Research Project May 11, 2006 10:15am by Barry Ritholtz Big announcement next week (finally!) on the research product; Here’s a quick look at the graphic design: Spread the wealth. twitter facebook linkedin What's been said: Discussions found on the web: Bynocerus commented on May 11 Any chance we could get a more eyesight friendly version? Barry Ritholtz commented on May 11 Not yet! That was done on purpose! Bynocerus commented on May 11 Sounds like we both learned from the same sales manager: “Your job is not to make the horse drink, it’s to make the horse thirsty.” Mark commented on May 11 Barry- That’s because it contains Barry’s secrets! So I have copied the image, printed it out, punched a hole in the middle and am playing it backwards on my old Magnavox stereophonic. It’s seems to be saying “The top is in. The top is in. The top is in”. Anyone have any idea what this means? Barry Ritholtz commented on May 11 II did expect the Dow to make a new high — hence, the 11,800 call. Look over at the metals and consider the differences between the precious and industrial metals: Most of the industrial metals like Zinc, Copper, Palladium, Aluminium are trading at all time highs. Meanwhile, precious metals such as Gold, Silver, and Platinum are not. Since most new bull markets surpass their prior highs, it would not be unexpected for the Precious metals to follow their industrial brethren and pass the early 1980 highs . . . Mark commented on May 11 But HERE? Have you looked at the daily, weekly and monthly RSIs on these metals? Gold? How about 90 on the MONTHLY? How do you sustain that? The gold stocks aren’t confirming. They are refusing to follow along for the ride. This morning the XAU was down while Gold was up another $15. That tells me a major correction is imminent. royce commented on May 11 I think you’re right on gold, Barry. How many gold buyers do you think are hoping they can call the top and get out before it drops enough to wipe out their gains? Alaskan Pete commented on May 11 Palladium is nowhere near an all time high, it’s closing in on $400. During the spike back in late 2000, palladium hit around $1100. But your point is well taken. Ned commented on May 11 I am with Mark on this. Barry Ritholtz commented on May 11 That doesnt mean we cant get a pull back in Gold — but a new all time high is very doable paul commented on May 11 re – Gold “Speculators have been alert to any sign that Beijing may be planning to switch a portion of its massive $875bn reserves into gold, a move that would electrify the market. “They seized on comments yesterday by Liu Shanen, an official at the Beijing Gold Economy Development Research Centre, who said China should raise the portion of gold in its reserves from 1.3pc today to between 3pc and 5pc. Such a move would entail the purchase of 1,900 tonnes of gold, equivalent to gobbling up nine months of global mine production.” http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/05/10/cngold10.xml If this is true, then plenty of updside – although it does seem like an insane time to add to a position…. Mark commented on May 11 “Doable”. That’s a very CASUAL word. It’s like we just put it in our Blackberrys or something just like lunch at the Ritz. I am not criticizing you. I love your work here. We may indeed hit it. But for me what $850 or $1000 gold MEANS is very scary. That means we lost control. That means Keanu Reeves is driving the schoolbus and I don’t think we get a Hollywood ending. Mark commented on May 11 People, if you haven’t figured out the big game of Chicken that is going on between the US and China over rates it is time to do so. The Premier’s visit being “non-State level”, the PM sell off of that morning, the WSJ articles, the non-support of the $USD, these little Chinese pronouncements, are all part of the great JPN, CHN, USA traingulation that is playing out on your bond and PM screens. Think of the final scene of The Good, the Bad and the Ugly. Which way does this one come out? Bynocerus commented on May 11 In case anyone cares, my own proprietary model I’ve been trading with for many years will trigger a short signal if we close below COMP 2282 today. I’ve been in cash for a few months, and it scares the hell out of me to be shorting into an oversold market like this, but we play by the rules we create or we suffer the consequences. I’d be curious to know if anyone else has taken the short plunge yet. LeroyB3 commented on May 11 I think I actually read somewhere once that crashes are usually from oversold conditions…you might want to check twice on that though. LB Bynocerus commented on May 11 Well, looks like the mini-meltdown is gaining speed as we speak. I wonder if we get a washout this PM or tomorrow? Mark commented on May 11 What this market needs is a good 300 point drop. Byno, no net short for me but completely hedged. Sold everything that wasn’t this morning. Alaskan Pete commented on May 11 Byo, i’ve been short the Qs for two weeks. trader75 commented on May 11 “The gold stocks aren’t confirming. They are refusing to follow along for the ride. This morning the XAU was down while Gold was up another $15. That tells me a major correction is imminent.” Perhaps the key question is, who is buying gold? Is it all speculators, as the Buffetts and the Bill Millers suggest? Or is there something else going on? China, Russia and the middle eastern oil exporters, for example, are sitting on literally hundreds of billions in cash. They have likely assessed Bernanke as a gutless wonder by now, and they can read the tea leaves as well as anyone else: Guys like Feldstein rubber stamping a competitive devaluation policy. Notable fed watchers calling for a fed pause due to consumer weakness. Washington showing zero sign of fiscal restraint, with Repubs likely to write checks even