Talking to the People

A few days ago, I was fortunate enough to have my article, Due or Die for the Dollar, published to the SeekingAlpha.com site. As you can see, if you click through on the link, it was a dollar bullish story which these days is hard to fine. Anyhow, going forward, anytime I have an article published at Seeking Alpha and there are people commenting on the article, I shall answer the critics here. So in my first installment of, "Talking to the People," I will paraphrase and then respond.

First comment comes from Mr. G. Essentially he says that the gold's fall off is not going to result in a bear market for the yellow metal and anyone who is without 30-50% of their portfolio in gold, is playing with fire.

My response to this is two fold: First, a bear market to me in gold is a falling trend. Some commodity bulls maintain that a commodity bull market can last 20 years and have 80% declines within it - personally, I think that is stupid. Many gold bulls hold onto the same logic. To that, I say, all the power to you. If you want to ride gold down back to the 350/400 level, good luck. Mr. G is not saying that but he is indicating that gold is a great safe haven position - he is correct. However, I am arguing that the safe haven trade is long in the tooth.

The second comment came from Captain Bob. He essential says that he could not disagree with me more (that's fair). He said there will be a point where gas prices do not fall anymore and the dollar benefited directly from this. Further, the CB's (central banks) have been buying dollars and this is not dollar bullish. The fundamentals of the dollar still stink. Lastly he says that the next move up in gold will be a doozy and it won't take 2 years to launch it.

My response to this is simple. People hold onto fundamentals in dictating the dollar direction all the time. They pull out the trade deficit or the rising debt levels here in the US but fail to point out that both of these factors were in play when the dollar last rose in 1994 to 2002. That to me is the story of the gold bug - pick the best story to push the gold agenda. Anyhow, the second part about the CB's buying dollars is not something I can really answer because it is published by the world bank with a 2 month lag. I know that the those who are pegged to the dollar have to buy dollars but I don't believe that is any factor driving this move. Finally, gold will rally sometime in the future since we live in an inflationary world. I argue though that inflation is now turning, regardless of the CPI figures and the next move for hard assets is down.

The last comment is from Paultaut. He says that the invasion by Russia into Georgia was the reason for the move (any time there is war near the EU, the Euro suffers). He says major resistance is at 80 (not 82 like I said) and he is using Fibonacci. He says that the eye popping inflation in the EU is what supports the Euro. Mentions that financial troubles will continue in the US and the dollar will resume its slide sometime.

My response, is several fold. First off, the dollar has been moving up for about a month now. The invasion occurred on Thursday or Friday. Further, there have been tensions forever between Mother Russia and is former kids. As for the technicals, I can see 80 though I don't think it will be that big of a deal. I am also not great with Fibonacci levels so if he sees 80, great. Just to let you know, inflation on the headline level is higher in the US than it is in the EU. Further, the core rate of inflation is higher here than it is in the EU. Additionally, rising inflation and sinking growth are not supports - especially when the future growth forecasts for next 2 quarters are for around 1% (where in the US I see about 2%). Finally, give me a break on the financial story. And in response that it will resume it slide someday, it will also probably rain or snow in the next year as well.

Well everyone, thank you for commenting on my article. Keep reading.