FYI: Excerpted from The Elliott Wave Theorist, January 2008, by Robert Prechter

Precious Metals
In nominal terms, real estate topped at all-time highs in 2005, stocks topped at all-time highs in 2007, and this month the inflation hedges—gold, silver and oil—have made new highs for the decade. Gold and silver have been playing a bit of catch-up to stocks, bonds, copper, oil, wheat and every other commodity or investment that has soared in recent years.

It appears to many investors that the metals are adjusting belatedly to the massive expansion of credit, with far more rise to go. After all, stocks rose 18 times in value since 1982, oil rose nearly 10 times since 1998, and gold has not even quadrupled from its 1999 low. Moreover, from their 1980 peaks, gold is up only 6 percent and silver is still down 68 percent, and that’s in terms of the lousy dollar!

No wonder those who have given up on real estate and who are starting to sell a few stocks are seeking refuge in the precious metals. But once again investors are leaping from yet another expired mania to an expiring one. The hype is everywhere—on TV and in newspapers and magazines. That’s why I am choosing this time to comment on them.

Are these inflation-hedge investments going to be the saviors of capital as so many are saying? If deflation is coming, the answer is no. If credit has begun to implode, these markets are likely to go down along with everything else. On the plus side, they should fall much less than everything else because they have not become as overvalued as everything else. So on a relative basis, gold and silver will be better performers. But I doubt that the metals will satisfy investors’ dreams, at least not until the great deflation is over.



MDW

prechter is a great promoter. but, he has not been correct for decades.
dharma

You're right about that, dharma.
On the other hand, his comments here on gold and silver (vis a vis other investments) seems reasonable and plausible to me.
He's not exactly saying "don't buy," is he?

Prechter's I am wrong number was $450 gold IIRC. He just kept moving the stop up. Is he stubborn or TPTB?

i dont disagree with precheters credit implosion theory, but it can e postponed IMO. The easing and fiscal stimulas may hold that dam for a little while longer. I guess thats what the fed counts on, to keep jobs up and income coming in, to see if the problem abates in some way thru time.

if, and this is a big if, we go into a straight up deflation. it will cause bank failures, which will cause gold prices to seek higher levels. prechter has stuck to his scenario for more than a decade. when crest of the wave came out he said to short the dow, it was 6k. still way under water. in this biz if you dont change, then change is all you will have left!
dharma
my take is this time will be more like the 70s w/stagflation, then the weight of the system loaded with debt will implode

dharma
I feel sure you recall "guns and butter" with Johnson. The same thing now with Bush only Bush doesn't call it butter, he calls it tax relief. Stagflation was/is the name of the game. Either way, inflation or deflation, it's win-win for gold.
Best to you

john george, that is my take as well. these things only end one way, students of the market, can atest to that. this will end no differently than all the others, no matter what the tulip bulb was. there is nothing new under the sun. its the same thing over and over and over again.
dharma

dharma
Amen. If there is a favorite book of mine it is the book of Ecclesiastes for the theme is universal and timeless.
Best to you


1 The words of the Preacher, the son of David, king in Jerusalem.
2 Vanity of vanities, saith the Preacher, vanity of vanities; all is vanity.
3 What profit hath a man of all his labor which he taketh under the sun?
4 One generation passeth away, and another generation cometh: but the earth abideth for ever.
5 The sun also ariseth, and the sun goeth down, and hasteth to his place where he arose.
6 The wind goeth toward the south, and turneth about unto the north; it whirleth about continually, and the wind returneth again according to his circuits.
7 All the rivers run into the sea; yet the sea is not full: unto the place from whence the rivers come, thither they return again.
8 All things are full of labor; man cannot utter it: the eye is not satisfied with seeing, nor the ear filled with hearing.
9 The thing that hath been, it is that which shall be; and that which is done is that which shall be done: and there is no new thing under the sun.
10 Is there any thing whereof it may be said, See, this is new? it hath been already of old time, which was before us.
11 There is no remembrance of former things; neither shall there be any remembrance of things that are to come with those that shall come after.

I don't want to argue with the word of God but a case could be made that
everything is new under the sun. The mountains and rivers and weather
patterns are in constant radical flux geologically speaking. People must constantly adapt
to revolutionary change in political, technological and cultural systems.
"no new thing under the sun" ? Tell that to the soldiers first facing the broadsword
or the longbow, machine guns, panzers, nukes etc. Did trains, planes, autos, cell phones,
vaccines, antibiotics, satellites etc preceed us in a distant recurring era?

The coming financial debacle will defy all predictions and definitions. We may see raging
waves of simultaneous inflations and deflations worldwide that move at unprecedented speed.
I agree with dharma that it will end in a blowoff but I expect it to be very deceptive.
Any platitude that you hold onto can become your Maginot line locking you into destruction.

This gold bull is so young that the calf is bearly strong enough to stand up and take a drink of mama's milk! Just look at the size of gold stock mutual funds...they are still tiny! Sure everyone knows that the price of gold is up but they remember the last time it got this high and what soon happened. They think that buying gold is for fools at this point. How many people in your neighborhood have any gold in their 401K or IRA? The educated investor class really does believe the Keynesian idea that it is a barbarous relic. You are possibly more likely to find gold investors amoung the working class and people who frequent flea markets, but the retail investor just aint there yet...it is still very early in the bull!

Paul
No philosophical diffences with you and I dont disagree with you that this time it is different because for us it is. The point I was trying to make is that throughout history people and events come and go and those people and events shape the future for a time. Then there is a reversion and we get to start over doing much of the same things we have done before and looking for answers to the questions we have asked from time immemorial. That our technology is different than what was available previously goes to show how "clever" we think we are.
Gold is the key to value at all times. That barbaric relic. More and more I am being convinced that it is beginning to trade as a currency.
Best to you

JG
I see your point and agree to an extent. Gold will have to
be dealt with again. Many things stay the same; many don't.

Aside from clever technology though I still think people are
changing. Consciousness is rising world wide. We are
exponentially more aware than any previous era. Leaving behind
toxic old forms of thought and emerging into new levels of
understanding in every discipline has never happened before.

But I expect a world war to break out any day now and that will
be the same old sh*t.

Respectfully,
Paul

(this is the last of this boring nonsense!)