Three weeks ago I warned the gold bears that an intermediate cycle low was coming due. Again the bears chose to concentrate on technicals instead of focusing on cycle timing and sentiment. The result? Strike two for the technical traders.
I think strike three is coming. I've warned again that the market is now in the timing band for another cycle low. That doesn't mean it has to bottom today or tomorrow. What it does mean is that the deeper we get into the timing band the the greater the odds become for a bottom followed by a strong rally.
As a matter of fact if the market can add a few more down days it will form a much better right shoulder in the inverse head & shoulders pattern.
I'm afraid the technicals are going to suck in the bears again right as the market puts in a bottom.
If we had seen a large selling on strength day I would be a lot more confident this is the beginning of something more significant. Absent that I think we have to assume that we are just seeing the normal move down into a daily cycle low that occurs like clockwork about every 30-40 days.
On Friday we started to see the McClellan oscillator begin to compress.
Often these compressions are followed by a large move in stocks. As we move deeper and deeper into the timing band for the cycle low the odds are going to increase that the move when it comes will be higher forming the right shoulder of the H&S pattern.
The prudent thing to do is either wait in cash for the cycle to bottom or cover shorts on the first swing low.
Longer term it would be much safer to wait for the Dow Theory sell signal before getting aggressively short, especially absent a large selling on strength day or days.
Ask yourself, do you really want to make the same mistake three times in a row? Selling into a bottom is a tough way to make money...even in a bear market.
Explain to me how you're not a technical trader if you use charts for all your analysis, especially while showing an inverse head and shoulders pattern, which is a clearly defined technical chart pattern. Also your upside bias seems to have you concentrating only on this little inverse head and shoulders pattern, when there is a larger and more important head and shoulders pattern still in play.
ReplyDeleteThe simple fact is this market still hasn't done much of anything since April. Until it breaks either direction and reveals the future trend it's just noise.
You should already be long gold, but in case you haven't, BUY GOLD before it's too late!
ReplyDeleteJustin is just plain silly.
ReplyDeleteJustin,
ReplyDeleteYou missed the whole point. Traderes concentrating totally on technicals got caught in not only the July bottom but also the gold bottom.
Both times I poointed out that sentiment and cycle timing was telling me that the technicals should be ignored at that time.
I'm saying it again. The technicals are probably going to suck traders into making the wrong decision at a turning point again.
The inverse H&S just happens to conrespond with what the cycles and sentiment are saying.
Justin is just going to sit on his hands and watch gold leave him in the dust even though he claims to study price action.
ReplyDeleteCatch a clue you just passed up the best buying opportunity since Feb. If you had listend to the G-train you could be sitting with strong hand status right now
Big mistake buddy.
Gary,
ReplyDeleteSounds like you are firmly convinced we have put in a "bottom". Are you going to own up to this bottom call you're making if you are wrong?
You could probably build a technical case for the market going either direction right now, and you've clearly taken the upside so I just find it funny that you blame technical trading on being faulty yet that is exactly what you use.
This little wiggle of 0.7% we've had off of the June low in the S&P could turn out to be nothing more that continued consolidating action and nothing significant.
Justin,
ReplyDeleteAgain you choose to ignore what I said. There are two lines in the sand. Trade below the July low and the bear is back. Better the Apr. high and the cyclical bull still has some kick left.
I have no idea which will come first. I certainly wouldn't short until that July low is broken though.
Bottom line I don't know which way the market is going next longer term. I am confident we will put in a daily cycle bottom soon though. But that is just a short term event. The market could roll over again in a week or two and break the July lows.
Without a sign that smart money is exiting I will need to see the July bottom broken before I'm confident the bear has resumed.
Gary, can you define what you mean by "technicals?" You use the term a lot, but as someone who uses technicals, and covered at the bottom in July as well as two days ago, you must mean something else. I have no idea what you are talking about. Do you just mean"charts?" If so why not just say "charts?" Cycles are "technical" and so is sentiment, since they sure aren't part of fundamental analysis.
ReplyDeleteJustin doesn't let price action tell him what to do, or he'd be maxed out in gold and getting rich like the rest of us.
ReplyDeleteJustin is Nag Boy.
Sheesh, no wonder the bears give me all their money. Reading comprehension isn't one of their strong points.
ReplyDeleteSure. The vast majority of retail traders will sell into a break of either a trend line or support level.
ReplyDeleteWhen the market broke below the May 25th low retail traders shorted heavily into the break expecting that break to lead to further losses. It also happened to be a break of the H&S neckline.
However sentiment was way too negative for the move to have much chance of following through and more importantly we were way too deep in the intermediate cycle to have enough time left for the market to move significantly lower.
I see gold is over that important $1217/oz level...higher prices just around the corner!
ReplyDeleteGary, was this an answer to "what are technicals?" You wrote: "Sure. The vast majority of retail traders will sell into a break of either a trend line or support level." Can you just define it? "By technicals I mean..." Charts? Trendlines? No point using jargon that is undefined.
ReplyDelete"When the market broke below the May 25th low retail traders shorted heavily into the break expecting that break to lead to further losses."
ReplyDeleteThis was an example of what I was talking about at the July low for stocks.
Gold bears sold into the break of the May pivot.
Both are examples of traders concentrating on technicals instead of the much more important (IMO) sentiment and cycles.
950 S&P is coming.
ReplyDeleteShort this little intraday bounce.
Funny how the market is essentially sitting right at the May 25th level that Gary says he outsmarted "retail traders" on. The idea that there is a whole group of retail traders out there who completely got that trade wrong and "suffered" because of it is pure conjecture. Maybe there is a bunch of them, maybe there isn't, but there is no way to know for sure and more importantly who cares.
ReplyDeleteEven if you would have played the market perfectly since May 25th, you wouldn't have made that much money, so focusing on that is a waste of time. Instead I'd rather just position myself for the eventual trend break which has yet to be revealed.
I sure hope GLD pulls back to around $118.20 so I can buy more.
ReplyDeleteJustin,
ReplyDeleteYou are again ignoring what I'm saying. Retail traders sell into bottoms then get caught in the rally and end up covering for a loss.
I'm trying to help them understand how cycle theory and sentiment works so they can break this destructive habit that ends up costing them money.
Absent some large selling on strength days (a sign big money is exiting the market) then one needs to wait for confirmation the bear is back before going all in on the short side.
As I've repeatedly shown the mathematics of the short side don't require one to be early to make money.
I even gave them a sign to watch for. Cover shorts on a swing low.
ReplyDeleteWe are deep enouh into the daily cycle that a swing has the potential to mark the bottom.
The nags here need to subscribe to Gary more than any of us. Then they might understand him better and convert the lesson to riches.
ReplyDeleteThe Nag Boys are still asking what Gary means by "trendlines" and "technical charts" LMAO!!
Isn't one of these guys the same one that was boasting of being up 3.5%, and asking "are you up that much?" :)
I sure am, if you multiply your returns by 10x, then add back all those commissions and spreads you pay! LMAO!!
