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Sunday, September 19, 2010

THE S&P TREND REVERSAL: GOLD TREND CONTINUATION

The S&P has now joined the Nasdaq 100 in completing the 1-2-3 reversal.


Now whether we get any follow through next week will depend on if the dollar continues down to test 80. Note that Friday was day 14 of the current daily cycle. We usually see a minor half cycle correction sometime around day 15 to 20.

So we should expect a short term top any day now. However I expect the pullback will just serve to dampen sentiment a bit so the next push higher can begin. If I had to guess I would say the market will likely find support at 1100.

The move to a higher high also puts this rally into week 11 of the larger intermediate cycle. (Today's move now moves the rally into week 12.)


That means we are now dealing with a right translated cycle. The majority of the time right translated cycles hold above the prior cycle low. In English that means it's now unlikely that the market will drop below the July low of 1010 at the next intermediate cycle bottom due in mid to late November.

How is that possible you ask? The economy is in dumper. Well first off never make the mistake of thinking the economy determines whether the stock market goes up or down. From 1932 to 1937 we saw one of the greatest bull markets in history. The Dow rallied almost 700% and it did it with unemployment holding above 14% and occasionally rising to over 20%.

Let me show you what is driving the stock market.


The dollar is in the process of it's own 1-2-3 reversal. If it breaks below 80 we will have confirmation that the counter trend rally that started last year is over and the secular bear trend has resumed.

I've been warning for sometime that the dollar is due to drop down into a major 3 year cycle low. A falling dollar is a sign that Bernanke is printing too many of them. He's trying to support asset prices and create the illusion of prosperity. He is probably going to succeed in creating asset inflation. However, in the process he is going to do tremendous damage to the global economy.

At some point the market will recognize that, and the global stock markets will roll over into the third phase of the secular bear market that began in 2000. But until the market wakes up to the fact that a currency crisis is brewing don't be surprised if we have a brief period where it will appear that everything has been fixed.

The initial phase of a currency debasement is often mistaken as an improving economy. It's not. In reality Bernanke will be doing massive damage to the economy.

At the dollar's next 3 year cycle low, due next spring, we will be dealing with a mini-crisis in the dollar. That is going to cause surging inflation problems.

Gold is already trying to warn us what is coming for those that will listen.

Since we were talking about trend lines let me say this again for those that forgot during the July correction. In a bull market all trend line breaks will eventually be recovered until the secular bull finally comes to an end.

In July I saw gold bears falling all over themselves  because the trend line from the Oct. `08 bottom had been broken.


I knew at the time that it was a mistake to attach any significance to the trend break. At the end of the article I said the "the bears are going to be wrong again". And of course they were wrong again. Gold has gone on to make new highs just like I knew it would. And we now have a new trend line to watch.


Sooner or later this trend line too will break and just like the last one it also will be meaningless. These trend breaks are one of the most effective tools the bull has to shed riders and punish shorts.

When the next break comes are you going to let the bull sucker punch you again or are you going to see it for what it is? A major buying opportunity.

96 comments:

  1. Gary, why do you put so much stock into the 1-2-3 pattern? I mean that pattern has to occur by definition if the market is reversing, but just because you see the pattern doesn't mean the market has to be reversing. The same pattern occurs over and over again during bear markets as corrective patterns. So there must be something else you see to support the assumption that its a reversal this time and not a corrective move.

    ReplyDelete
  2. The 1-2-3 reversal is one of the more dependable patterns. Much more so than wedges, head & shoulder tops or bottoms and the myrid other obscure patterns traders put their trust in.

    Actually if drawn correctly in the right time frame the 1-2-3 reversal is a pretty dependable pattern. The mistake most people make is not letting the #3 confirmation occur before jumping on the band wagon.

    That being said, all the 1-2-3 reversal really is is a higher high and higher low. That is the definition of an uptrend.

    Used inversely the 1-2-3 revesal would be a lower high and a lower low (which may be developing on the dollar index).

    Of course there is more than just the 1-2-3 pattern that suggests this time it will prove to be correct. We also have the fact that the dollar is moving down into a major 3 year cycle and yearly cycle low. A falling dollar is going to act to prop up asset prices.

    ReplyDelete
  3. Using the 1932-1937 rally in this example is specious reasoning, at best. Stocks declined 89% from the top before the 1932 bottom. We haven't seen anything like that yet.

