I could be wrong once again here, but watching the U.S. Equity Markets makes me twitchy. The trading appears about as synthetic as it ever has since active and overt intervention began several years ago.

990N inhaling future contracts on the SPX bid is not a sign of strength, but one of extreme desperation.

All of the triggers I had lined up for an explosive move in Gold & Gold Shares have occurred, yet they have had little or no Price impact.

Liquidity is abundant, but is primarily being put to use in the Financial Economy to keep the House of Cards from collapsing.

Dislocation and disaster are ignored, deeply rooted in the mindset of not wanting to know, a cultural phenomena of epic and unparalleled denial in modern history.

The crosscurrents are certainly abundant. Big Oil is under accumulation, yet crude remains under extreme pressure as though the tipping point will be $50.00 crude.

Cost of Credit (aka Money) is dysfunctional at present. Making sense of the Yield Curve through conventional Financial Metrics may prove to be an egregious error in judgment. The Yield Curve flattened further as Q4 GDP came in weaker than expected. The long end of the Curve rallied in price flirting with the 115 level, causing further compression, while the short end continues to wait patiently for today’s Fedspeak @ 2:15PM EST.

The unbalanced accounts of the United States continue to reach proportions of absolute and unimaginable consequence to this observer. Witness the unfunded liabilities explosion in 2004’s Financial Report of the United States Government to “Social Insurance.”

This weekend’s G7 meeting will likely set the tone for the coming year, as our partners in Credit Bubble maintenance ask just what in the hell is going on over here the land of perpetual Bubbles.

I have little doubt what Finance Ministers in attendance this weekend will be asking one another as they consider the degree of exposure to these compounding risks within the United States.

Is the Dollar worth saving, or even perpetuating?

What is the value of actual collateral inside these inflated Bubbles, in particular the largest Bubbling of Capital Stock, Real Estate?

Should I continue placing our Nation’s reserves and financial system at risk?

And, what am I going to do with all these Dollars?

It would appear Gold; the physical metal will be catching a bid in the short to intermediate term. As for the mining equities, they are suspect at present until proven otherwise.

They are denominated in Dollars.

This entire year appears to be a setup so far, one constructed to move capital towards bonds away from alternatives, including gold.

Watching at this critical juncture may prove to be prudent.

It is difficult for the Gold Bull to accept Gold & Gold shares heading in opposite directions for a period of time, but cash, where it is needed, isn’t flowing.

And that is not a positive for Gold, not just yet.

It certainly will be, but caution is warranted here in my opinion.

© 2005 John Mackenzie
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