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Wednesday, September 8, 2010

DEFLATION NEVER HAD A CHANCE

Lately we've been hearing a lot of talk about Kondratieff cycles, Elliot Wave super cycle, end of the world, deflation, deflation, deflation.

What the deflationists fail to acknowledge is that in a purely fiat monetary system deflation is a choice not an inevitability. To put it in simple terms, if a government is willing to sacrifice its currency there is absolutely no way deflation can take hold in a modern monetary system.

It doesn't matter how large the debt contraction is, 10 trillion, 100 or 1000 trillion, any government with a purely fiat currency can, with the stroke of a computer key, print enough money to wipe out the debt. Granted they will destroy the currency by doing so, but at some point we are going to be faced with the choice of print or deflate. I have little doubt Bernanke will choose to throw the dollar on the sacrificial alter.

Consumer credit isn't growing you say. Consumers are deleveraging. Not possible to have inflation unless consumers are borrowing and wages are rising. Pure nonsense!

Let me point out one indisputable fact and then I will delve deeper into the deflation/inflation argument and where investors need to put their capital to protect themselves from the coming inflationary storm. In a purely fiat monetary system a government that is willing to sacrifice its currency can, if they so desire, print enough money to mail every man, woman, and child a check for $1,000, $100,000 or a million dollars. To do so would halt any deflationary force right in its tracks. It would for most practical purposes wipe out all consumer debt. Impossible you say? Well the US has already done it twice. (It was called a tax rebate, in case you forgot.)

Here's the thing, where the inflationary forces show up is determined by who gets first use of the money. So far that has been the banking system. Through the myriad bailout programs the Fed has created money out of thin air and forced into the insolvent financial system. That has resulted in selective inflationary forces being unleashed. Instead of loaning credit to consumers or businesses who don't really want it, the financial system has plowed the money back into financial marketss. It's the reason the stock market rallied 80% despite flawed fundamentals. It's why oil rallied from $35 to over $80 despite impaired fundamentals. It's why gold is threatening to break out again to new historic highs.

If instead of forcing the liquidity into the financial system it had instead been mailed to the average consumer, we would now be seeing real estate prices rising rapidly again, food prices and gasoline would be going through the roof. Wages would be rising out of control.

Where inflation shows up is a direct result of who gets first use of the freshly minted dollars. I can assure you we don't have an impending deflation problem; we have a rapidly approaching inflation problem and currency crisis.

I've said for a long time now that eventually the market is going to make Bernanke pay a terrible price for his insane monetary policy. That price is going to be a currency crisis in the dollar and I think it's already begun.

While everyone was busy watching the Euro crack during the first part of this year what no one foresaw was that eventually the cancer that began in Europe would at some point spread into the dollar. It began 3 months, ago although no one has noticed yet.

Next I'm going to illustrate the long term cyclical nature of the dollar as the cycles are now lining up perfectly to bring on a major currency crisis in the US dollar, much worse than what just transpired in the Euro.

First let me show you a chart of the largest cycle, the three year cycle.


I've marked the last six 3 year cycle lows. These have tended to bottom about every 3 to 3 1/2 years with most running 3 years and 3 months. The consideration here is that the next major three year cycle low is due next year sometime around the March to June time frame.

As they say, the doody is going to hit the fan when the dollar moves down into this major cycle low, and Bernanke's foolish attempt to print away the credit crisis is going to blow up in our face. By spring of next year we are going to be mired in a full-fledged dollar collapse.

The first warning is going to come when the dollar breaks back below 80. That will signal that the current intermediate cycle has failed. As soon as that happens we can close the door on the dollar.

We should first see a test of the all time lows by late this year when the next larger yearly cycle is due to bottom. After that we should have one more leg down into late spring or early summer that I expect will send the dollar to new all time lows


The only way to abort this from happening is for Bernanke to immediately start withdrawing massive amounts of liquidity from the market. That won't stop the 3 year cycle from coming but we might have hope that the dollar could hold above the all time lows and we might avert or at least reduce the damage that will be caused by the impending currency collapse.

I can assure you he will do no such thing though. For one he has no idea the crisis is brewing. (This is the same man who assured us in '07 that the credit problems were contained in the sub-prime markets and in '06 that real estate was not in a bubble.)

And second, if he were to withdraw liquidity the country, and world, would quickly sink back into recession and then depression. No, I don't think we have to worry about Uncle Ben turning off the presses.

So what should investors do to prepare themselves for the approaching conflagration? They must be invested in real stuff, commodities. There is a reason virtually the entire commodity complex was showing relative strength as the market put in the intermediate cycle low in early July. Smart money was and still is positioning to weather the coming storm.

I would point out that the beginning phase of the crisis isn't going to feel like a crisis at all. A falling dollar will act to support all asset prices. We may even see nominal new highs in the stock market.

But eventually too much of a good thing will turn deadly and the true scope of the mess we are in will dawn on the market. At that point the collapsing dollar will no longer support stocks and we can expect the market to roll over and begin the next leg down in the ongoing secular bear market. Unlike stocks, commodities will thrive in a currency crisis with one in particular shining above all the rest.

That one of course is the only remaining secular bull market...Gold!

118 comments:

  1. Gary,

    Maybe what you outline will happen, but I seriously question your time line. If it happens, it will take much longer, I think.

    Why do you think the stock market won't benefit from inflation ? When gold went to over $800, the stock market went up also.

    ReplyDelete
  2. Gary: I agree with you that inflation is a choice. What you say will probably in fact come to pass, but timing is everything. Bernanke certainly does not want to print for no reason. He will print when he is convinced that it is necessary to avoid a deflationary collapse. Your guess is that that will be very soon, but while I agree they will print rather than allow collapse, the timing is, well, a bit of a guess on your part. It depends on external events. When does a crowd turn into a riot? What's the catalyst? Who knows! When will people panic out of the dollar? Who knows! I bet that once there is sovereign debt panic the presses will start. Will that happen this Spring? Maybe. It may be that we need to see more deflation first before the Fed panics enough to have the result you are talking about. Let's look at it this way...There are two forces pushing right now: consumer contraction and deleveraging, and printing. In my view, right now the force pushing in one direction (deleveraging) is stronger. If it starts to "win" they will panic and push so hard with the presses that that force will be overwhelmed...but that hasn't happened yet. You can point to commodity price rises, and I can point to real estate. You can point to stocks and I can point to wages. Let's just say it's a mixed picture. If deflation starts to win, they'll crank it up and we won't have this debate about whether inflation is present to or not---it'll be damn obvious. So maybe deflation first (sovereign default) and then inflation. Gold either way, though!