    ReplyDelete
  4. Using the 32-37 analogy wasn't meant to suggest we were going to rally 700%. I was showing you what can happen when the government debases the currency.

    By doubling the price of gold the government effectively doubled the money supply in the early 30's. It led to a massive surge higher in the stock market despite virtually no improvement in the economy.

    ReplyDelete
  5. BTW the 07-09 bear was the second worst bear market in history. It is pretty unlikely that all we are going snapback is 80%. All of the other 7 great bear markets in history spawned larger rallies than what we've seen so far.

    ReplyDelete
  6. I keep looking at the performance of ANV and SLW and it's making me drool. I sense a pullback coming this week as the prices of the metals themselves correct.

    All of my PM money remains in AGQ and to a lesser extent UGL...no company specific risk, obviously.

    My hesitation with the mining stocks is that they're STOCKS, and I fear (probably irrationally) that when equities fall again, miners will underperform, just because everyone will be hating stocks in general.

    ReplyDelete
  7. I think quite a few people have the same irrational fear. I would point out that it took a very rare market crash to take everythig down.

    The odds of that happening again are almost non-existent.

    The next leg down in the bear won't come as a crash but as a long slow grind similiar to what happened during the 2000 to 02 bear.

    In that scenario we won't see the massive panic selling event that we saw during the fall of 08. Without a panic selling event the miners will continue to decouple from the stock market and follow gold.

    ReplyDelete
  8. http://www.zerohedge.com/article/debunking-great-myth-us-consumer-deleveraging-or-why-us-economy-will-end-not-whimper-bang

    very interesting;

    This shows that consumers are NOT actually changing their behavior or dropping down debtcwillingly.

    They are almost *exactly* like traders caught in a bad trade hanging on and HOPING for things to work out. As they don't they get a margin call in the form of foreclosure or BK and taken out of the game. (And I'm pretty sure most here know what happens when you have a losing position and your strategy is based on 'hope'.)

    There is no capitulation by the consumer - they are holding and hoping. Very bad and shows things will get much worse as the hope runs out. Everything from the 2008 crash low is still just a false recovery floated on printed paper.

    --TZ

    ReplyDelete
  9. Gary wrote:
    "Without a panic selling event the miners will continue to decouple from the stock market and follow gold."

    Yeah, I hear you.

    In looking at the latest gold trend line, it looks like gold might move lower from now until mid-October, at which point it would presumably bounce off your blue trend line. MIGHT is the operative word.

    That wouldn't be so bad. I'm not leveraged, so I'd hold all my AGQ and UGL positions and then have a good opening to pick up some SLW and ANV, which would presumably have pulled back considerably if gold prices fall for the next month. I need some kind of meaningful pullback before buying those miners.

    ReplyDelete
  10. I doubt gold pulls back all the way into mid Oct. The daily cycle doesn't last that long. We should get a bottom by late this week or early next week.

    ReplyDelete
  11. What ever happened to Justin. He's been MIA since getting run over by the train!

    ReplyDelete
  12. Justin doesn't want to talk about how all of his trades are way against him. Today is going to help, either.

    ReplyDelete
  13. gary 2.05pm,
    "The next leg down in the bear won't come as a crash but as a long slow grind similiar to what happened during the 2000 to 02 bear."

    I thought SPX is more like 2004-2005 now, not 2000-2002??

    oa

    ReplyDelete
  14. I'm not suggesting we have begun the next leg down in the bear yet. On the contrary I've been trying to warn bears for months to wait till we have confirmation before shorting (mostly unsucessfully).

    But when the bear does return I think it will be a slow grind coen like the `00-`02 bear not a crash like the `08 market.

    ReplyDelete
  15. Oh no, shorts taking another beating.

    ReplyDelete
  16. Well, this signal sure isn't working. I cut back some on my shorts and will cut back more if we close up here today. We are WAY overdone now, so I hate to do it, but not playing with stops means you will eventually kill your account (unless you are never wrong...which sure ain't me!) I have always loved the line "It's fine to be wrong, but it's criminal to stay wrong."

    ReplyDelete
  17. DG,
    Did you cover your short?

    ReplyDelete
  18. It's great to watch from my Old Turkey's perch even as PM's seem to be rising inexorably and my portfolio keeps gaining.
    Part of me feels great but another part of me is a bit nervous about what kind of currency crisis awaits us in the near term.

