Gold Stocks Are "Golden"

Last week's rout around the world continued yesterday and last night, with many markets declining 3% plus or minus. U.S. indices, after having opened almost 3% lower, were off "merely" 2% or so an hour into the day (and by midday had trimmed the losses almost in half), with only gold stocks bucking the undertow, along with gold.
So, for all the times that gold stocks have served as whipping boys, they were the port in the storm today (until the last hour). Also, for what it's worth, gold stocks currently have a triple "threat" working in their favor: oil prices aggressively lower; plus both the dollar and gold higher -- the sum of which benefits their earnings, cash flow, etc.
A Greenspan Thesis Is Shredded Though many people read the recent weakness as a sign that we must crash soon, I see it somewhat differently. (Which doesn't mean we couldn't . . . it's just not my view.) Markets collectively have demonstrated that they are in fact bigger than the central banks -- a message that Alan Greenspan tried to prove wrong for 20 years. He and other charlatan central bankers everywhere have wreaked massive havoc on the world for two decades. The sooner they're seen for the clueless incompetents that they were/are, the sooner the world can start thinking about how best to pursue sounder policies, including a new gold standard. But in the meantime, in some ways world stock markets are now on their own, as central banks have used up a considerable amount of their ammo in the last two years, with rates still nearly zero almost everywhere.
And, even if quantitative easing is restarted (or, should I say when), it's not clear to me how that will boost psychology as it did in 2008/2009, when QE was part and parcel of lowering rates. Now, there's no real ability to lower rates in the Western world (though the potential outcome of more moneyprinting has not been lost on gold).

Gold Stocks Get an Upgrade
On the subject of gold, an important development occurred today: Finally, a dead fish (pulling a page from past cycles in other industries) raised his target on gold for 2011/2012 and upped his opinion on a handful of large gold stocks -- which is a potentially meaningful change in psychology that I expect to see prospectively. I have repeatedly said that part of what has held back gold stocks has been folks' angst that the price of gold is ultimately (or sooner) headed way back below $1000; and that when that view changed, gold stocks might "perform" better.
I don't want to make too much out of a single data point. But I believe that today's dead-fish upgrade (the firm was UBS -- not a small bucket shop) may be a harbinger of future action, as the naysayers embrace gold at some point. That will be a sight to behold.
Back to the action: The last 90 minutes saw the market drive higher and recover essentially all its losses. If we don't see a big collapse tomorrow, my guess would be that we see a decent rally attempt from these levels.
Away from stocks: The dollar was on fire once again (ex the yen). Oil lost 1.5%. The piggys were predictably higher. Silver lost a fraction while gold gained 0.5%.
Index Close % Change
Dow 10043.75 -0.23
S&P 500 1074.03 +0.04
Nasdaq 2210.95 -0.12
Nasdaq 100 1815.68 +0.02
Russell 2000 640.02 -0.19
Sox Index 344.51 +0.58
Bank Index 49.23 +1.03
Dow Transports 4199.57 +0
Dow Utilities 355.99 -0.7
Nikkei 225 9459.89 -3.06
Gold - Front Month 1198 +0.34
Silver - Front Month 17.78 -0.78
Crude Oil 68.75 -2.08
Dollar Index 86.46 +0.3
Euro Spot 1.24 +0.27
Long Bond 20-year 125.25 +0.7
FOTM - Yen Spot 90.39 -0.18
5/25/2010 4:31:38 PM