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Sunday, May 2, 2010


I'm going to start off by stating that I don't think Bernanke is going to "get away" with the insane monetary policy he's chosen.  Printing trillions of dollars, cutting rates to zero, trying to manipulate the bond market and generally tampering with the natural market forces is going to have consequences. 

There is a price that will have to be paid for this madness. Just like there was a price we had to pay for Greenspan's reckless attempt to avoid a recession when the tech bubble burst. Greenspan certainly bought some time and a brief period of illusionary prosperity. But he did it by creating a housing and credit bubble. When those burst as all bubbles do, the fallout was much worse than if we had just weathered the recession to begin with.

Ultimately all of Greenspan's and Bernanke's efforts have just loaded the nation with a monstrous debt burden that we will never be able to repay and soaring unemployment that isn't going away anytime soon.

Now I’m afraid Bernanke has probably let the inflation genie out of the bottle with his reckless actions. That means surging commodity prices. The fact that almost all commodities resisted the stock market decline on Friday is an ominous warning sign.

Both heating oil and gasoline broke out of recent consolidations on Friday despite huge selling pressure coming off the stock market.

It now looks like we've probably seen the cycle low in oil.

If oil follows the gasoline and heating oil markets to new highs (and I think it will) I'm afraid we are going to get a strong surge higher. And if we did just see the cycle low a few days ago this push could last some time as the average cycle in oil has been running roughly 50 days trough to trough.

Gold has also broken above the recent resistance level with follow through this time.

Gold is also early in its daily cycle so we could see a strong push higher here also. I'm expecting gold to at least test the highs during this minor cycle advance. And I'm leaning fairly strongly in the direction of a C-wave continuation for the reasons I outlined in the weekend report for subscribers.

Keep in mind that all this is progressing despite a strong dollar. Of course that is just an illusion. It really isn't possible to print trillions of dollars out of thin air and have a strong currency. The dollar just appears strong because the currencies it's measured against are exceptionally weak right now. The relentless rise in most commodity prices reveals the truth about the dollars value.

We are now on the verge of a surge (maybe a huge spike) in inflation.

I think Bernanke is about to get served notice that he didn't fix anything. All he did was create a much bigger problem. Unfortunately you and I are the ones that are going to pay for his mistakes with higher taxes and much higher inflation.


  1. TIPS signalling the same thing

  2. Gary - You are suggesting an inflationary surge by looking at the prices of commodities. But look back to 2007-2008. Stocks peaked in October of 2007 yet commodities kept running till the summer of 2008. Oil hit its peak in July of 2008. Stocks were already down 20% from their peak by then. How do you explain that ?

    Bernanke was pumping money into the system yet stocks were dropping and all the excess money was flowing into commodities.

    You are saying all assets will get a lift from Bernankes loose monetary policy but it didn't last time around. Couldn't we see a similar scenario where commodities get a boost till mid summer while stocks drop and perhaps the bottom starts to fall out in all asset classes by fall. We may then get that once in a lifetime buy opportunity in Gold perhaps in the 800s before it runs to 2500-3000 in 2012-2013.

  3. Eventually spiking oil will collapse the economy again just like it did in 08. But I think I would wait till it actually happens before positioning my investments towards deflation.

    In regards to gold I think you need to take a good hard look at a very long term chart. I think we've seen the last of sub $1000 gold for the rest of the duration of this bull...maybe the last of sub $1100 gold.

  4. If you think inflation is about to happen, that means house prices are no longer going to fall, and have corrected.

    You cannot have falling house prices in an inflationary environment. Same with wages. You cannot have declining wages in an inflationary environment.

    I don't see wages going up any time soon. Nor do I see house prices going up.


  5. LOL What do you think we've had for the last year?

    Virtually all commdoties have been rising some like oil and gas almost 200%.

    The stock market has risen 83%.

    We most certainly can have rising asset prices while housing falls and wages stagnate.

    Reality is kind of making a mess of the deflationary theory.

  6. One day, equities and commodities diverge for one day and it's a warning sign of a catastrophic economic event?

  7. I can buy a 400K home for 200K, how is that inflationary? Where is the increase in wages? You are confusing distortions in the market with inflation.

    I just saved $200K on a house, and you are saying that extra $1000/yr you spend in gas is inflationary?

    Look at Zimbabwe and Weimar. People were making boatloads of money. It wasn't worth anything, but they were still making boatloads of it.

    I don't see anyone making boatloads of money.

    Interest rates are @ all time lows. If you call this inflationary, what did you call the 70/80s?

    Answer this one question, How can you have declining house prices and wages, in an inflationary environment.

    Until you answer that question, your inflationary argument has a hole in it.