    ReplyDelete
  19. Unlike the other short siders, DG is a real trader opting to take his losses while small. Good trading!

    The permabears are scorched already.

    ReplyDelete
  20. 1300 still looks doable

    --TZ

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  21. The bear will never return. Game over.

    ReplyDelete
  22. Gary, if we are going to face surging inflation problems ahead, what will this do the housing market? More infation, higher housing prices because every thing (lumber etc.) will cost more? Do you think the bear market in the housing industry has ended?

    ReplyDelete
  23. Nope, not by a long shot. Housing has a severe oversupply problem.

    We might see prices temporarly propped up by a falling dollar similar to what is happening in the energy market, but real value isn't coming back for a long time.

    What good is it if your house increases by 10% if everything else jumps 50?

    In real terms housing will continued to be mired in a bear market for years to come.

    ReplyDelete
  24. But dollars invested in buying a house is better then cash in the bank if we are going to see a currency crisis. Right?

    And many market observers say that there is a lot of money on the sidelines waiting to come in (after the dollar crisis?), and will probably pour into real estate because that is beaten down right now. What's your take on that argument?

    ReplyDelete
  25. Take the current rent of a property, multiply x100.

    THAT is the fair value to buy or sell. If it's (significantyl) higher you want to be a seller. If it's lower you want to be a buyer.

    Real estate will continue dropping until it AT LEAST equal x100.

    --TZ

    PS: this formula works through human history.

    ReplyDelete
  26. CLARIFICATION:

    MONTHLY rent.

    Condo rent is $2000;
    Condo is worth $200,000.

    simple.

    --TZ

    ReplyDelete
  27. ANON,

    Cash in a house is better than cash in the back. The house is a harder asset than paper.

    But all you are really saying is eating dog food is better than eating nothing, when you have pizza (gold/silver) in front of you on the same table.

    Furthermore, the amount of "cash" on the "sidelines" NEVER CHANGES. That's a meaningless statement. If somebody buys anything, their cash goes to the guy selling and now HE has the cash.

    --TZ

    ReplyDelete
  28. My question would be why would one want to buy into a deflated bubble when they could buy an ongoing bull market?

    Doesn't make sense unless one is trying to underperform. Look at all the energy bulls still expecting oil to go back to $150. It ain't going to happen as long as the fundamentals are impaired in the energy sector.

    One will be better off staying in the sector that's running on all cylinders.

    ReplyDelete
  29. Let me take that back, telling people there is a lot of "cash on the sidelines" is NOT a useless statement. It is actually very good propaganda and a cute phrase to repeatedly use in media to try and convince people to hold or buy overpriced assets.
    :-)

    --TZ

    ReplyDelete
  30. TZ,
    How is 100 used as constant multiplier factor with rent? Can you substantiate?

    ReplyDelete
  31. I use 8% gross yield on RE as a measure of fair value, which is just below the 100X measure.

    In this low interest rate environment I might consider 7% to be acceptable. RE has the added risk of vacancy and high carrying cost.

    An article on the FT on Tokyo RE claims that you can get 12% yield on low end properties. That is quite remarkable given that mortgage rates are 1.X %, although lending is very conservative and the interest rate is variable. Imagine if you could a 15 year fixed rate at a few % interest with that kind of rental yield.

    Anyway, the conclusion is that you might be surprised on the downside in RE if Shalom B is not successful in inflating away the problem across the board.

    The Japanese experiment shows that moderated Keynesianism simply does not work. It only "works" if you drive the country into a banana republic status and that's pretty difficult if you have the world's reserve currency.

    ReplyDelete
  32. Frank,
    We may lose reserve status for the $dollar just as we get to the middle of the next recession in 2012-2014.
    The banana is not off the table by any means.

    ReplyDelete
  33. TZ,
    "Take the current rent of a property, multiply x100"

    what is now??

    ReplyDelete
  34. This comment has been removed by the author.

    ReplyDelete
  35. Always? I think this is the first time. You are confusing me with one of the anons, who actually enlightened me about his middle name.

    I find the middle name ridiculous, which accentuates his ridiculous policies.

    I would equally ridicule someone named Peace or Salam if they occupied one of the most powerful positions in our corrupt governing circles.

    ReplyDelete
  36. TZ, maybe the question was prompted by someone's concern about their personal situation using that metric.