    Re the market: I shorted 1000 Q's in the after-market with a little less confidence than usual (as reflected by the small size), but with the Vix BB crash, the SonS today, the low volume, etc. I thought it worth the shot. Great study on a good site, by the way:
    http://quantifiableedges.blogspot.com/

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  3. I can assure you we aren't going to have hyperinflation by next year. What I am expecting is a move down into a three year cycle low and probably new lows on the dollar index. Hyperinflation if it happens will be down the road maybe at the next three year low or the one after that.

    But I think most people miss the point. Bernanke doesn't have to do more printing. He already did it. The problem is already there.

    It just isn't possible to print several trillion dollars and not have something bad happen. That bad thing is going to become apparent as the dollar moves down into the yearly and then the three year cycle low.

    There is no way we are going to have deflation after what Ben did. The commodity markets are already screaming that we have problems brewing. Just look at what is happening in the ag sector and precious metals.

    Even with extreme oversupply and depressed demand gasoline is still $2.70 and oil is over $70.00.

    If it weren't for an impending dollar collapse oil would be at $30 or lower. Something is propping the energy markets up and that something is too many dollars floating around looking for somewhere to land.

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  4. All great points and it seems Doc agrees with you:

    http://www.thedocument.com/samples/20100902_silver_sets_closing_high.cfm

    It will be interesting to see if treasuries lead the way down like he says. I've been thinking about a TBT position just as a little side play to all my gold miners.

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  5. I continue to believe that the catalyst will be in the bond market. As long as people fear run into the dollar this won't happen. But when the fed loses control and the bond market rises say 2% on the 30. 2% on the 10…I don’t know, but at some point.

    Interest rates cannot move up according to our current policies...this according to the fed will cause deflation, or what ever BS they want to say. They will print via buying treasuries to keep rates down.

    The question to me, at this point is about power. Right now the US has veto power at the IMF. If the majority of power left the US, as a new reserve currency is needed, the US would resist in all matters of ways to keep the USD up for as long as the FED can. Of course drinking to avoid a hangover only makes the hangover worse, if not deadly.

    The stupid stories out Europe are well known, just like a report coming out saying the US is bankrupt. Really…I didn’t know, but since you wrote a FULL 1 page document on the subject I will freak out now. Stupid.

    My thoughts.

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  6. Gary, several trillion has been printed, and that's the force on one side, but how much asset value has been vaporized? What is the total value of the real estate decline, the business bankruptcies (Lehman etc.) and the other destroyed value? If three trillion is printed but five trillion is tossed into a fireplace, what then? I don't have the numbers, but you can't just look at one side of an equation to reach a conclusion. It does seem to me though that the amount printed is less than what has been lost (stock value to has been vaporized since the recession started,, even after this bounce). What he has already done offsets the current asset destruction. i believe he'll need to panic much more than this to set of dollar-destroying inflation.

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  7. How do you know for sure that oil will be at $30 if Bernanke didn't "do what he did"? Is there some kind of analysis that lets you get to that number, or do you just pull it out of thin air?

    There's multiple things wrong with your analysis:

    1) The Euro and other currencies would have to severely appreciate if the dollar were to collapse. But the thing is the whole world suffers from the same problem, which is a debt problem. So if their currencies were to appreciate strongly, it would disable them from doing the same thing we are supposedly trying to do (according to inflationists) which is to devalue our currency to pay off our debt. So would their central bankers sit back and watch us get what we want and not allow them to do the same thing? I don't think so! If what you're saying was actually possible (which quite frankly it may not be) those central bankers would start doing the same thing so that they could also pay off their debts. So they would halt the dollar's demise by devaluing themselves, if that is even possible.

    2) The second point is what you're saying most likely isn't even possible. Your basic assertion is that a core group of bankers is going to be given the political will to destroy the currency, destroy the entire banking system, destroy the international currency of settlement, bankrupt millions and millions of people across the world, and they're just going to get away with it, without any type of backlash whatsoever that will have the ability to stop them. I don't thing so! First of all, the international banking system is such a gravy train for all the fat cat bankers across the world that they are never going to let a rogue academic at the Fed destroy the gravy train they have been running for hundreds of years. The fact that they can collect interest from millions of people and essentially create money and live off other people is something they will never want to give up. They would most likely rather default than let their system be destroyed by Ben Bernanke. They will most likely never want a gold standard restored, no matter how bad the economy got, because banking and printing money is a very profitable venture. And as long as we have free country the American public is not going to let a group of bankers destroy their savings without a fight, it's just not going to happen.

    3) Finally, we have a real world example going on right now that proves central bankers barely have any power to control their own currencies. Japan is fighting tooth and nail to devalue it's currency through the actions of the central bank, and they can't even do it! If central banks really had the control over their currencies that inflationists think they do, then Japan would be getting exactly what they want right now, which is a cheaper Yen. But since they don't have that control in the real world, the market is determining the price of the Yen.

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  8. You forget congress changed the mark to market rule. For all intents and purposes debt destruction has been stopped dead in it's tracks. At least in regards to the real estate markets.

    The Fed is monetizing massive blocks of debt and in the process recapitalizing the banking system. As long as the toxic debt stays on the Fed's balance sheet the banks are basically free to start over and the Fed can continue to monetize debt. Which it is doing to the tune of about 10 billion a week.

    That doesn't stop the average Joe from deleveraging of course except in the case where he just quits paying his mortgage (which a lot of people are doing).

    But I think I can guarantee that the slightest hint of deflation and the Fed will crank up the presses full blast again. Ben guaranteed as much in his speech at Jackson Hole.

    People are making the mistake of thinking a stock market correction is deflation. It's not. If we were experiencing true deflation prices of everything would be collapsing again like they did briefly in late 08 and early 09.

    That just isn't happening

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  9. You have no basis to assert what "prices should be doing" given "what Bernanke has been doing". There is not scientific way to prove what Bernanke supposedly did is the direct cause of the price of anything. If it was, why do we have markets then? Why wouldn't we just ask Ben what the price should be, given what he is about to do?

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  10. Gary,

    2 thoughts:

    1)Currencies are relative, so what is the USD going to collapse against? The Euro? Every other currency is so small in comparison that a move into it would actually sink that country.

    2)The world's reserve currency has always belonged to a super power, and warts and all, you guys are still the only game in town. Flight to quality might be described better as a flight to safety.