Now the stock shorts have big problems.
ReplyDeleteEven if one can't find the courage to buy gold, at least know better than to stand on the tracks with the G-Train coming through.
I think with today's aciton we can assume the coil in silver is going to play out in line with the stats.
ReplyDeleteI believe the questions to Gary about what he means by technial analysis were rhetorical. The person asking the question was pointing out that Gary has said trading technicals doesn't work and yet here Gary is with a head and shoulders pattern drawn on the chart and he's using it to indicate what the market might do! So the person asking the question was asking it not because he doesn't know what TA is, but rather because Gary seems to have his own version of it, and the person asking the question wanted Gary to explain what he means when he uses the term "technical analysis".
ReplyDeleteThere are lots of traders out there who use TA and also look at cycles and sentiment. Using one does not exclude using the others.
Jeez, Gary, just define the term! You know what a definition is and an example is not a definition. You're an intelligent guy---what are you fighting here? You bash "technicians" and it's just a straw man. You ought to have enough integrity to define your terms. Every time you want to show you are smarter than "technicians" you trot out something different quasi example. I rarely take issue with what you say, but this is just marketing crap. I use technicals and, according to my posts on your own site, have been trading better than you have ( I don't short at breakdowns or buy at tops). Here, I'll start you off..."By technical I mean the usage of..." Just answer the question. If you won;t I have to wonder why as it is a perfectly fair question. I'm not arguing with you, just asking for you to be clear and unequivocal once. Do you, in fact, mean charts since it's the only example you have ever given?
ReplyDeleteSilver is looking dandy, indeed, and the miners are exquisite.
ReplyDeleteYou don't even speak English well. There is no such phrase as "technical trendlines." I think it's wonderful that you are a fawning follower of Gary's Maybe he'll send you some dirt he has walked on. For me, I merely respect him as a clearly educated trader. You don't appreciate definitions as your English is poor, but some people do. You're busy laughing your ass off while you could be learning how to have intelligent dialogue and how to invest/trade. By the way, at $5 a trade my commissions are insignificant, and it's now 6.8% after the huge short position I was warned not to take.
ReplyDeleteFrom the tone of DG's comment, it sounds like he's losing some hard earned cash today!
ReplyDeleteI guess Gary means a lot of traders get stuck when using "traditional" technical analysis which could be defined by trendlines, formations etc. But as some has already pointed out, sentiment and cycles (along with some other stuff) of course is part of technical analysis as well. It all depends on the person doing the analysis and what kind of toolbox he uses.
ReplyDeleteI would like to ask Gary a thing at the same time, why should the stock market put in a intermediate cycle low around here? I mean, is it a yearly cycle or something you´re looking for or what? Or is it just based on the regularity of the lows this year?
Why so testy today, DG?
ReplyDeleteI don't care too much for charts, that's correct, but I know +24% is far better than 6.8%, and paying more commissions/spreads is not helping you. :)
Don't be so bitter. Get is some gold and you can smile, too.
First off let me clear this up again. I don't think TA is completely uselss. I've said numerous times that I use some TA. What I've repeatedly said over and over is that I don't think one can get an edge in the market by solely depending on technicals alone.
ReplyDeleteNow that I've made that clear again for the umpteeth time I'm going to start getting a little pissed if people keep intentionally misquoting me.
Here are the technical signals I do watch IN conjuction with sentiment and cycles and money flows.
Triangles
Crawling patterns
1-2-3 reversals
coils
T1 patterns
I don't think one is going to get an edge trying to trade H&S patterns, wedges, trendline breaks or violations of support and resistance levels solely on their own merit.
If a neckline break occurs 21 weeks into an intermeidate cycle the odds are high the pattern will fail.
If a wedge pattern breaks down 31 days into a daily cycle the odds are high the pattern isn't going to follow through because the daily cycle is due to bottom.
A simple cross of the 50 DMA below the 200 isn't a 100% guarantee the bear has resumed. More often than not the 50 just recrosses before any meaningful decline occurs.
So for the last time I don't think that a purely technical approach to trading is going to garner one an edge in the market.
DG you yourself admit that a big part of your trading is experience and has nothing to do with technicals. If I asked you to write down the rules of your trades you couldn't do it.You couldn't do it because you don't have a set of rock hard, no violation rules that you follow.
You have set entries but your exits are to a big part intuition based on years of experience.
No, I'm having a fine day. Pretty light right now, but long gold, NLY, SJT, Short only GE and covered JWN this morning. I am also long bonds that supposedly are terrible to own. I just sometimes get tired of people pretending to be intelligent and to make debating points when they don't know what they are talking about. I have had great exchanges with Gary and a few others on this site, though. To me a troll is someone who just picks nits and is not trying to learn anything. I have learned a lot form Gary and some from few others, but many writers are too busy laughing their asses off to do anything useful (how many asses do they have anyway?)
ReplyDeleteStefan,
ReplyDeleteThe marekt already put in the intermediate cycle low in July. This is a smaller cycle low.
The intermediate cycle runs about 20 weeks.
The daily cycle runs about 30-40 days.
The market is now working on a daily cycle bottom.
If you've learned from Gary, just imagine if you became a subscriber. You might not have to nag him about specific definitions of words such as "charts" all day.
ReplyDeleteAnd they're ain't nothing wrong with laughing. It's better than whining "I'm just trying to learn", while you criticize the host that obviously knows far more than you.
Gary is O-some.
ReplyDeleteAnd just in case I wan't clear yes the technicals I'm talking about are charts.
ReplyDeleteThey are the main tool for retail traders. Most have convinced themselves that all they need to beat the market is a subscription to a charting service.
They expect to beat the smartest, best capitalized traders, with inside information and massive research depts. with nothing more than a bunch of charts.
Thank you Gary, and my apologies if I pushed too hard (really). I do in fact place my entries solely on technicals, but you are right about my exits. I agree completely that charts used in isolation do not work. Perhaps the misunderstanding is that you use the phrase differently than anyone I have ever seen. Most people refer to "fundamental analysis" and "technical analysis." Sentiment and cycles are both technical, so when you say "technicals failed" I will now translate your use in my head. I believe it is a disservice to everyone else---especially new readers--- who don't get your private usage of the term, but if that's the way you want to write, it's your blog! Again, sorry for crossing the line if I did.
ReplyDeleteAh, our posts crossed, Gary. You mean "charts." Great. Simple. Done. If you ever feel to switch your language from "technicals" to "charts" it would of course be a lot clearer. And other than this I can't think of anything I have ever taken issue with that you have said. You are clearly a very good technician and analyst and I think you are doing your readers a real service. I have started recommending your website to others, which is something I very rarely do as most sites just lose people money. And I you get this gold move right, I will immediately subscribe!
ReplyDeleteKissing ass, with a little bit of a dig. Nice.
ReplyDeleteGary has been right several times on gold, why take a sample of one call (this one), to make your decision, DG?
ReplyDeleteFigures. While DG was twiddling his thumbs unable to make a decision, the subscription price to Gary's letter jumped 33% when the discount window closed.
