After touching $1000 per ounce in July of 2008, gold prices have dropped more than 20% in little more than a month.
Friday's price action in the gold market confirmed our fears - and exceeded them!
This is a disaster of monumental proportions for analysts who are confident of gold's value as a hedge against inflation.
Inflation is done.
Currencies fall
The value of the British Pound and the Eurodollar also fell sharply.
Paterson has never been able to successfully predict currency movements except as they relate to inflation.
In this case, it looks like the rest of the world is inflating, while the US restricts its money supply.
Monetary Base Growth Below 5%
With the base growing at 2% per year, there is plenty of room to add high-powered money to the system.
MZM Growth Slows
Bonds Rally
In the past weeks the bond market has faced
* $27 billion in new 10 and 30 year securities
* CPI of 13.2% on an annual basis.
Credit Spreads Continue to Widen as Corporate Yields Increase
Put Options on Bear Stearns
A trader gambled $1.7 million on out of the money puts on Bear Stearns. The options had only a week till expiration, and were $30 out of the money.
The position made $270 million.
Read it all.
http://tinyurl.com/59mwwz
TACTICS
Continue money market arbitrage, extend the maturity of liabilities, add assets.
STRATEGY
Announce a major change in the economic future of the United States.
Inflation is finished for the future, until money growth resumes.
Be wary of hedging liabilities, and consider hedging assets when spreads widen and yields are attractive.
Asset quality is the topic of the year.