    The house that I rent is over-valued by 2.6X and would need to drop 60% according to this metric (based on mid-2007 purchase price), and this is a location where rental demand is high and rental houses are very rare.

    Although a relatively expensive house would have a lower yield than a condo. Here 7% would be a solid buy if you can get a 15 year loan for 4-4.5%. Then it's a decent investment and balance for a portfolio that does not have RE exposure. However, you are not really supposed to get a 4.5% loan for a rental property, but it is quite common "benign fraud" by the small housing investor.

    For apartments the condo fee is another factor. Do you count (rent minus condo fee) times 100? That would be a very difficult find.

    In any case, the 100X precludes purchase of any RE today in the 57 US states, as our Great Leader likes to say.

    ReplyDelete
  37. Who could possibly get upset, or take it personal, if one addresses Shalom Bernanke by his name?

    It's hilarious, and a fact! :)

    ReplyDelete
  38. I'll call Bernanke anything I please, especially his name.

    He's also a criminal, although not yet a convicted felon like George Soros (Schwartz).

    ReplyDelete
  39. I see bears are getting Stomped again, with capital "S".

    ReplyDelete
  40. Things are getting stretched in the PMs. A pull back would be healthy in my opinion, lest we risk a more severe snap back to mean reversions. It would be nice to get some sideways to downward action for a week or two to cool off the froth.

    So, what are we looking for here? A good 30 to 35 pt drop in gold would get us a nice entry on a swing low. Come on daily cycle and do your magic.

    ReplyDelete
  41. JOHN,

    >How is 100 used as constant multiplier factor with rent? Can you substantiate?

    I think a Yoda approach may be illustrative instead, vs handing out fish. May I ask a measure YOU propose or use to value real estate? Alternately tell me the flaws with mine before I elaborate.

    ANON 10:32

    >"Take the current rent of a property, multiply x100"
    >what is now??

    Well...take any property on MLS or your local paper. Take the price. Find the rent you could get. Divide. The values depend on property. And are higher in all bubble regions of CA,FL,NV, etc.
    These are also the same regions where much of the wealth destruction is happening and will continue.

    --TZ

    ReplyDelete
  42. FRANK,

    Yeah. I could sense the collective pause of a few people when I said 100x rent and they did the math on properties they owned
    :-)

    Reality is a bitch

    --TZ

    ReplyDelete
  43. if I may add ... i own a little investment real estate, in general, you can make money up here anyways, when you buy at 10 times earnings ( or less, depending on some of the cost structures, i.e oil heated ( where owner pays vs. electrical heat paid by tenants ) and sell if multiples exceed 14 or 15.

    So, if you own a building that collects 24K$ annually in rent, as a rule if you pay 10-12times that, you can still make a return. Its starting to get higher here partly because of the insecurity of the stock market, but the Canadian government has made it more difficult to purchase. i.e. you need to drop at least 5% down, you can no longer amortize over 40 years, etc.

    Of course, real estate has loads of other factors depending on where you live, including very difficult tenant laws here, vacancy rates, repairs,etc.

    The good thing is its a steady revenue stream, your equity builds via rents, and in general, it grows at a nice steady pace.

    cheers
    peter

    ReplyDelete
  44. TZ,
    I am not disputing 100 as the multiplier but attempting to understand it.

    ReplyDelete
  45. FRANK,

    >The house that I rent is over-valued by 2.6X and would need to drop 60% according to this metric (based on mid-2007 purchase price), and this is a location where rental demand is high and rental houses are very rare.

    But rental demand isn't "high" enough to rent for 100x the price.
    So how high is it really?
    :-)
    Not high enough to justify the prices.

    PS: before people peg me into it, the range is actually 100x-125x. Let me elaborate.

    If you OWN, then substantially over 125x is worthy of a sell, imo. Most real estate is in this category by a mile.

    If you are BUYING, then 100x or lower is a valuable buy.

    The range in between is the rough metric where it isn't really clear.
    It can also be viewed at the bid/ask SPREAD of the transaction since real estate take 3-6% to transfer. So (like in the markets) you want to be buying near the lower end and selling near the higher end to give yourself a margin of safety.

    Since we are post-bubble and things are still collapsing down, I am focusing on and was only discussing the 100x valuation (to BUY to MAKE money). At 100x you have sufficient safety to make the investment (all other considerations aside).