    You are confusing market distortions, with inflation. All that extra money is staying in the circle of the banks. Until it gets in the hands of the people, it's not inflation.

    Do higher commodity prices suck? yes. But, that doesn't mean it's inflationary. It just means there is a market distortion (which I also believe is created by Ben).

    So, although I belive Ben is respoinsible for these higher commodity prices, that doesn't mean it's inflationary.

  8. Hmm all that money is leaking into assets especially commodities. That is inflationary.

    Just because there is an oversupply of real estate and high unemployment that is holding down real estate and wages obviously is in no way keeping liquidity from finding it's way into other sectors.

    Like I said reality is putting a serious dent in the deflationary theory.

    If you buy into the deflationary nonsense then short oil or gold or silver or copper. Hell you could even short real estate prices. Which by the way are rising in Las Vegas, one of the hardest hit areas in the country.

    I will warn you that anyone following this course has lost their shirt. So I'm not really sure I would be willing to back a flawed theory with real money.

  9. You still haven't answered how you can have declining asset (housing) prices in an inflationary environment.

    All you did was state we have an oversupply.

    Well, we have an oversupply of Oil/Gas, yet those prices are going up.

    State one example, in the history of the world, that had inflation, with declinging house prices and wages.

  10. LMAO That one is easy the USA in 2010.

  11. "Hmm all that money is leaking into assets especially commodities. That is inflationary.

    No, that is a market distortion.

    Yes, it sucks, but it's not inflationary. All that money (credit) is still sitting in the banks.

    Until it gets to the people, it's not inflation.


  12. "LMAO That one is easy the USA in 2010."

    So, you believe this time really is different.

    You still haven't explained how you have declining house (asset)prices in an inflationary envionment.

    All you are doing, is identifing a bubble, and calling it inflation.

    By that same description, we had inflation in 2000, when the nasdaq was at all time highs. Obviously we *HAD* to have inflation, because the Nasdaq was @ 5000.

    If you take a step back, you realize that what you are calling inflation, is high oil and gold prices.

    You still haven't answered the question.

    How can you have declining house prices in an inflationary environment?

    Oh yeah, you just said, this time is different.


  13. Gary are you Toby Connor or did he copy your commentary?

    This posted on Safe Haven:


  14. No that's inflation. You can try to name it something else but all of us have to pay $3.00 for a gallon of gas. Gold is still over $1100 whether you want to call it inflation or not.

    Oil is still 150% higher than it was a year ago. That is still inflation no matter what you want to call it. And it is happening in spite of oversupply. The reason is too much liquidity. That liquidity is finding it's way into asset markets.

    Inflation has nothing to do with real estate pricing or wages. Inflation is an increase in the money supply. That we have in spades and it is causing inflationary pressures in the commodity markets and in most asset markets.

    You can label it what ever you want but that doesn't change the fact it's happening.

  15. Maybe you can't see the truth. We don't have declining housing prices. We have rising housing prices. Accounting rules have been changed banks no longer have to mark to market. They can hold on to bad loans, take free money from the government and put it to work in the aset markets and get a decent return.

    They don't need to make loans. As a matter of fact it's probably stupid for them to make loans in this environment. Why risk capital loaning it when you can get a risk free return just buying treasuries or a much greater return by putting it to work in the commodity makrets.

  16. "Oil is still 150% higher than it was a year ago. That is still inflation no matter what you want to call it. "

    No, that's a bubble.

    Does it suck? Yes. If it's inflationary, where are the higher wages?


  17. Well it can't really be a bubble if it's not even at new highs, but like I said you can label it anything you want we all still have to pay for it and it is still caused by the Fed inflating the money supply.

    A rose by any other name is still a rose.

  18. The famous stock market bubble of 1925–1929 has been closely analyzed. Less well known, and far less well documented, is the nationwide real estate bubble that began around 1921 and deflated around 1926.


  19. No certainty on what happens next, BUT...

    1. Housing costs represent about forty percent of price indexes by far the largest component.

    2. The cost of labor is far more significant in the price of goods and services (energy excepted) than commodity prices.

    3. Despite your repeated claims of "printing trillions and trillions of dollars," money supply is not expanding.

    4. Until labor costs start to rise, it ain't (price) inflation.

  20. You can continue to name it what ever you want but the fact remains that despite stagnate wages virtually all commosity prices are rising, some like energy at increidble rates.

    Reality proves the flaw in the deflationary theory.

    You can continue to delude yourself as long as you want but I have to go with what I see actually happening.

  21. Besides, 'anon', if commods are going up in this supposedly deflatioanry environment, just image what they'll do when the excess liquidity hits the people (inflation), as you say. Nothing but higher prices for gold/silver, etc.

