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         Daily Blog - Tiger Software

                            September 13, 2007

        The Coming Dollar Collapse,
                     Gold and Interest Rates

William Schmidt,     - Tiger Software's Creator
      (C) 2007 William Schmidt, Ph. D.  - All Rights Reserved. 

      No reproductions of this blog or quoting from it
      without explicit written consent by its author is permitted.

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See earlier related Blogs here:  
                August 27, 2007       Technical Resistance Has Many Meanings:  Recognize Them And Profit.
                August 9, 2007     China Now Controls America's Financial Destiny
                July12, 2007  US Dollar's Decline Is Getting Serious
                July 3, 2007   British Pound Makes A 25 Year New High And Poses Dangers for The US Stock Market
                July 2, 2007 Where Are The US High Tech Jobs Going?
                June 28, 2007   Housing Correction Continues.  No Bottom In Sight, Yet
                June 24, 2007   The 1929 Crash: Could It Happen Again?   Yes- Absolutely.
June 14, 2007  Ending The War in Iraq Would Be Bullish.

9/13/2007      The Coming Dollar Collapse, Gold and Interest Rates

                    Yes, this is a scary headline.  But if you google "Dollar Colapse" you get dozens and
           dozens of links to investigate.  Since writing a dissertation on the British Chancellors of the
           Exchequer at Columbia, I have thought about this subect over and over.  I do commend to
           you one link from an author, Samuel Brittan, whom I read while writing my dissertation.
           And, one final thought, no one in Germany in 1920 expected the Deutsche Mark to become
           worthless in 4 years.  But it did.  And the consequences were grave.

                                                                      My Thoughts

                    Down rushes the US dollar.  Bush's trillion dollar Iraq blunder continues. Congress
           lacks the will to stop this costly tragedy.  And American jobs keep leaving the country.  Meanwhile,
           the Fed is under massive pressure by banks, home builders and mortgage lenders for rescue.  Only
           the World bull market keeps the US from slipping into recession.  So, what can you do in this
           environment to make money.   Buying gold stocks is certainly one time-tested approach.  Another
           is buying oil stocks, and another is buying Biotechs, which are more resistanct to recessions
           and the initial onset of a bear market. Will there be a massive liquidity crisis that takes down the
           value of all liquid assets, gold and gold stocks included?  That is what we started to see in August,
           until the Fed came to the rescue.  These are subjects Our Hotline discusses each night.  Here we
           want to focus on Gold Stocks, but first consider the Dollar's steepening decline.

                                                               The Dollar and The Euro
                                 These charts do not show very big drop in Dollar in last two days.

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                  There is mounting evidence that foreigners are increasingly unwilling to buy US debt.  And why
          should they continue?  They are compensated with interest rates of 6% while the US dollar
          declines at a 6.8% clip.    The chart below shows that Central Banks have recently dramatically
          increased their selling of US Treasuries.  This means the Fed will have to "print money" in ways
          we can't imagine, if they want to shore up the economy and the stock market until after the
          2008 Presidential Election, as history shows they are want to do.   Bernanke in 2003 reportedly
          said he would have dropped tons of freshly printed greenbacks in the 1930's to have prevented the
          Great Depression.  Much of his, and his mentor, Milton Friedman's,  academic research was
          on the monetary mistakes made between 1928 and 1933.

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                                                              How To Trade Gold Stocks

                  Tiger's Automatic Buy and Sell Signals have done particularly well with XAU, the Gold Stock
          Index.    $10,000 invested in their Buys and Sells would have brought a profit of 118.7% in the last 11
          months.   This does require short selling.  If short-selling were not done, the gain would have been
          57% when  taking the signals at the next day's opening.  TigerSofts charts calculate this for any stock
          you want.  It allows $40 per trade in commission and "slippage".  Simply trading the long side would
          have produced very good gain in 2005-2006, 40.6%.  If you read further, you can see how a trader
          might know when to shift from a trending market to a trading market.  In the current situation,
          we will know to shift to a trending approach when the XAU makes a decisive breakout above
          160 and Gold Bullion makes an all-time high above 725.  In the meantime, we now have an
          automatic Sell on the XAU, though I would personally want to wait long to sell out gold stocks.
          The dollar is profoundly weak.   With interest rates being lowered by the Fed, it will be harder
          and harder for the Treasury to sell its massive debt to pay for Bush's Trillion Dollar Iraq War. 

                 The XAU has been trading essentially sidewise for since January 2005.  Tiger's Automatic
          Buys and Sells sense this and produce signals appropriate for this type of stock behavior.

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                     From March 2006 to December 2006, Tiger's automatic signals would have
             gained a trader 65.4%, or 40.6% only buying and selling.  This sues the next day's
             opening price.

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                            In 2004 the XAU was in a strong uptrend.  We can see this in any ways. 
                 But look at the ITRS indicator at the bottom of the chart below.  This shows how
                 well the XAU is doing versus the Dow Jones Ind. Avg.  Until March 2006, it
                 has been steadily positive.  A SIMPLE way to trade a market or stock like this,
                 is to buy the stock when it is above a 20 or 21 day mvg. avg.  That would have
                 gained 57% between July 2004 and March 2005.

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         Gold is fast approaching its 1980 peak at $725.      

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                              Trading the Fidelity Gold Fund with TigerSoft

           TigerSoft signals here would have produced an 88% gain since November 2006.

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                                                                Gold Seasonality

            A peak in October, a shallow decline into November and then a year-end rally are what seasonality
      would lead us to expect.

                                      30-year Study by seasonalcharts.com

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Adam Hamilton on Gold Seasonality

    "Seasonality also exists in gold. There are times of the calendar year when
gold tends to do well and other times when it does not. Although there are many
varying reasons for this phenomenon around the world, the most famous example
of gold seasonality has to be the Indian wedding season.

    "Indians have a deep cultural affinity for gold, so in the autumn India's farmers
tend to invest their profits from harvest in gold. But even more gold is bought
for the Indian weddings that happen late in the year during festivals, mainly
in October and November. Something like 40% of India's annual gold demand
occurs in this short period of time. Wedding gold is often in the form of intricate
22-karat jewelry that the bride's parents give her to secure her financial future
and financial independence within her husband's family.

    "Just as wheat traders use wheat's seasonality to help them make trading decisions,
gold and even gold-stock traders can use gold's seasonality. With gold having definite
seasonal tendencies at different times during the calendar year, investors and speculators
can study it to better understand when seasonality helps or hinders their probabilities for
success in launching new trades."
http://www.321gold.com/editorials/hamilton/hamilton071307.html )
















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