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  11. Justin,
    I think you somehow believe contral bankers have the power to control the laws of economics. They don't. All they can do is print money.

    Conditions are now in place so that at some point a choice will have to be made. Either let the system collapse and suffer another Great Depression or print and try to kick the can down the road as long as possible.

    I don't believe for one second that the Fed will willingly go down the deflation path they will continue to try and avoid short term pain until something breaks. That something will be the dollar and the bond market.

    ReplyDelete
  12. Justin,

    You claim that the dollar cannot suffer a crisis because the euro is in just as bad shape and would have to appreciate substantially. So how do you explain that the euro suffered a crisis this spring and the dollar... which as you say is in just as bad shape... appreciated substantially against it?

    The truth is we're going to continue seeing a round-about of currency crises until the CBs get their acts together. It's the dollar's turn, and the buck's recent behavior supports that judgment.

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  13. What will it collapse against? That one is easy it will collapse against gold which it is already doing.

    The flight to quality has been going on for 10 years now. It's called a secular bull market :)

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  14. Oh boy, another inflation/deflation debate. I'm sure glad as we haven't had nearly enough of that over the last year or two (probably more, actually). I think I'll pass. :-)

    Really, these arguments are so worn out it's not funny. And none taking part will ever have their mind changed; or at least won't admit it. So what's the point?

    Have at it though.

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  15. Anon, isn't it the case that all fiat currencies (USD, Euro, ...) could simultaneously devalue relative to some other non-fiat currency (gold) and return to their intrinsic value (zero)?

    As this happens, the demand to hold gold and silver will rise as they meet the criteria for money and cannot be debased. Isn't what we are seeing the remonetization of PM's?

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  16. I agree no one will change their mind but it does make for a lively debate :)

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  17. Gary why don't you answer my question? How do you determine that oil should be $30, but it isn't "according to what Ben did"?

    Why don't we just call Bernanke up everday and while he's eating his breakfast, and ask him how much money he is going to print so we can determine what the price of everything should be? Why even waste time with having a market then?

    Can someone explain to me how the Japanese have created the biggest government debt on Earth yet have a currency that has trended higher for 12 years?

    ReplyDelete
  18. Ombibulous,

    I guess it comes down to the time frame. I think the process is going to be slower and longer than thought possible.

    Because of that, there will be opportunity to fix it, by appointing another volckler or whatever.

    But you play the hand that is dealt.

    ReplyDelete
  19. thedocument,

    Let's suppose central bankers actually have complete control over the value of their currencies (they don't by the way).

    If the dollar were to depreciate in a big way, the Euro would appreciate in a big way. But the Europeans suffer from the same problem we do, which is a debt problem. So the ability for them to pay off debt will be extremely impaired with a stronger currency. So the idea that if they had control over the value of their currency (again, they don't), and they would just sit by and watch the ability for them to pay off debt with cheaper Euros pass them by, because what Bernanke is doing, is utter nonsense. Inflationistas must like their dessert, because in this case they are definitely having their cake and eating it too, if they think that can happen.

    ReplyDelete
  20. Hi Gary and folks,

    The dollar may collapse against gold but we are looking at the dollar index which is not measured in gold terms but against other currencies. So let's be specific when we talk of the dollar - dollar index or gold price?

    PMs will rise if any or all of the major currencies devalue regardless of what the dollar index is doing I believe. Good for PM investors in the final analysis.

    I look more at what govts do than what the consumer does. Debase or default? Currencies of defaulting govts will be dumped - and therefore good for PMs. We win in almost any scenario folks!

    ReplyDelete
  21. Actually the Yen was considerably lower until the last three years. But to answer your question Japan never debased their currency. They didn't need to. They had massive savings to draw on to fund their bail out programs.

    If Ben didn't print then where did the liquidity come from to drive oil from $35 to over $80?

    It certainly didn't come from a supply and demand imbalance as it is pretty universally agreed that the world is over flowing with oil.

    The only other way to turn the deflationary collapse we were experiencing in 08 was by massively increasing the money supply.

    Roosevelt did the same ting in the 30's with the same result, deflation was halted.

    Just like today though it didn't improve economic conditions it just stopped the deflationary forces.

    ReplyDelete
  22. Gary, you're being too negative.

    Sure, the dollar could undercut the 2008 low, but i see it going no lower than 60-65 before it stages a massive comeback. At least that's what I see in the dollar chart patterns.

    ReplyDelete
  23. The dollar could very easily "go up" along with gold for an extended period of time, given the fact that the dollar could easily outperform other currencies, but not gold if demand for gold was high enough. It certainly is possible and is actually what I think will happen for the next few years.

    ReplyDelete
  24. Beanie,
    The dolar will surely rally viciously afte the 3 year cycle low jsut like it did out of the 08 low.

    These counter trend rallies are critical to keep sentiment under control and keep the bear intact.

    The same thing happened as the dollar bounced out of the 05 3 year cycle bottom.

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  25. Collapses stop because the market decides prices are too low and then they get bid back up. To assert anything else is ludicrous because you have no causal proof that actions of one entity caused the entire market to behave in the manner it did. To say that is just providing false evidence to support your case, since you have no proof.

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  26. Justin,

    No one claimed the CBs have complete control over their currencies, and that's part of the point. If they could have such control then the fixed ratio system attempted decades ago under Bretton Woods would still be in place. Currencies, like other freely traded assets, are subject to the emotional swings of traders, as well as the underlying fundamentals. The malfeasant practices of CBs these days... massive printing... actually causes more volatility, not less. This is why we will continue to see a series of currency crises rotating from one currency to the next until we get someone in power who knows better or until the system just breaks.

    ReplyDelete
  27. Tell me how could price be too low as you call it when we are massively oversuplied with oil and demand had collapsed? How does price rise in that environment?

    There is one way and only one that it rises, because the monetary base is expanding rapidly. That is the only way price could over run severely damaged fundamentals.

    ReplyDelete
  28. Most think the USD is a national currency; it is not. It is the reserve currency for our current world. So asking the question whether or not the USD is better than the Euro arises, the simply answer is no.

    The Euro plays semi-pro ball, while the USD plays in the majors. That is to say the need for the USD to be stronger than any other currencies is needed within our current economic system.

    ReplyDelete
  29. Prices rise because more people are buying than selling, and vice versa. To assert anything else, especially a narrow specific reason like "money printing", and present it as "the only solution", and that "everything else is wrong", is 1) false because you have no causal proof 2) misleading because you have no proof yet are presenting it as proof.

