The Chart du Jour

The Great Reflate

March 20, 2001

By, Barclay T. Leib

21 years ago this week, the "Hunt Silver Crisis" sent a temporary shudder through Wall Street. Silver, in just a matter of weeks, had plunged from over $50 an ounce to under $10, and the previous "Richest Man in America" -- Nelson Bunker Hunt -- was broke. Wall Street worried: Just how many banks and brokerage firms would he take with him?

That crisis came and went, and a few intervening metal rallies notwithstanding, the metals markets have never quite been the same since. How fitting it is therefore that 21 Fibonacci years to the week since the boys of the Comex placed their final death blow to Nelson Bunker Hunt (see this old PEI article I wrote for more details), the Bank of Japan has arrived pronouncing that they will print money until the people in the streets of Japan feel absolutely compelled to spend it (before it declines in value).

In no uncertain terms the BOJ pronounced Monday that their explicit goal is to make their consulmer price index register "stably a zero percent or an increase year on year." They intend to do so using all available resources of the Bank of Japan's current account balance, flooding liquidity into the system via the outright purchase of Japanese Government Bonds, and ballooning their own indebtedness.

This move has long been called for by various Western economic pundits, and long been resisted by the fiscally-conservative BOJ head Hayami. The shift is an important one to the global economy and markets. Undoubtably the Nikkei (and likely U.S. markets) will celebrate. In addition, and contrary to the obvious long-term debasement of the yen that this move will bring, the yen could actually rally in the short term (undoubtably bringing renewed dollar buying opportunities at a point yet to be determined now that our initial 122.60 target has been reached).

To the metals markets, the results should be far more swift and obvious: BUY. If Greenspan weighs in with a 75 basis point cut, BUY EVEN FASTER. It's all becoming ever so obvious: The governments of the world are going to print paper to solve their woes. That's no big surprise, of course. It's just that they're now not only doing it, but they're also actively telegraphing it.

Others such as Bob Prechter's Elliott Wave International may think gold's recent rally and decline is yet another wave 4 failed rally. But on this Fibonacci anniversary of Nelson Hunt's demise, we invite our subscribers to view our current "quickie" view of the XAU Gold and Silver Stock Index by clicking here. We believe both the Elliott and Fibonacci rhythm of this chart and the extrapolated target we point to have recently become exceedingly clear. Non-subscribers can gain instant access to this chart by signing up for a quarterly subscription to below.

Subscribers are invited to click here for immediate access to our latest in-depth article: "Measuring Financial Time: The Magic of Pi." The article is 10 pages in length, and in it, we touch upon two centuries of financial history. We also leave readers with our cyclical vision for the next decade, as well as a shorter term perspective of the NASDAQ 100 index for the balance of the year.

Non-subscribers are invited to sign up for a quarterly subscription below.

It also may be of interest to some as well that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.

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