    FRANK:
    You then discussed the possible rates you get for a loan as factoring it. Yes, but mostly no in my book. You have to pay whatever you pay for the SALES PRICE. The RENT you get is the rent you get (before expenses) on the property. How you pay for the sales price with a combination of debt/equity/whatever is a separate discussion. The price and the rent stay the same.

    --TZ

    ReplyDelete
  46. fubsy,
    I have no idea what metrics you are using to state that gold is stretched. Are you using a percentage above the 200DMA? sentiment? because everything is very normal to slightly understated.
    I can see how some people feel like they missed the bus on this run up, but to say that its stretched is quite a stretch in itself.

    Aaron.

    ReplyDelete
  47. My rhythmic sense is telling me its time for a bull flag. Gold to drift down to 1260ish about now. Just doc'n it here. Silver to 19.80 or thereabouts.

    Or maybe I'm just wishfully thinking.

    ReplyDelete
  48. FRANK,

    >For apartments the condo fee is another factor. Do you count (rent minus condo fee) times 100? That would be a very difficult find.

    If you own the condo, you get X money every month from the renter. That is the RENT. The price is what it sells or would sell for now. There are no other considerations including condo fee. That is something you pay as the owner just like all the other bills, tax, maintenance, whatever.

    If the price/rent is over 100x I wouldn't buy (since we are collapsing from a bubble). You could use 125x if you really want and have some rationalization that makes sense. Over 125x (where I live stuff is 2x-3x) would be a fast sell in my book.

    Yes...your observation that this math makes almost everything unpurchasable is rather enlightening wouldn't you say?
    I believe a lot of 'investors' are now wishing they'd heard this earlier.

    --TZ

    ReplyDelete
  49. JOHN,

    Your response wasn't a challenge, I know.

    How about this to start:
    http://www.q1publishing.com/public/images/uploads/Housing%20Price%20to%20Rent%20-%2020100307.jpg

    Remember this is a national average. The bubble areas are still substantially higher (and that's also where most of the wealth destruction will continue).

    --TZ

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  50. The only stretched metric that I can see is that we are on day 18 so we are now in the timing band for a daily cycle low and maybe short term sentiment is probably getting a bit stretched.

    Other than that this C-wave probably has at least another $100+ dollars before it needs to take a more substantial rest or consolidation.

    I'm just watching the dollar. If it makes a swing low then maybe it's time for the gold daily cycle to correct. If the dollar drops below 80.86 then I would expect the dollar to tag 80 before anything pulls back.

    ReplyDelete
  51. I'm sure this won't come as a surprise to anyone, but my indicators are once again showing "strong market" status for the stock market.

    In runaway markets I ignore sell signals and take buys even if they are just small pullbacks. It's just an accident that I even get "strong market" signals, as my buy/sell parameters certainly aren't designed to show it.

    That's another way of saying this market is probably much stronger than I even suspect.

    ReplyDelete
  52. A MIAMI EXAMPLE:

    units for sale:
    http://zilbert.com/the_floridian/the_floridian.asp

    same building rentals:
    http://www.zilbert.com/the_floridian/the_floridian.asp?RNT=1

    focus on 2bdrms only (most common condo)

    Throwing out the lowest and highest 3 for sale the prices are: 400k-750k

    If you eyeball the rental prices for same building (exclude furnished) you get 2700-2800 (you can also look below at CLOSED rentals to see actual transactions).

    properties renting at 2800 are a value buy at $280,000. The units are selling roughly 2x rent.

    There are actually units on both lists:
    #1712: sell 580k, rent 2.8k ->2x
    #2801: sell 850k, rent 3.5k ->2.4x
    #1202: sell 400k, rent 3.5k ->1.1x (rent is too high; highest on list; something wrong here)

    Pick another one. An exercise for readers:

    ICON buy: http://zilbert.com/icon_south_beach/icon_south_beach.asp
    ICON rent: http://www.zilbert.com/icon_south_beach/icon_south_beach.asp?RNT=1

    The rentals (look at closed transactions too) are $5k or so. (2bdrms).

    The listing prices of same units is 900-1100k. Again roughly 2x.

    Remember that if you put 1mil in gold, you've made about 17% or so each year for last DECADE.

