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Wednesday, September 22, 2010

CURRENCY CRISIS HAS BEGUN

It's been my position for a while that Bernanke's monetary policy would eventually create a currency crisis in the worlds reserve currency.

I warned that crisis would begin as soon as it became apparent the dollar was caught in the grip of the 3 year cycle decline.

I had three conditions that had to be met before I'm was willing to call the beginning of the end. The first condition was for the dollar to move below 82. That was the warning shot that problems were developing.

The second and third condition were a move below long term support (80) and a failed intermediate cycle.

The drop below 80 this morning has now completed the final two conditions.


I've marked the last three intermediate cycles with the blue arrows. The move below the last intermediate cycle low this morning initiates a failed intermediate cycle. This is also an extremely left translated cycle. Left translated cycles tend to produce the worst losses as they have a long time to move down. The ongoing cycle shouldn't bottom until it puts in a larger degree yearly cycle low in November or December.  I expect that low to test the `08 bottom at 71.


Finally we should see a full on mini crisis by the time the dollar drops into the major 3 year cycle low next spring or early summer.


I've been pointing out for months that deflation just isn't a possibility in a purely fiat monetary system. A determined government can create inflation any time it wants as long as they are willing to sacrifice the currency. I think it's safe to say the United States has no compunction against destroying the dollar.

We are now heading into an inflationary storm that will expose deflation theory as the pure nonsense that it is.

240 comments:

  1. Gary,

    about stocks,

    there is a strange difference in cycles between european and USA stocks. EU seems to have already bottomed the half daily, while USA seems not.

    A lower in USA stocks can bring down Eu stocks, but then there will be a loto of failing cycles in EU.


    What do you think about it, whos going to move toeards the other?

    ReplyDelete
  2. I don't see anything that looks like a half cycle low in either the CAC, DAX or FTSE. I expect they will follow the NYSE down.

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  3. What about friday low? With the dollar declining so fast, coldn't this have been this one the min point we were looking for?

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  4. I am seeing USD below 80. I know I should be happy as a PM investor and I know we are expecting it but still I feel it is quite tragic really.

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  5. If markets head down from here because of dollar then we should see a spike in bonds accumulation along with commodities, right?

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  6. You said the same thing back in August 2010. The dollar dropped for a few months, but then surged.

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  7. Does it mean the market rallies from here?

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  8. Gary, if the US dollar begins a precipitous fall wouldn't we expect to see other countries take aggressive actions to devalue their currencies, and if so, won't that mitigate the fall of the US dollar making it difficult to predict the full extent of decline?

    Thanks in advance.

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  9. Gary,

    You believe we are headed for a currency crisis and I agree. But don't you think if the DXY actually has a 6 handle (not to mention other countries are devaluing so this is not a very good measure) then gold will have some kind of parabolic (use whatever term you want) move at that point. I'm not trying to get too far ahead here but it just seems that $1600+ would seem very conservative if fear is running in the streets with the world's reserve currency (and most others). It would seem like a move over $2k could very well be in the cards. Do you think this is a realistic possibility or does it not fit with the final C wave to go that high?

    Thanks,

    Steven

    P.S. For others, gold re-embedded and silver is still very embedded fwiw which, again, should mean that all pullbacks are shallow and buying opps (and bear traps) until they lose their embedded status. Of course this is a bit tricky as well as gold did lose its embedded status last week but then quickly recaptured it.

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  10. Gary,

    One more question. You said a potential place to remove a bit of leverage if one wanted was when the dollar tagged 80. Well it's done that this morning obviously. Do you still think right here is a good place to remove some leverage or wait until what I think you said earlier was for the big money to blow through $1300 (and possibly $21.50 on silver) to bring others in and then do it?

    Thanks again,

    Steven

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  11. Anon,
    I said I expected the dollar to drop to 80 and then bounce. I also expected that bounce to fail.

    I think I got it pretty darn close don't you?

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  12. I assure you all, the dollar is going much lower. I just don't want to bleed the value too quickly lest you hang us.

    Think about it. My inflation target of 2% (compounded), even though it sounds reasonable, still dooms the dollar in just a few generations. Check the charts for yourself.

    Better yet, don't. We much prefer to rob you without you knowing and affecting every individual. No escaping the most efficient theft, that of the value of the paper we issue.

    At least the people here are intelligent enough to put their paper "money" into real money via precious metals.

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  13. Steven,
    If you need to take down some leverage anytime now is OK in my opinion. Gold is only $6 from 1300.

    We are late enough in the daily cycle that the first swing high should mark the beginning of the correction. If it doesn't then it's likely the runaway move is just going to start runnning over all our timing tools and one better just get in and stay in.

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  14. No year end rally?

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  15. I'm curious to hear Gary's answer to Steven's question, but will add that in here is good enough for me to take the leverage off. Might even clip an additional 20%, leaving just 80% of core position on.

    Of course, if we ever pull back as expected I will put it all back on! :)

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  16. Anon,
    Anyone buying bonds with the currency that they are priced in depreciating rapidly needs to have their head examined.

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  17. I thought the future is unknowable and unpredictable? It seems quite predictable around here!

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  18. On the contrary, anon 6:03. I'm just trying to respect the percentages by taking some off here.

    :)

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  19. Lets see...2% above the closing price yesterday...yup 1299 and change. Chances are good that we close below 1300 :)

    Aaron.

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  20. gary--
    thoughts on feelings where the dollar rally failing? Should we wait for a swing high rather than a target in mind?

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  21. In terms of half cycle low : china index CAF ahead of SPX..

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  22. Gary + All fellow Subscribers,

    Yesterday I showed a profit for 1st time this year. I lost big trying to short before I found Gary's blog.

    Good luck to one and all. The $HUI is hot out of the gate today too.

    Tom

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  23. Sweet Jesus, the UUP has completed a death cross if I'm not mistaken?

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  24. "Anon,
    Anyone buying bonds with the currency that they are priced in depreciating rapidly needs to have their head examined."

    Gary Gary Gary........ pride before the downfall. This article and your own tooting of your horn made me sell 20% gold today and go to 60% dollars and bonds.

    I know I know..... I will get crushed and I am an idiot and a troll -

    blah blah blah

    Thanks for "calling the end of the dollar today"

    I've been waiting for such an article.

    ReplyDelete
  25. anon1,

    He's been saying the dollar should have a bounce at some point in here, and only that this actions confirms the longer term trend lower is still in effect.

    Can't you read?

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  26. TommyD,

    Congrats to you - good to hear!

    ReplyDelete
  27. http://www.minyanville.com/businessmarkets/articles/currency-crisis-monetary-policy-ben-bernanke/9/22/2010/id/30208

    Is this your alter ego (Toby Connor)? Or a plagiarist???

    ReplyDelete
  28. The move in the dollar today isn't an ending move, although I do expect a short term bounce. This is a failed intermediate cycle. There isn't anything more bearish than a failed and left translated intermediate cycle.

    I keep telling everyone that these cycles work and the dollar will drop into a 3 year cycle low just like it's done like clockwork for the last 30+ years. I suppose you will finally believe me at the bottom. Of course at that time you will be screaming for everyone to sell the dollar and I will be calling for a bounce. :)

    ReplyDelete
  29. And if anon1 wants to pretend he's fading Gary because he's so smart, then why is anon1 taking some gold off the table right when Gary advises it's ok to do so?

    ReplyDelete
  30. Oh I can read g-string

    His is now tooting his own horn and calling for a currency crisis in the dollar.

    I guess I'll just take the other side and get steam rolled by the lord of his universe.

    It will be the call of his lifetime, or the one that humbles him.

    I am betting on the latter is all. You go ahead and bet with him.

    ReplyDelete
  31. because g-string -

    gary never advises trading the gold bull

    I am not trading it for a quick move. I won't be adding this 20% gold back anytime soon is my guess.

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  32. FWIW, I really don't think that bonds are a good indicator anymore as they are being bought by central banks, who are playing with their currency and could care less about ROI.

    How else can you explain bonds and gold?

    Yes, I did get ripped by my bond short.

    ReplyDelete
  33. http://www.zerohedge.com/article/guest-post-more-forensic-evidence-gold-silver-price-manipulation

    excellent article.
    Note also confirmation of my earlier comments that silver performs (so FAR) 2x of gold. The actual number is 2.23.

    The shift in the manipulation function he demonstrates in 2008 is fascinating.

    --TZ

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  34. At least Anon1 is man enough to show up and take the abuse ...even if he is still in denial. That's more than one can say for Justin and 950 boy :)

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  35. Voila! Dollar down almost 1%, stocks refusing to go up...maybe money coming out of stocks into Gold?

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  36. yeah Gary -

    I am worried about that. I foresee myself loving the EUR/USD at 1.65.

    You are a future seeing genius.

    haha

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  37. Well not really seeing the future. Just going with historical cycle data and a fundamental view of what the Fed is doing and how the marhet is going to react to it.

    For some reason you seem to believe that the Fed can print trillions of dollars out of thin air and it will magically be positive for the currency.

    I don't believe in magic.

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  38. Anon1,

    Did you lose your skirt, or did you get confirmation of yourself being masochist? Do you sit naked in front of the computer with candle wax or something?

    Wow and to think you manage a big hedge fund for other idiots. I guess you guarantee returns as well. How to get to zero in 10 years or less. Keep buying those bonds, you dumbass!

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  39. Gold back to 1285 or lower by today's close puts us back in the wedge formation and has a good chance of starting the cycle low decline.

    --TZ

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  40. Anon1,

    There are many blogs making all kinds of calls. Some are too high level, and some are actionable. Some get it right most of the time, many not so.

    Gary is not the only one calling for currency crisis. Marc Faber and Jim Rogers are the other guys.

    Of course he does issue warnings for the benefit of subscribers and he is right so far more often than not.

    So I do not quite get your animosity towards Gary?

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  41. thanks g-string anon-

    i will

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  42. The difficultly in reaching 1300 when we are SO CLOSE with seemingly so much strength is a *tell*. What it shows is that a lot of longs are deciding to front run the assumed jump to 1300 by selling a bit BEFORE IT.

    Obviously anybody long wants to get as much profit as they can (trader types). So all the longs are saying "I'll wait till it pops 1300 then sell and take my money". But there are a bunch of them and what is happening is a few are going "ehhh...I think I'll just take 1298 and leave. Why be stupid". So they generate a bit of weakness.

    Then it pauses longer and some more longs get itchy and decide to lighten a bit. Then then a large group of the remainder start getting more itchy.

    Repeat. Repeat.
    If you have ever been long with a lot of profit and doubting it will go much higher you have been in this situation. First ones to the door get the money.

    We will see, but it looks to me like the (weak; recent buyer/chaser) longs are getting nervous.

    --TZ

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  43. I'll say it again before another anon does - If long, just stay turkey. I'm not discussing these things to panic you out. I'm discussing them (possibly wrongly) for people like me who want MORE of a position or have continuing income stream to invest. If a week or so of time gets you a 15% lower entry on SLW (or whatever), then it could be worth it. Whatever you have now you should just sit on.

    --TZ

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  44. anon1 is a masochist as pointed out above. He loves to get spanked, too!

    At least he acknowledged Gary's genius and bought gold, though.

    ReplyDelete
  45. Anon1,

    How big is your corn-hole anyways? You must be used to it by now getting pounded from every wrong trade? Thanks for blogging, it helps me to know which direction to trade. Keep up the pride trade!

    g-string

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  46. "For some reason you seem to believe that the Fed can print trillions of dollars out of thin air and it will magically be positive for the currency."

    You know my answer to that.

    Has nothing to do with being positive for the currency. All frat will go down over time against gold.

    But the $ is not priced in gold - but against a basket. It just has to go up against that basket.

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  47. GARY,

    You expect a pullback of 24-$40 on gold, but theoretically it can pull back as far as just above the last cycle low of 1211, right?

    So you think only a pullback to test 1265 breakout or so. I see the possibility (but I'm unsure of the *likeliness*) of a lower pullback to 1230 area retracing much of the recent move up.

    What odds would you give such a thing assuming it is *possible* within you view?

    --TZ

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  48. once again - g-string shows his capacity as a child.

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  49. yeah g-string -

    I'm just getting crushed in those bonds.

    I can't believe all the money I am losing in them......

    thanks for bringing that to light. Now I know why I am poor.

    ReplyDelete
  50. OK let me put it this way you seem to believe that the Fed can print trillions, while Europe institues austerity measures so they don't have to debase their currency and some how that will be positive for the dollar.

    It still amounts to believing in magic and I still don't.

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  51. Gary,

    Any guesses on a pullback target for the miners?

    If stocks and gold head lower together, it could be pretty sharp?

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  52. Being very late to the party and having put some money to work in early September would you recommend adding any additional shares? I only have a few percent gain so there is not much profit for me to take.

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  53. Sold half of my silver leverage in my futures acct. this AM at 21.10. A shout out to TZ, I appreciate your short term trading commentary, it is helpful.

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  54. Elaine,
    I would wait to see if gold pulls back into the daily cycle low soon.

    I will go over strategies in tonights report.

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  55. "...while Europe institues austerity measures..."
    That money they saved in Europe and the UK just went into the bond market, didn't it?
    In which case it'll only help keep interest rates low (on top of rescuing the bond holders' portfolios).
    J

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  56. Don't thank me too much yet. My commentary didn't catch this last gain and so far is repeatedly predicting a pullback that doesn't happen.

    --TZ

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  57. TZ,

    USD down almost 1% but silver and gold just about flat.

    Maybe the move down to the cycle low is kicking in and we have your pullback!

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  58. TZ,

    It is not whether you are right or wrong, my decisions are my own responsibility. I am just voicing that I like the discussion on short term trading strategies. Others prefer only to hear about what is for dinner on thanksgiving. :)I enjoy hearing your take on trader psychology, it often rings true for me.

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  59. I'm fully aware that as this think keeps creeping up I'm saying "looks toppy now", then "looks even toppy-ier now".

    I say what I've been saying lately because, like Gary making his own mistakes, over the years I would be long and get enthusiastic and ignore signs that I was buying (or not selling) into extreme gains. I'd only be looking *UP* and not down. When things INEVITABLY turned (even if only temporarily), the market would really take out many of my gains and I wouldn't be prepared mentally to want to hold or to buy more at good prices when OTHER people paniced out.

    I think I've adapted and now I'm more patient and more atuned to both directions of the market.
    Yes...it has cost me this gain SO FAR because I wasn't willing to chase (unlike previously) and because this move has been VERY strong we all agree.

    But I think the turtle (turkey? :-) wins over the rabbit. This wave C is far from over and my patience and watchfullness of some of the things i'm saying MAY pay off as I calmly pick entries when others are bailing.

    We won't know if i'm right until this thing corrects and we see what happens.

    --TZ

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  60. Notice that we gapped open on almost everything precious metal related this morning. Another bad sign of too much enthusiasm. All those gaps are collapsing.

    --TZ

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  61. @ Elaine, @ Gary - YEah...thanks...you have gone over some exit plans for taking off leverage in reports, maybe you can touch on when to add to existing positions!

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  62. Gary,
    " I expect the "news" will be used to take profits after the strong rally of the last three weeks (the pullback into the half cycle low). "

    Good call!! Amazing...Where is the "half cycle low"?? 10 DMA?

    OQ

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  63. I doubt the marekt will drop below the 200 DMA. If it does then I would look for buyig to come in at 1100.

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  64. Sure there's no inflation. 15 yrs ago when I was in college, we'd go to a local dive bar after classes and get 10 cent chicken wings with drafts.

    Just heard the same place advertise the same event, but the wings were 40 cents/each. +400% in 15 years!

    As long as the people don't notice the pain immediately, the Fed will continue to rob us.

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  65. Inflation? Jim Rodgers says buy land..Is there a stock for land investment instead of "real land"?

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  66. I am a bit nervous because I did buy in late and if we get a big dip I would be negative. I would then need to hold through the downturn and wait for the next leg up.

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  67. Elaine,

    just be patient with your position and you should have a plan in place (this will get rid of the emotion involved with your position)

    ReplyDelete
  68. Anon-
    there are a few but are not pure land plays. Many have ranches or other ag related activity with them,.
    Two that come to mind are TRC and CRESY

    CRESY foreign and TRC in California

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  69. For the first time in my life I've been buying actual land, with timber that once cleared can also be used for farming. Feels odd, but I am sure it holds it's value much better than Justin's dollars.

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  70. Looks like the mainstream media has caught on the Gold train:

    http://finance.yahoo.com/news/11-Ways-To-Cash-In-On-siliconalley-2915174768.html;_ylt=AthQImaqi1XsidpeVC_nZMm7YWsA;_ylu=X3oDMTE1ZDZ2YzkwBHBvcwMzBHNlYwN0b3BTdG9yaWVzBHNsawMxMXdheXN0b2Nhc2g-?x=0&sec=topStories&pos=1&asset=&ccode=

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  71. Still mostly PM's though!

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  72. I'm joining the others and taking off my leverage in PM's and will buy back if prices drop or hold over the next couple weeks. Wake me when this happens.

    Back to what I love best, the snooze.

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  73. Why are gold and silver up, but GLD and SLV down?

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  74. The futures market closed before the Fed announcement yesterday so the ticker you are seeing on TV is from yesterdays close.

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  75. Gary,

    You stated earlier that anyone buying bonds need to have their head examined. Well Gary, I bought more bonds last week and I am making money. Right now the bond market is still in bull mode. The fundamentals still support low rates and they could even go lower. And yes, one day in the future, interest rates will rise and the bull market in bonds will be over and those that bought long-term bonds at these levels and held on to them will suffer. But in the meantime I am making money in bonds just like I have for over twenty years.

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  76. Got some TYH , TNA..
    The market will forget today's bad breadth..another up day tomorrow..

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  77. Gary,

    I heard on CMBC that if the Republican take back control look for gold to drop. Any comments on this?

    Rod

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  78. I heard that Republican want to cut millionaire's tax? Is that true??

    OQ

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  79. flipped my TZA into TNA

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  80. Gary,
    I am a business owner consider a building lease term of 2-3 years. If inflation hits as you predict, would you consider this a wise move? My thought is locking in a historical low rate and paying with future fiat currency that is worth less would be a good move. Of course assuming my business supports the lease with future unknown business environment.
    Thanks, KB

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  81. Gary, I was holding TBT (long interest rates) thinking it was time for it to rise, but it's dropping. Is that what you would expect? Thanks.

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  82. Jerry,

    You do realize that you over the last 3 months could have just bought a basket of currencies and made the same return as on the long-dated bonds with lower risk, and no fixed top. Also, I find it funny that you are bragging about a bond return when for example the TLT and the UUP are almost completely offsetting. I will have to go with Gary’s head examination suggestion.

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  83. Or Jerry could've bought a ticket on the G-Train and been up 40% in DGP since Feb., like some of us.

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  84. Well, no buy signals today, but I still think this decline in stocks will be quite limited.

    Even this two day hesitation has done a great deal to relieve the short term overbought condition, and longer term we're not yet overbought (neutral in fact).

    It will be interesting to see if the AAII voters have managed to scare themselves this week, or if they remain bullish.

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  85. USD tried to regain 80 and failed. Pathetic.

    Aaron.

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  86. Now that we all sold out of our PM's, now what?

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  87. Anon,

    First, what I said about bonds is a statement of fact. I did not mean to give the impression that I was bragging. Surely it was no different than what Gary and some of the others here do at times. The problem is that Gary seems to believe that the bond market is currently in a bear market and has been in one since the end of 2008 simply because the 10 and 30 year Treasury bond yield has not got back down to it's low that was seen at that time and never will. The fact is the bond market is made up of much more than 10 and 30 year Treasuries. Every other sector of the bond market has gone up since then making higher highs. Several of my bond funds in the last two weeks have made all-time highs. Even longer-term Treasuries are not that far away from those low yields. The is no evidence at this time that anyone can say that it is a fact that the bond market is in a bear market. The bond market is behaving just like it should in a bull market.

    Second, what makes you think I do not own gold and silver? Is it just because I still own and buy bonds? I am sure that you have all your money in DGP since February and made 40%, right. I am an investor not a trader or speculator.

    And lastly, I am not Justin or Anon1.

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  88. The Republicans controlled the us government for 8 of the 10 years of the gold bull market. The gold bull was born under George Bush.

    Ben Bernanke is a Republican appointed by George W Bush.

    Alan Greenspan was a Republican appointed by Ronald Reagan.

    So tell me why anyone would think gold would drop under a Republican government. If anything I would expect more of the same.

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  89. How many people are seriously buying bonds as an investment? I am convinced most deflationists don't really have accounts? Probably destroyed a long time ago, or they are trading in artificial yahoo stock games or something. Keep starting new fake accounts every time the trade blows up. From what I can see deflationists have a perpetual short on the stock market, love buying high duration low yield bonds, and play around with some gold. How anybody is still alive after that I don't know. They would have to constantly sell their gold winnings to keep putting more money into losers. Moreso they are convinced their bonds are winners, but fail to realize that the dollar they are denominated in has and continues to blow up. The perpetual belief that the USD is going to rise, and that printing more money will only increase the value of the USD is crazy.

    I would love to hear some solid reasoning to why the USD will be strong, and why bonds or any fixed rate investment is a great investment.

    ReplyDelete
  90. http://garyscommonsense.blogspot.com/2008/12/more-dollar-musings.html

    Oh how times have changed...

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  91. Another high on SLW. Wow.

    It has the SAME "momo" exhaustion pattern that caused me to buy puts on it previously (expired worthless; you longs are welcome :-).

    That pattern is still there and getting more and more stretched. Yes...it did what markets do and lasted longer than me and others expected. Not yet doesn't mean not ever. Does patience win this one?

    I'm watching this with fascination and wondering the outcome. (I have no position in it and continue to think SLW might be possible at 22. a 15% drop and quite normal from the history of this stock.)

    Comments only. NOT trying to scare anybody. If you are in with a profit (especially if below 22) just hold and go get lobster for dinner, imo.

    --TZ

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  92. As gary says... bull markets get overbought, then they get more overbought, then they get even more overbought!

    Aaron.

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  93. Somebody's out there buying SLW on every micro-dip. It's almost unnatural.

    I think some big hedge fund is trying to accumulate a massive position.

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  94. SLW's privileged position and business model make it ideally situated for the PM bull.

    IMHO, looking for exhaustion in the metals or in SIL/GDX as a cue to fade SLW, if that's the game, rather than SLW itself.

    With GDX only now just moving above major resistance, I don't see an edge fading SLW (or its priapic cousin, ANV) right now. A one- or two-day pullback strikes me as too hard to time until the broader moves show signs of cracking.

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  95. Unlike Gary, I believe markets are clearly manipulated (the degree of possible manipulation decreases over time horizon.) Short term hits to weak hands are easy and happen all the time, imo. If you or I had the money and power and access to the accounts and computer in NY we could do the same thing. This isn't voodoo, it's just a job with a plan.

    With the dollar at/below 80. With silver near the high. With gold at wedge top and near round 1300. With momo exhaustion on SLW (NOTE: HUI and GDX have similar readings). With futures options expiration on monday.

    With all these, I can't see how a hit doesn't get planned and start in short order (like...within next 24hrs).

    Again...just my musings as I watch this. In years past I wouldn't be considering these things as much and take some knocks as a result. Now I'm more careful but it has come at a cost. The cost right now is that a pullback won't take away large profits I have cause I don't have any (beyond core.) Although it should give an entry.

    --TZ

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  96. AARON,

    >As gary says... bull markets get overbought, then they get more overbought, then they get even more overbought!

    Trust me BIG on this statement: that sentence may continue with a few commas more, but it does NOT continue to infinity. When the certainty that it does enters your mind you better watch out.

    --TZ

    PS: The sentence also depends on 'overbought' which is conveniently undefined in all our usages. SLW could jab down to 22 or 21 for a day or two and still be in a raging bull market. SLW's chart is **LITTERED** with $3 and $4 drops in VERY short periods.

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  97. Coffee and SLW have something in common. They have a way of waking you up in the morning - sometimes harshly.

    :-)

    --TZ

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  98. Gary from January 2009:

    I'm just guessing here but I think the dollar rallying back above the 200 week moving average and rising unemployment are going to be the most important themes of 2009. Both are deflationary.

    Until I see the dollar move and hold back below the 200 week moving average I'm going to assume that deflation is the name of the game for now.

    Actually as long as unemployment continues to rise I don't really expect any easing of the deflationary pressures. So I have my doubts that we will see the dollar back below the 200 this year and maybe not next year either.

    As a side note; I expressed my opinion in a prior post that gold demand would drop in a global slow down since the largest use of gold is in jewelry. It appears to have started.

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  99. TZ
    Like you I think the markets are manipulated, however unlike you, I dont think that the manipulators are all powerful, they can be taken on by hedge funds and they can take hits like they have been. Compare the recent take down to the ones in 2009 for instance. They are losing grip and its evident to me.
    I think you overestimate the manipulators' influence here.

    Aaron.

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  100. Anon 2:48
    Listen to Gary in May 2009!
    http://garyscommonsense.blogspot.com/2009/05/feds-inflationary-policies-are-going-to.html

    Apparently all "recessions are deflationary."
    "The path the Fed has chosen is destined only to intensify the deflationary collapse. "
    What's changed, Gary?
    Does Toby Connor $$$ have something to do with it?

    ReplyDelete
  101. GC,
    Obviously I have changed my opinion. Once I thought about it for a while it became apparent that a determined government could just mail checks out to the population. No deflationary force no matter how great can withstand that kind of onslaught.

    ReplyDelete
  102. The aha moment came when I watched the Fed drive the dollar back below the 200 week moving average last year with their first round of QE.

    At that point it became painfully obvious I was 180 degrees wrong about deflation.

    ReplyDelete
  103. Looks like Deflation Gary didn't even predict a bull market in 2009:

    http://garyscommonsense.blogspot.com/2009/04/waht-can-we-expect.html

    ReplyDelete
  104. And as you conviently ignore I've been saying for quite some time that the Fed aborted a right translated 4 year cycle that should have followed that exact path.

    I will be the first one to say I would never have believed it possible but it happened.

    Nice try though :)

    ReplyDelete
  105. This crappy junior silver miner, MGN was up 11% today.

    A lot of the bad stuff is showing relative strength lately.

    ReplyDelete
  106. More from Deflation Gary July 2009:

    http://garyscommonsense.blogspot.com/2009/07/1-2-3-reversal-in-dow.html

    Gary 100% wrong on the July 2009 bottom in the market that led to a monster rally.

    ReplyDelete
  107. If you want I can help you find my many wrong calls. I've always said I wasn't going to be any better than anyone else.

    60% over the long haul if I was lucky.

    I was early back into the bull in Jan. of last year.

    I thought 850 was going to be the bottom of the last D-wave in 08. Gold dropped another $170.

    I thought the stock market would top in June of 09 as it tagged the 200 DMA.

    I still believed we were stuck in a bear market. Missed that one by a mile.

    I'm sure there are many others over the years I just don't remember them right off the top of my head.

    ReplyDelete
  108. at least gary mans up, admits he was wrong, and adjusts accordingly. He doesnt hide behind an "anonomous" name tag, pulling comments out from 18 months ago.

    Clearly you have loads of time to be going through 18 months of posts to find some where he was wrong. Its kinda sad actually ..

    peter

    ReplyDelete
  109. Hi Gary
    I have a question for you. I live in Canada. When you look at the Canadian currency since 1990, it is a story of a declining dollar to the point where in 2002 and 2003 our dollar was 1.60 to the US dollar. Basically our dollar was only worth .40 cents to the US dollar. Politicians and analysts everywhere called for the government to intervene and prop up the Canadian Dollar. I belong to a Canadian Business group as I run a small business in Canada. My business boomed from 1995 right through to 2009 and from 2000 to 2008 the years were amazing. We exported so much I couldn't get enough help. Unemployment in Canada went from 12.1 % in 1992 to reach the lowest in history at 5.9% in Feb 2008 as our dollar kept falling. You would have thought that a declining dollar would have creatd run away inflation, but the opposite occurred as inflation fell every year from a high in 1992 of over 6% to pretty well 0%. Every year my exports grew by leaps and bounds until by Spring 2008 my company was 10X the size it has been in 1990. Today with the declining US dollar our dollar is at 1.05 to the US dollar and my exports are down by 30% and I have had to let employees go. Unemployment in Canada is up to 8.1%. I attended many conventions over those years and my US competitors all complained that if their dollar would only fall their exports would pick up. In the past 3 months my US competitors are picking up contracts that we would have normally received as the US dollar is lower. My cousin who runs a medium size American business in Minnesota has seen his exports move up 20% this year alone and he has hired on another 500 people since March 2009. I asked him about the currency crisis and he told me that a lot of US businesses hope the dollar gets back down to at least .70. He said he doesn't understand why anyone would not want to see the US dollar not as strong. He was saying that the average American doesn't own Gold shares so they could care less how high gold goes, but they do want to work and as his business picks up he can hire more, but he has to be competitive and that means better pricing which a lower dollar can bring. He was saying that he just picked up a contract that he lost every year to a Chinese company as their currency is so low, he couldn't do the job without taking aloss. For the first time he got the contract which although it is just a slim margin, still is profitable. So can you explain better why a currency crisis is going to be difficult for the US economy? Living in a country that always had such a low curreny I don't quite see why a lower US dollar will hurt businesses. Thanks a lot for your blog. I love reading it and I have learned a great deal although I don't invest in anything other than my own business. Frank Harrison - Toronto ON Canada

    ReplyDelete
  110. That one is easy. $-$5 gasoline. $5 or $6 loaf of bread, Eggs jumped almost 40% in just the last couple of weeks becuase corn and wheat have gone through the roof.

    Inflation crushes profit margins which means companies make less profit. Less profit means tougher to raise wages. If wages can't rise employeees find it harder and harder to pay for everyday needs.

    We went through this in the 70's it didn't turn out well.

    ReplyDelete
  111. Gary,

    If your hyperinflation scenario plays out--and it looks like it will eventually--do you have plans to get the hell out of the US? I suspect things here could get quite ugly. 'course, once things begin to fall apart here, will there be any country that escapes that kind of havoc?

    Here's an article by Karl Denninger re The Fed's insanity and the destruction it will ultimately cause. Pretty much aligns with what you're saying.

    http://market-ticker.org/akcs-www?post=167162

    ReplyDelete
  112. Gary,

    Your answer to the Anon who posted about the Canadian dollar overlooked one important point that he made: His country continued to have very low inflation which eventually went to near zero. How do you explain that, that the Canadian dollar was weak, but the country enjoyed near zero inflation?

    ReplyDelete
  113. It can be explained by the commercial net balance of the nation.
    Canada exports, USA imports.

    Cheap currency helps the exporters, expecially the manifacturers and low-value (shoes, clothes, plastic objects).

    For what i know, Canada is a strong exporter country.

    ReplyDelete
  114. One also has to take into account that commodities were in a bear market from 90 to 2001. The supply and demand side of the equation was in favor of lower prices.

    ReplyDelete
  115. Gary
    My apologies for the duplicate postings. Internet explorer was not working properly. I am sorry. I have gone to firefox but I cannot see how to delete the duplicates. I would appreciate it if you would do this for me. Thank you
    Frank Harrison

    ReplyDelete
  116. Can't you flip a coin and get a 50% track record?

    ReplyDelete
  117. Some people can. However in the stock market emotions make it pretty difficult to win 50% of the time and if you can do it 60% you are right up there with the best in the world.

    The only consistent way to do better is to use a mechanical system. However systems that more than 60% tend to be the kind of systems that register a lot of small profits and a few big losses.

    ReplyDelete
  118. >Anonymous said...
    >Can't you flip a coin and get a 50% track record?

    Uh oh, somebody's bitter. Must be tough being a frustrated bear.

    ReplyDelete
  119. >Anonymous said...
    >gary, u fckhd, people actually pay you for this banter bs????????

    Whoa! Swings from bitter to angry in one post! Better put the bottle down Anon and try to move out of your mother's basement.

    ReplyDelete
  120. Hi Gary
    Thank you for fixing my duplicate postings. Having lived in the 1970's in Canada, we had high inflation, very high interest rates which peaked at over 21.5%. I had a mortgage at 17.5% for 3 years, BUT I invested my money in long term (10 year) Government of Canada bonds at 18.5% and made a killing on those. But this article on the Bank of Canada's website (our version of the FEDERAL RESERVE) http://www.bankofcanada.ca/en/speeches/2002/sp02-6.html talks about how THEY claim they came to an understanding in 1991 on how to control inflation and reduce Government deficits. That's quite interesting as by 1990 inflation was already down to 6.7% in Canada. But interestingly our dollar went above par with the US in the 1980's when our fiscal house was not in order.
    While our dollar moved lower in the 1990's through to 2008, we saw rapidly declining prices on everything the household used including eggs, bread, etc., but during this whole period despite what the government claims, while they balanced their budgets, our national debt sits just behind GREECE. Total Government Debt per capita as per 2010 is Greece at 35,403, Canada at 32,500; Norway at 55,500; Italy at 44,657, France at 38,107; UK at 28,693 and US at 29,499. These figures are from Economist Intelligence Unit. So how did we in Canada get in such a mess? Simple - government continued to spend even more when our economy was booming. As my cousin in the US always tells me - politicians will do nothing until their backs are to the wall and a gun is to their heads. Then they will finally do what is necessary, but he doesn't blame them, but the electorate who will never accept tough choices from any political party because there is no faith in government. When I travel the world on my business meetings, that lack of faith in government is a worldwide problem.
    I think your outlook for currency crisis is taking more into account a hyperinflation scenario. I'm not sure that will occur. It didn't happen here that's about all I know, but we sure did export like crazy. I often wonder how much control any one government has on its own currency when the global economies are so intertwined. At any case I enjoy your blog. It is very interesting and you are certainly good with your predictions. Thanks again! Frank Harrison - Toronto ON Canada

    ReplyDelete
  121. "http://garyscommonsense.blogspot.com/2008/12/more-dollar-musings.html

    Oh how times have changed..."

    Great find......

    It's like he forgot he knew that.

    ReplyDelete
  122. Anon1,
    Just in case you missed my response to GC ealier.

    "Obviously I have changed my opinion. Once I thought about it for a while it became apparent that a determined government could just mail checks out to the population. No deflationary force no matter how great can withstand that kind of onslaught.

    The aha moment came when I watched the Fed drive the dollar back below the 200 week moving average last year with their first round of QE.

    At that point it became painfully obvious I was 180 degrees wrong about deflation."

    ReplyDelete
  123. "By the way the weekly cycles are starting to line up I'm guessing we still have three more major legs down in this bear market."

    Oh this is great. Keep em coming GSCP and Anon - this is comical.

    May take the bloom off the guru a bit.

    ReplyDelete
  124. G,
    Why do you even bother to respond to these fleas. Your record and demeanor speak for themselves.

    It's painfully obvious anon1, Justin and the other assorted trolls are just looking for some way to vent their frustration on someone else.

    Just pitiful.

    ReplyDelete
  125. Peter says:

    "He doesnt hide behind an "anonomous" name tag"

    As if Peter identifies who you are?

    If I used the name Mike even though that is not my name - would I be more transparent? HA!

    ReplyDelete
  126. It's painfully clear that the Anon whom I call G-String is either Gary himself or his minion.

    Seems to reply all day long almost always right around when Gary does.

    And only those two names use LOL!

    Kinda a co-inky-dink maybe?

    LOL!

    ReplyDelete
  127. Hey no hard feelings garystring

    I just find it funny with the double standard here.

    You were obviously wrong for quite a while last year. Looks like you were bearish during a decent 30-50% rise.

    Yet you lived to keep trading.

    Anyone who is bearish now gets crucified on your forum, yet the market is still lower or unchanged for the past year.

    And we are all idiots while you are the hero.

    Just shows that opinions are like butt holes..... everyone has one.

    LOL!

    ;)

    ReplyDelete
  128. 2 Anon1: I do not know what your problem is, dude. I have been following Gary's advice for about a year and a half and I have doubled my money and have just retired and went back to college. He is not always right (nobody is) but he is the first one to admit that he was wrong. And you just seem bitter.

    ReplyDelete
  129. Instead of being rude and vulgar why not just debate your ideas in a calm fashion. Everyone would be a lot more cordial towards you even if you have a different view.

    If you feel strongly about something then instead of just railing against the community or me just put your money on the table.

    Standard bet size is $1.

    If you happen to be planning a trip to Vegas I'm willing to up the stakes to dinner at the local Mexican cantina. I do so love Mexican...especially when I can get someone else to pay for it :)

    ReplyDelete
  130. ooook

    yeah - i'm the rude and vulgar one.

    Maybe your alter ego who posts as anon should listen to that same advice

    ReplyDelete
  131. Leonard -

    No problem. I just respond to his blog entries when they become personal and he basically calls everyone who doesn't agree with him an idiot.

    Then you challenge him and all the lemmings on the forum rush to his defense and call you a troll, idiot, jackass, dumbass, etc.....

    Needs to rename the site - doublestandardtracker is all.

    I have fun here. I can take the name calling just fine. Seems like everyone else hates push back though.

    ReplyDelete
  132. >Then you challenge him and all the lemmings on the forum rush to his defense and call you a troll, idiot, jackass, dumbass, etc.....

    Uh, that's because you are one.

    Now, back to counting my money!

    ReplyDelete
  133. Course its not you gair-

    Just pure coinkydink I'm sure

    ReplyDelete
  134. Good one LowTax -

    That one really hurt....

    Tell us all how much you have when you are done counting.

    Can you count that high though?

    8 dollars comes after 7 if you need help....

    LOL!

    ReplyDelete
  135. Anon1, do you have anything constructive to contribute?

    ReplyDelete
  136. Well since you asked... Gary helped me avoid the 2008 crash so that's money I got to keep. Then I made roughly 40% in 2009 even after taking into account trades that Gary kept telling us we shouldn't make (stubborn idiot that I am), and so far this year, I'm up about 50% on assorted silver miners.

    Perhaps it's only 50% of $8. But even if it is, Gary's advice is priceless. And you and I both know it's a tad bit more than $8, which is what's eating you alive isn't it?

    Now back to your mom's basement!

    ReplyDelete
  137. I don't see where I called anyone an idiot...well maybe politicians or Bernanke but I think most people would agree with me on those two.

    And I suspect it won't be the last time I label them that way.

    ReplyDelete
  138. indeed Gary we would agree on that.

    Lowtax - yeah - I just worry and agonize about your trading and results.

    I find it funny too when people enjoy sharing their returns with everyone but don't back it up.

    I would love to see proof of your returns. Shoot them to me at chartguy2000@yahoo.com

    I was willing to send mine back in the day when people we saying I can't trade and didn't run money, but no one took me up on it I assume because no one wanted to be disappointed that I actually am not blowing up like they all wish.

    Everyone here is all making 40% a year for years, more than the greatest investors of all time..... so I say - let's see it everyone!!

    One question Lowtax - how did you make so much money on Gary's calls in 2009 when he was bearish as the market ripped higher?

    i wasn't around back then, so am just interested to see how you were able to only pick his good calls while missing the powerful rally off the lows?

    Thanks!

    ReplyDelete
  139. Actually I caught the bottom of the bear market on the swing low.

    That was a yearly cycle low so I expected it to move back up to or close to the 200 DMA. I just expected the 200 to turn price back down. When it didn't I quickly figured out that the Fed had aborted the left translated 4 year cycle.

    Cycles analysis can usually get one fairly close to major bottoms. Tops are another thing. Cycles are mostly worthless for spotting tops.

    So all anyone would have lost was the little bit before I recognized that the 200 was not going to turn the market back down.

    ReplyDelete
  140. Leonard -

    Sure I have - it's constructive, but its just the other side of Gary and the forum thinking on bonds and the dollar. It was a pretty good debate back a few weeks ago.

    How about you - you provide anything constructive that I can go back and read?

    Thanks!

    ReplyDelete
  141. Gary got a 1-2-3 strikeout in July 2009 when the 1-2-3 move he invented went against him! LOL!

    ReplyDelete
  142. 40% is what the market returned in 2009, nothing to brag about! LOL!

    ReplyDelete
  143. Anon1:

    >I was willing to send mine back in the day when people we saying I can't trade and didn't run money

    We're still saying that!

    BWAAAAAAAAAAAAA HA HA HA HA!!!!

    ReplyDelete
  144. strange people love gary or hate him depending on when they got in.

    Or Jerry could've bought a ticket on the G-Train and been up 40% in DGP since Feb., like some of us.

    or could have started with Gary in January like me and be sweating that I am up 3%.
    Still riding though

    fat boy

    ReplyDelete
  145. Although not in the realm of being impossible, I don't see hyperinflation being likely. That would require a real run on the dollar to the brink of a quick disaster. Maybe my logic is off, and I would encourage anybody to offer additional thoughts if they have any. I can’t see other countries standing by and watching the dollar, their reserve currency, blow up without at least attempting to slow its demise for that county’s own self interests. Without the reserve currency status this would be another issue. I have already posted on this, so I won’t repeat, but since we are in the dollar below 80 stages, the quickness in the demise in the dollar probably has an effect on our gold and pm investments. Don’t confuse me with a strong dollar. I am discussing the shock to the dollar as it crumbles to its intrinsic value, which I don’t pretend to have a price for, but severely down from here is all I need to know. I heard targets though, not mine, of 45 before this is said and done.

    I guess my question to the blogsphere, if anyone is interested, is how quick do you believe the dollar will be destroyed? Slow band-aid(high inflation) or rip it off drop(hyper-inflation)?

    ReplyDelete
  146. I doubt we will have hyperinflation anytime soon. Certainly not at this 3 year cycle low.

    ReplyDelete
  147. Gary,

    You mentioned for gold that at a certain point cylces may not work. Is there a point where your cycles would not work for the USD?

    ReplyDelete
  148. In Demark theory, Prof Depew on Minyanville went through his long-term scenarios on the dollar today (9/22). On the quarterly, he is looking at a DXY 76.69 level for a buy signal. On the monthly, he is looking for a level of DXY 72.50 to register a buy signal. I'd say this corresponds pretty well to Gary's 71 target. At that point, we shall see if a long-term bottom has been put in for the dollar. Depew expects 72-79 to hold and for the currency crisis to be short-lived. Not saying that gold will be ending its bull market as it's been rallying whether the dollar is or not lately, but even the dollar will have its turn of selling exhaustion.

    ReplyDelete
  149. The only time I've seen cycles get totally short circuited is during a runaway move and those only occur on the upside.

    ReplyDelete
  150. nice work lowtax

    that was funny

    ReplyDelete
  151. Kevin,
    The dollar will most certainly put in a major low by sometime next spring and it will bounce hard out of that low.

    It's possible this will correspond to the next deflationary scare and mirror the markets move down into it's four year cycle low due in spring or summer of 2012.

    ReplyDelete
  152. Here is an interesting study for you bond haters......

    Take a look at the long term chart of US 30 years priced in commodities (CRB Index) - not dollars.

    Not just gold - but a basket of commodities, since inflation will show up in more places than just gold.

    In 2008 the low in the ratio was hit at .24.

    Today it stands at .476...... just a nice little 98% increase since the bailouts and printing presses went into overdrive.

    Looks like it is forming a 1-2-3 bottom as well.

    I think bonds have held up just fine in all this "inflation"

    Another study is that the SP500 is down 10% in terms of gold this year, while being up 2% nominally. Sounds great for our gold longs.......but....... the SP500 is up against a basket of commodities. So "inflation" as of now only seems to be showing up in gold.

