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The
financial crisis is fast unfolding as Fannie Mae, Freddie Mac, AIG, Lehman,
Merrill Lynch, Washington Mutual and Wachovia are joining Countrywide, Bear
Stearns and company in their disappearing acts.
There are
rumors now that Morgan Stanley is in trouble, too. I am surprised that the
administration did not do more than they did to stabilize the financial
sector (not that I am for it). There's no question in my mind that conditions
in the market are worse than 1929, except that this time the dollar is not
anchored to the gold standard so governments are printing at will. Watch out
for credit card collaterals deteriorating, which will hurt Citibank and Bank
of America.
Before
you put me in the economic doom and gloom camp, let me be specific. I am
anticipating more trouble for the financial sector, not doom and gloom
spanning the entire economy. The debt implosion in financials merely
facilitates wealth transfer, not economic collapse. This is the time to go
shopping for hard assets. International land, apartments, good stocks,
metals. Those hard assets are not disappearing and with a poisonous dollar,
and after the crunch we're having, those assets priced in dollars will act as
a shelter for all dollar holders. I expect the dollar to freefall relative to
metals and Asian currencies in the next 6 months.
Oil is
down slightly to $96 while gold is up $86 yesterday and $31 today to $893. AIG
and Lehman both have big positions in the futures markets (long oil, short
metals), and I highly suspect those positions are being unwound (ie. Sell
oil, buy to cover metals). I have been VERY careful in not calling a bottom,
however I am confident now that the bottom is in, and things can unravel
quickly if short stops are taken out, creating a squeeze.
 
Below,
I've linked to an interview of John Embry, the most famous gold fund manager
in Canada. His fund is down 45% YTD, which makes our numbers look very good. Like
Embry, we now have positions that are selling for as much as 20% below the
cash they have in the bank. Finally, I expect a very healthy rebound in
metals and metal stocks, while rest of the markets continue to yo-yo. Finally,
the wait is over.
John
Embry: "When the gold's all gone, the market will go nuts": http://www.theaureport.com/pub/na/1624
By : John Lee, CFA
Goldmau.com
John Lee is a portfolio manager at
Mau Capital Management. He is a CFA charter holder and has degrees in
Economics and Engineering from Rice University. He previously studied under
Mr. James Turk, a renowned authority on the gold market, and is specialized
in investing in junior gold and resource companies. Mr. Lee's articles are
frequently cited at major resource websites and a esteemed speaker at several
major resource conferences.
Please visit www.GoldMau for
instant market alerts and stock updates.
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