Friday, November 21, 2008

Peter Schiff and the Dollar

Be careful out there today folks.

Word is there is a lot of lot of mutual fund selling thats going to occur today. Many stocks have dropped below $5 during this massive selloff. This in turn is triffering another round of selling by mutual funds because many aren't allowed to own stocks under $5.

The bounce has reversed this morning, and the mutual fund selling could provide us with another ugly day today.

I will be back with a recap later. In the meantime, check out Peter Schiff. One of my thoughts lately circles around the dollar. Peter touches on this, and I also believe the move in the dollar is way overdone. There is no fundemental reason for the dollar soaring like this.

The one theory as to why the dollar is strengthening is because the world is more screwed than we are so money will continue to flow over here.

This is hardly a strong thesis. Fundementally the dollar should be severely weakening based on our ridiculous bailout spending, our weakening economy, and interest rates that are hovering near zero. I am starting to believe the speculators have piled into the dollar trade just like they did in oil. As we have seen all year, when the speculators pile in, the trade usually ends up turning into a disaster. Oil/housing anyone?

The play here would be to buy some metals. You buy them based on a weakening dollar versus any fundementals in gold or silver.

Good luck today!


7 comments:

johndaniels said...

nice run in gold and metals today. /smile dont wanna say i told ya so! :)

not sure whats gonna happen i just want some stability. It will prob give it all back, hey, im a realist. but today, at least its nice to be right...

even blind cat catches a mouse once in a while!

johndaniels said...

you may be safer with silver, platinum or palladium than gold here though. Silver is still about 50% down and pt is over 50% down... gold is right back where it was...showing it meddle but there may be downside. If I had 2 choice: silver here, bullion coins (like maple leafs or american eagles) and shop to get a good price.

Jeff said...

JD

Nice move for you today. I think you are in good shape.

Gold is going to be a nice play on the weaker dollar. World investors are getting worried about having too much money in US dollars.

I think they are really looking to diversify and find an alternative. Gold might be the choice here unless some other currency is put together.

If the dollar reverses hard, gold is going to win.

Gold is a great way to trade a weaker dollar if you think the move up in $$ is over.

thats see if this move has legs. I think it does. Gold sat in a consolidation pattern for awhile and I knew eventually it would break hard in one direction.

It looks like we have a base and gold is going to rise.

Lets see what happens!

Dr. Gold said...

@johndaniels: Gold is win because it's not a major industrial input. If you're going to invest in a heavily industrial metal like silver for its "precious metals" value, you better hedge with some bearish bets on other industrial metals.

I'm long gold, and also long DBA now, strictly as an inflation play. Also increasing my bearish bets on the S&P here

Jeff said...

DR

Good points.

I sold my SDS on the dump yesterday but plan on jumping back in again on any pump.

Gold is holding up better than many other metals and commodities.

I think this US dollar concern is providing major support here for the yellow stuff because it could be viewed as an alternative to the buck.

However, short term deflation is a concern and could pull other commodities and metals downward short term.

This Obama treasury announcement is provide a nice entry on some shorts.

Dr. Gold said...

Sorry, my last post got cut off. I was going to say I'm increasing my S&P short here because the S&P/Gold ratio just broke down through its 1:1 support today.

http://stockcharts.com/h-sc/ui?s=$SPX:GLD&p=D&b=5&g=0&id=p92583463076

Jeff said...

Parabolic close

Up 7%

This market is whacky! I think traders are going to start having nervous breakdowns:)