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  30. Here's the thing:

    1. The tax rebates were insignificant.
    2. The yen was 159 in 1990. After twenty years of helicopter drops, it is 83.
    3. The stock market rallied to the 61.8% retrace and has been declining ever since, exactly as one would expect in a bear market.
    4. If oil prices are the result of printing, then Bernanke has failed since the printing is supposed to bail out the economy.
    5. Gold is pricing in deflation, not inflation. That should be obvious from the fact that it has failed to exceed the inflation-adjusted 1980 high.

    ReplyDelete
  31. Here is a great new article explaining exactly why there is zero chance that the dollar index is headed south of 80 anytime soon:

    This is Sparta!

    ReplyDelete
  32. 1. If they were insignificant then why did they spike the price of oil to $147 and drive the economy over the edge into the worst recession since the Great depresson.

    2.I'm not sure what your point is about the Yen.

    3.The stock market has been in a secular bear market since March of 2000 and in that time the Dow and S&P both rallied to nominal new highs.

    During the secular bear market from 66 to 82 the stock market also rallied to nominal new highs. Retracement levels are completely meaningless but they make for a nice argument.

    4. I've said all along that it's not possible to print prosperity. It didn't work in the 30's and it won't work now. Printing just halted deflation that's all.

    5. Do you have some kind of time limit I don't know about that if gold doesn't exceed the inflation adjusted high within that period it means we are experieincing deflation?

    You sould know that big secular bull markets tend to last 15 to 20 years. If by the 15th year of the bull gold is way above the inflation adjusted highs will it still have been forecasting deflation?

    ReplyDelete
  33. What drove oil to $147 was the announcement that Cantarell field was depleting far faster than previous projections. It has nothing whatever to do with tax rebates. Where the heck did you even get the "tax rebates spiked oil" theory?

    The yen is a fiat currency, they've been printing like madmen for two decades, therefore your "can't have fiat deflation" theory is plainly in error.

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  34. Everybody seems to be missing the big picture, and that is a shift of power from West to East. This on again / off again argument really misses what is happening. We are experiencing a shift in power globally from the U.S. as the dominate nation (read reserve currency), to the Asian theater, and primarily China. Argue all you want, but everything that is happening is part and parcel of that evolution.

    ReplyDelete
  35. Anon,
    Put up a chart of oil and the dollar you will clearly see that oil went parabolic reight as the dollar broke through multi decade support at 80. The finishing touches were added as the government dumped an extra 300 billion into the lap of the american consumer.

    I'm afraid Cantrell had virtually nothing to do with anything. The worlds oil fields have been declining for some time now.

    ReplyDelete
  36. Gary, given what you believe will happen to currency, I understand why you would not want to own GLD. I purchased GLD LEAP options which you have warned against (a very long time ago). If I were to roll these over into actual futures options, shouldn't it be safe because ultimately, the gold option would roll into a futures contract from which I could force delivery of actual gold at that point?

    ReplyDelete
  37. Steve,
    The only reason I don't own GLD is because I think the percentage gains will be much better in silver and miners.

    If you buy futures and hold to expiration then you are going to have to take delivery. If that is your intention that would be one way to acquire physical.

    ReplyDelete
  38. Justina's panties are in a bunch again. What a nag!

    How does anybody know anything, Justin? Do I really exist? Is anything real? Squirrels don't need money, why do I?

    ReplyDelete
  39. Justin,

    Well there is one thing we can know definitively, that your stock shorts are a losing trade.

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  40. Gary, the Daily Bell picked up your (or your pseudonym's) article.

    http://www.thedailybell.com/1358/Is-it-Deflation-Yet.html

    ReplyDelete
  41. Again, the Japanese have not been "printing like madmen" since 1990. Since 1992 M2 has gone up by 2% p.a. It is very important to understand that it is politically unacceptable to destroy the purchasing power of money in a society of savings. Sure the yen has fluctuated due to various macro-economic developments, but there has been a healthy deflation of general price levels.

    The Keynesian medicine in Japan has been entirely via budget deficit stimulus projects, which have been a dismal failure. Note that the 200% debt to GDP is gross and held internally.

    The Japanese govt has borrowed from their own citizens (who had large savings) at ridiculously low interest rates. This is probably done via pension funds and other money management conduits for savings. (This is just my guess; I have not researched it.)

    Furthermore, the terrible performance of the Japanese stock market over the last 20 years has led to nearly no retail participation. Where does money and savings go? Into bonds.

    The Japanese succeeded in driving down the currency during the mild 2001-6 QE because it helped fuel a carry trade. The effective of monetary policy usually lags so the JPY hit record lows against the EUR (180?) and about 125 to the USD in 2007 to early 2008. But once the carry trade ended the yen snapped back violently. During this era some retail investors (Mrs. Watanabe) sought high yield in NZD, AUD, etc. But the majority of retail funds remained invested in JGB. And people who stepped outside got badly burned during 2008, so I am sure that little money is flowing out from Japan today, and the interest rate differentials are not that high anymore. In 2007-8, banks in NZ were paying maybe 8% interest or more.

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  42. Shorts are getting flambe'd again.

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  43. The G-train is rollin.

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  44. I sure hope we get a pullback so I can add to my PM's. Seems like it's taking forever!

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  45. Looks like a snoozer to me. Somebody please wake me up if SLV gets to $18.50 so I can buy some. I'm already loaded up with gold.

    Back to doing what I do best! :)

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  46. Yes, Gary, you have hit the 'Intellectual' big time by being picked up by the Daily Bell. It is my favorite daily read (after your posts, of course), and is always thoughtful and insightful.

    Congratulations!

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  47. Inflation/deflation debate--
    Justin-- Anonymous and the deflationists
    -- some of us (including me) agree with Gary on this issue however it is not just for the sake of agreement. My agreement aligns much more with my economic philosophy and acquaintance with the Austrian crowd. (History of reading Faber-Rogers-Schiff-- Mises-- Rothbard--Hayek etc.)
    So please do not lump us all as just Guru jumpers on.
    There was a price to pay for excess-- bubbles and credit collapse. There will be a bigger price to pay for excessive printing-- (including another bubble)

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  48. I'm quite familiar with all of those analysts, having listened to many of them for years. But ultimately it is price action alone that really matters anyway, and not theories and opinions. Some of those guys are broken clocks that will never change their opinion regardless of how wrong they could potentially get it. I think that is kind of stupid personally.