    So the label is not nearly important as the result...higher prices either way!

  22. Gary,
    I read several articles including this one http://www.groenewegenreport.com/?p=287
    that have a theory that gold will sell off as a result of the unwinding of carry trade. (see excerpt below) but that will only provide a new buying opportunity for gold. It seems reasonable. Assmuming you believe this could happen, any idea what the timing would look like? (I know this is somewhat of a stretch but all possibilities should be considered.)

    The unwinding of the carry trade will mean that all asset classes will be sold off and that investors will have to cover their short positions/borrowings in US Dollars. The US Dollar will strengthen for purely technical reasons and not fundamental reasons; moreover the US economy is in shambles. Barring some extreme circumstances, i.e. an Israeli attack on Iran (the Russians have announced that they will start the Bushehr reactor in Iran this summer), we believe gold will also be sold off initially because of its inverse correlation with the US dollar and the need for redemptions. And when the technical strengthening of the US Dollar reaches its peak, investors will wonder why they hold dollars considering the bleak economic circumstances in the US and will likely switch massively back from US Dollars to gold.

  23. Gold may or may not be due a B-wave decline. I really doubt it will drop below $1000 ever again during this bull market and I have my doubts it will even go below $1100.

    But the US economy is hardly in shambles anymore. Profits are picking up. Just go to any mall or to any resturant and it's obvious people are spending again.

    Anyone trying to say the economy is in shambles is just flat ignoring reality.

    Granted it's a phony prosperity bought on the back of government stimulus and liberal printing press money but it's still real for the time being.

    There will be a price to be paid but I don't think the bill is coming due just yet.

  24. I never said we had deflation. I don't know what we have, but it's not inflation.

    I ask you to explain 2 things:

    a)How can we have falling housing prices in an inflationary envionment


    b)how can we have declining prices.

    Your only replies are:
    a)This time it's different
    b)gold is going up and oil is going up (with a few other commods). Therefore we must have inflation.
    c)The banks are buying commodities, therefore it's inflationary.

    You're the one claiming inflation.

    I'm asking how. I never mentioned deflation, you did.

    You write an entire post, claiming inflation.

    You keep repling, but yet refusing to answer those 2 questions.

    You try to chuckle, and side step the post, with LMAO, but all that is, is a juvenile reply.

    If it's so obvious, I'm missing something, explain those 2 points.

    I'm not dening energy prices are going up. I'm not dening gold is going up. Where did I do that in any of my posts. You tell me to look at the preivous year. I never denied it.

    You're the one calling it inflation. Now you claim it's really it's just "banks buying commodities". Again, I agree with that. It's the "therefore it must be inflation" part, I don't agree with.


  25. I guess I would have to ask were it's written that we can't have inflaition unless real estate is rising? That just makes no sense at all.

    We obviously do have inflation despite stagnate real estate prices.

    For some reason your definition of inflation means rising real estate.

    My definition of inflation is an increase in money supply. The symptom is rising prices which manifest mostly in the commodity & asset markets.

    So I guess if you want to manufacture your own definition of inflation you can convince yourself we don't have it.

    That still doesn't change the fact that we do have a huge increase in money supply and we do have rapidly rising asset markets and commodity prices.

  26. My contention is that:

    a)You cannot have falling house prices in an inflationary envionment.


    b)you cannot have falling wages in an inflationary environment.

    I'm not saying that inflation is defined by housing prices.

    "So I guess if you want to manufacture your own definition of inflation you can convince yourself we don't have it."

    Your entire post is about rising energy prices and gold causing inflation. You are manuacturing your own definition of inflation.

    Now you clain its money supply.

    You never even mention the word money, let alone money supply in your post.

    Now, if you want to write a post about money supply, and how it is increasing, leading to inflation, that is different.

    I don't agree with your claim of [energy and gold is going up, therefore we have inflation] premise.

    Again, I'm still waiting for the reply to my 2 questions:

    a)How can we have falling housing prices in an inflationary envionment?


    b)How can we have declining wages in an inflationary environment?


  27. Gary, what do u see higher mining tax on mining companies since the aust starts this first round to win elections? It sure impact the stk price of mining companis in aust. But, they don't have the bad bankers here to blame first.

  28. Gary:
    I don't believe you're making sense on the inflation thing. Rates are rock bottom, yet we hardly see any 2007-8 action in the base metals and energy, etc. Real estate price indexes are also way below where they were at that time.
    "sp" is making some good points, and I don't see you strong on the money supply side of the discussion. You hardly touch on that.
    With regards to gold, I think a lot of us on this blog believe its going up for the next several years regardless of what happens to money supply.
    But I really don't see a cogent argument on your part with respect to what's going on with money.