    These units, however, are priced at $1,000,000.
    The rent is $5k x 12 = $60k.
    Minus $1500 condo fee = $42k.
    Minus 1% property tax = $32k.
    Minus 1% maintain/misc = $22k/yr.

    So you MIGHT make 2.2% off these based on price/rent.

    --TZ

    ReplyDelete
  53. Hi TZ,

    Great insights on home prices and rents...thank you

    I've been wondering for a while now how to evaluate the price of a house...thank you for the Rent X 100 tip..

    what about 4-5 Bedroom family homes? It's hard to find the rent on those.. They're not really for rent as most ppl buy them directly...how would you know how much to pay for those?

    ReplyDelete
  54. A longer term price to rent chart
    http://4.bp.blogspot.com/_pMscxxELHEg/SMAGJbFYWKI/AAAAAAAADak/cQUwiM1ccV0/s1600-h/PriceRentNationalQ208.jpg

    1 is still where you want to be to start with good value

    --TZ

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  55. I'm still wondering what happened to Justin. Was he dead on arrival after that train hit him?

    ReplyDelete
  56. There is a huge difference between the replacement costs of housing units and their actual selling price in many parts of the country.

    Any increase in the price of commodities may not necessarily translate to an increase in the price of homes. This is because the price of homes is primarily determined by the availability of credit. Given the pressure on wages and chronic underemployment, the ability to service larger debt loads are going to be constrained.

    To put it in other words, there is no pricing power.

    This lack of pricing power is going to start haunting those firms which primarily have a domestic exposure. There input costs will now increase and the margins will get squeezed.

    ReplyDelete
  57. @ Aaron,

    Actually my words were a little misleading. I was looking at the charts and projecting the consequences of a continued run up from here. My thought being that if the rally continues we will be stretched and vulnerable to a more significant snap back, and I would like to see a sideways consolidation or a slight pull back at this point to allow weaker hands to let go now, and provide a firming prior to further gains.

    Of course, as I write this I realize that the PMs are a volatile sector and I'm just wishfully thinking.

    As far as missing the run, I fortunately am not in that camp. I have been in the PMs since early 2009, and currently have appx 70% of my portfolio in various PM related issues. I am firmly entrenched in the Old Turkey Camp.

    My musings simply illustrate the novelty (and anxiety) of riding a C-Wave in a bull, and how it is less easy than one may think. : )

    F

    ReplyDelete
  58. Justin got mushed by the G-Train, and he hasn't spoken since.

    ReplyDelete
  59. The guy freaking out over using Shalom Bernanke's real name (as if it's some kind of attack) is drawing more attention to the strange facts than he's trying to suppress. Good going.

    ReplyDelete
  60. aviat72:

    "replacement cost" is not a valid way (for the most part; i'm excluding exceptions) of measuring the value of something. It assumes that a final item is somehow worth EQUAL to or MORE than the components that went it. Numerous examples (like now) show this is often not the case.

    I can take a crap load of money, buy expensive carbon fiber components, engines, titanium, computers for CAD design, fiber optics, professional to put it together....and build the HIGHEST TECH airplane in the world (and most expensive).

    Upon use, we fine that my design is *unstable* and crashes one out of every ten flights. Nobody wants to fly in it, I can't make any money.

    The planes are worthless except for scrap. The REPLACEMENT COST to build them is ASTRONOMICAL.

    So...the replacement cost of something doesn't measure it's value. The value is only measured by what people are willing to pay to USE whatever an item is.

    The USE of a plane to FLY in it.
    The USE of real estate is to RENT it.

    The amount of money it took to MAKE it could be all over the map. (Of course the goal of capitalism is to only support ventures where the inputs are LESS valuable than the outputs -> thus you get PROFIT.) However with a manipulated financial system, currency, and interest rates as we have now this restriction is broken and numerous endeavors are undertaken where the inputs are DESTROYED. Housing is a massive example.)

    --TZ

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  61. Fubsy,

    Nobody said getting rich was gonna be easy, but it sure beats the alternative! I'm also having a struggle against myself to stay the course, but I've been rewarded since I subscribed which has kept me focused.

    ReplyDelete
  62. aviat72:

    Actually, I rephrase a bit. "Replacement cost" is NEVER a method of using to *value* something.

    It is only useful as a measure to determine if **YOU** should buy something that is available for sale, or MAKE ANOTHER ON YOUR OWN.