ReplyDeleteNow that's good trading!
The simple fact is cycles are based on how the chart flows, and sentiment is solely based on how price action messes with people's heads. So in essence it all boils back down to price. So following price is all one needs to do to be successful in the markets, along with limiting risk and recognizing when you are wrong.
ReplyDeleteFair question. In am very impressed he called the bottom, but as he himself says, exits are very important. If gold goes to $1400 and then back to $1100 and he stays long the whole way, I'll be, well, less impressed. He may have done this in the past, but since I've been following him I have only seen him bullish (and by the way, to one of the millions of "anonymous", his price going up is not relevant to me. If $50 is a big deal for you, you are not much of a successful trader OR investor.)
ReplyDeleteSo exits are "very important" to you, and you admit you don't have a system for exiting, other than feel?
ReplyDeleteIf you're only making 6% to date, with all that labor (pecking away), commissions and spreads, you ought to be grateful for $50 discounts.
Justin, I mostly agree with your trading attitude, but sometimes price doesn't do it. Suppose the SPX rallies from 1150 to 1200, then back to 1150 then back to 1200, etc. On the last trip down the sentiment turns super bearish. That means the 1150 level will hold. If on the last trip people get super bullish, it will break. The price alone does not tell you this. In fact if people are bearish and it does break, you will get caught short. Price is usually correlated with sentiment, but not always. If you agree that sentiment is important why not look at the measures of it directly rather than just price? No harm getting additional useful data. What am I missing here? I have never used cycles but Gary is persuading me there. his calls can;t be luck! I probably have simply never found anyone who was good at it before.
ReplyDeleteHow does DG come up with +24% is not as successful at +6%?
ReplyDeleteHe better go back to teaching English.
Gary,
ReplyDeleteYou mentioned about GLD possibly closing a recent gap, but the $GOLD chart doesn't show this gap. How are these things usually resolved, or which is more likely to dictate price to the other?
I suspect arbitrage between the GLD and gold is at work. Either way gaps on GLD almost always get filled.
ReplyDeleteAs I said in the weekend report I expect the gaps to fill during the next daily cycle low.
The gain is not relevant by itself. You can go to Vegas, put it all on red, hit, make 100%, and claim you are brilliant. The question is your return on a risk-adjusted basis. Lots of traders have a few good years and then go broke. I did that once when I was a kid , which I why I use tight stops. But you're just trying to make debating points and not really accomplish anything so no point responding to you in the future (I can see why you stay anonymous---you might fool someone into dealing with you at some point).
ReplyDeleteOh I see, now you're doing better because you have tighter risk control (according to you), even though you're only up 1/4 the amount, with 10x the effort and expense?
ReplyDeleteGary is right that I should just ignore the nit-pickers and complainer, and focus on exchanging useful information with people. Since you don't identify yourself you can wait a while and make another useless and poorly thought out comment. I'll respond to actual questions or comments in the future, but your stuff is obviously not worth bothering with. Thanks for the reminder!
ReplyDeleteBy the way, Justin, when you have time I'd love a response to my previous post to you.
The market has gone absolutely nowhere in 9 months - yet you want to act like the bears are getting crushed and the bulls are killing it?
ReplyDeleteGold bulls are killing it, anon1.
ReplyDeleteDG, I'm really starting to think you don't trade at all. You act like money is no object, yet can't afford the $200 ticket to get on the G-Train, even though you spend all your time here.
ReplyDeletewassupwiddit?
I'm a gold bull anon....... but the article was a chart of the SP500 and the statement that somehow the bears are getting hammered.
ReplyDeleteNeither the bulls or the bears have gotten hammered for nine months, unless of course you are somehow trading.
I posted a couple of weeks worth of trades with both entries and exits. I just object in principle to buying stuff without a good reason. I only get two services (sentimentrafder.com and stockcharts.com) and if I add a third (Gary's) it''ll be because I'm impressed. It's not about the $200 or $150. Invite invite something into my life without making a conscious decision about it .As for whether I'm an actual trader, well, believe whatever you want!
ReplyDeleteanon1,
ReplyDeleteGo ask Wrong-Way TK if the bears are getting hammered? Forget it, he won't tell the truth anyway.
Anon1,
ReplyDeleteHere is the exact quote from the June 28th market update, which is free BTW. Anybody can read it.
"So the end result is we have huge forces trying to rip the markets and global economy in two different directions. While most of the world has resigned themselves to facing their fate and are now prepared to let the market work and cleanse the system, the US has vowed to fight the market with as much liquidity as it takes to do the job. I expect we are now going to be treated to one of the most volatile and unpredictable markets in history. Why anyone would want to try and trade that I have no idea. Let’s face it this is a recipe for getting eaten alive. Personally I would rather swim across a river full of Piranha’s."
As you can see I don't think anyone is going to make alot of money in this market...well unless one is an exceptional short term trader. I'm certainly not.
But I'm clearly not showing favoritism to either side other than the mathematically advantage on the long side.
I'm just trying to help people spot these turning points so they can limit losses. Unfortunately cycles analysis is pretty much worthless for spotting tops so I'm not going to be able to help traders spot shorting opportunities ... unless we see large selling on weakness data and sentiment extremes.
Neither one of those have happened yet so I just don't have anything useful to contribute to the short side right now.
In case you forgot I did mention back in late Dec. and January that sentiment had reached extremes and we had been seeing heavy selling by insititutions but as most tops are hard to spot I was a bit early on the call.
That is always going to be the problem spotting tops. Markets go up differently than they go down. Tops tend to be a process and bottoms are often an event. I can usually get fairly close on bottoms with cycles analysis.
But I'm almost always early on tops.
Anonymous wrote:
ReplyDeleteTMV baby, that's the ticket!
How's that TMV trade going, buddy?
long RIMM 50.70 1/3rd position.
ReplyDeleteFwiw bond cycles appear to follow right along with stock cycles most of the time. Bond prices are so overbought that I expect we are moving into a major cycle high along with the stock market approaching bottom.
ReplyDeleteI wouldn't be surprised if the coming top doesn't mark the top of this 2 year cycle. Then the question will be can bonds drop below the last 2 year cycle low.
Anon1. Gary is right here. If you are a trader you know that most people will buy tops and sell bottoms. That's what makes the top and bottom! Gary is not writing for highly experienced short term traders---he's writing for 95% of people. What he is saying seems completely reasonable to me and I'm not sure why you are busting his chops. We have been highly volatile and it has been a market only a very good trader would love. Holding gold for a big ride (if Gary is right) will certainly be the easiest thing for most people to do.
ReplyDeleteSome of the anon's keep coming back to the "up 24 percent". What are you talking about here? The gold market since a particular date?
ReplyDeleteAs long as Gary is right about gold being in a long term bull, you can put all your investment funds into gold and do really well. But what if he is wrong? Or, what if he is right very long term, but gold soon corrects down to 1000, or even lower?
DG's point about risk control I believe has to do not only with position and stop management but also with diversification. You go 100 percent into one instrument, you better be right.