  29. Gary-

    Your call Friday of this channel's death was a bit premature. A bit of a fake out as we closed the day back in it and now appear to be heading back to mid-channel support. I'm targeting 435-440 zone to see if we can gather support. If we are about to get B wave down, I think the 410 zone will hold up fine.


    That being said, I'm going the physical route for the large % of my positions and will trade a smaller piece as well as "buy and hold" some of my favs once we a brief pull back.

  30. I don't think the US is going to accomplish anything by raising taxes on miners. Most of them aren't making all that much money :) And it's a pretty small industry here in the US.

    We are getting nowhere at this point. You insist on including rising real estate prices (which we have here in Vegas) and rising wages in any definition of inflation. I use the standard definition which is an increase in money supply leading to rising prices. That doesn't mean all prices across the board must rise.

    Inflation is leaking unevenly into different sectors.

    In early 08 we had falling housing, falling wages & a falling stock market but that still didn't stop all the liqudity the Fed was pumping from finding it's way into the energy markets that created an inflationary storm that put the final touches on destroying the global economy.

  31. by 2007-8 action, I mean, prices for the most part have a ways to go before we get all hysterical about inflation...

  32. K,
    If you are going to require that price be at 08 levels before you admit inflation then yes we have no inflation.

    I realize that price will never just "gap" up to that level. They will have to work their way higher.

    That's the symptom of inflation, rising prices.

    Virtually all asset prices are following this defintion and have been for over a year.

    Here's what I think should be evident. Energy costs for everyone have increased dramatically over the last year.

    Health care costs have increased sharply over the last several years.

    If I eat out the cost of an average meal at almost any restaurant has risen 20-25% from several years ago.

    The stock market has exploded since March 09.

    It is clear to anyone who has to live in the real world that the Fed's monetary policy is creating asset inflation and commodity inflation.

    I don't think any amount of monetary expansion is going to overpower the massive oversupply in real estate and labor. So money just isn't going to flow into those two areas. It's going to flow into the areas where it will be treated better.

    That is what's happening unless I'm just imagining all these higher prices.

  33. Jay,
    Here's my question. What do you do if today is just a normal pull back after four powerful up days in a row? What happens if tomorrow miners explode higher for a 4-5% gain? Let's face it the HUI isn't even below the 10 DMA yet.

    At some point one just has to quit letting the short term control their emotions and go with the secular trend knowing that drawdowns are inevitable. It's just the price one has to pay to reach strong hand status.

    But in your case I think going with physical is a very smart choice. You won't be nearly as tempted to sell on every little correction. I also suspect you won't even be tempted to sell on a big correction.

    Physical will probably make it possible for you to ride the entire bull to completion. And that is the goal. So whatever one has to do to accomplish that goal then go for it.

  34. Gary:
    I hear you, cost of living is higher nowadays, but I imagine in a lot of countries, Dubai, for example, the crazy real estate collapse has been great for people who still have jobs and no significant debt (think bubble-era mortgages).
    In Dubai, and the UAE as a whole, everyone is literally on the move, exploiting the significant collapse in rent.
    All I'm saying is some kind of similar dynamic likely is at work in other regions that experienced housing bubbles.
    People may have a surprising amount of money to spend, i.e. more than what is generally thought.
    I've come across numbers that suggest that even with the spike in energy that consumers probably have more to spend than they did a couple years ago.
    The "inflation trade" was in vogue a few years ago and in full force in 2008. Those who made investment decisions based on fighting inflation, on advice of many gurus and financial companies, got taken to the cleaners if I remember correctly.
    Back then, it was said that the Fed was not tightening fast enough, as suggested by the likes of Faber and Rogers. The Fed was stuck at 5.5 while CB's like Oz, NZ, Canada, Europe, Bank of England were lifting rates.
    Final thing I want to say is this: After Japan's bubbles collapsed in 89, for several years the no-brainer trade was to short JGB's. How much did the pro's lose on that trade?
    People are calling the end of the the Treasuries bull market, but it might be too early, you never know with these things.

  35. Residential housing is an extremely leveraged asset. In 2004-6 the leverage approached infinity. In many markets with high "intrinsic demand" the prices have not dropped. But it's definitely government programs that are supporting housing. Areas that have the ~720k conforming mortgage cap see strong demand below that price point. For example in the DC area.

    When the bond bubble bursts then housing will see its next leg down. We would need something approaching hyper-inflation to lift housing prices without government support. Printing money by itself is not enough; you need artificial conduits like FHA, Fannie and Freddie.

    As Gary points out, monetary inflation leaks out into the economy in different ways. Houses prices and oil are very expensive on a historical long term basis but far below their 2006 and 2008 respective peaks.

