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...Brighter Every DayHarry Schultz But gold bullion from a "long-term investor" point of view has been very puzzling over the last year. As our weekly gold chart reveals, gold has for last 12 months moved down, up, down, up, down, in 5 legs of several weeks each, & overall gradually compressing in size, to form a 1-yr symmetrical triangle. Traders, on the other hand (like us & our GoldChartsRUs readers) have not been puzzled - as it's not unusual for gold (both bullion & shares) to move in legs. We have sold, bought, sold, bought & sold, to match each of those 5 legs. It's obvious that, on balance, investor's (buy&hold) bullion portfolios have moved sideways, while traders could book profits at the end of each leg. This was naturally more profitable for gold shares than bullion. Chart (below) shows average gold share rose, in Schultz Gold Share Index terms, from 9.7 to 12.7, a 33% rise, while bullion went sideways.  ••• Tit bits: China is relaxing rules on sale of gold bars, approving plans for 4 banks to begin offering them to customers soon. This should lead to a jump in gold consumption in China, with 1 dealer predicting a 10% rise. ••• We've revised our Schultz Goldshare Index, replacing 2 non-performers. That's what U should do to your portfolio. Prune dead branches, replace with growth golds. Don't view that as optional; surely it's mandatory. ••See Futures section, pg 11, for gold targets, up&down.
Big PictureDear Reader, Oddly, despite globalization (promoted by govts/big biz), which I've decried since its inception, the world is amazingly separating into sections. I call it Separatization. There's no such word. But now there is. It's a kind of war between homogenized globalization & separatization. How so? Objectively, let's start with: 1. Eastern Asia/China & the Indian subcontinent, which has taken over the leadership locomotive role. They want to trade (& raid) but definitely not become part of the West. They want to be separate & equal (or equal plus for China). They're delighted with their new-found & growing power. 2. The US: has lost thrust (due largely to Asia powering) & lost moral leadership (due to the coup d'état by the misguided policies of the neo cons). If the neo cons remain in power til 2009, they'll have destroyed so much of US economic, monetary & military power & influence it is unclear if it can be regained A.D. (After Dubya). US political policies have separated the US from the ROW (Rest of the World). Not a soul could deny that.
4. Scandinavia should perhaps be seen as separate from Europe. They're more stable, yet more socially experimental, & highly inventive. Very different mind-set from Euro heartland. Often vote No on Euro affiliations. Mentally different, separate. 5. Black Africa, long a basket case economically, then politically (ego), now medically. Mostly refuses to help itself. Too busy arranging graft, corruption & channeling foreign aid into leader's pockets, & killing dissidents. Still sees itself in black (them) & white (us) terms. Most are disgusting racists, especially the leaders. We try to help, but they won't make the mindset changes needed for progress/health/survival. They would rather die (& will) than play by proven & humane rules. On present course, Africa literally won't survive both AIDS, their racial prejudice & victimitas. That black Africa won't intervene or even condemn the vile Mugabe is proof they prefer to wallow in racist excrement than evolve as humans. Exceptions? Sure, but they aren't in charge. Mbeki sucks; blind-sided & biased. Africans separate themselves from the world to an unacceptable extreme, exemplified last week by African Council refusal to act on Zimbabwean genocide, as requested by Europe/US/UN. 6. Brown (Arab) Africa: Also suffers from Colonial Blame Syndrome, but a few are less extreme. They let their Muslim religion separate themselves from ROW. Worst case: Sudan/Darfur, where Arabs seek to wipe out Blacks to make it an all Arab nation. Worse genocide than Yugoslavia/Milosevic. Separatism gone psycho. 7. SouthAmerica: Split. Non-cohesive. Who says that's bad? Separatization comes naturally here. That aside, the continent has some very pink spots (Venezuela, Cuba) & some bad behaviour (cutting rain forests). Is largely anti-US, as a result of old wounds from the fruit companies & ongoing mega bank treatment (lend & repossess), & terrible IMF advice (what do they know?) (not enough) (another bureaucracy). But becoming leading agricultural super power. Risk: over-dependence on China as customer & investor (bit like US/China). Hope S/A doesn't find China owns them one day. 8. Oz/NZ: Doing well, thank U. Happy to be left alone & separate. These 2 even avoid union with each other, have said yes/no/maybe, but No in the end. Oz even stopped free entry for Kiwis who freeloaded on the Oz system. Oz is still racist, which keeps separatism going, but is a sad trait. NZ resents tall poppies, but is more prosperous than ever which may allow for poppy growth. I love the Oz & NZ $'s, highest yielders in 1st world. 