faster as they grow desperate. Gold’s unchecked rise being all but ignored by the fed. The upshot is, these guys’ dollar exposure is friggin’ ginormous (to use a Ritholtz term), and their gold exposure is absolutely miniscule relative to where it could be and should be. All it would take is for these three to make an institutional type allocation decision, i.e. “raise our gold exposure from 4% to 8%” etc, to send gold over the new high moon. Or rather, to keep it chugging along without dips as it has been doing. Maybe it is a risk tradeoff for the dollar mountain boys (i.e. the folks sitting on a mountain of dollars). Buying a little bit more gold at a sky high price when one’s exposure is low makes more sense than sticking with huge overexposure to an empire currency that is falling through the floor. Sooo, and I”m almost done I swear, if these guys are the ones keeping the gold train going, it’s not necessarily a Danger Will Robinson type signal for the gold miners to tail off here. One could argue that the gold miners are more speculation driven ’cause they don’t have the China / Russia / ME lift, and that the miners are also more vulnerable to a sudden massive liquidity withdrawal general if / when the stockmarket goes kablooey. Not saying that gold can’t or won’t correct bigtime. But what type of event could bring about that correction, other than something which also juices the dollar in a big way at the same time? Bernanke is walking right into the Von Mises endgame. Jest me .02 Mark commented on May 11 t75- If the price would naturally collapse of its own weight if left alone (and at monthly, daily, weekly RSIs of roughly 90 you could certainly make that case), then all you are doing is bidding up your own buys if you continue in this manner. Seems you could/should let it correct and start from lower. But then again the Bank of England sold at the lows so perhaps making economic sense isn’t the highest priority. rob commented on May 11 not punk rock enough Barry. I hope you are going after the street.com’s biz. that site is a train wreck at this point. trader75 commented on May 11 Mark: The RSI, and pretty much all oscillators, are reversion to the mean type instruments. They can be helpful in determining how far things are out of whack with the historical norm. But when the historical norm itself goes out the window, reversion to the mean becomes meaningless. I’m not making a hard prediction here, or saying that gold is going to go straight up… but I think it’s safe to say the historical norms are pretty much trashed at this juncture. In terms of economic sense, a lot depends on perspective, and where you stand is determined by where you sit. Let’s say you are sitting on a huge pile of dollars, talking hundreds of billions worth of paper, and you know that mountain of paper is about to hit the skids. You would have a very keen interest in buying gold, as would others in your position, and waiting for a substantial pullback might be a luxury you can’t really afford. Look at it another way… say that you want to buy fire insurance on an expensive piece of Southern California property, the value of which is 50% of your net worth. Furthermore say that you can’t buy this insurance all at once, you can only buy a little bit at a time, and it’s the dryest season you’ve seen in a long time with the brushfires in full swing. In a situation like that, you might not be too comfortable assuming that the premiums will back off. If the fire comes before the correction does, you’re done. trader75 commented on May 11 “not punk rock enough Barry. I hope you are going after the street.com’s biz. that site is a train wreck at this point.” Punk rock? Train wreck? Are you on crystal meth or what? 95% of the value will be determined by content. Quality of content, timeliness of content, diversity of content, structure of content. Who cares what the site looks like as long as it’s clean, professional, easy to navigate, and not populated with cartoon characters. Mark commented on May 11 t75- I have all that but YOU LIT THE FIRE. “We” want an orderly revaluation and the Chinese are having none of it. So USTs are being exchanged for gold to 1) diversify and 2) to piss us off with the acceleration of the decline in the $USD. That’s the thesis right? So when someone calls in this poker game and chips cross the table what happens to the gold price? In other words, who do you think is winning this spat? Hint: It isn’t us. So when that little bid is gone from the market, which I happen to believe happens soon, there goes the price of gold. Why soon? Because the adults in the room ie the bond traders will bid up the long bond aggressively unless we cut this sh#t out, like they are doing today, and we can’t have that or the housing market goes into the crapper. Anyway, that’s the way I see it. Alaskan Pete commented on May 11 Looks clean. I prefer right side menus though..for obvious reasons….right handed mouse use, scroll bar on right side, etc. Tim commented on May 11 Someone please tell Mark that this is 2006, not 1996. trader75 commented on May 11 Hey now, wasn’t me who started this fire…. it was always burnin’ since the world’s been turnin’…. trader75 commented on May 11 And by the way, that ain’t the thesis… Mark commented on May 11 Anyway, it’s a fine day. The Dow is off 150, the Naz is in the crapper, my portfolio is UP nonetheless, and I’m about to grab a beer. Since Tim thinks I’m frozen in time, my first one will be with an iced mug. Cheers , all. Tim commented on May 11 Sorry, I thought I heard someone said bond vigilante and kind of spazzed. rob commented on May 11 just kidding trader75. whats the matter, you got a turd in you pocket? Barry Ritholtz commented on May 11 Now you kids play nice ! 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