  36. I think the ultimate outcome is not necessarily an "inflationary" event more than a crisis in confidence in government debt, fiat currencies, bank failures (driven by more massive losses to come in the CRE and housing sectors), sovereign defaults...They will try and paper it over, but the overwhelming force of the debt exploding will render the efforts useless. I think the desire to be in tangible assets like gold and silver will become a feeding frenzy. Real Estate is toast and nobody wants to catch that falling knife as far as investments go. Gold and silver being such small markets will see major moves even as globally people in various defaulting countries move in "save havens"...even it's just a small % of the people. This is a global crisis of confidence in government backed debt.

    So, yes housing deflation (credit backed assets), asset inflation based on fear of imploding government debt. That's the long term play.

  37. Utter nonsense. TIPS have not signalled anything for years.

    Copper, Brazil, China and gold miners have and they are down on the year.

    This year is the year of Dollar Thrifty Group. Hardly an inflation play.

  38. Anon 10:13 AM:
    I was thinking the same thing about TIPS. Good point about the other "real" signals like Brazil and miners.
    I remember a few weeks ago when I thought DTG was "expensive" at 23.
    Then thinking that at 43 the stock was "finished".
    Lo and behold, 15% up today above 50 bucks a share.

  39. Actually miners are not down for the year they are up 6.8%.

    Anyone can pick a mandatory point to start from and come up with the answer they are looking for.

    Let's see how about from March 2000. The stock market is down 22% while miners are up 468%.

    Buying and holding a secular bull market would have been very good to an investor while buying and holding a secular bear market wouldn't have quite the same effect.

  40. Copper is also not down on the year.

    From the 09 bottom copper is up 161%. One must allow for consolidations from time to time. If you decide to measure from the top to the bottom of a consolidation you can certainly make the data tell a story that just isn't there when you look at the big picture.

  41. TIPS? They are indexed to official CPI. So you are telling us that CPI data does not signal inflation. So what?

  42. Hello fellers
    One change today in that thar tradin account is I shorted some yeller junk at the close...1184 ish...believe me wit a tite stop!...cant bi sew i sell...would much rather bi but cant rite now...all else the same... go buck to 85 then outa here wit the dawler...i am getttin nervouse wit mi short oirl trade...87.5 stopps...

  43. OK copper and miners are down from the levels that the Jan correction began from.

    You say we are on the verge of an inflationary surge. Therefore , copper, gold stocks, and emerging mkts are a GREAT BUY HERE TODAY.

    You have laid out a marker from here, right now.

    What these assets did from 2000 is not the point.

  44. Yes I think they are a buy at this point. Actually I'm about as certain as it's possible to be that gold is a buy at this point.

    Why? Because it's in a secular bull market. Does that mean it's going to head straight up tomorrow (I suspect this is what you require)?

    No of course not. Gold could enter a B-wave decline and I'm sure you and virtually every short term trader in the world would come on here and point out how wrong I was.

    The thing is I won't be wrong because gold will recover from a B-wave and go on to the next C-wave, maybe several C-waves before this is over.

    If one requires perfect short term timing then I have to point out that it can't be done on a consistent basis by anyone. So I don't try. All I want to do is ride the bull and if that means from time to time I have to twiddle my thumbs for a while then so be it. It's a small price to pay for the huge reward that can be had investing in a secular bull.

    All four of my requirements have been met I want to be long.

    I'm certainly not going to sell either gold or the stock market. I'm not an idiot. It is a bull market after all and the 200 DMA is rising. Only someone with a death wish would short either one of these markets.

    Like I always say there are two acceptable positions in a bull market, long or cash :)

  45. OK. This is a great long term buy point for these assets. Mark it down.

    I totally disagree.

  46. Ok 3-5 years from now we'll see who was right :)

  47. Gary, if the Gulf Coast shipping lanes are disrupted does that have an inflationary effect on commodities, or will it be insignificant? Any etf's in particular that might see a bounce? DBC? UGA?

  48. I hadn't really thought about that. Having production shut down might be bullish for oil though.

  49. Brinkley over at Blue Chip gives her top mining picks. I've followed her for a year and can say without a doubt one of the better traders out there.


  50. Hey Gary, why are your articles and the ones by "Toby Connor" exactly the same???


    It's been like this for a while now where both blogs are identical and have different authors.

    Any explanation?

  51. It's Gary doing both blogs, FYI. He's got a partner who is marketing to other outlets and they want to keep the tracking data distinct.

  52. Australia's largest gold miner.

    That's company-specific and country-specific risk, despite high gold prices.

  53. 131 break in the euro...oh nooo!!!
    Go Buck Go!!!...83 next stop 85...