I believe Gary is correct about gold being in a long term bull. However, I have no idea how big the corrections will be along the way, nor do I have any idea as to how well Gary will time the exit, whether it will be very near the top or much earlier or later thereby missing much of the move. You might be up 24 percent today, 40 percent next month, and then only 5 percent 3 or 4 months down the road. Timing is pretty important, when do you take some profit and let the market correct to a lower price so you can buy in again?
Says the man asking what Gary's definition of TA is? Man you are ticking both sides off today. :)
ReplyDeleteGary, gold and stocks have been correlated off and on the past couple of years. Is there any way to get a sense as to when they might move together again or when they are less likely to be in sync? I am intrigued that gold is up sharply and your stock cycles are bottoming. Any thoughts?
ReplyDeleteWhy does everyone argue over here? My guess is that it is because Gary has been very accurate about the PMs and miners.
ReplyDeleteGary writes:
ReplyDeleteThe difference between Japan and the US is that Japan had massive savings at the time they embarked on their failed plan to bailout the system. They mostly drew from this internal savings to fund bailouts. That is deflationary.
We aren't doing that. We have no savings. Our only recourse is to borrow and print. No matter what size the deflationary pressures the Fed can effortlessly print 100X that amount of dollars. The check is that it will destory the currency. Obviously they will attempt to walk a fine line and devalue the currency gradually and try to stay one step ahead of the deflationary forces."
Another typically cliched, totally mainstream explanation of the meaning of US debt and deficits.
Once again, I'll post an article (by PIMCO, no less) on Japan's QE. Hell, the CB over there even bought STOCKS...!
"Domestically funded"/"internal savings" is simple nonsense, because the US Govt bond market draws from/ is funded by GLOBAL SAVINGS.
THIS IS THE CONUNDRUM of the current global financial system. And no, Gary, China's CB will NEVER allocate Dollar or Euro (FX) reserves, i.e. park their FX holdings, in anything but sovereign bonds in any even remotely meaningful way.
To think that they would allocate more than a symbolic percentage of those holdings in commodities or anything else is quite simply mindless. In any case, let's say China's CB decides to sell TNX and buy into commodity-related assets. That money (Dollars) transferred to the seller will be reinvested in Dollar assets *again*, most likely US Govt debt.
This means two things, really: A)The MSM talk of China's nuclear option on US bonds is nothing but total B.S.
B)So long as there is a U.S. current account deficit, negative balance of payments with most huge economies like Germany, Japan, China, then US debt will be bid.
And we can apply everything you say "fundamentally" about the Dollar as a currency and apply it to the other majors.
The yen, dollar, and to a certain extent the swissie, OWN the international debt markets. There is yet a lot of scope for deleveraging.
DG,
ReplyDeleteThat's a tough one. Obviously in order for the Dow:gold ratio to continue down to one we are probably going to have to see gold and stocks decouple at least to some extent.
I guess it is possible for the Dow to stagnate at 10,000 while gold continues to rally till it hits 10,000. Although I expect it will be more on the lines that the Dow will put in another leg down in the seular bear and gold will continue to move higher. I think it's probably more likely we see 5000:5000 than 10,000:10,000.
Like I always say humans will do irrational things at the top of bull markets. Even so far as to continue to buy debt from a bankrupt country actively trying to debase it's currency.
ReplyDeleteAt some point commonsense will always return. When that happens the bull makret in bonds will come to an end and we will embark on a long term bear market that will ultimately become just as irrational on the down side as it's gotten on the upside.
Just basic human nature!
I think it's important to get Gary to rethink his fundamentals.
ReplyDeleteI will offer my 2 cents here and say that Gary is ALL ABOUT CHARTS.
I agree a 100% with Justin that things Gary uses like sentiment gauges and cycles that he claims aren't technical analysis, or whatever, are simply derivatives of price.
Fundamentally, it is CRUCIAL people who read this blog understand that he is critically off the mark in understanding the financial system.
Gary's against gold manipulation and PPT conspiracy theories, rightly so, but he's hell bent on demonizing people like Bernanke. (I'm not saying I think BB is right or wrong, but then again I'm no expert on monetary policy. I just know misinformed opinion and inacurrate statements when I see them.)
From a practical perspective, and being a gold/PM miners longterm investor myself, I think it's critical for people to understand that Gary's portfolio is one MASSIVE RISK play.
If he's right, whether by luck or not, then he stands to make a lot of money. But really, what are the chances his portfolio, heavily geared towards a notoriously volatile sector (miners/juniors) won't blow up, or simply underperform other sectoral indexes?
As a fellow PM miners investor, I can add to the chorus that this sector seems to be in a secular bull market that's a few years from climaxing. But trust me I own quite a few of these plays, and a lot of them , especially silvers, are nothing like the relatively pretty GDX chart.
Gold, on the other hand, looks like a sure bet compared to the heart-attack inducing miners.
Pima makes a good point about going 100% in one direction. You had better be sure. Price action, to me, doesn't matter except for potential accumulation points if I add margin and a test of my resolve for the bull(not quite having balls of steel at all times). Old turkey, as it is called on this blog, is about riding the bull.
ReplyDeleteI for one like Gary's work because it parallels my long-term view of investing, but he has quite a few TA tricks up his sleeve as well. The risk reduction is in the fundamental story for the bull and my measurement is the sustainability of an event, the investment is a device I hope takes advantage of a perceived unsustainable environment. And you are correct, if you are wrong about the fundamental story your account is burger meat. Gold is a buy and hold, or never get in. Gold for the most part has been very tame for the last bit.
A recent unsustainable event was oil at $35.
Current potential ones include: bonds at current yields, wild debt problems, energy crisis. Now how does one take advantage of this? The least risky to me was gold. Even deflationists like gold. If the result is a currency crisis, gold. If extreme monetary inflation gold. One may argue for commodities in general, but commodities that are needed for life will produce a potential cap. The risk is government intervention to contain costs. Gold has no value, except as a unit of account. Gold has some strong support as well, big money support, and countries like China liking the commodity. Nothing is perfect, but the picture is strong enough for me hold gold during this bull.
Beyond gold, then you look to miners and silver for added leverage if one likes.
Sometimes I wonder if the PMs are more tied to the market than to the bullion price. On the other hand I have a hunch that the broad market doing well may be holding back the explosive move in the PMs (like in 2002-2003). Any thoughts?
ReplyDeleteJust so I'm clear when I say technical analysis I'm talking about charts and the lines and patterns most retail traders use to game the market.
ReplyDeleteI think DG already explained sentiment and how it really isn't just a derivitive of price so no need to go over that again.
Cycles are a way to quantify human emotions and have absolutely nothing to do with price.
Money flows are a way to piggy back on smart money. I don't want to be standing on the track when the train is coming. It much safer to follow behind.
So for the most part these three tools have nothing to do with price or at most a very limited correlation.