    Until the bond market breaks down and the dollar resumes it's bear market, deflationists have nothing to fear, that's just the bottom line. If they continue to trend up inflationists will just continue to be confused and incorrect.

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  49. I would point out that inflationist have been buying gold and have been deadly accurate.

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  50. GDX taking a bit of a dump. It could be forming a weekly key reversal to the downside.

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  51. I pointed out in last nights report that gold had tested the all time highs and it is possible we could see some sideways consolidation or even a move down into a daily cycle low but I doubt this is an intermediate cycle top after only 6 weeks. If it was then gold would be heading into a D-wave decline and I just don't give that much chance of happening with the dollar due to move into a 3 year cycle low.

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  52. Price action should be telling Justin to cover his shorts.

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  53. blah blah blah... deflation or inflation who cares. These arguments are tired and more played out than a Lindsay Lohan court transcript on TMZ..

    http://www.oftwominds.com/blogoct09/deflation-inflation10-09.html

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  54. Regarding gold vs. silver: I agree gold will outperform silver, but there is an additional consideration - it isn't that simple.

    So far, roughly, silver performs 2x whatever gold does. But gold has lower volatility by far.

    If the volatility of gold is 1/2 silver or lower, then it is possible to buy 2x gold and get the returns of silver at a BETTER risk adjusted return. Many people discussing buying X or Y or Z based on return alone miss this aspect - you can leverage a LOWER return item if the volatility is less and actually be better off sometimes. (And before you jump on the word 'leverage' it just means buying MORE of the lower volatility than the higher volatility. It doesn't mean going into debt or negative in this discussion.)

    Now...the flaws in this example, as seen by silver, go both ways - in the 2008 meltdown silver actually had MORE than 2x volatility (or BETA) to the downside compared to gold. In very bad situations gold does even better than silver even at 2x.

    However, in mania situation (as the expected C wave coming up) silver will tend to slightly outperform the 2x situation as things are peaking. But you have to ask yourself if the extra outperformance is worth it if you just had more gold. And what if you are wrong and things meltdown again? And what if you just increased gold to maybe 2.5x near the end of the C wave if you really wanted to try and catch that blowoff boost?

    It's just a discussion. I'm actually big on silver, slw, etc and thing it will outperform. But adjusting for risk/beta/volatility as described doesn't make the situation as clear cut.

    --TZ

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  55. CORRECTION: my first line, ironically, is completely reversed:

    I agree SILVER will outperform GOLD.

    duh...need coffee

    --TZ

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  56. Gold dropped to 1248

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  57. TZ,
    I think you might want to re-read what you just wrote. If silver is twice as volatile as gold but you buy twice as much gold you will still match the same volatility in your overall portfolio as just owning silver.

    Your math was slightly flawed :)

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  58. Sing,
    Gold may have decided to work down into a daily cycle low. I will go over where to look for a bottom in tonight's report.

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  59. TZ,

    Would you therefore also think that something like UGL (2X gold) might be better than SLV?

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  60. Gary

    do you think we passed the daily cycle top at 1263?
    that would lead gold to correct at least to 1243 at 38% from 1210

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  61. Gary,

    Way to trash my post without even acknowledging it in any way.

    I can read what I wrote. I started out making a point by showing how gold and silver could be EQUAL holding 2x gold vs. silver. That was a large part of the post. I'm glad you picked up on it.

    I then descibed how 2x gold could be BETTER than silver. Then I described how it could be WORSE than silver based on different assumptions.

    Yes..I pointed out how they can equal at 2x. Why do I have to re-read this? What issue do you have with what I said?

    --TZ

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  62. O.K.Gary...I give up. You have been remarkably accurate in your calls (not just "Gold is going to soar!") I have been trading for over 30 years and am not easily impressed by the occasional good call. But I had said that one more good call and I'd subscribe...well we just touched the high and have now sold off, as you had predicted. I'll be starting with a short subscription and extending it as we go along if things pan out as you say. Do I need to learn a secret handshake or something?

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  63. I was pointing out that one can not in fact lower their risk by buying a double gold fund. If siler moves twice as much as gold then buying twice as much gold (leveraging 2:1) will be the same thing as buying silver.

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  64. DG,
    I'm heading out ot the cliffs just subscribe and when I get back I'll get the login info to you.

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  65. TZ,

    You may want to add a valium to that coffee. Chill out a bit.

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  66. Gary,

    I clearly wrote this:
    >If the volatility of gold is 1/2 silver or lower, then it is possible to buy 2x gold and get the returns of silver at a BETTER risk adjusted return.

    If gold is 1/2 or **LOWER**... it is **POSSIBLE**...to get better.

    I also specifically pointed out how this exact scenario was TRUE in the 08 crash.

    And finally the point of the post was to mention that the issue is not as CLEAR CUT as "just buy silver" (even though I have). That statement is totally true and the value of the post is in raising the concern for people to think over.

    Jumping on it and saying "check your math" when I started with an easy to understand 2x example and worked from there isn't warranted. Yes..i get it. If silver does 2x gold they are the same. That wasn't the point of the post - it was the **starting** example to communicate something of broader importance and the proper words clearly indicated issues for further evaluation.

    --TZ

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  67. RA,

    The 2x, 3x, "ultra" and "super" ETFs have a decay built into their trading due to the daily rebalancing that occurs to maintain an over 1x exposure. That kills "going 2x to equal silver" using them (remember...assuming a simple 2x example for discussion. Nothing in markets is that perfect.)

    You would need to have the extra gold exposure through something that didn't decay daily.

    --TZ

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  68. Gary,
    Your article triggered a thought about the cycle low of the dollar,, Just a thought about our distribution system in the USA and world,,, JIT Just-in-time it's called. Remember China and the backed-up transportation system?
    During hard times, why are we still utilizing JIT and not going back to a better inventory practice? I just feel we are vulnerable to a real unforeseen calamity, i.e. food, medical?
    Who is stocked up with survival stuff on the board here? Is it wise to discuss? Gary, have you thought about this JIT?

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  69. TommyD, that's an interesting point. It is a well-established fact that companies concerned about inflation keep high inventory levels since said inventory gains in value over time in such an environment. Yet, they are clearly not doing this. Verdict: no inflation.

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  70. Looks like we are having the makings of the long awaited pullback!

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  71. Never, EVER get in front of a G-Train. Everybody know that.

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  72. Steve,

    Futures are a much superior way to trade gold/silver if you intend to do it with any size. First, you get 60/40 tax treatment on gains, meaning 60% will be long-term and 40% short-term capital gains whether you are in the trade 5 minutes or many months. GLD, since it holds the physical, is treated by the IRS as a collectible and taxed at a flat 28%.

