 The Porsche Syndrome
Der Invest
Informant
Randy Buss
8 December 2004
On the anniversary of US's Pearl Harbour bombing, I'll refrain
from the "easy" analogy today and won't speak of the
Japanese "bombing" the US Dollar, on the contrary,
they have been the US Dollars' best friend these last years.
I mean, who else besides the Chinese have been buying, no, sweeping
up the US Treasuries to keep the USD going? The Japs. Now, let
us all bow down in thanks and nip on a glass of sake rice wine.
Otherwise, the Dollar would have been incinerated quite a while
ago, I suppose.
Meanwhile, with a bit more
time off than usual, I've been able to catch up on some reading
material. I don't know if I'm anymore the clever for it, more
confused yes, but more clever is doubtful. One of the things
which, as in love, caught my eye, was the phrase : "when
we feel deeply, we tend to interpret narrowly" which
I sometimes think sums up both the gold and US Dollar cheerleaders
rather succinctly. Everyone says the Dollar is dead. Everyone
says gold is going through the roof - and at that - it's doing
it tomorrow. Dare I say, I have my doubts on both counts.
Why? Too MUCH vested interest.
It's simple. The powers that be - Central Banks - I believe,
do not want a US Dollar rout to take place. Nor do they want
gold and silver to sky rocket. Remember, national economies hang
in the balance, so if any Dollar depreciation is going to take
place, then it should be "orderly." That is
their mandate - keep the order. Ok, so in a downward bias towards
the USD. That has certainly been the case these last 2 years
going from 83 cents to 1.34 cents against the Euro. Painful certainly,
but not "going Argentinian" as it were.
I have now read so many excellent
articles from "experts" and "old timers"
on why gold will soar - tomorrow , why gold will correct lower
- tomorrow - and very few who have admitted that they don't know
where it is going in the short term. I believe I'm in the last
group. From a purely fundamental point of view,
gold has a lot going for it - at least with respect to the US
Dollar price - and therefore should be still advancing in Dollar
terms. I mean, the US Dollar is still falling and has not bounced
significantly upwards. Likewise, intervention to my knowledge
has not been swift or even forthcoming as of yet. ECB is still
on the sidelines and the Asians are likely more than fed up with
FED Dollars. Technically, gold looks overbought
and articles on the Der Invest
Informant site, show those indicators running out of steam.
Both the XAU and HUI indices have been operating poorly these
last weeks and losing considerable steam, nearly 5-7% down. Individual
gold equities are no where near their Q4 2003 highs. Historically,
the last quarter of the year has traditionally been strong for
the metals - and indeed - gold and silver have advanced nicely
these last weeks.
What's going on and where does
all this leave us? I currently believe the financial world is
running into a fundamental conundrum which has crept up on them
and, being human and lazy, and being politicians and C-Y-A orientated,
have done little to rectify the "happy party" of the
last years. I call it the Porsche Syndrome. Where one who is
intent on killing himself (The Fed) decides to at least "go
out in style" and takes the 911 turbo up to 10.000 rpm into
a brick wall - that certainly seems to be the US' fiscal model.
But as long as the seat-warmer is on and gentle music wafts through
the interior, who cares how it all will end - I'm comfortable
for now. But getting back to the point, I believe the financial
world is currently in limbo. It KNOWS the US fiscal house is
in terrible order. It also knows that the distasteful medicine
required for the US (consumer saving, government saving, cutting
budgets + deficits, increase internal investment, rolling back
the empire, etc) will also harm the "export pushers"
as this will cause their economies to equally be short-term affected.
Hence, the dollar continues to fall and a world is turning to
itself and asking "What next shall we do?."
The thing is, they don't have an answer - they are groping. Meanwhile
the DOW and Nasdaq are rising. Why? I think investment managers
are looking to either push year end returns up or keep investors
in a good mood or both. After the Bush inauguration in January,
maybe the markets will give us more "clear speak."
At this point, I am searching
for more clues. The bond action has been yo yo. Up and down fakes,
but no real KEY action. The bond and currency markets are MASSIVE
- but still no decisive movements yet.
We will need to look for a
plethora of puzzle pieces and I don't think it will be easy.
I have read articles of a "muddle through" economy
for the next 10 years. I have also read Jim Rogers who thinks
the commodity bull will last for the next 20 years. Could both
be right? Sure, but also could be wrong. I do give much credence
to that scenario though - Asia is expanding and needs raw materials,
Asians like gold not paper, Asians are tired of US hegemony and
see economic might as a valid weapon....we just need to wait
and see.
7 December, 2004
Randolph Buss
http://www.dinl.net
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and Disclaimer Statement: This document is intended for informational
purposes only. DINL is not a registered financial advisor in
the USA. Not advice or intended as advice. The author has not
received any payment or reimbursement of any nature for writing
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