We can just agree to disagree on the macro issues. So far my read has played out exactly as I've expected. In 2000 stocks entered a long term bear market. The powers that be in co-operation with the Fed have tried to defeat this process by expanding the money supply and increasing debt astormnomically.
Just like I thought it would it created a debt bubble and a long term bull market in commodities... the same as every other time in history.
Trusting that human nature hasn't changed I expect the powers that be to be unable to admit their mistakes and continue down this path. So far I see no sign that they have deviated.
Also trusting that human nature hasn't changed I expect the secular gold bull to play out like every other secualr bull in history and continue higher until it achieves bubble proportions.
Then at some point the last fool will buy and the bubble will pop just like all other bubbles in history.
Gold being a thin market and easily accessable I expect to rise to levels quite beyond what any of us can currently imagine. Again a characteristic that tends to play out in most secular bulls but especially so in precious metal bulls.
Now if you think I'm wrong then for heavens sake don't invest in this volatile sector. You will just end up selling bottoms and buying tops.
If you think I'm right then adopt an Old Turkey strategy so you can profit from the bull.
Great recent posts. The "make a killing or burger meat" scenario is exactly why I have spent a lifetime developing a trading system that revolves around entry points and stops. Between when I was 21 and 25 I turned $30,000 into $650,000 in my account as a retail broker. I then lost $100,000 a month for six months (by staying short at the bottom in 1982). I was an idiot and thought I was smart. I have since worked on entry points and getting an immediate head start and then placing break-even stops. I am whipsawed a lot, but when I get it right...Great fun. Having a macro opinion is great but as has been said "markets can stay irrational longer than you can stay solvent." I am extremely unlikely to have a very bad year trading this way (if my systems fail consistently and I take fifty .5% losses in a row). The "Buy and hold stuff" only needs to be wrong big time once. I hope Gary never is because a lot of people will go down with him if he is. I guess every approach has its weaknesses. Just a few thoughts...
ReplyDeletein the spirit of pimaCanyon's comment above, one MUST ask, what if Gary's bull market scenario does not play out as he expects, or gets derailed for whatever reason?
ReplyDeleteAlso the same commenter wondered recently why people/institutions should not continue investing in UST's while they still pay some interest, whereas gold does not pay anything. You have to pay to store it.
Gary keeps saying bonds were a bubble burst and that gold has yet to become a bubble.
I wonder about that. I own a lot of bullion and would still make money should gold begin crashing from current levels (>35%, etc.)
Yes institutions like insurers are allocating more money to bullion. Yes, Central Banks are diversifying FX reserves into gold, but that does not mean jack when you see the history of such institutions' investment performance.
People have been talking about gold as a safe haven for at least 2 years now. In Asia/Mideast/Africa, as I've said before, price is not an issue. Gold will be bought for a few more generations to come because it is looked at as a store of wealth. They will buy if it goes down, and if it goes up a lot, they'll take a break for a month or two and then buy again. What ramifications that mentality has for the price of gold is really unclear.
Many will say short supply will do the trick? But why should it necessarily be so, when we've witnessed bubbles in which stuff with massive oversupply got massively overbid, and vice versa for stuff that was scarce yet did squat price wise...
My point is that as someone who's read 3 years worth of Gary's service, I'd worry my nuts off that he's so overconfident about what gold will do.
It used to be he had a much broader view of the markets and offered some amazing insights.
Now he's shifted completely to cycles and Goephart's sentiment gauges and ABCD cycles in gold which I could never recognize... all with a total gold and silver bias, ultimately based on a couple of ratios (again, those charts...)
If you're taking naps, not worrying about your investments, then something's probably deeply wrong. In my experience such biases end in tragedy because you were never vigilant enough.
Let me point out that as long as one isn't leveraged it is impossible to turn ones account into burger meat. Gold can't go to 0. Even when gold was dropping into the 8 year cycle low it was actually gaining massive purchasing power because everything else was dropping much faster.
ReplyDeleteGold will always retain it's purchasing power. It is the one true form of currency that can't be debased.
So this notion that one could be wrong and ruin ones account is simply ridiculous unless you are heavily leveraged.
Now if you buy the top of the bubble and then ride it all the way down into a secular bear market bottom you won't have any fun but you will not destroy your purchasing power.
Folks there is a lot more to investing than just whether or not the numbers in your account are going up or not.
The Dow could rise to 30,000 and one could still lose a huge amount of money. As a matter of fact we saw that exact thing happen from 2000 to 2007.
If one bought the Dow in March of 2000 and sold in Oct. 07 they lost a tremendous amount of purchasing power even though the market was nominally 20% higher. The reason of course is because the Fed destroyed the value of our monty during that period. the rise in the Dow did not keep up with the massive inflationary forces that had been unleashed by the government.
Another element that has held me in this bull is that gold can't go bankrupt. Solvency is an issue for leveraged positions; I don't like using leverage. I break my rule at times, not saying it is smart but Old turkey gets real boring at times. I also have an old European style to investing; if I don't make money, I simply pass the investment to my kids and they benefit. In this way my only risk is the correctness of an unsustainable event, and the device I use to take advantage of it. This risk may somewhat be negated by other factors. Gold is a strong hold, easy too for the most part. If you had to hold gold or $1200 for 50 years or 100 years, which would you choose? Anyways the way I think….
ReplyDeleteI was actually much more bullish on energy during the last bull market. And if you have been reading my stuff then you know I exited that trade very close to the top (I'm not a perma-bull by any stretch of the imagination)
ReplyDeleteFor all the many reasons it has become apparent to me that this leg of the commodity bull will be led by the precious metal sector..and maybe agriculture.
Again this is how commodity bulls tend to play out. the underperformers during the first phase tend to outperform during the second and vice versa.
Now oil is underperforming and gold is outperforming as expected.
Like I said if you don't believe in the bull then don't invest in it.
Looking like another gapper downer tomorrow bulls!
ReplyDeleteOn the march to S&P 950!
told ya
George
The one item working in the bulls favor is wrong way TK. We are still on the march to 950 on the S&P but I just wish TK wasn't so damned bearish recently.
ReplyDeleteHe even went short GLD again today!
Pima asked what I've been in to be up 24%.
ReplyDeleteWell, I don't watch every tick b/c it'll drive one crazy, and force exits too early, I just checked, and I'm actually up 25.5% in my only holding, DGP from a price of $25.77 early in the year.
At one point around a month ago I had given up half my gains, but I'll push the bull unless my stop is hit. As for the question when I'll get out, I'll exit when Gary does or very close to then.
And this is my only long term holding. My entire career as a trader (14 years) has been shot term, only on a few occasions being longer than 2 weeks. It's where I learned to make money, but since it's company money, I trade their way. So I often take trades contrary to Gary's recommendations, but I have a very clear time limit. In fact, I was short stocks today for a brief time, but am flat again with small profit. And to compare results, my trading account (firm money) is much larger but only up 8% this year, whereas the LT account (all mine) is up 25.5%
Gary keeps me focused on the LT. I still find it difficult in my trading to withstand much drawdown, even when I expect more gains later, so exit many winners too soon. If my firm decides to let me handle large amounts for longer term setups, I'd do that, but they do not like huge swings in equity. Eventually, I'll just show them the LT results over time, and they'll most likely give me the green light, but that is probably not till next year some time.
