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May 20, 2005

Sweet 16

Intel stock has performed a feat over the passed three weeks the likes of which I have not seen before. It closed today above its opening price for the 16th consecutive session. Other high-profile tech stocks such as XM Satellite Radio, Yahoo, and Research in Motion have undergone similar run-ups recently. With action like this, who has time to pay attention to gold, currencies, and macro-economic data?

Well, anyone who cares enough to protect their assets, for starters. It is interesting to watch gold bears claim victory because of the recent price decline and in the face of macro data that should scare people into precious metals more than any time in this country’s history. On the heels of deceptive inflation numbers, our Federal Reserve has kept interest rates artificially low, thereby inflating the money supply.

Also, recent figures published by the Treasury show a dramatic increase in U.S. bonds held in Caribbean banks. It is widely professed that these purchases are being made by hedge funds, but in an article publish today on, Rob Kirby makes a strong case against the hedge fund argument and instead implicates monetization by the U.S. government. It will be very interesting to watch and learn which postulation is correct. Should the monetization theory be correct, we could be looking at a new round of bubble creation or, if some sort of international financial calamity pops the bubbles, at a flight to quality, which I believe will be into traditional stores of wealth like precious metals.

Disclosure: Short Intel, XMSR, YHOO, RIMM


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