thing that is absolutely certain and that is Gold is now headed to at least $1650 and in all probability much higher. This is happening NOW!

What more do you need to know?



We have more important matters at hand, my friend.


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#3) On May 22, 2009 at 12:40 AM, streetflame (29.24) wrote:

You said something about unfounded optimism?

"I have delved deep into the coal and iron ore industries, and I can unequivocally state that there is no relief in sight from rising input costs for the steel industry. " June 04, 2008

"I strongly believe we are in the early stages of a bull market in Aluminum." June 27, 2008

"Those who are long... relax... this is a temporary correction in a long-term supply/demand driven bull market for coal." July 02, 2008

Please continue making critical micro assessments as you have the last few months.  It is much more helpful than wild macro prognostications and regurgitating press releases.

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#4) On May 22, 2009 at 7:29 AM, XMFSinchiruna (26.54) wrote:


I'm flattered. You clearly have read all my stuff voraciously. I'm glad to count you among my regular readers.

Regurgitating press releases? Ouch. I definitely don't think that's fair.

And as to the missed calls above, I freely concede to having been blindsided by the abruptness and severity of the late summer sell-off in commodities. However, even great macro prognosticators like Schiff were tsken by surprise as well. I'm aware of no one who called that forced liquidation event and how it would impact commodities in particular. There was one Fool who said that the next top Fool would be someone who went contrary to the commodities trade, which was very perceptive, but I doubt even that Fool would say he/she saw how that would have played out.

That Aluminum call was among my most unfortunate, particularly because I was so excited about the prospects that I likely helped to nudge people into the sector before that ugly fall. I feel very badly about that one, but that could not have been reasonably predicted through fundamental analysis. Again, in my error I was in some pretty amazing company.

With the unforseen impacts of the forced liquidation event aside, I continue to offer Fools a well-informed and well-supported macroeconomic perspective that is key to understanding fundamental dynamics at work here. I will not change my approach, but thank you for expressing your views.  

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#5) On May 22, 2009 at 7:46 AM, XMFSinchiruna (26.54) wrote:


In short, I'd much prefer to be wrong about a chapter than to discover that I'd been reading the wrong book entirely. I invest on the fundamentals, and like Schiff I maintain that the dramatic late-2008 sell-off and global economic disruption was a freakish aberration from an otherwise cohesive fundamental understanding of the crisis.

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