And I'm not a "hedge fund" or "money manager", I'm simply a firm trader on a small desk of 8 guys.
ReplyDeleteI just got done reading the comments on Gary's post Bull or Bear...
ReplyDeleteas Justin wrote:
With the pollution of false information on the Internet it seems there are plenty of people willing to take the other side of my trades.
Anonymous1 has some fantastic observations and comments on Treauries worth reading in that post.
A few years ago some big shot derivatives desk trader asked me what I thought about the Long Bond. That was back in 2005 around the time China "readjusted" the RMB *Yuan* rate against the Dollar, so it must have been summer.
Asked me if I was a buyer said I wasn't sure, but I was buying gold... Like all these internet experts, AND financial market experts he claimed that 5 point something percent (or close to 6, can't remember at the time) return on 30 years was peanuts.
Again, I find that the biggest characteristic of the people who want to short the US Government and are worried that the US is bankrupt is that they don't have their facts straight. And they are so arrogant about it, like they have their theory (untestable by the way) is flawless. Much like Gary's here.
The US federal government is not an individual, and as the most powerful government and nation, and most stable, on the planet, its financing works on a different dynamic that individuals or nations like iceland or greece, or even Japan.
The same people, or type of people, who are aching to go short Treasuries (for several years) are the same that wanted to go short Japanese Gov Bonds in the nineties.
They got raped. I've said this before.
I TOTALLY AGREE with anon1 that the ultimate contrarian trade now would be to buy the long bond.
To say sentiment towards Treasuries a good is a bunch of B.S.
Banks are still touting EM bonds like Brazil and other economically unstable places, as "safe" investments.
I don't know about people's sentiment guages, but in my experience and it is quite obvious on the blogosphere, people absolutely hate US Sovereigns.
Funny how TLT breaks out like this right after PIMCO announces it was selling 20% US paper to shift into emerging sovereigns...
How typical...
For people who think that the pro's know what they're talking about, get this.
We've got a situation where the professionals are giving Qatar, an Arab Gulf nation with a despotic system of government in one of the most unstable regions in the planet, they're giving Qatar 10 year money for less than 6%, I don't remember exact rate, but it's less than 5% coupon last I checked.
If that's not outright insane and indicative of the stupidity of the general professional investment community, then I don't know what is.
"He even went short GLD again today!"
ReplyDeleteTK went short gold? That's music to my ears! :)
LOL George you can tell us when we get to 950. Right now you are just a perma-bear that is heavily at risk of being too early.
ReplyDeleteWay too much risk for me this late in the daily cycle. As I keep reminding it would be safer to wait for confirmation then get short. The little bit of percentage you give up would be more than worth the consequences if you are wrong.
khalid=justin=anon1=too much time on their hands. I am really starting to think that there are about 3 people on this blog. Heck maybe only 1, and I have been talking to myself this whole time. Is being crazy contagious?
ReplyDeleteTwo items: First, Jason Goepfert's bond sentiment gauges show extreme bullishness. Not super high, but near the top end. I trust him more than whatever anecdotal evidence anyone can provide. His gauges are not especially long term, so ultimately the bond bulls may be right. Just thought to throw this in here. (Consensus Bulls and AAII bond allocation are both to heavy in bonds)
ReplyDeleteSecond, I may be getting a buy signal at the close. I have posted three signals here so far: A Buy on 7/30 (up 200 the next day) A sell on 7/15 (down 260 the next day) and a sell on 8/6( took three days, but down 260 again). IF I get it it'll be signal number four. You might want to buy some Spyders. It's gonna be close. I need a small down day on the Dow (maybe 15 or less).
Gary my man,
ReplyDeleteConfirmation to get short was last Tuesday's close. Before that, it was Obama's election.
Throw your charts away, they are useless! Long term shorters will be paid handsomly!
Stop looking at charts and start looking at the world around you.
DG,
ReplyDeleteAlmost everything in the financial markets is a derivative of price, including sentiment and cycles. Sentiment is obvious since price movements in either direction create excitement in either direction which is depicted on sentiment oscillators. Sometimes lulls in price movement can cause sentiment to move in either direction too, but all in all it's directly related to price.
Cycles are nothing but a structured price movement where depending on duration you expect the trend to either stay in place or change temporarily. But without price action you have no cycle, so saying the two are divorced makes no sense either.
Personally I'll look at any type of analysis myself including those two things, but in the end I'll make up my own opinion based on the facts in front of me. Also since price is the driving factor for how money is made in the markets I look at price first and then the derivatives of price as secondary indicators.
Sorry I just can't waste capital on the short side as long as the secular gold bull is intact.
ReplyDeleteGary
ReplyDeleteYou know why this market will sink?
It is because nobody is shorting. Shorts can't cover to drive it up.
Looks like some buying on weakness today folks....another opportunity to get net short before the close.
S&P 500 target: 950 then cover.
George
LOL
ReplyDeleteright, I'll leave people with their fairytales about Ben Bernanke and how money works in the global financial system.
I know why I've invested in gold and miners (the latter thanks to Gary), but I'm under no illusion that I know why exactly gold is in a bull market.
It's funny how the people who are so sure and confident they'd know exactly what to do if they were in Bernanke's position, or Timmy Geithner's or on the Prez's Council of Economic Advisors, etc.
Most of these commentators would struggle to run a business successfully and survive for more than a couple of years.
I'm not an apologist for government but there's definitely more than meets the eye to these things.
Gary has a truism he always repeats, that human nature doesn't change.
Yes it doesn't.
The facts are out there, yet people continually choose to remain misinformed on emotional subjects like the the trade deficit. Hearing most pundits, you'd think America is finished once and for all, i.e. bankrupt, so you should shift your wealth to Hong Kong or Singapore.
Sure you can buy now, but think how much sweeter it will be when you can buy the S&P at 950!
ReplyDeleteBe patient folks.
George,
ReplyDeleteYou are certainly positioned in the secular direction. But you are taking on huge risk that you might be too early, especially as we near an election.
It just doesn't make sense to risk huge losses for a few extra percentage points. If you incapable of riding a bull then at least have the patience to wait for confirmation the bear has returned.
LOL like any perma-bears will be able to buy at 950. That's the best joke I've heard in weeks.
ReplyDeleteWell, I know exactly what I'd do in their situations, being their all Israel-firsters.
ReplyDeleteI'd get rich with my buddies, then "make aliyah" while the getting was good! :)
Got the buy signal! Bought 1000 SPY and 2000 Q's at the close. To be clear: This signal demands a 1% or more rally within three days. Given Gary's cycle bottom and a few other things it should be worth more than that. It has been backtested by a major hedge fund to 1980 (no optimizing or data min ing) and shown to be a little over 80% accurate. I may add tomorrow based on overnight stats. If they gap up at the open and we get a trend day up and can't add I'll live!