  54. Gary,
    The dollar has blown through the 20 day bollinger band. Is this of any significance? Thanks.

  55. The Bollinger band trade only works on the downside.

    Markets go up differently than they go down.

  56. "Super Tax" Hits Australia; In US, Gold will be an Easy Target

    BHP Billiton Ltd. and Rio Tinto Group, led declines in mining stocks in Sydney trading on concern Australia’s plans to impose the world’s heaviest tax regime on resource companies will cut billions from profits.

    It will not be long before the US considers doing the same thing to its natural resources industry. Indeed, anything that makes money, especially gold and energy will be easy targets.

    For several years running I have been asked at precious metals conferences about the possibility that government will confiscate gold as did FDR. My response has always been "Physical confiscation will never happen again . However, they may tax the hell out of it."


  57. Physical confiscation will never happen again . However, they may tax the hell out of it
    I agree with knifecatcher that resources will be the a government treasure trove. I believe, however, that the Oz news is a buying opp. I don't think a potential longterm secular bull market in PM miners will be derailed because of this, especially if one is inclined to believe that the future will see much higher PM prices.

    Do not worry folks, DTG, a bellweather of the latest equity bull market, is up 0.14% as I write.
    It's a good sign ;)

  58. Top is in.

  59. I'll believe it's in if the decline exceeds 10% off recent highs?

  60. Maybe a short term top but we have virtually none of the signs of a top for the cyclical bull yet.

    Let's face it any significant weakness is going to bring out another round of QE and no market is going to collapse in the face of that kind of support.

  61. Collapse is strong word; but let's assume there would be one, which is not what I am suggesting, QE is not something that works overnight. It's not like Bernanke prints money on Monday and on Tuesday stocks and PMs go up. There was some good QE in 2008 and 2009 while the stock market spiraled out of control. New printing takes some time to sink in; a lot can happen meanwhile.

  62. The market bottomed almost perfectly when QE was announced along with the change in mark to market.

    The Nikkei rallied almost 20% immediately when a round of QE was announced. Same for the FTSE when the BOE decided to continue QE.

    Believe me every hedge fund in the world knows you don't wait around once a central bank starts printing.

    That's why it's too dangerous to be short in an environment where every central bank is willing to destory their currency to achieve their reflation goals.

  63. cyclical bull, bear, depression, it's hard to argue that no matter which way I play this market I lose!
    Down 4K just today. This is more money than I have lost when I was being dripped dry on the short side.

    The MMs are shaking EVERYONE - long or short.
    So rigged market is what I will call it.

  64. Perhaps you should quit trying to trade and just ride the bull :)

    Ignore the short term dips. In the long run they are meaningless.

  65. FWIW most daily cycle declines last about 5-10 days. Today is the 7th day. We are already starting to see BoW numbers building. Of course we will have to wait till the end of the day for the final number.

  66. I'm gittin' SMACKED! but still have good profits built in....whew!!!

  67. To Jay,

    You managed to hold off and not buy the up move (good job), but today is too early to buy, IMO. Load up after another day or two like this.

    Good luck.

  68. Gary wrote

    "That's why it's too dangerous to be short in an environment where every central bank is willing to destroy their currency to achieve their reflation goals."

    Until the moment it becomes counterproductive.


  69. Confirmed sell yest in that yeller junk..if close beelo 1175...look out...will cuver shorts in a few days and maybee git lawng...
    I thinks i am goin to tri to use Gawry as a cuntraryan injicactor...testin stawrts twoday...this will bee fun...
    still lawng dawlers...very short equitees...was sweatin that thar short oirl...but ok now
    gots to go fellers...guud luk tradin...

  70. "The Bollinger band trade only works on the downside.

    Markets go up differently than they go down."

    Fine. Currency trades are always mirrors of each other.

    The dollar^H^H^H^H^H^H euro has blown through the 20 day bollinger band. Is this of any significance?

  71. Curious...we have a pullback in the PM's..who is buying today? Lots of folks saying they have been waiting for this so are you pulling the trigger today?..if not why not? How about the stock indexes anybody buying right now..today?

  72. Anonymous said...

    To Jay,

    You managed to hold off and not buy the up move (good job), but today is too early to buy, IMO. Load up after another day or two like this.

    Good luck.

    Thanks and I agree. How are the "investors" feeling today? HOLY CRAP silvers getting murdered! Even old reliable SLW getting taken to the wood shed. I had SLW puts in place yesterday and chickened out. Sold me for a loss...Kept hearing those words "never short a bull!"

    I did finally jump into some physical, but view this as an insurance play and will keep adding on dips. I think most of these are just testing the 20DMA which all look to be around the break out levels (SLW 17.80's, SVM rising trendline at 7.60's, XAU rising trendline around 169 or so)

    Let's see what the charts are telling us over the next few days, but I'm hopeful a good entry is about to be set up.

