Back in mid Jan on the AHS msg board, I warned about the implications of the Cyprus bailout. Again, in late Feb I warned of a bank run. Given the terms of the "bailout", which is really a "bail-in", over the weekend, it will interesting how much of a bank run will occur in Cyprus and other Euro-zone non-core countries.
Given the continuing problems in Europe, just about all banks are under capitalized, other "bail-ins" should be expected in the coming months/years. I would also expect the same in the US when Treasuries move 100-200 basis points higher, in a short period of time, leading to tremendous losses at US banks-which will need to be re-capitalized with depositor money.
For investor implications, I would expect a strong $ this week vs the Euro and lower gold/commodity and stock prices as the process is deflationary. Which is according to my plan-often quoted in recent weeks/months on this and the AHS msg board. I suppose the "wrinkle" in my view would be for the markets to anticipate more or the promise of more QE, immediately, as the policy response.
There is talk that Russia will come in and bail out Cyprus for all its NG rights. Should that occur, I think it reduces deflationary downside risk-net net bullish for gold. My first buy is ABX, then GG.
Commander you have been prescient and generous so we keep calling on you. Re NG, how do you see the gas/coal dynamic unfolding for the rest of '13? Eventually regulation will seal the deal in favor of NG of course, but what about the short term?
W/R to NG, I'm tempted to take some profits if/when NG hits $4.05-$4.10. Since mid Feb it has rallied $.80 from $3.13, so a 50% pullback to the $3.50 area is my expectation. At that time, if I am correct, I'll replace inventory and buy net more as I expect NG to get to $4.50 sometime in 2013.
I pick $4.50, because at that price, the vast majority of producers can cover their all-in costs and still make a decent % profit. Longer term, winter of 2013-14, if NG gets above $5.00 and the rig count gets back over 500, then I will look to sell most of my positions as the reward/risk ratio there is fairly equal.
Of course, if there are supply disruptions (hurricanes) and/or favorable legislation (anti-coal and/or pro NG vehicles for example) then I will hold for $6 on NG.
I thought of you as soon as I saw the headline about the run on Cyprus ATMs. Once again you are on the money. The stock market has been going up, but I believe your take on the entire situation will play out. Im looking to purchase gold/silver on a future dip. Thanks again for all your analysis.