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Gold hits record high, Stocks up, is this a sucker rally?

Discussion in 'Economics and Financials' started by padre31, Nov 11, 2009.

  1. padre31

    padre31 Premium Member Luxury Box

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    The Stock market is up to 10,000 or so, the problem is these rally's are not based on anything other than mostly speculation, and perhaps a brisk carry trade in Gold.

    Is the stock market overvalued and is GLD simply another bubble?
     
  2. Stringer Bell

    Stringer Bell Post Hard, Post Often Club Member

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    Yes and yes. Second crash of the "W" should be any day now.
     
  3. padre31

    padre31 Premium Member Luxury Box

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    Well, with the decline of the dollar US stocks sort of our cheaper for overseas buyers, but the profit is not really there to justify the rise in prices.

    As for Gold, if the dollar freefalls, GLD looks like the last safe haven left..no?
     
  4. Stringer Bell

    Stringer Bell Post Hard, Post Often Club Member

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    I don't believe the dollar will freefall. But if it ever were to, there would be a lot more issues than where to invest.
     
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  5. texasPHINSfan

    texasPHINSfan New Member

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    good post sir.
     
  6. Stitches

    Stitches ThePhin's Biggest Killjoy Luxury Box

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    Screw gold, I still want ruthenium catalyst.
     
  7. my 2 cents

    my 2 cents Well-Known Member

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    Just curious here but what do you think will happen when the dollar has been so diluted at basically zero interest, the Fed is buying more debt than ever, Foreign investment is way down, we owe more money than ever, unemployment is still going up, and profits are choppy at best and diluted at that. I do not mean that as smart arse, I am just curious as to what other outcome there could be and i understand the potential for debate as to degree but cannot see any other options as far as probability of it happening......I understand debating the depth of the issue but I am at a loss when someone believes it will not happen to any degree and really legitimately curious what you feel would change the scenario....I personally think some people just think it will not happen because it has not happened before.

    Inflation is inevitable, probably severe but IMHO only the degree of inflation is debatable......oil is going up primarily because of dollar dilution and return rates and once we start to see inflation oil will go through the FN roof, Chinese are not investing because they do not want to buy diluted dollars......there is a lot at play but I do not see how anyone can doubt that the only people with a true appetite for USD at this point is the FED so at some point we have to ante up and face an inflationary period if we do not want the dollar to free fall............and IMHO...very very strongly IMHO....we are talking SERIOUS SERIOUS inflation with this type dilution of debt and dollar..............so it is kindof like pick your poison, big time inflation or dollar meltdown....sort of like a choice between having your eyeballs taken out with an ice cream scoop or having you coconuts removed with a butter knife...................it is different...not a good difference but a difference never the less.

    Those are my thoughts, but I really am curious why you do not think the dollar could possibly free fall? And I am really not being a smarty pants here.
     
  8. Stringer Bell

    Stringer Bell Post Hard, Post Often Club Member

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    WW3?

    I mean, we have so much money invested into our military, you dont just let those resources go to waste.

    I still do believe the Fed has an exit plan regarding all the money out there though.
     
  9. texasPHINSfan

    texasPHINSfan New Member

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    my biggest indicator for thinking the dollar won't free fall? because when the **** really hits the fan, people flee to the dollar, not from. witness the second half of 2008.
     
  10. my 2 cents

    my 2 cents Well-Known Member

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    I do not get it..............you reference people running to the dollar but the exact opposite is happening...so why do you reference that?

    IMHO **** kinda has hit the fan since we are in arguably the worst recession in 40 years...I kinda think that is **** hitting the fan myself. And "people" have not run to the dollar.........I am witnessing Q3/4 of 2008 through right now....the FED is buying up the bond issues and not foreign investment particularly China......Chinese investment even in private enterprise is way down and primarily to other countries and not the dollar....typically China buys over 30% of any bond issue and they have been liquidating their dues and not replacing them since their purchasing has been under 7% since around Jan/Feb.

    The Chinese are the the main foreign holder of our debt...and overall investment in US bonds is down over 12% and they re liquidating and not buying. They even chose to invest in their stimulus rather than continue to buy bonds and the Chinese are not known for their risk management so that is even more telling that they choose risk in their own infrastructure that may or may not give them a decent return rather than let money sit in a note at a guaranteed ****ty return with the possibility of having their investment diluted.

    I do understand what you are saying...but despite your saying it that is not what is happening so I am confused a bit.
     
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  11. CarChemist

    CarChemist New Member

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    Yes, I'm confused as well. People haven't been running to the dollar for soon half a decade now and probably wont for another half. If something people are running to the cash for gold companies.
     
  12. texasPHINSfan

    texasPHINSfan New Member

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    because it's true?

    the start of the recession saw the dollar spike as money flowed to the currency:

    [​IMG]
    (Chart shows 2008, at the beginning of the subprime meltdown)

    to put things in perspective, the value is around 75 right now, so it is still at higher values than it was at normally prior to the subprime meltdown - it was hovering around 72-73 as you can see from the chart. so again, this dollar "decline" you're seeing is just the value normalizing after the worst of the recession in the last 12 months.

    i'm not saying the dollar cannot collapse. i'm just saying that too many people are doing the chicken little routine by looking at a graph that doesn't tell the story (i.e. the graph posted that only shows 2009). if you look back farther, this move, while drastic in a short time, is just a correction..... not the end of the dollar. ;)

    now, regarding your questions about the Fed buying the dollar and China not buying - this has more to do with other factors than belief in the dollar. remember, the dollar is an investment just like everything else - and it's cyclical. At the beginning of 2009, the dollar was higher than it has been in years. China is also hurting themselves and are not in a position to buy anyone's debt, much less our own. I think when you have an investable asset that is topping out, combined with other countries that are struggling with their own debts, it makes for a "perfect storm" with regards to our currency and buying our debt. this is all my opinion, obviously.
     
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  13. padre31

    padre31 Premium Member Luxury Box

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    Gold is up 49% this yr per NBC news, so perhaps this is a good time to bump this thread as well, and WHY investment advice, outside of general ideas, on the internet, is a bad idea, nothing wrong with taking a profit but this could be flipped the other way as well.

    The dollar will strengthen a bit as uncertainty spreads...but at the end of the day...

    [​IMG]

    Do notice, Tex's chart back in the day featured a dollar at 88 cents v the euro (I'd guess) now it is down to 76 cents or so, or it has lost 12 cents on every dollar used to buy things that are imported as the purchasing power of the dollar had declined that heavily.

    What used to cost 10 dollars now will cost 12.00
     

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