  73. Blogger Natanarchist said...

    Curious...we have a pullback in the PM's..who is buying today? Lots of folks saying they have been waiting for this so are you pulling the trigger today?..if not why not? How about the stock indexes anybody buying right now..today?

    May 4, 2010 10:05 AM

    Hi N-

    I like Doc's strategy of waiting for an overall market swing low on SPX. Target zone is around the 65DMA or 1150. I know these entries can't be timed perfectly, but some signs of a bottoming of the selling (candlesticks, macd flattening out, RSI oversold readings, etc). RSI should be flashing oversold in a few days.

  74. Anyone think the 61.8 fibonacci retracement on the DX will be resistance to it going much higher?

  75. Are you showing 83.82 as that Fib line?

    I'm watching the upper part of this channel which would be around 84.90's.

    DOC pointed out a pattern a few week back on the DX and said if it plays out we will hit 85


    DX channel

    DX Channel

  76. Yeah, not at my ESignal now, but I think the 61.8 was around 83.5 +/-

  77. One should sell some longs or get short closing at these levels...not a good close at all!

  78. Look fellows the dx is going alot higher and the euro will touch 126 short term...

  79. It looks as though we slide back towards the 1100 area from here...I know this is not what yall want to hear but it is...

  80. Deflation is coming!

  81. From IACP:
    Until the liquidity situation is resolved we would also be cautious with gold as it has posted a nasty reversal today on the last resistance 1,185/1,187 (c=a since the lows) we had highlighted before the run towards new highs. Once default fears are batted away with the liquidity bat then not doubt the Gold bullish trend will return.

  82. Silver miners took a beating, but the golds did well today. GDX looks good, XAU and HUI looking decent, some of the bigger gold miners like ABX, GG, GOLD held up very well.

  83. Gold down 1% in general slaughter. I'll gladly take it, and follow the advice I shared with Jay earlier....looking to ADD more DGP after a couple days decline, which I'd welcome.

  84. Hot diggity! Sabina Gold&Silver up 20%+ today!

  85. "Copper is also not down on the year."

    You are lying again.

    Front month copper on the CME closed at 3.3275 on December 31, 2009. The last trade today was at 3.1540 (it was down for the year even before today).

  86. More thoughts on inflation (keep in mind there are a lot of anonymous posters disagreeing with you :) ).

    1. Housing costs make up a far bigger percentage of spending than restaurants for most people, and those are still down quite a bit from their highs.

    2. Liquidity is being withdrawn as economies recover (not to say governments won't put it back at some point in the future), which is NOT supportive of commodity prices.

    3. You can not have any type of sustained inflation (one time price spikes don't count - oil is not going up another 150 percent from here over the next fifteen months) without rapidly rising wages, and those are nowhere to be seen.

  87. Ananymous--
    1. Housing costs are not going up-- might be due to the excessiveness that was seen and current liquidity is not flowing to that sector!

    2. Liquidity is not being withdrawn-- What do you call the QE and stimulus programs. Massive liquidity was pumped in the system--- massive. Look at our Debt levels.

    3. You can have sustained inflation without risinf labor prices. it is frequently uncommon but the inflation is currently going to be caused by the devaluing of our dollar. If your dollar is worth less then your goods are going to cost more unless goods prices are lowered and that is not happening. Dollar will continue to fall after euro is done with its problems. I agree with Gary that dollar strength right now is actually euro weakness.

  88. People need to understand that Gary and the other Inflation Now! bloggers have a private language. We all define inflation as prices and wages going up broadly. They define it as an increased money supply whether costs go up or not. They then find the areas with rising prices and say, "See!" Housing is down, wages are weak, hotels rates are down, rents are down, etc., but if you just look at what is up, lo and behold...Inflation! For the rest of us, we won't likely see inflation until housing bottoms, capacity utilization rises, wages/unemployment stabilize, etc. Look at what happened to silver and oil today. They got killed. Excess money is being funneled into some areas, but "inflation" is not here and won't be for a while yet.


  89. Has anyone here younger that 59 1/2 decided to liquidate your retirement funds (IRAs, 401k's). I think the government is going to force these funds into government securities in the coming years. Now maybe the last time to get out. Take the 10% hit and pay the taxes on traditional ira's & 401k's...I'm seriously considering this. ZeroHedge has run some stuff on this as well as Catherine Austin Fits, Denniger, etc.