    Still...the results of MAKING another one on your own will STILL BE VALUED at the price justified by it's **USE** (ie...rent)

    --TZ

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  63. I thought condos in FL were going for about $20,000 now!

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  64. You little girls giggling amongst yourselves about the name "Shalom" are weak anti-semites. Tittering about how it reveals something about him -- really! -- but it's all perfectly innocent, honest, mom!

    You should at least be men and own up to what you are.

    ReplyDelete
  65. Gary: one alternative to your 1-2-3 scenario could be coil in SPX which broke to upside today- Since initial move is often reversed with a powerful move in the other direction, maybe a retest of 1040 coming?

    ReplyDelete
  66. Nick,
    The price action the last couple of days doesn't constitute a coil IMO.

    However we are reversing the coil from early August. It has taken longer than normal but it did revese as of today. Which should lead to a powerful move higher, probably to new highs.

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  67. Gary before we move to a new high in S&P will we likely see a pull back to the 1120s in the new couple days with the housing numbers tomorrow and unemployment claims on thursday?

    ReplyDelete
  68. We are due for a move into a half cycle low anytime, but if the dollar continues to drop I wouldn't look for the short term top in stocks until the dollar tags 80.

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  69. Calling a guy by his name, Shalom Bernanke, makes one an "anti-semite"?

    LMAO!

    Nobody said he was jewish, like every other member of the "Federal" Reserve, which is just a bunch of private banks. But now that you mention it, I'd say that is odd considering jews are just 2% of the US population.

    How can they be labeled anything, including "anti-semite", for discussing facts?

    You need a checkup, brother!

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  70. You're teaching a clinic on disingenuousness, brother. Getting a little ham-handed in your last post, tho.

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  71. Mista Hasbara, please don't beat me for being a Gentile. I trys my best, I do.

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  72. Hmmmm...

    http://www.zerohedge.com/article/silver-merely-levered-gold-play

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  73. Hey, I'm not the only one that calls Shalom Bernanke by his name! Hot off the press:

    http://www.zerohedge.com/article/welcome-chez-shalom-here-menu-tomorrows-fomc-lunch

    Imagine that.

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  74. GARY,

    SOS seems to work for GLD too.
    http://online.wsj.com/article/SB10001424052748703339304575240360171647790.html?mod=WSJ_latestheadlines

    called the exact peak in may before that crushing sellof that hurt a lot of people

    --TZ

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  75. your just so fcking smart gman, thats why you need subscriber money to keep feeding your losing ways,

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  76. I'm sure G-man makes far more $$$ from his ideas than his newsletter. They don't call him the G-Train for nothing! :)

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  77. TZ,
    There were actual quite a few SoS days in GLD leading up to the June top. One would have had a tough time trying to time the exact top relying only on the SOS numbers.

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  78. Gary,
    oil is still close to the lows while almost all the other commodities have rallied sharply since July. Any idea what's going to go on? What if inflation picks up but oil price stays low, then will the economy still be be destroyed by inflation?

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  79. " Anonymous said...
    your just so fcking smart gman, thats why you need subscriber money to keep feeding your losing ways,"
    September 20, 2010 6:40 PM

    Hey anon..and I can see why you would post under anon...if you were a subscriber, you would know what Gary's portfolio is made up of and you would know when he bought. Then you would realize that your statement makes no sense; AND you would be making money like most of us subs have and you wouldn't have that petty jealous attitude..but hey to each his own.

    @ Peter..you made a comment about the Canadian gov't now requiring 5% down for house purchases. I was chuckling to myself about this. I remember when the Gov't and banks first allowed only 5% down and they let you take the down payment from your RRSP. This was back in the late 80's or maybe it was early 90's. I remember it was part of Kim Campbells platform when she was running for the leadership of the Tories. I thought it was stupid then and its stupid now. Up until that time, most Canadians put about 20% or more down and you couldn't get a 40 year mortgage. 30 year mortgages in Canada went by the way side in the late 70's if memory serves me right. Canadians up until recently use to try and pay off their mortgage as fast as they could because interest is not tax deductible and loans are full recourse. Oh how times have changed. I actually was in Montreal in early August and there were lots of ads in the Journal du Montreal for 30, 35, and 40 year mortgages. Something tells me this isn't going to work out to well for some Canadians, especially in Toronto and Vancouver. probably to a lesser extent in Quebec, because well there Quebecois...haha Quebec Sa Faire eh..or is it Je me Souviens..lol..I expect the next slogan on the License plate will be..Quebec..La Pays du Chomage.. We'll see I guess.

