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September 22, 2005

Golden Article

Gold bugs were treated to one of the most bullish signs they could ask for yesterday: a pan by S&P analysts. The S&P analysts opinions on gold included the obligatory insipid comments such as, "In general, we think gold is a bad investment because it's very seldom that gold outperforms any other investment, like stocks or bonds," and "We believe the low level of gold prices in the late 1990s led to sharply reduced exploration, which we think will result in flat to lower production even if the metal price rises dramatically." Nothing like mixing up cause and effect.

The price of the illustrious metal fell back a bit in today's trading after hitting a new high of $475 yesterday. The other gold (the black, viscous kind that world economies revolve around) also pulled back slightly today. It seems a lot of fear has already been built into oil prices ahead of Rita's impact. Coupled with my belief that oil reached an intermediate-term high in the wake of Katrina, it seems to me that oil has the potential to fall through the floor should the damage of Rita turn out to be mitigated.

Turning to equities, the market's were quite bouncy today. We saw a couple large swings, relatively speaking, and the indices finished well off their lows. From a technical standpoint, this could portend an impending bounce. Regarding specific industries, homebuilders got a little wind in their sails following the earnings report of KB Homes. Several of the homeys were up more then 3%, and KBH tacked on 4.2%. One earnings report does not shift my belief that the gig is up for the homeys, though.

Two other recent dogs, Dell and Wal-Mart, caught significant bounces today in their very oversold states. Though I'm longer-term negative on these companies, I think they could "correct" a little here, so I opened small long positions. I would like to emphasize "small." I generally don't like trading signals that are contrary to my fundamental analysis, and when I do, I keep the trade sizes down.

Disclosure: Long DELL, WMT

 

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