    Second, you have round-the-clock liquidity, so if you do your analysis in the evening (as I do) and realize you need to make a change, you can just do it without having to wait until 9:30ET the next morning.

    Furthermore, commissions are much, much cheaper. If you want exposure to 33 oz of gold, for example, you buy 330sh of GLD and pay a commission of $8? $9? You can buy one mini-gold contract for the same exposure and pay $2.

    Also, you do NOT have to take physical delivery by holding to expiration because unless you classify yourself as a hedger, your futures merchant (broker) won't let you hold until expiration. They give you notification when the front month is approaching its last trade date so you can close the position. If you want continued exposure, you just sell your front month contracts and buy the next active contract out.

    The only downside to futures, as I alluded to above, is position-sizing. You can only buy gold in blocks of 33.2 oz (mini contact) or 100 oz (big contract), so if you want less than $40k in exposure, you're out of luck.

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  73. I keep hearing how Bernanke is an idiot who doesn't realize what he's doing. I would argue that he knows full well what he's doing (better than almost anyone). He has access to the best, most current information and people with his level of responsibility usually aren't idiots. What he is doing is serving the interests of politicians, megabanks and the financial markets. So to say Bernanke is going to kill the dollar is correct, but I don't believe for a second that he doesn't realize this. It's just that prudent monetary policies aren't his goal.

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  74. Per Elliott wave theory, gold has begun a major C wave decline which will take it to right about $800.

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  75. Per Elliot Wave theory P2 ended a year ago.

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  76. Shalom Bernanke is a criminal who knows exactly what he's going to do to the dollar. His only goal is that it doesn't happen too fast (frog in boiling water), or he and his cabal might hang.

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  77. Anon#9-
    When the EW crowd gets bullish on precious metals, we will know that the bull market has finally topped!

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  78. Anon-
    Agree with this part--

    knows exactly what he's going to do to the dollar. His only goal is that it doesn't happen too fast (frog in boiling water), or he and his cabal might hang.

    I just feel that his hands are tied.

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  79. Here is why Bernanke does not know - and cannot know - what he is doing:

    Bernanke is trying to increase the "float" of dollars in the system. However, in a 10T+ economy that is globally integrated and also a reserve currency, there is no method to calculate how additional dollars will be absorbed by the system.

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  80. Anon-
    you make our point--
    that he is adding dollars to the system.
    If it is not enough to provide the desired result then more dollars will be added to the system!

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  81. The "Federal Reserve" is the greatest component of Uncle Scam.

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  82. Anon#9......and your call on the stock market is?

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  83. Yep, more dollars will be added...until it becomes politically unacceptable to do so. Ironically, rising commodity prices have little or nothing to do with Bernanke's efforts. Across the board, commodity prices are going up due to supply/demand imbalances. It follows that Bernanke's efforts will continue to be curtailed.

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  84. "GLD, GDX, and SLV are all down hard today." -Wrong Way TK

    SLV down hard? LOL

    http://slopeofhope.com/2010/09/golds-precarious-perch.html

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  85. Took advantage and added some. Oh, My spec play is FRMSF.PK please do your own due diligence... I really don't go for the OTC stocks -- I took a small position today.
    GL

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  86. Just sold 1500 more QLD in anticipation of buying back soon.

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  87. "Anonymous said...

    The "Federal Reserve" is the greatest component of Uncle Scam. "




    Uncle Scam is the greatest component of the Federal Reserve. (or should I say, "Not Federal No Reserves"

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  88. driver1
    Going by the DJIA, it appears that P2 was completed on April 26, 2010 at the 61.8% retrace of P1. That means we are in P3 down. If P3 were to extend P1 by 161.8%, then we would have roughly -1,200 on the DJIA. Since that is not possible, let's just say that stocks are going to get obliterated.

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  89. anon#9,

    There are dozens of valid EW counts out there right now. The big bad Peeeee Three is only one of them, and one that is not very likely IMO.

    But even if you take P3 off the table, there are still several possible bearish counts in play at this juncture and I believe one of those will play out.

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  90. ... unless the count is wrong, in which case shorts who subscribe to EWI might be risking obliteration. EWI has not exactly threatened the crystal-ball business since last summer.

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  91. Hey Gary, any thoughts on DROOY? It moved over the 50day MA with decent volume yesterday. Looks like a buy here?

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  92. Gary-

    Had this daily topped on gold now today indicating further weakness or should this small sell off be viewed as a golden opportunity to buy some miners?

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  93. Looks like the dollar might want to fill the gap (Sept. 1st) higher tomorrow. Perhaps we can get a gap down tomorrow to get long for another trade.

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  94. Jayhawk,

    We are definitely in buy-the-dip mode until the intermediate cycle tops. I also have serious doubts that a daily cycle topped in just 10 days. This is going to be a choppy ride, so it's best to put your seatbelt on and maybe close your eyes. That last bit is a euphemism for not watching your account balances, which is exactly the way I am behaving.

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  95. For those interested in Tom DeMark (TD) indicators (take it or leave it):
    SPX up level qualified this morning, indicating more upside in the general stock market
    Gold registered a TD daily sequential sell yesterday. This doesn't necessarily mean "sell", but a change in the uptrend, which would correspond to Gary's sideways consolidation or daily cycle low call. Sell is good for 12 "bars", or 12 days from today.
    Silver had a TD daily sequential sell last week. Prof Depew on Minyanville is looking for Silver to pull back to 19 before buying. Once again, like on here, he is very bullish on Silver as it qualified an up level on a weekly basis, indicating a very strong uptrend for the next few months.

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  96. thedoc, your website/analysis looks so similar to Gary's... is there any reason why?

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  97. Kevin Depew is great.

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  98. Doc/Jayhawk,

    With all due respect, I think we hit a peak for now yesterday and this selloff accelerates into next week - giving us the first main correction since the big low over a month ago. I don't view the one day pop down a few weeks ago as a real correction.

    The momentum appears to have cracked and there are a lot of weak hands who haven't been tested holding stocks in 'midair'. Those people are ripe for option makers and 'the big guys' to pick off for profit. 1200-1210 might be possible.

    (And yes this would counter a few views that gary has stated recently. Sorry. I'm sure somebody anonymous can make a big deal out of it and somehow make it look like i'm attacking everybody and shorting the gold bull...instead of giving a measured opinion which I believe to be true.)

    --TZ

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  99. Anon:

    I suppose it's because we both use cycles as a basis for analysis and have read each other's work for years. There are key differences in interpretation methods, though. I consider Gary's analysis to be indispensable, but obviously put more weight on my own ;-)

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  100. I think gold has room to correct, perhaps even tomorrow, but I think we break 1265 next week. There are way too many buyers in the 1235 region who dont want to miss the ride, and the way gold has held is very bullish. In the past a rejection at a technical level (all time highs) would result in an immediate 20-30 dollar sell off (a lot of times even more). Buyers are waiting to buy the dips.
    Aaron.

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  101. I'm licking my chops for a couple days pullback in here. Got my buy limits in on SIL and SLV already. Hope I get filled.

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  102. Something else interesting is developing. I annotated this:

    http://img525.imageshack.us/i/goldpic.gif/

    Gold is now in a HUGE wedge formation. This more often than not resolve by going down. But it can (less likely) resolve higher which then results in *explosive* moves and could be what we are waiting for for this next C wave.

    Notice we have now tagged (as of yesterday) the top line. I expect at the MINIMUM that we will return to the lower line and possibly punch through it briefly (around 1200).

    Even if we resumed going up this move down temporarily would have the result of:
    1) testing all the weak hands I suggest are now recent buyers.
    2) produce a real correction to this last gold move.
    3) moving to the lower line and popping below it would result in the sort of panic pattern selling that gary often discusses being used to scare people out of position so big guys can get in.

    Gary's alternate view would be that we can punch higher NOW and keep going, which is possible and would be fierce.

    I just throw it out for discussion/consideration.

    --TZ

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  103. Earlier Gary wrote:
    Actually the Yen was considerably lower until the last three years. But to answer your question Japan never debased their currency. They didn't need to. They had massive savings to draw on to fund their bail out programs.

    If Ben didn't print then where did the liquidity come from to drive oil from $35 to over $80?

    It certainly didn't come from a supply and demand imbalance as it is pretty universally agreed that the world is over flowing with oil.

    I have no idea where Gary and Frank get this idea that Japan has not "printed" money. With Frank I simply assume he has a specific concept of money printing, but with Gary, he keeps repeating a lot of flawed ideas about money and money transmission.
    There are myriad central banking reports and investment banking reports on the Japanese experience. Just go to PIMCO's website, for example.
    You can't just keep dismissing ex-central bankers as academics or dumbasses and instead automatically subscribe to ideas of people like Jim Grant, or Faber and Rogers, all people I deeply respect but they're not all-knowing.
    The Japanese began monetary easing relatively late, compared to the Fed. That was their main problem, along with the fact that they pretended their bad loans would recover in value at some point or believed they could lend more to save whatever was bad on their balance sheet, ie. the gamble for resurrection.
    People can rightly point the finger at the changes in mark to market accounting principles as a ruse, I agree with them, but the US still is not showing the ineptitude of Japan in the 90's.
    Make no mistake, once they decided to do it, Japan printed money.
    Now, the other point about Japan domestically funding their government debt, the so-called "internally funded" JGB's.
    Again, so what?
    SO WHAT?
    It is axiomatic of the current international financial system that the U.S. funds itself internationally.
    In case you don't know, then understand this.
    The Dollar rules for several reasons. One of them is that the Dollar is king in the export markets.
    Another is that with rates as low as they are, and the Dollar's exchange rate at relatively historic low against the general FX market, the Dollar is a great currency to borrow in for the international bond issuance.
    (As a borrowing currency, it's becoming like the Yen, as Frank correctly notes via his reference to carry trade, and Swissie in recent years up to the subprime-instigated collapse in markets.)
    I am only remotely interested in Gary's cycle work, but let's assume he's correct about the 3 year cycle low in US Dollar Index. That jives well with the fact that lots of international dollar bond issuance will be due in the next few years (i.e. principal to be repaid in full).
    That's a reason why Yen is in demand now. Paying back old Yen-denominated paper back in full nowadays. Of course, in retrospect people borrowed much more than they should have...
    Going back to this non-issue of "internally funded" yen bonds... So What?
    Japan has a pool of domestic savings to tap into.
    The US has, and will have China and many others, for at least another decade, to tap into.
    That's not even mentioning the U.S.'s own domestic market, who have just started to discover a taste for Treasuries.

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  104. A resolution of that wedge higher would suggest almost $1500 target.

    --TZ

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  105. TZ-

    You could be right, but I'm a tad under exposed to the miners. I consider the past 2 days a nice dip to buy and went with SLW and ANV which have been pretty strong. I like the support at 23 for SLW right here and 24.50 on ANV. I've got good amt of dry powder to add more next week.

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  106. Although I agree with Brian there is a movement of power in general from West to East, who knows how long that's going to take to complete.
    The Chinese financial and economic system is inherently unstable. It doesn't and will not have the innate flexibility the systems of the US and places like the the Nordics and the UK and Germany have until China switches into a liberal democracy. (By liberal democracy I mean the general political systems of the West and Japan.)
    People talk up the Singapore Dollar nowadays and have been for a for a few years now. But do I want my money in Singapore, or Switzerland, in the long-run? Which place is riskier?
    The Euro is not a serious currency. It is quite simply a risk asset.
    Before August 2007 all the experts were shitting on the Dollar and talking about how exports would be invoiced in Euros from now on.
    Apparently, some Brazilian supermodel would only accept payment in Euros those days.
    It's a risk asset, and no one in his or her right mind would park Central Bank liabilities, because that's what FX reserves are, by definition, in risk assets.
    China can diversify all it likes, in Pound Sterling, in Euro, in gold or miners, or Agriculture but in the final analysis, who knows where the value of these things really lies? Because anything other than the dollar and possibly Yen is pure speculation. So to expect China to go all out and use even 5-10% of their FX reservesto buy gold is unthinkable, to be honest.
    I know which currency I want to be in (Dollar), even if things go the way of the primary Dollar bear trend since 2002, and the Dollar Index heads to the low 50's.
    China can be the future. But until we are quite confident it is, no one has any real business, unless you are as rich as Jim Rogers, parking your wealth in the East.
    The East's a different world that if you lived there for a few years, will make you pine for the corruption and ineptidue of Bernanke and Co and the US government. These guys are jokers compared to the bad guys East and South of the real Western Europe.
    I've said it here before. Everyone's an expert and knows better, it seems, than the people with the actual power.
    Yet I know I wouldn't trust your average blog commenter who criticizes Geithner or Ben Bernanke to run a small grocery store or coffee shop with any acceptable level of competence.
    Yeah, I heard the ex San Fran Fed governor charged a couple hundred grand for a "paper".
    So what? Geithner didn't pay taxes? So what?
    The kleptocrats of the East are laughing their asses off. You can take that to the bank.

