Also, yes, my comment contained links. But it’s not showing up

Yeah, oil should do well long-term because production has peaked, but in a crisis like this you want the best liquidity, and that means gold. You can use your gold to buy oil and other assets when things get really depressed.

Gold does act like money, so yes, it should go up against other assets in deflation. When I talk about being bearish on it, that is only short-term and from a trading perspective. It could even rise more against the dollar in deflation, if more and more people perceive and panic about the risk in holding fiat currencies or get more afraid in general. There isn’t that much of it to go around, so sure, a major shortage could develop. I just think that these concerns have been very strong for well over a year now and that gold needs to take a breather.

The comment I mentioned is from this mornings: July 21st, 2009 at 6:57 am

I see no comments awaiting moderation. When is this one dated?

PS: my previous comment still is marked as “Your comment is awaiting moderation.”

We could of course already be rolling over, in which case the past week was just a short squeeze to clear the way for a sustained decline. Or we could bounce in the 850 - 970 range for a while and make no headway up or down for several more months. Who knows?

The market has such a range of possibilities now. The bubble mentality is still alive, as evidenced by the PE (well over 100, going on infinite, since trailing 12 month earnings will be negative after this quarter) and dividend yield (currently 2.6% on dividends that must be slashed by >50% in the next couple of years). So long as investors care nothing for fundamentals, there is not much holding the market down, but because fundamental value is to be found only so much lower than today, the declines from here could still be mind-blowing.

I think value won’t be approached until we have at least a 5% yield on (and I’m being optimistic here) $15 of dividends for the S&P500. That is the 300 level, though pessimism and government actions that worsen the depression could drive prices much lower still. We are still in the middle stages of this bear market and early stages of the depression.

Markets are mad, I’m a bit annoyed: a new-new ear. What do you think?

PEJ, I buy a mix of strikes — deeper OTM when the VIX is low, NTM or ITM when I think the risk of market advances is higher. With a sub-20 VIX, I’ll be buying OTM. At times with a very low VIX and a strenuously overbought market with weak internals, I will even look at expirations of 12 months or less.

I try to sell into the final declines of intermediate degree downdrafts. I sold most of my 2010 puts last October, November and February. If, for instance, we were to fall to SPX 400 by next summer, and the market was starting to look oversold, I would be getting out of 2011 and 2012 puts, even though my final bear market target is much lower.

PEJ, my own opinion on oil and PM is pretty clear: when this corrective bounce ends, they should resume their major decline and make new post-peak lows. I still think gold could fall to 700 and oil to under 20. Aki, I agree, the gold short is in general not so great a trade relative to equities, but the shorter-term set-ups can be attractive coming off these hyperinflation panics.