Iran switches reserves to gold

The G20 got together this weekend to stimulate and regulate. At the same time Iran is buying gold. The future rally in gold might come sooner than expected.

I think its pretty significant news when one of the world largest oil producers is switching its reserves to gold.

http://www.guardian.co.uk/business/feedarticle/8025778

Shorting US treasury bonds

Both Marc Faber and Jim Rogers have recommended shorting long us treasury bonds. For a multitude of reasons, I think they are very right. In my opinion, shorting us 30-year treasury bonds, is going to be a very good long term trade. You can do this by buying the TBT. I honestly cant see why anyone would want to borrow any more money to the US government at this point. They have very little industrial capacity left, and what they do have, GM and Ford, will soon go bankrupt or be bailed out by the us government, further adding to the massive mountain of US debt. The US has so far been lending to consume, and what the government is doing now is basically bailing out people who consume for a living, with money they dont have. Historically its never worked, and it wont work now. The US government is either going to go bankrupt by defaulting on their bonds, or create such a massive amount of inflation that the bonds will be worthless compared to now. Maybe even both.

This graph is very nice. The 30 year US T-Bond Yield was 15% in the eighties! Like Marc Faber said: US government bonds is the last bubble.




By the way, I sold my PM stocks for 42 $ per share, to buy some TBT. I also traded some oil and telecom shares i thought were a bit oversold. Alright profits. I'm not planning on posting all of my trades here in the future, as this is not a trading blog. This was an exception.

Also, Obama won. I see he wants to introduce a new new deal. Even better reason for shorting long US trasury bonds. But too bad for the americans, and the world for that matter, who will have to suffer through this long government made recession/depression.

Gold and politics

Quick comment on gold: I think gold will fall down further, perhaps even touching 500. So far its difficult, if not impossible, to say when, and at what price gold will turn bullish again. Still, buying at these levels will give good long term gains. Id also like to point out that other commodities (agricultural, base metals and energy) look very inviting at these prices.

Also, there is an election on in the US. I have no idea whos gonna win, although it seems as if Obama has the best shot. (He currently has a 87,6% chance according to intrade) But still, I dont have a clue. for all I know, Mcain is saving his best hatchet job for tomorrow when Obama has no time to respond. We'll see.

Philip Morris

Bought a little PM stock today for 41.11 per share. Im generally positive about tobacco companies and PM is a good and safe pick. Im not planning on holding it for a very long time, since Im waiting for other better picks to materialize. Speaking of tobacco, I also think snus has great market potential. So I might look into swedish match soon.

Gold again

Gold will fall from 920 to 750-650 in a couple of weeks or months

Gold is now 707.05, Just up from a low of 682. Its safe to say I got this prediction right, although I have to admit i happened a lot sooner than I expected. Here's Bloomberg on the recent fall: Gold Set for Biggest Weekly Drop in 25 Years on Dollar, Shares

Im a bit busy, so I wont be writing much about gold now, but I think buying at these levels looks very tempting from a longer term perspective.

Airlines (short comment)

I talk to people all the time who advocate buying "the cheap financial stocks". I don't think this is a good idea. If you want to get something cheap now, you should look at airlines. Here are some reasons:

They have fallen alot (never a good reason in itself, but still worth mentioning)

Several bankrupt airlines equals more customers for the rest. (E.g lufthansa and ryanair are moving in on the italian market after alitalia bankruptcy)

There is no real substitute for intercontinental airlines (E.g singapore airlines ) I also think that demand for commercial airlinetravel, for several other reasons, is more inelastic than generally percived.

Nobody talks about airlines, and when they do its usually bearish.

Boeing, the worlds larges airline manufacturer, is having problems with strikes. At the same time its difficult to get new planes as demand for new fuel efficient planes exceed supply. This means that those who already have planes or options to buy, have the advantage. In other words existing airlines have an advantage over potential newcomers.

and yes, oil prices have fallen a bit without any particular effect on the prices of airline stocks.

In short, airlines will be one of the leaders in the next bull market, and they are looking very cheap right now. Especially intercontinental airlines.

I'll get back to more about airlines later.




Ps. Look at gold today. 725,70 $ per Oz

Gold and the future

With new banking bailouts and stimulus packages being announced on a weekly basis, I'm beginning to wonder if we should just announce a monthly or weekly date for major global government intervention in the world economy. In an environment like this, to predict a fall in gold price might seem counter intuitive, but that's what I'm going to do.

As of my writing Gold is priced at 773.25 $ per oz. I'm slightly annoyed that I didn't start this blog earlier, because over my desk I have a note from the 9th of October that reads: "Gold will fall from 920 to 750-650 in a couple of weeks or months. The rescue packages are not big enough to get credit flowing again, more stimulus/bailouts will be getting increasingly unpopular, contraction to continue in derivatives and the loan markets (credit cards, car loans, student loans etc ) still have a way to go before they stabilize." I wrote gold will fall in a couple of weeks or months, not very accurate timing of course, and I was somewhat surprised by the immediate fall in the price. Still I think there is some further downside to gold as the global credit problems will continue. Also, since July, the CRB Index has fallen about 40%, whereas gold only fell about 12% in the same period. This can of course be explained by inflation fear (gold as an inflation hedge), but right now I think deflation is a more powerful force, and the major host of market participants doesn't understand the future prospects of dollar inflation. Savings rates are also still much to low in the US, and the monetary contraction will still continue for some time.

Let it be said though, I do not recommend any shorting of gold at this time, as it is not worth the risk. Rather wait for gold to become cheap enough to buy, or if you have a longer perspective you might even start careful buying right away. I think gold will go much higher in the future, but not until credit markets open somewhat. I can be more exact about timing, prices and reasons later, but 1000 $ per Oz will seem cheap in the coming years. So, there you have it, gold will fall a bit in the next weeks or months, and then reach new highs.