  90. As to inflation--
    I guess it depends if you are a believer in the Austrian School of Economics or not.

    Then, following the common idea of inflation, Mises (1912, [1981], p.
    272) tries to develop a more precise definition of inflation:
    In theoretical investigation there is only one meaning that can rationally be
    attached to the expression Inflation: an increase in the quantity of money
    (in the broader sense of the term, so as to include fiduciary media as
    well), that is not offset by a corresponding increase in the need for money (again
    in the broader sense of the term), so that a fall in the objective
    exchange-value of money must occur. Again, Deflation (or
    Restriction, or Contraction) signifies: a diminution of the quantity of
    money (in the broader sense) which is not offset by a corresponding
    diminution of the demand for money (in the broader sense), so that an
    increase in the objective exchange-value of money must occur.

    Ludwig von Mises

  91. So Von Mises says that inflation is when supply is greater than demand for a currency. We've beaten a dead horse here that the supply has been pumped to the moon. How de we determine if the demand for the US dollar has been satisfied? Or more importantly, over satisfied?

  92. Gert,
    No way would I short a bull market. It doesn't make any sense to come on and tell us in the middle of a correction that you are short. Tell us how many false starts it took to catch the move. How much did you lose before you managed to score 3.8%?

    That is all the S&P is down and that is if you managed to sell the exact top.

    One of the most important lessons I learned was to never short a bull market. The meager returns usually don't cover all the false starts and if you mistime an entry the bull can do something unexpected and destroy your account.

    If you think the market is going to go down just go to cash.

    Folks if you are going to be an investor you have to ignore these short term wiggles. Let the day traders get all up in a lather about a .8% drop in mining stocks. Remember this is a bull market and those that can hold through the noise will reach the end of the bull rich.

    Those that have to trade every wiggle will probably end up with little or nothing.

  93. Anonymous-
    Do you want to hold the dollar longer term?

  94. What I want is irrelevant. I'm just an idiot swimming in a sea of disconnected tidbits of brilliance trying to make sense of it all. If the dollar could hurry up and tank it would certainly help my cause. Your comment simply got me thinking about supply and demand of the dollar. We have a huge supply. That's a given. What metrics do we have available to measure the demand? How do we know when the supply exceeds (or dwarfs) the demand?

  95. Anonymous--
    Great question-- I will see what I can do. My vague question was a weak attempt at determining dollar demand as somewhat weak. (ie--not many would want to hold in my unscientific poll) I sure do not know why anyone would want to hold unless you needed it as a hedge for business or lopsided trade?
    Maybe someone on the blog has more tangible studies.

  96. "1. Housing costs are not going up-- might be due to the excessiveness that was seen and current liquidity is not flowing to that sector!"

    That's what I said. The fall in housing prices has more than made up (for most people) for price increases in things like restaurant meals.

    "2. Liquidity is not being withdrawn-- What do you call the QE and stimulus programs. Massive liquidity was pumped in the system--- massive. Look at our Debt levels."

    It most certainly is. Many countries (Australia, Brazil, Israel) have already started to raise rates. The Fed finished their purchase program a while ago, and their balance sheet has started to (slowly) shrink. They are preparing for asset sales soon. The fiscal "stimulus" has also passed its peak (I wouldn't expect any more unemployment benefit extensions), and the cost of short term borrowing has crept up noticeably over the past several weeks.

    "3. You can have sustained inflation without risinf labor prices. it is frequently uncommon but the inflation is currently going to be caused by the devaluing of our dollar. If your dollar is worth less then your goods are going to cost more unless goods prices are lowered and that is not happening. Dollar will continue to fall after euro is done with its problems. I agree with Gary that dollar strength right now is actually euro weakness."

    Have you ever studied even basic economics? Without more money (higher wages) to buy things, people will buy less (or substitute other goods). Foreign exporters will have to accept lower profit margins and won't be able to pass on all cost increases as the dollar weakens (against Asian currencies).

    Name one time in history that there has been a BROAD, SUSTAINED inflation without rising wages. You can't. It has never happened.

    The euro is on its way back to parity over the next two years (it is still overvalued - fair value is about 1.15). I am long dollars, and expect to stay that way for the next eighteen to twenty-four months. The euro has enjoyed a "only alternative to the dollar" premium that is rapidly disappearing.

    Dollar strength is euro AND yen AND pound weakness. The U.S. is going to have (by far) the strongest economy (among the advanced nations) over the rest of the year).

  97. 1. So we agree-- Housing prices falling or not going up does not mean there is not inflation-- Good.

    2. You are talking about credit tightening after they have been loosened like nothing ever before. This is equivalent to saying you were given 100 dollars and later someone took away 20 and therefore there is tightening. Nonsense.

    3. yes I have studied economics--
    The reason inflation is not worse is because jobs have not come back in masse and labor prices are not increasing. As early as the 70's we had inflation without increasing jobs or labor prices going up. Called Stagflation.


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