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Its the economy stupid !!!!


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I have stated I thought the debt ceiling crises was just a sideshow, but we were all transfixed with the slow motion train wreck which was unfolding before our eyes. I have been reducing exposure since the spring as I felt the QE2 fueled rally had lifted prices of all asset classes beyond levels that could be justified. It is now looking like the US economy is in fact contracting how much of this is very temporary caused, by participants sitting on their wallets because they wondered about getting their check or (cheque for the Canucks) next month is moot at this stage but I can assure you that I did not expect a resolution to result in the price of gold making a new high and the mkt making a new low.

  I was certain that the second Washington was not the focus eyes would once again turn to the bigger problem which is Europe. I have felt and still feel that Europe and the problems that are building there are much larger and have much more potential to cause gasp dare I say it "permanent loss of capital" The US bailed out the banks the risk was transferred to everyone through TARP and bailouts. In Europe its the govt.s which have the risks Germany France can not bail out the rest of Europe. I suppose China can do a little but no way is the US treasury going to come to the rescue. It seems to me that some real wealth is going to be destroyed and some largish banks will get wiped out and the fear of this and the solutions to this is why we are seeing gold trade where it is.

  I also believe that we will never see a secular bull mkt  in equities as long as gold is the asset which is getting the most love.

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