ReplyDeleteGood interview with Robin Griffiths on King World News. His call back in June was on the money. He's seeing weakness now until Oct 20-but nothing earth shattering...Like SPX 980. From that point, he's calling a rally until the Spring before things get really ugly.
ReplyDeletehttp://kingworldnews.com/kingworldnews/Broadcast/Entries/2010/8/14_Robin_Griffiths.html
Did DG get that buy order filled?
ReplyDeleteJustin: You probably agree that overwhelmingly bearish sentiment must result in a rally (and the reverse of course). If that is so, isn't it possible that there might be record bearishness but price doesn't tell you to buy? It is impossible to have universal bearishness without a rally (who's left to sell?). Sentiment signals are correct by the definition of how markets work. What price structure is that accurate? What do you mean that you trade solely by price? You keep buying new highs?
ReplyDeleteDG,
ReplyDeleteWhat's are the stop levels on the SPY and Q's?
Got it filled. SPY at the close and QQQQ after hours (I was late by 30 seconds for the Q's but I had to be sure the Dow was down---I hate these close ones!)
ReplyDeleteAs for stops, I do not, unfortunately, have a good algorithm for that. I do it by market feel and, frankly, get faked out far too often. I hope they open higher and don't put me to the test. That's what has happened with the last three signals and so I got a little lucky and took home some big wins. If they open sharply lower I'll probably sell some and watch them rally without a good-sized position. but that's just the way it goes. Let's hope for an up opening.
Sorry, that was an incomplete answer. If we drop 1% before we rally 1%, the chances are high its a bad signal. I personally usually lighten up before that but strictly speaking you can wait for the first 1% move to sell, and it is 80% likely that move will be an up one. The system has no opinion as to what happens after the rally has taken place. Given Gary's cycles I hope to be able to hold on for much more, but we'll see.
ReplyDeleteI'll add a tweek to DG's buy signal that may help. A daily cycle can't bottom until a swing low forms. That swing low will form if the S&P moves above 1082.62.
ReplyDeleteOne could wait till the S&P forms the swing low to tilt the odds a little more in their favor.
No swing low then don't enter the trade.
DG- if they gap it up tomorrow, lets hope for a trend up day. I mentioned over at Moo's blog: I thought this morning was primed to give us a reversal but the S&P experienced trouble at the 108 level early on. As Rosa responded: judging by the action in the Russel, we did get the reversal.
ReplyDeleteI'm not convinced of the reversal but I like your long entries at the close. I'm long several issues myself.
Ten-Year: Yes, I normally do not like gaps in my direction as it's usually the dumb money moving in, especially gaps down when I am short, so if they gap up let's hope for that trend day! Remember too the signal can take a few days to manifest. Good luck.
ReplyDeleteAnd Gary, yes, with 1082.62 so close no reason not to wait and see if it works---unless we gao up big.
Guru Smart Money, can you help me?
ReplyDeleteGary-
ReplyDeleteAre you sure this is not mid point consolidation before another waterfall decline?
http://www.screencast.com/users/Jayhawk1991/folders/Jing/media/a5b22f60-0256-4b2b-8a21-5501e73ca1f7
DG,
ReplyDeleteGood luck on your trade.
Hope it works.
After today - short term the bond market should pull back.
ReplyDeleteWhen everyone starts talking about its collapse again, then you buy yet again.
Buy this dip in bonds that is about to come up.
Khalid;
ReplyDeleteinteresting comments you posted today.
So human nature doesn't change- very true. Therefore the American fiat currency will fail like previous Fiat currency's before it. Only a matter of time. All Empires have failed throughout history, America will be no different. Time being the only variable. Not sure how to trade that, but the simple response would be to prepare for the it, whenever it comes and it will come, by having Gold, Guns and Land, a power source and potable water.
As for Bernanke and Geithner and the rest being smart..well that depends on how one looks at them. Are they smart because they are well paid by their bosses to work on their bosses behalf? Does that make them smart? Maybe. Certainly they are not for the people.
What I want to know is how do you go Long the second American Revolution while shorting the sub human waste called an American Politician.
hey Gary, love the blog. What books do you recommend to learn cycle analysis?
ReplyDeletehey Gary, love the blog. What books do you recommend to learn cycle analysis?
ReplyDeleteKeys, you made some excellent points at the very end of the last post. There is a lot of argument about inflation vs. deflation and whether or not and how this will affect gold and bonds. But you hit the nail on the head - right now the gold story is NOT really about inflation vs. deflation. It's about the debt crisis which can only express itself, ultimately, as a currency crisis. A revaluation, as you put it, needs to occur. This will be a difficult and drawn-out process and the reflationary Fed/Govt forces will continue to battle the deflationary deleveraging process as we go along.
ReplyDeleteThe truth is that while the Fed balance sheet is huge, the money is just sitting there as velocity is close to nill (a point against Gary's argument). But contra Anonymous1 and others, history (including Weimar) teaches us that velocity can increase dramatically in a very short span of time and that the key is human confidence in the currency. If that should ever come under question, velocity will get out of hand and Bernanke will regret the vastness of his efforts. Inflation has mostly to do with the money supply, but hyperinflation has mostly to do with confidence. The Fed can control the former, but not necessarily the latter as it only has limited control of the debt and its growth.
I like your point about Japan likely needing more foreign lending and that this will likely require higher rates going forward. Either that or the BOJ puts the brakes on and GDP collapses, killing taxes and leading to the same scenario: default.
We are not dealing with mere inflation/defaltion - we are dealing with Leviathan - a monstrous debt so large that currencies will ultimately have to be forced into reality. Gold will feed on this EVEN WITHOUT a growing money supply becuse it will anticipate the demise of the currency(ies). Fear is the driver of the gold price.
Kudos for your thoughts.
Jay,
ReplyDeleteI think you are probably wasting your time trying to find this kind of pattern in an intraday chart.
Don't really know any cycle books off the top of my head.
ReplyDeleteI offer a fairly detailed explanation of how I use cycles in the terminology document. You could always buy a one time monthly subscription so you could study that I guess. It would probably end up being about the same price as a book.
Hyper-Inflation at the moment is a pretty absurd though LowTax......
ReplyDeleteThe reason is that we are the reserve currency and all other currencies are priced against the USD.
This idea of a dollar crash overnight is silly. That would mean that the GBP, EUR, YEN, AUD would all skyrocket. Why would their fiat currencies double or triple or go up 1000% in value? Are they that much safer than the US? Especially when they are worse off economically or about the same as far as pain goes.
I said it before and will say it again, expect Gold to go up along with the USD as it has for the past 8 months.
It's why gold and cash is the safest bet in this uncertainty when deflation looms in the face of potentially massive inflationary printing going on. Only potentially, because who knows when the printing ever makes it into the economy. Based on bank reports today, banks aren't lending, but instead buying...... you guessed it - Treasuries.