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  107. Yesterday and today big SoS? Is there a correction coming?

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  108. Jayhawk,

    I like your choices. SLW and ANV are actually my two favorite miners.

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  109. Gary writes:
    If Ben didn't print then where did the liquidity come from to drive oil from $35 to over $80?

    It certainly didn't come from a supply and demand imbalance as it is pretty universally agreed that the world is over flowing with oil.

    Oil's clearly been a bull market since 99-2000 when it rose from 10 (?) dollars a barrel.
    I agree with Gary about the Supply Demand equilibrium, and I'm not a peak oiler, either, i.e. to hell with Cantarell.
    But I agree with Justin who brings this up regularly in the comments, and questions how Gary is so certain the spike in energy comes down to monetary policy.
    One can make a case that demand from emerging markets justified rising oil prices to an extent, for example.
    I just can't agree with this concept that this guy, Helicopter Ben, presses a few buttons, and "aborts" this or that "cycle" as Gary like to always say.
    I don't know why you resort to such statements Gary, when you clearly don't believe crazy ideas like GATA and PPT.

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  110. Doc-

    Thanks-I hope they continue their upward trajectory! I don't like the potential cliff dive if they start getting punished.

    I couldn't wait until the evening updates from you and Gary as these dips are not lasting long. I've got my core position, but have been waiting for a dip to get in with some miners.

    If anybody has any insight on these tickers let me know. These are my finalists to add more-

    Silvers-
    HL, SVM, EXK

    Golds-
    NG, NDG, GBG, GORO, possibly EGO & SA-but may just stick with a large % in ANV and add those smaller ones.

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  111. khalid: there is a staggering amount of oil on this planet. By the time this bull market is over, the concept of peak oil will be shelved again. In fact, there is more oil inside U.S. borders than the politco let on, but if the public were not scared of running out of energy, the politicians couldn't fund their pet projects, such as war and alternative energy.

    Jay: I have a pile of SLW stock and warrants, and some options because I love their business model. I also have a basket of juniors that I've been holding since last summer, but I wouldn't have bothered picking them if GDXJ had existed at that time.

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  112. DOC
    like I said earlier, I'm definitely no peak-oiler.
    Yes some people have a lot to gain from the fear mongering regarding fossil fuel scarcity.
    I have my own concept of what moves commodity markets and it involves large sector specific companies and government policies.
    But the main thing to understand here is that you will rarely get the real story from the MSM or Wall Street or The City (London).
    For example, the "oil shock" story of the early seventies is largely bullshit, but the real studies and reports on the energy price rises of the time conveniently lie out of reach of most people hidden in a few books and journals.
    If they would just open up the oil exploration market in the Middle East in true capitalist fashion, the oil price would crash to way below 10 dollars a barrel. But that's not happening anytime soon because of the energy lobby in Washington.
    The problem with Iran nowadays, for the US, for example, is not whatever crap they keep jabbering about in the MSM. It's the possibility of Iran wanting to open up oil exploration to companies from the rest of the world (ex US, UK). That would drive the oil price down in a minute.
    Returning to the issue at hand in this blog post, however, there isn't much data, any data, to convince me of this pretty flimsy theory that monetary policy during Greenspan and Bernanke somehow was a the proximal causal factor of the rally in oil.
    Oil went parabolic, along with its sectoral stocks, while fed funds were a few hundred basis points above where they are now. Plus there wasn't any QE back then. That's just one of several observations that falsifie this notion that the Fed is the root of all price evil.
    Look, in a bubble if people are gonna bid up an asset or whatever, tulips, etc. they'll find a way to do it. You don't need the Fed or a central bank to fuel anything.
    Now, lax lending standards, that's the more likely culprit. That has more to do with credit policies than with monetary policies...

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  113. Hmm that is where you are wrong. Easy money is required before any bubble can form. Greenspan was debasing the currency since 01 (actually since LTCM) it created the housing bubble and started the credit bubble it also sent commodities along with supply and demnand fundamentals into a secular bull market.

    Bernanke then made the problem worse when he aggressively debased the currency in a vain attempt to halt the subprime and credit implosion. This sent the dollar cratering below multi decade support (80) for the first time in history.

    It wasn't until that break that oil which was just moving up in a long term bull market quickly turned into a massive parabolic move. As a direct result of Bernanke's foolhardy attempts to halt the credit market implosion.

    Read your history no bubble has ever formed without easy money.

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  114. Read my last couple of sentences.
    Easy access to credit (money) is what I'm referring to.
    When banks don't think twice about giving you cash... as what happened prior to August 2007.

    I think by "easy money" you're trying to imply that low rates and unlimited QE can lead to dollar collapse, asset bubbles, etc.
    At the minimum, you need reasonably lax bank lending standards to cause these problems you keep talking about.
    That's simply not happening.
    It's clear as day to me that rock bottom rates and all the money printing in the world won't force people to buy stuff or speculate in stuff.

    I know my history.
    In my neck of the woods when rates were double digits in the early 80's, there was a massive stock market bubble in a country called Kuwait, an ass crack of a country that saw its stock market value reach a truly astronomical level (a couple of hundred billion dollars in THOSE days, 1982 when Kuwaits GDP in a previous oil bull market was 21 billion dollars).
    The whole bubble was based on post dated checks, a parallel credit system that began some 10 years before the bubble exploded.
    Kuwait was an extreme bubble, but
    the same thing is happening in China where official central banking policies are HELPLESS in controlling rampant speculation because of the underground shadow lending going on.
    Gary, you focus too much on Ben Bernanke in your fundamental story to justify a gold bull.
    The other thing is what currency crises are you talking about in Euro or forthcoming in the Dollar?
    Currency crises are what happen in developing countries with devastating effect.
    The lower Euro stimulated Germany's economy recently.

    Gary you attribute too much importance to monetary policy.
    Outside Canada, Oz and the East ex Japan credit standards are so tight now that you can forget about whatever you're talking about (inflation).

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  115. Nope I meant easy credit. A credit bubble and asset bubble go hand in hand.

    But QE is essentially the same thing. The Fed prints money and gives it away to someone. In the current case it is the financial institutions who then plow it into asset markets.

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