 Fedheads
John Mackenzie
jrmfl@adelphia.net
Jun 16, 2004
Over the past several years
I have become accustomed to the emotional and suspect diatribes
of some in the Gold Advisor Community. Filtering this white noise
has done wonders to preserve capital and better helped me to
understand the dynamics of the Gold market's gyrations.
I do believe many in the Advisor Community have grossly underestimated
the Federal Reserve's will to preserve the status quo through
its reckless and historic endeavors.
Today was a pivotal day for the FED.
We had Chairman Greenspan bullhoring against the incoming tide:
Greenspan: NOT CONCERNED WITH
LEVEL OF CONSUMER DEBT
Greenspan: NO CONCERN FOREIGN
BANKS WILL DUMP DOLLARS
Greenspan: NOT WORRIED ABOUT
U.S. HOUSING MARKET BUBBLE
Greenspan: SAYS SURPRISED IF
HOME PRICES RISE FURTHER
Greenspan: SAYS BOOM IN HOME
SALES UNLIKELY TO CONTINUE
Greenspan: WAGES LIKELY TO
"CATCH UP" TO PRODUCTIVITY
Greenspan: LONG-TERM FISCAL
OUTLOOK 'DISTURBING'
Greenspan: HIGHER TAX REVENUES
WILL CAP 2004 DEFICIT
Greenspan: ENERGY PRICES NOT
FACTOR IN FED POLICY YET
Greenspan: HIGH ENERGY PRICES
COULD BECOME A PROBLEM
Greenspan: CAUTIONS THAT FORECASTS
ARE OFTEN MISTAKEN
Greenspan: BENIGN INFLATION
IS 'GENERAL VIEW' OF FED
Greenspan: FED BELIEVES INFLATION
IS NOT A PROBLEM
Then, we were served up the
Tsunami:
Greenspan: U.S. ECONOMIC RECOVERY
NOT SHORT-LIVED
Followed by this Gem:
Greenspan: REPEATS THAT FED
MAY HAVE TO BE MORE AGGRESSIVE
My take on this outpouring
of missives is simply this:
Chairman Greenspan is deeply concerned about all of the above.
And for all of the dismal warnings above... once again, Gold
was capped for an under-$6 gain.
The Carry Trade has barely begun to unwind and those very large
players are growing increasingly concerned about escape. This
is precisely why we are seeing the rampant and uncontrolled expansion
of OTC Derivatives. No door is too wide and there is clearly
not enough room for escape. This has truly become an
all-or-nothing game.
Gold, in light of the above, is underperforming.
I do firmly believe these reckless speculators will make every
conceivable attempt at forestalling alternate & honest alternatives.
This will fail in short order as I suspect we will see an
elephant or two attempt to leave the herd and rush the exit.
This will unmask the Fed's only real alternative... Hyperinflation,
the likes of which we have yet to see.
When this begins, we will see gold break free of its paper shackles.
Between now and then, I believe we will see Gold Equities come
under pressure as the Dollar and Yields begin to rise concurrently.
The trade will then reverse in short order as the Fed begins
an "All Out" campaign of rampant expansion
of bank credits, monetization and aggregate expansion through
intervention.
In the end, it will end badly.
When - I believe sometime in late 2005.
After 2005 Gold will begin to ascend to its proper monetary role.
Simply put, this is one "honest money" advisor's opinion.
Jun 15, 2004
John Mackenzie
jrmfl@adelphia.net
John Mackenzie
manages private capital and hosts a gold
forum/investors exchange on Yahoo! groups.
321gold
Inc
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