9. Canada: Many wish their US border was a 50-ft Berlin Wall. They're anti-Bushwars (& made it clear). They separated themselves, one by one, from the US 250yrs ago. That's how separatist & independent they are & good for them! Recent poll says they regard many Americans as "vulgar & violent." Many Americans agree & have been moving to Canada in record numbers. 10. Russia wants to trade with the West a bit, but mainly sees the West as a place to sell to (oil, gas, weapons), not buy from. They still want to rebuild their military empire. Putin wants continued separatism. 11. Middle East: they create their own separatism - in their heads. If they could open their minds/hearts they could thrive & conquer violence. Until they do, they'll fool themselves that their separation is demanded by their religion, rather than of free choice. 12. Japan/S.Korea: A separate world of their own culture/choice. No desire to change. In conclusion: Separatization is rampant, & best. It offers more freedom & choice. It's the opposite of the Tri Laterals & One Worlder's plans which reduce choice--& illustrates our point. Fortunately, the world (as U see above) is moving away from homogenized culture & political globalization. Merriam Webster defines "globalism" as "a national policy of treating the whole world as a proper place for political influence." To which I say it is an improper policy. The US Founding Fathers sought separation from England with its then lack of free will. We're still fighting for free will, separation, choice. PS: "globalization" (as opposed to globalism) has come to bring another aspect to that political definition, ie, a commercial dog-eat-dog process fostered by multi-national companies who also pressure politicians to push through subsidies & 1-sided trade treaties, like NAFTA, that give global corp giants an advantage over small biz, & lose jobs in the 1st world nations. Another case of big is usually bad, small is usually better. Especially if U favour individuals over global giants. How to benefit from Separatization? Many ways. Avoid the multi-nationals. In the longterm their overseas factories, offices, chains, shops will often be confiscated, attacked or taxed punitively, &/or their domestic mkt may shrink from local job outsourcing boycotts. Look at their charts; some are already short sells. Those who forsake outsourcing may gain biz. Trade wars have begun. This requires careful geo-scrutiny of country funds. More ideas to come. Big Pic titbits: The bond mkt has a terrible record at predicting recessions or deflation. ••• Another LongTerm Capital Management squeeze could trigger a system implosion, as could a derivatives confrontation. •••• The US Conference Board LEI (Leading Economic Indicators) is currently the best economic forecasting tool. •••• US utilities recently hit 4-yr high, mainly because dividends are back in fashion after a long vacation.
•••• US CPI index continues to provide useless numbers as it excludes the leading inflation factor: rising house costs. Not to mention exclusion of gas, which rises steadily. And Greasyspan wants the real CPI kept secret. •••• Economist mag ranks global housing bubble with the tulip mania; is biggest bubble in history. Many are buying houses with near 100% credit, but get only 50% margin to buy stocks; over that is considered risky speculation by the SEC. •••• My hedge fund mgr friend Hugh Hendry says: "Shame on U, Sweden, shame!" for slashing interest rates so drastically. It cast a spell on int/rate mkt. But if it pushes ECB to cut rate, it will be helpful; IMO they now will, finally. Weak EU economy needs it. Happy smoke signals from your
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3. Europe's
case is even more extreme.
They're unsure if they want to reform their socialism.
They're at home with their termites, but the structure can't
survive trade winds (pun intended). Europe harbors a doomed economic
& socio philosophy. If they agree to reform, it'll
take years & maybe they don't have years (China). If they
don't agree, they'll become a white-collar 2nd world.
No longer 1st, but not quite 3rd. Blair implied as much in a
brave speech last week. France is the weak link. They have an
attitude problem. Germany is unhelpful. To top things
off (& validate my point), France & Holland committed
an extreme act of separatism by voting No on constitutional unification
in recent elections. Euro states even separated themselves from
US advice says columnist Wm Pfaff, who headlined his 6/18 IHT
column: The Atlantic just got wider. (major European article
inside).
••••
As often forecast here, China isn't ready to revalue the Yuan,
& won't anytime soon. US pressure assures it can't happen. [Editor's note: (Ooops)
"Investment consultants can be right about some of the issues
some of the time, but cannot be right about all of the issues
all of the time." -Barb]