    My question - how much of that is true "inflation" and how much is speculation?

    A tad worrisome - not a ton - but a tad.

    ReplyDelete
  153. >Anonymous1 said...
    >nice work lowtax
    >that was funny

    Thanks man. I'm going out on a high note - y'all have a good night.

    ReplyDelete
  154. anonymouse1 is certainly envious of the G-Train and everybody on it. If he could afford a subscription he could be happy too!

    ReplyDelete
  155. Tell oil it can't deflate Gary, down 17% since April, AND with a falling dollar.

    We have both inflation & deflation.

    The equity markets have now topped, 1150 will not be passed. Dow at key resistance, it was repelled.

    http://screencast.com/users/Gary_UK/folders/Jing/media/04fdbc3d-06cd-445d-9ba9-090d42223ca1

    ReplyDelete
  156. Also, I agree with anonymous, the dollar will surge from here.

    ReplyDelete
  157. I got my dollar that says this will only be a temporary move into the half cycle low and it won't be long before big money starts buying the dip again. Big smart money doesn't fight the trend, they follow it. Expecting them to do anything different before sentiment has become extreme is probably hoping in vain.

    I got two dollars that says the dollar will be at least down to 74 by late November and probably more likely it will be testing 71.

    ReplyDelete
  158. I would suggest bears use this small correction to cut their losses as much as they can and then just get on the bull so they can try to recover their losses.

    As soon as we get a swing low one better plan on exiting shorts.

    ReplyDelete
  159. Gary: I am a bit confused about your tactics. You have said you are right about 60% of the time, but I believe you also do not always use stops (though on occasion you mention stop points). If that is so how do you avoid decimating your account. Suppose for example you have the whole picture wrong and gold winds up at $300/oz. You either stop yourself out somewhere or you will need to quadruple your money to get back to even. ??

    Re my recent sell signal: Darn! I have seen this happen often and it is still frustrating after all these years. That is, we get (by my measures) super overdone, continue on in the overdone direction which stops me out, and then go where I thought we would. Oh well. If you can keep you losses small and let your profits run, you'll do well in this game. It's being stubborn that kills a trader or investor. My posted signals here are now seven for eight, I believe. I am looking forward to 8 for 9. And looking forward to adding to my PM's on this dip!

    ReplyDelete
  160. DG,
    Fortunately I don't have to rely on that 60% because there is a bull market to invest in.

    I can tell you if I was going to put stops on my gold positions and if they didn't do what I wanted them to do in the time frame I was going to give them to do so then I wouldn't do much better than 50-60%.

    But I don't put stops on my positions because I'm not trying to time market moves (a trader is really a market timer. He will stop out of a position even if it is a winning position if it doesn't do what he wants in the time he requires it to do so), I invest.

    Let me give you an example. I have 1 junior that dropped almost 50% from where I bought it. If I was a trader I would have taken a big loss on that trade. I probably would have taken multiple losses.

    But the fact is this is a bull market and the bull will eventually correct any timing mistake. With that in mind there really was no reason to sell my position for a loss. It wasn't a losing position, it was just a position that needed more time to work. That position is now in the green by almost 100%.

    I don't have to agonize over where to enter, I don't have to get nervous after my position has risen 1% and sell and then sit and watch that position rally another 10%.

    I only have to be right about 1 thing, the secular bull market.

    There is no doubt that I am right about that, so now all I have to do is spot the end of the bull...which isn't terribly hard to do.

    ReplyDelete
  161. So I take it that you are saying the chance of your thinking a bull is still alive and being wrong is zero? That is, it is not possible that the gold bull is ending here? (Especially with individual stocks. Suppose fraud had been uncovered?) My problem with that is you only need to be wrong once in your investing career about your bull-call to do big damage. I was sure in 1982 that the market had not yet bottomed, lost a fortune, and it changed my style ever since. I have never regretted the change and make money consistently (except once since then when I got away from my discipline---a good reminder/lesson). If you are certain that you will never misidentify a bull market top, what you say works fine. That claim would make me nervous though...

    ReplyDelete
  162. Well there is no question I'm right about the gold bull so no worry there. The question is could the bull be ending?

    I will say this the only way the bull could be ending is if human nature has changed. I'm willing to bet that nothing in our DNA has changed significantly in the last 5000 years. As long as I'm right about that I don't have to needlessly fret over whether the bull is ending yet.

    Why? Because bull markets never end until they reach the manic bubble stage, none more so than a gold bull.

    Human emotions still work the same way they always have and I expect 10,000 years from now one will be able to make that same statement and it will still be true.

    ReplyDelete
  163. By the way I'm not sure what your following statement has to do with anything... "I don't have to get nervous after my position has risen 1% and sell and then sit and watch that position rally another 10%" Cutting losses does not mean you have to cut winners! Bad trading is still bad no matter what your style, and cutting winners is bad. Your statement has nothing to do with what we are talking about---using stops.

    ReplyDelete
  164. Yes, emotions won't change, but measuring them does. That is, you are right that bulls end on extreme greed, but as they say, no one rings a bell to say "now the emotions are at a peak---time to get out.". I agree we have not seen it yet in gold, but measuring sentiment extremes is not as simple as you make it sound. And you are also right that it is easier in gold. Do you not trade this way in other markets? What do you do when gold is in a bear? Is it as easy to get stock tops (2000 was simple...2007 much less obvious.)

    ReplyDelete
  165. I'm just pointing out one of the pitfalls of trading. Traders tend to get nervous and not let their positions run when they have a winner. Emotions get in the way of discipline.

    I'll use the recent example and this isn't a dis toward you by any means I'm just using the example to show how emotions work.

    You picked the bottom of the last daily cycle very close. Your position was in the green right off the bat. You had a clear stop very close to your entry that if hit would have only cost you a very small loss. The correct IMO move would have been to let that profitable trade run and let the stop do it's job if the trade didn't run.

    However emotions got in the way and you took profits very early. While this was a winning trade and you can look at it as such, I'm going to suggest it was a losing trade. Why because it could have been a very large winning trade and at some point when your system has multiple losses you are going to need that large win to off balance those many small losses.

    The correct strategy and one that would allow one to book the big gains would be to wait for some sign to exit other than just taking a quick 1% profit. My suggestion would be to wait for SOS numbers to show up or as I said in the nightly reports one could take profits as soon as a swing high formed under the assumption that the half cycle low was in progress.

    All I'm saying is you need to develop an exit system to go along with your entry system. One that will allow your profits to run and then have the discipline to stick to it even if it means you add a few more losses.

    Now I will say I'm just basing this on the recent market trade. You may very well have other trades that you do exactly that and all you try to do with your "market system" trade is collect 1% gains. If that is the case then ignore everything I said :)

    ReplyDelete
  166. No stock tops are very tough to spot. But we will see massive public participation at stock tops. When we start to see the public come in one has about a year to a year and a half before the party is over.

    Gold is much easier. We will still have the one year timing band but we will also see a Dow:gold ratio at or near 1:1 as a sign that it's time to get out of Dodge :)

    ReplyDelete
  167. Yes, Gary, you are focusing on one trade. I was leaning bearish so took the smallish profit. When I shorted the euro in January and China earlier I had an opinion. I rode the euro from 145 down to 119 (using the leveraged etf euo). I have also been long the bonds you have been bashing and have a large profit there. Some of my entries are for a quick trade and some are for much more. depends on my macro view. But it's wrong to say emotions got in the way. Selling something that goes higher does not at all mean it must have been emotional. I'm a little surprised you drew that conclusion. And I agree most traders do it wrong and for most people your approach is better, but everyone is not necessarily "most people."
    Good debate, though. Thanks.

