Passing The Time

I must admit that days like today are really tough. The PMs are not trading on any rational fundos. They are simply reacting to headlines and the algo gyrations they cause. Yuck.

As mentioned this morning, we should all be prepared to buy any significant dip that develops. IF you get a chance to buy gold close to $1600, consider yourself fortunate. IF gold were to fall through 1600 and approach the significant support near 1585, consider yourself blessed. Silver, on the other hand, is just no fun at all. I'm now firmly in the camp that considers the margin hikes of May to have been so significant that silver can't seem to muster the open interest necessary to sustain a consequential move to the upside. The rallies are real but they don't have the depth necessary to sustain their gains. Once the buying pressure is exhausted, JPM steps in and pushes it back down. Earlier this year, rallies in silver were two-steps-forward-and-one-step-back. Now, it's more like 1:1. We had a very nice run from $34 to $41 but $42 is beginning to look like a real stretch. At this point, a pullback to $38 looks more likely in the short term. IF, by the grace of God we do see $42 this week, I plan to unwind my December call spreads and move to the sideline for a while.

Wrapping up for today, here's some user-inspired content for you to chew on. First up, ScottJ recommended this video series to me last week. Though it appears to be about a year old, you'll likely find it interesting.

"RSP" sent me a note mentioning my "long-ago, seminal post" called "Preparing Accordingly". I thought I would reprint it below and add the music video that he suggested went right along with it. 

 

SUNDAY, DECEMBER 19, 2010

Preparing Accordingly

 
Lately, I spent a lot of time fashioning posts about the daily machinations of the gold and silver markets. I will, no doubt, continue this practice as it is a hobby/passion of mine. However, the subtitle of this blog refers to the end of The Great Keynesian Experiment and its implications so I feel I need to "get back to basics", so to speak, as it is the "prepare accordingly" part that we all need to practice.
images.jpeg

I found this image on Google and it seems to sum up my point of view. We are but children, at once hopeful and optimistic, yet watching our future drain away. The arcade coin drop is a metaphor I've used often in the past and I think it provides a decent visual. In the immortal words of Inigo Montoya: Let me explain. No, there is too much. Let me sum up.

Our "coin" was dropped by the great Texas slimeball politician, LBJ, when he created The Great Society in the 1960s. A new, expanded role of the US federal government was created and politicians learned that they could manipulate government largesse to their own political gain. In 1971, the coin began sinking into the funnel and spinning faster when republocrat President R. Milhous Nixon, realizing that the gold-sponsored money supply of the US could never grow at a pace sufficient to support this ever-expanding government, removed the US from the "gold standard" and the US dollar has been backed by nothing but the full faith and credit of the US government ever since.

Republocrat Jimmy Carter presided over the initial wave of stagflation brought upon by Nixon's decision. The "coin" kept dropping and circling faster and faster during his four years in office. In 1980, suddenly there was hope. Conservative Ronald Wilson Reagan was elected and through a policy of tax-cutting and higher interest rates, the conservative Reagan defied the laws of physics as the coin actually moved up the funnel and slowed. However, having succumbed to old age and senility, even Reagan suffered a "death-bed conversion" to Republocratism  and the coin began dropping again in 1986. Republocrat giant, G. H. Walker Bush took the reins of government in 1988 and, by 1992, our coin was spinning faster than ever and dropping at an alarming pace.

With the election of hick republocrat Billy Jeff Clinton in 1992, things began to get out of control. Soon, faced with a rapidly approaching end game, all republocrats in Congress and the Federal Reserve decided to go for broke. By massively inflating the US money supply, an illusion of prosperity took over, not just in the US but globally, too. This mirage held our collective imagination until the year 2000 when, suddenly, we began to realize that all was not well and that the coin was actually spinning faster and was much closer to the bottom than we'd thought.

"Good heavens. We can't have that!" exclaimed the new republocrat president Dubya Bush. With his partners in crime in Congress and the Federal Reserve, Little B reached into the funnel, grabbed the already speeding/dropping coin and actually gave it a push faster. By 2008, the coin was nearing the bottom of the funnel.

Just then, a dangerously under-qualified former street radical republocrat was elected president. President B'rock O'bottom is now presiding over the end of the game. At the end, the "coin" spins faster and faster until the bottom simply drops out. This is where we stand today. Are not events spinning faster and faster? Are your politicians and policymakers not making more rash and spurious decisions with each passing day? Are global leaders not positioning themselves for the next World Order?

The end of US hegemony is near and with it, the end of the US dollar as "world reserve currency". This catastrophe and all in entails could have been avoided with responsible leadership and an educated/involved populace. However, selfishly, we in the US decided it was best to pursue a plan where we foolishly thought our recklessness was beneficial. This attitude was best summarized by republocrat and Keynesian legend, John Connally, who, as the coin was dropped in 1973, told the world that "the dollar is our currency but it is your problem". Sadly, we allowed Mr. Connally to be prescient for almost 40 years but the world is about to turn the tables. Soon...very soon...the coin will finally reach the narrow end of the funnel and the bottom will simply drop out. What happens next will not be fun and games.

OK, that's it for now. Keep the faith and keep smiling. We're all in this together.  TF

179 Comments

Dr Durden's picture

Wanna know why silver can't

Wanna know why silver can't get above $40?

http://www.google.com/finance?client=ob&q=NYSE:JPM

LongGoldLongSilver's picture

They love to spend!

The love to spend our money! Only in the world of politics is an increase in debt considered a "spending cut."

http://www.economicfreefall.com/2011/08/how-to-spend-less-by-borrowing-more.html

silver foil hat's picture

If I were to hold "cash"

I'd rather do it in rolled coins....

at least the nickel and copper will be worth something.

If hyperinflation really takes off, I bet the quarter and dime (and half dollar) will actually represent their respective values.

Paper FRNs (actually cotton) will be worth only pennies to the dollar... even after cotton futures go up.

The penny is already worth nearly 3 cents (1982 and earlier.... if you can find a significant amount of them still circulating) and the 1982-2011 penny is almost worth 1 cent in zinc.

The nickel..... well that's already worth nearly 7 cents in nickel and copper.

Just wait... soon we will have aluminum cons, if there are coins at all.

Since the treasury actually produces coins (the FED produces the paper FRNs) watch Sotero issue an EO recalling all coins.

That's my prediction.

Shill's picture

The Social Security Cut Washington

The Social Security Cut Washington Does Not Want You to Understand

http://inthesetimes.com/article/11767/the_social_security_cut_washington_does_not_want_you_to_understand/

In response to your post above Silver Foil Hat

Is it Already Too Late for U.S. Coins?

http://www.numismaster.com/ta/numis/Article.jsp?ad=article&ArticleId=22598

hpx's picture

What Mike Maloney gets wrong....

.....is that he actually thinks someone will allow oil to go to $10. No matter how enormous the deflationary pressures become, