greetings from malibu thursday, page-33

Nova Star

I do not have a figure for a bottom in mid 2013, but if I had to guess it would not be 3100 as this would require very serious economic damage (international financial system woes/our exports to China to go cactus).

Basically I think our market would be affected by a downturn in the US market, which is due to have a cyclical downturn unless the Bernanke magic and continued govnut deficits can keep asset prices elevated despite a topping out of business profit margins and revenue, because there is PE multiple expansion. Some believe that very low Fed interest rates will result in people moving more funds into equities.

My expectation is that at worst the US will follow a Japanese style economic path where recessions are shallow and growth is muted. The US has an advantage over Japan in having food self-sufficiency and most mineral and energy requirements being (or could be) met from domestic sources. I think the US market could fall 20% to 30%, and our market may follow by a smaller percentage due to moderation by our economic reliance on exports to the Asian region where Japan and China are, or will be, stimulating their economies.

But depending on an a range of factors pretty much anything could happen so its best not to be wedded to one scenario but to be flexible.

I am fairly negative in the shorter term about the goldies, which is where I speculate. The POG is likely to remain range-bound for most of next year ($1400-1800) and continue to be negatively impacted by high costs, high taxes, continued lower demand for gold in India, lowish reported inflation in the US/China and by investors preferring to invest in dividend paying shares and real estate making a comeback (at least in the US). So goldies are probably going to be pretty cheap in mid 2013 and perhaps worth a punt from around August. Therefore I am mostly in cash and patiently waiting for developments to unfold. Commodity prices have peaked. The days of lots of goldie multibaggers in quick time are over unless the QEing around the world can generate more substantial inflation.

Voltaire has provided some charts which show a bottom in our market around June 2013.

loki