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  168. DG,
    Let me ask a question. Does your system have a positive expectancy if one takes the 1% profit as soon as that target is reached?

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  169. Yes, I believe so, since it is right 80% of the time, but I don't trade it myself strictly for just the 1% gain and have never bothered test that. The hedge fund I am working with to birth a new fund is an options trading firm. Using 25 deltas the system showed a 27% annual return with a 9% maximum drawdown(!) from 1980-2005. The system is tailor-made for options trading, but I don't trade them myself given my "day job", so use the system as part of my overall trading and not exclusively. It was created to get "perfect" entry points since I use such tight stops, and it does its job (as you have seen by my posts). It also does not usually give nearly as many signals as it has been giving this year. Man, I wish we had launched the fund in 2007 (2008 was also a great year). My favorite was getting a buy on 10/10/08 and having us be up 936 points the next day.
    But your point is a fair one: using it alone with, say, SPY's is not that great if you always take the 1% profit.

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  170. For your scenario to play out, it means that the Euro will make new highs given it's by far the biggest component of the Dollar Index.

    Is this really possible? I can see the euro going to 1.40/1.50 which equates roughly to your 75 target. But make new all time highs? Near impossible....

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  171. Why is it impossible for the Euro to make new highs?

    That would suggest it is impossible for the dollar to make new lows and we know from experience that has been happening with regularity for most of the last 10 years.

    To say something is impossible in the financial area is a recipe for disaster.

    The banking sector thought it was impossible for real estate to ever go down in price ;)

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  172. Damn!
    This snp just wont roll over, I wonder if that could have been it for the correction!

    Aaron

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  173. I've gotten a buy signal, and it presents a bit of a puzzle for me. It's not my style to buy strength, but I may make an exception and just let the bull market in stocks bail me out, if necessary.

    On the other hand, by ignoring the sell signals, I still have my core QLD.

    I think I'll wait a bit to decide.

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  174. DG,
    Let me point something out. You say that because the system wins 80% of the time you assume it has a positve expectancy. An 80% win rate in no way guaranttes a positive expectancy.

    The Bollinger band crash trade has an almost 90% positive win rate but when used on individual stocks it doesn't produce a positive expectancy.

    So let's look at the system in real time. If the system wins 80% of the time and wins 1% then in order to have a positive expectancy one can't lose more than about 4% when they hit one of those 20% losers. I'm guessing you don't allow any trade to go more than 1% aginst you before bailing.

    Now the question is what happens to the system if you factor in the real time stop of 1%. I suspect if you back test the system and put the real time stop into the equation your 80% will quickly turn into 50% or less if you make your stop tighter.

    In that case one just ends up breaking even while making their broker money.

    The reality is that a good entry is basically worthless for making money. One has to have stops and an exit that allow trades to maximze profits while minimizing losses but not so much so that stops end up being so tight that a trade isn't allowed to "work".

    I suspect that DG does this from experience but a novice trader just trading DG's entries will most likely not make money without a mechanical exit to go along with the mechanical entry. I doubt 1% is going to do it if they also incorporate a tight 1% or less stop. And even a better exit plan won't work if one doesn't have the discipline to follow the rules. breaking the rules will turn a positive expectancy into a negative because they will take profits too early or stop out too early (too tight stops) in an attempt to "fine tune" the system.

    One has to be willing to accept the losses when they come because that is the only way they will be able to hold for the big winners that are needed to offset losses when they come.

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  175. I'm showing it slightly above 80??

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  176. Hey Gary.

    Look at that now, Dollar straight back above 80, the classic false breakdown.

    Stocks rolling over as I predicted, the start of crash 2010.

    Silver probably about to double top, should fall as dollar rises.

    Interesting times, but the Eurozone is falling apart fast, all the money is heading into US treasuries, and out of equities.

    Just watch this unfold. I see 8500 on Dow, maybe lower in the next 5 to 6 weeks.

    A little chart of the Dow to show why it can't go any higher...

    http://www.screencast.com/users/Gary_UK/folders/Jing/media/04fdbc3d-06cd-445d-9ba9-090d42223ca1

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  177. Gary,

    Not disagreeing with the inflation hypothesis, I just think one of your recent data points may be in error. The price rise in eggs may be related to the recent salmonella issue with a large number of eggs and the huge recall. That type of event can have a big impact on prices short term.

    Not much weakness in PM's, seems buyers are waiting for every little dip. Starting to look like a runaway train to me!!

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  178. You predict nothing, Stupid Money!

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  179. Well countered.... In my defense, I did say 'near impossible'

    All i'm trying to say, is the implication of a new euro high.... From a dollar perspective, I'm with you but from a euro perspective, not likely unless the 'austerity measures' begin to work that is. (Given that noone believes they will, i'm nore inclined to think it may do the trick)

    Personally, i'm the view that once we reach 75 or possibly slightly below, a new crisis will be triggered that will cause another dollar rally (for the wrong reasons, but ultimately because of another dollar shortage as in 2008). But i'll reevaulate my opinion when and how we reach 75.

    However, if matters slip from the central bankers' hands then we may well see fiat currencies collapse. A distinct possibility.

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  180. What do I do now that I sold all my PMs? They are rallying. Help.

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  181. I still got my dollar on a swing low marking the bottom of the half cycle low and I think you are going to wish you had taken the opportunity to cover shorts into this decline.

    Btw most breakouts and break downs fail. Which is to say they trade back above or below the pivot before a continuation of the trend.

    The failure of the dollar's intermediate cycle is an extremely bearish sign. It will move down into a 3 year cycle low just like its done for the last 30 years. I got a dollar on that one too if you want to double down :)

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  182. Gary, do you think silver is headed down soon? Rallying today. F$ck no. Should I get in now or wait? I like SLW.

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  183. Anon,
    Why in the world would you sell all your PM positions? I've been beating the bush for months to hold Old Turkey and only to reduce leverage never sell core positions.

    Did you choose to ignore Old Turkey?

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  184. Because you said PMs due to correct due to dollar rebound. Right no? This sucks.

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  185. Anon,
    Just hold on to your core and add leverage on a correction or a failed swing high if no correction materializies.

    That assumes one is willing to use leverage of course.

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  186. We do know who SoundMoney is right? Although at least not so trollish, yet anyways.

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  187. I'm not in PM either. New here. Should I buy silver right here, right now?

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  188. Anon,
    Sounds like you need to buy a subscription or if you are a subscriber you need to pay a little closer attention to what G says.

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  189. I did pay attention. He says dollar to rally, PMs to go down to 1/2 cycle low. I'm not deaf you know.

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  190. I clearly said not to sell core positions. So if you sold everything then you did ignore what I said.

    How many times must we learn the lesson that surprises come on the upside.

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  191. USD solidly under 80 now.

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  192. Hmmm, if this is a market that's "rolling over" I can't wait to see what the rally is going to look like.

    Look at them charts. Makes one think the half-cycle low is already in.

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  193. If we get a swing low tomorrow then I would be inclined to agree.

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  194. Gary, would that apply to gold too?

    Aaron.

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