Selling Long, Going Short and Buying Gold

Source: Thomas Kelly, Seeking Alpha  (10/21/07)

...let’s get down to where I am really putting my money–gold. I think we are on the verge of an incredible bull market for gold, based on the fact that the Fed has to cut rates in order to assure the sanctity of the banks...


...Finally, let’s get down to where I am really putting my money–gold. I think we are on the verge of an incredible bull market for gold, based on the fact that the Fed has to cut rates in order to assure the sanctity of the banks. The banks need low short rates or we may well see WaMu or Countrywide or someone else actually fail as losses continue to pile, and the Fed cannot let that happen. This confirms once and for all that the dollar is no longer fit to be the world’s reserve currency, and therefore, it will continue to fall as people look toward the euro and gold to take its place.

In addition, the dollar is going to be further plagued by the weakening economy. As I see it, the Fed has to cut on Oct 31st because a banking crisis is the nuclear apocalypse of economics. However, what people don’t realize is that the Fed is powerless to stop a recession because the drop in short term rates will not act to lower long term rates as well (and the 10 year is all that matters to save housing)...

The result of all of this policy will be that the euro probably goes to $1.50, gold goes almost immediately to $1000, and oil will probably spike short term above $100 (due to dollar weakness). While oil will then probably correct back down because of U.S. economic weakness, there is no reason to believe that the euro or gold will weaken after a rate cut. To the contrary, we could see gold assume leadership of the economic system, and that could push gold higher than anyone is currently willing to admit...

With my rant over the dollar out of the way, now on to where I’m putting my money. I am making a very big and broad bet on gold, and spreading my money across the sector in several different miners...

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