Gold soars, equities tank

My long precious metals / short equities play has worked beautifully.  The question is what will happen going forward, debt ceiling debates notwithstanding.  I have no idea what stocks will do, because if the USDollar plummets, and equity markets could meltup in nominal terms, investors could still lose in real terms, due to currency devaluation.  A sharp decline in equities could also give reason for the Fed to re-deploy QE.  Further easing could cause equities to rebound as a result.

Short-term, bond prices are rallying in a flight to quality.  Long-term, I view this as a huge mistake, as interest rates can't stay at these depressed (manipulated) levels forever--and US Treasuries are no longer "riskless" safe havens.   Of course, Japan has defied this logic for 21 years and counting, so one can never tell.  As Keynes once said:  ""Markets can remain irrational far longer than you or I can remain solvent."

Precious metals remain in a decade-long secular bull market, for reasons I've blogged about ad nauseum.  The bottom line is that a debt ceiling hike changes nothing with our structurally broken economy.  We still have a compounding debt problem, and raising the debt limit exacerbates the problem, even if it delays the end game.  The G-8 countries are overly indebted (with Germany the lone exception, however their banks have exposure to bankrupt sovereigns), and the competitive currency devaluation continues.  There will be no winners in this race to the bottom.

Be right, and sit tight.  I ignore claims of precious metals being in a bubble.  I let the weak hands exit for a "profit" and I buy the dips when precious metals correct.

See disclaimers in the side bar.

Disclosure:  long precious metals, and mining shares.  Opened a long position in TBT today, a double-short on 20+ Year US Treasury bonds.  Long DXD, a double-short on the Dow Jones Industrials Average.