With people out of work and end demand circling the toilet, along with housing prices now in double dip territory for real estate, why would BofA lend you or your neighbor money for 30 years at 4.25% when they can instead give it to the entity with a printing press and taxing authority at 4% for the same time frame?
Lending will not pick up until employment does. Employment will not pick up until end demand does. It's a viscious cycle that has begun and is much more complicated to stop than just printing money.
DG,
ReplyDeleteI look at sentiment as a piece of information. Sentiment is going to oscillate along the way but the primary trend is what is important. Of course at extremes such as March 2009 sentiment is going to look horrible and the trend change coincided with the horrible sentiment. But sentiment was surely horrible during the 2008 crash as well yet the market kept on crumbling.
So getting the primary trend on price is the only thing I'm really concerned with, sentiment is going to oscillate like an RSI indicator but the trend will still play out.
Every once in a while someone posts a comment about my trading style being "too much work" (which I never mind as I love the game---I'm sometimes sad Friday afternoons that i have to wait until Monday), but reading all the arguments about inflation vs. deflation and yen vs. dollar vs euro makes MY head spin. I read it because I do want to understand what the heck is unfolding, but to me it seems a hell of a lot harder than learning to cut your losses and let your profits run! Any style can work and I guess we settle on what suits us, but I like being completely liquid and able to dump everything in five minutes and go the opposite way. Of course, for emotional traders that is their worst enemy, but if I were locked into stuff, then I'd be really nervous.
ReplyDeletethanks gary
ReplyDeleteWe certainly aren't going to see hyperinflation in the next 4 or 5 years but we are on the path that leads to that outcome.
ReplyDeleteNow let me ask a question when the banks get free money from the fed and use it to buy treasuries what does the government do with that money?
That's right they spend it on things like stimulus and government payroll. To think that money isn't getting into the economy is just ridiculous.
Not to mention that some of that money is being thrown at asset markets like stocks and commodities. You don't seriously think the banks are completely satisfied with a 2.5% return when they can get many multiples of that in other asset classes do you?
Anon1,
ReplyDeleteIs the EUR/USD your favorite currency pair to get long the dollar? Just curious, I see other currencies that look vulnerable potentially too but obviously the Euro has a sovereign debt issue that is surely going to flare up again.
"You don't seriously think the banks are completely satisfied with a 2.5% return when they can get many multiples of that in other asset classes do you?"
ReplyDeleteSure I do - because that is what is going on. You think the corn market can handle the billions? Or Cotton?
No - so they buy the most liquid security that gives them a return and has no risk.
If you think stimulus is somehow inflationary long term - you are kidding yourself. The more government spends on stimulus - the less likely your inflation scenario takes place believe it or not.
If they were spending that money on jobs creation, I would join you in the money getting into the economy in a way that bring inflation.
Which is more inflationary: giving $450 a week to an unemployed worker who is scared to spend money and just maintains the basics of life?
Or spending that money (or making a job creating environment more palpable for small business) on creating a job for that guy - who can now have confidence to go buy products for which factories have to buy more goods to produce and thus hire more workers to meet demand thus creating an upward cycle that produces higher and higher prices and wages?
Stimulus might bring future demand forward, but just makes the problem bigger. Money getting into the economy via stimulus is one of the worst arrows in the hyper-inflationists quiver.
Again - if handing out money was so inflationary, why are we not drowning in higher prices at the moment? I mean - we have 15 million workers getting the equivalent of printed money via 99 weeks of extended checks. They do nothing productive for that money, its basically a weekly printing show..... and yet, the numbers show dis-inflation is getting stronger by the report.
Justin -
ReplyDeleteAt the moment yes it is. We are short a number of FX pairs against the $ but the EUR is out largest. We are also short ht EUR against the JPY
We are expecting a EUR bounce here soon as we pull into the daily 50 and lower B Band, but still plan to add into strength up to the 20 period monthly MA on the EUR. 1.10 still remains our initial target. We are only bouncing off the 200 period monthly MA on the EUR, which coincided with the lower BBand, but the fact remains, that chart is broken.
How people can like the EUR over the USD at this point blows my mind. To hate the USD is to love the EUR.
No thanks,
Gold and Cash......
We are not dealing with mere inflation/deflation - we are dealing with Leviathan - a monstrous debt so large that currencies will ultimately have to be forced into reality.
ReplyDeleteThanks for your comments; they actually help me refocus on my thoughts. Inflation or deflation actually may not be the issue at all in fact, and would be funny if irrelevant despite all our debating. Currency destruction via a world wide Leviathan(as you put it) is the real poison. Hyperinflationary actions or deflationary actions are the choice of how to deal with it. Either way, as you put it, Gold should do well because it is reacting to a debt crisis, opposed to our choice of poisons. Just another way of looking at things, that again is consistent with a gold bull. So many fundamental reasons to go old turkey here.
I still believe Ben will continue his inflationary actions btw, just like the different angle.
DG, my buy signal did not hit yet, but I use a 30 minute chart. Tomorrow SPY needs to break and close above 108.71.
ReplyDeleteI also closed my SLW and AGQ Sept calls today, they hit my profit targets and these gaps will fill before we move up again, IMHO.
IAG is looking strong.
Bob K.
Anon1, you need to re-read my comments. I was not specifically referring to the USD, although I see it as the best looking horse in the glue factory. I was referring to most developed world currencies. As such, the devaluation will occur relative to hard assets, such as gold, and NOT between currencies. The UK, France, Japan, etc. are pretty much in the same boat as we are so I don't expect huge swings relative to the dollar.
ReplyDeleteI agree with your gold/cash recommendation - I've been there for two years now. I've also been staying away from debt and minimizing what little debt I do have.
I read the bit about banks buying Treasuries as well - I think David Rosenberg has been on this for quite some time now. It's true, there will be a solid bid under them from banks (where else are they going to put all that government money???) and from retiring baby boomers who have had enough of the stock market. Having said that, I still find the bond market too risky given the underlying insolvency and I have no reason to go there - I've made far more money in gold/silver. Diversification seems like a pretty weak reason, but maybe I'll end up eating those words :)
It's not looking good for the bears this morning. I think I hear the G-train coming.
ReplyDeleteBetter jump off the tracks little perma-bears before you get run over LOL
Wrong-Way TK getting POPPED again. What else is new?
ReplyDeleteStocks have tumbled since Gary's bullish post while bonds have surged. When Gary crows do the opposite.
ReplyDeleteIt does appear the daily cycle will make one more push down possibly into GDP revision next week but the daily cycle will bottom and the bears that sell into this decline are going to suffer just like they did when I warned an intermediate cycle bottom was due in late June.
ReplyDelete"Stocks have tumbled since Gary's bullish post while bonds have surged. When Gary crows do the opposite."
ReplyDeleteCould not agree more. LOL!
You do realize that this post is so deep that no one but you and I are seeing this so pretending to be a second poster agreeing with yourself is really quite ignorant.
ReplyDeleteNot correct Gary, I also saw this. I agree it is somewhat ignorant of you to pretend to be a second poster and agree with yourself.
ReplyDelete