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Boris Chikvashvili

Boris Chikvashvili

Boris Chikvashvili was supposed to be a theoretical physicist (Russia+Jerusalem Hebrew University, MS Physics, with distinction, toyed with QUARKS). Somewhere on the road to PHD…

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Gold and SPX: Both Faked It

Dear Reader, We Bull Market in almost everything that moves starting from Mid Year 2010. That would a right view if one is living to make more Dollars Pounds and/or Euros regardless of their purchasing power.

That reminds me a joke. Nikita Kruschev was visiting certain collective farm in south Russia requested farmers explain for the reason the cattle did not produce enough Milk. Farmers answered, that there was not enough of green grass fro them to feed on. He instantly replied. Have not you heard of Pavlov Principles? Just put the green goggles on those cattle and they will think everything around them is a green grass.

Ok, that is mostly what the markets have been dishing lately the Green Goggles for investors who will believe anything just as long as they use those green goggles courtesy of Ben Bernanke ( Dear Fed Chairman). The only problem maybe that Insiders took those Goggles off and saw the reality and are SELLING LIKE THERE IS NO TOMORROW.

The chart attached , clearly, indicates that GOLD and SPX ( Not shown) look similar till the end of 2010, but were faking it all the way from April 2010. They ended the year 2010 down in AUD, CHF, SGD, KRW, MYR, etc. Actually, the list is large and includes more than 15 Currencies of relatively Major economies of the world. There are many types of investors Traders ( short, Swing , long ) term players.

Larger Image

Investors that are longer term oriented. For the latter part of types of market participants, the Purchase Power of the assets they hold is/should-be more important than the actual amount of certain currency. For example having more GBPs does not mean one profited if GBP lost purchase power. Our approach to trading is with that orientation of worldwide view of the markets. Not that we fail to see the short term trends, but we prefer to concentrate on a longer ( One year or more) term picture and conduct the short term fine-tuning with that view in mind. That is how and why we nailed the GOLD tops in December 2010 and January 2011 and were aware that GOLD was not in a true bull market all along. Same was the case with the US stock markets, just as long as one was not using ( here we go again) those terrible Green Goggles.

The chart attached provides the view of future Market Prediction for Gold and views the metal to be in need to revisit levels, at least, close to summer 2010 lows in many/all currencies. That leads to the forecast of GOLD/SILVER ratio declining in the same period. View On stocks is a bit different one and we believe that SPX*UDX ( multiple of S&P cash and Dollar Index) will be a profitable position for next 3-6 months. Of course, this does not preclude the drops in the elevated stock market values, but the counterweight rallies in Dollar shall keep the SPX*UDX multiple in/around the black for the most part.

After that the situation should change and one has to be more cognizant of the return of "SELL AMERICA(n)" motto we adopted from April 2010. Indeed anyone holding USA stocks and/or Bonds, has managed to lose money by 2011 regardless of what the Dollar based charts look like. The influence of the strong(er) Dollar soon to come, will be felt more intensely on various sectors and Energy maybe the first casualty. Which in turn may help the transports in general and Airlines in particular. Consumer related products may/will do better as the declining commodities( especially OIL) will help improve their mood even more than the rising stock market was able to do ) Somebody must explain to Dear Bernanke that to see lower gas prices come down at the pump does a lot more for the consumer than even pumping up the stock market.

Would like to finish on that note of FED and related policies and point out that according to FED we should all be feeling better with the market being higher and not falling of the cliff due to his heroic efforts. Should not somebody know that there are cycles in the business and after every down comes the upside in the economy? Should not somebody gather courage to tell the FED that if they could only let things happen real people may discover real truth about markets, that they can go up and down and they do not need the FED help. What a revelation that could be. That is perhaps why they are afraid and "do not let it happen", lest we figure out that emperor is naked. Well, if FED likes to take this challenge and let it happen we shall all find if there is a REAL NEED FOR FED. For now, here is what I know, while some on WALL STREET may feel rich(er), a lot of retired people can only see .. 1) Their money does not buy Groceries and Gas it used to. 2) They are afraid of Never Getting any of the Social Security moneys promised ( even if many contributed tonnes of money to it) and 3) There is a personal debt per person in USA that has climbed closer or over 200,000.00 while connected/chose ones grab the same money. Is this supposed to raise the spirits of Elderly or Young In America.

Elderly, Of Course, grow as a percentage of total population?

Now if GOLDMAN ( GS) was really doing Gods work, shouldn't they be asking that question(:- instead of grabbing huge bonuses?

Please remember, nobody asked them if they were doing Gods work, they volunteered.

Kidding of course, God Apparently says "hell with elderly , future belongs those who do not care about the past". The only problem is that even future looks bad with all those debts piling on.

And , of course, congress will say, do not worry, Pensions Will be there for elderly we certainly do Gods or , at least, peoples work.

Ok, got it, but will those pensions have PURCHASE POWER? or do we need to permanently use the Green Goggles?

I know. No answer(:-

Meanwhile, we just raided the Social Security again to transfer 4000 dollars to rich(er) family earning over 250,000.0 A year. Well take of those Goggles and see. There is your answer.


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