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This may well set off some alarms out there but I think it will be worth it.
Dr. Clive Roffey is bullish on gold....as I remember he stated that gold may
well be in a classic blowoff stage. At this point in time though, I cannot
agree with that. Those others of you out there who agree with him, let's
hear your thoughts.
For some time now I have been a believer that deflation is a bigger worry
than inflation. Right now we have consumer confidence running very high yet
spending patterns appear weak. Auto sales the last reporting period were
down 9.5%. Retail sales are also down. The asset backed securities sales by
aggressive lenders has sustained the flow of credit to consumers already
burdened with debt. Just recently one of these lenders, a subprime auto
lender, declared bankruptcy leaving $500 million in asset backed securities
outstanding.
Right now I think the majority of people think the Fed will drop the other
shoe and raise rates again. At least that was the concern in early July.
But what if the availability of credit lessens demand for goods and services
later this year? That would be deflationary. If that is the case, then the
"classic blowoff" in gold may well not be a blowoff at all, but another down
leg in price.
If this all this is relatively correct, then the worry about the Fed raising
rates is unfounded. Their next move could be to lower rates to combat the
threat of deflation....which is much the opposite of what people today
expect. That would make financial stocks (i.e. insurance, etc) a much better
place to invest than precious metals, etc. Technical analysis confirms this
theory. Just look at the charts of these groups.
What do you all think out there??
Jerry
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