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  80. I'm fairly confident when the dollar collapses that oil will break higher. It is already breaking out of the bull flag.

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  81. Hi Gary,

    What publications do you recommend for cycle analysis?

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  82. To clarify, which books / articles would you recommend for learning cycle analysis?

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  83. Off the top of my head I don't know any publications but I'm sure there are plenty. I'm sure a google search would turn up what you are looking for.

    If you are a subscriber I have a fairly detailed explanation of how I use cycles in the terminology document on the website.

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  84. Thanks. Keep up the great analysis.

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  85. Thanks Nat for responding to Anon 640.

    Saves me the trouble.

    I thought after a couple of shots to the head, zombies are supposed to die! But for some reason they keep getting up...

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  86. Now Brazil is trying weaken its currency...
    http://www.businessinsider.com/brazil-currency-intervention-2010-9

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  87. From the action in gold this morning, it appears that perhaps QE II (lite) is coming, and they are just buying room for the upside run, me thinks.
    I still think we take out 1300 soon.
    Aaron.

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  88. Don't let them fool you RA, they're easing all the time. The only difference is QE is when they report it to the masses. Criminals man the presses, and that's all we have to know.

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  89. Wow, stocks higher again. G-Train coming through!

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  90. Thanks for the tip anon 601. Looks like as PM investors we should be in good shape then :-)

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  91. Hello.

    Well, a tricky few days to navigate, and maybe a few more left to go, but it is becoming more and more obvious to me, and others, that this last little bit of 'irrational exuberance' from the POMO juiced markets will end in tears, and pretty soon.

    I see maybe, another 1-2% upside, then we start down again. I have added a few more puts and discovered VXX, which looks a steal at current levels.

    I posted a comparison yesterday between late 1930 and today, have a look here if you are interested...
    http://wealthadviseruk.blogspot.com/2010/09/2010-or-1930.html

    Complacency (by market participants, and those who think they are in control of events) is the chink in the armour that will bring things crashing back to earth in the next 4 to 5 weeks. I still think 25 to 30% from here.

    Every market tops out on good news, so I am hoping Bernanke is a little upbeat today maybe?

    I am pleased to see Gold doing well. Not for myself as I want to join the fun after the crash, so some sort of correction would be nice.

    Interesting time ahead though.
    Will China & Japan sort out there little spat? Will the Eurozone completely freeze over? Will China raise rates?

    Why does the world never learn?

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  92. Sound,
    You need three things to happen before an intermediate rally tops.

    Sentiment has to reach bullish extremes. Not there yet.

    We need to see large money flows out of the SPYDER's. Not there yet.

    And we must have a weekly swing high. Not there yet.

    You are too early. Be patient. Trying to pick a top in this cyclical bull market has cost many an impatient bear dearly and I suspect some have lost everything because they threw caution to the winds and leveraged heavily on the short side.

    BTW markets don't just all of a sudden come to their senses. That's not how human emotions work. Fundamentals are irrelevant. Markets only turn after emotions reach the exhaustion point.

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  93. Hi Gary.

    Which one is right do you think? Gold or oil?


    Or maybe both, as Gold is actually a good deflation hedge I believe.
    http://www.fool.com/investing/international/2009/02/27/why-gold-is-an-excellent-deflationary-hedge.aspx

    Anyway, here is USO chart, with equities about to catch up and then some ..(USO is down 25% since April 10).
    How far down will it go now, down 2% or so today? Oil and the dollar falling? Odd eh?

    http://www.screencast.com/users/Gary_UK/folders/Jing/media/396e45bc-8573-4940-b44a-10b779f0194e

    And Bernanke's language, wow, how doom laden, exactly as I have been predicting. So now th market has to stew for 5 weeks. It'll be a fun time!!

    ReplyDelete
  94. Oil is suffering from the same oversupply problem as real estate. Eventually a collaspsing dollar will push oil higher though.

    You are still making the same mistake though. Trying to pick a top is a losers game and one that will do tremendous damage to your account.

    Just be patient and wait for the signs of a top to appear before trying to fight the trend.

    ReplyDelete

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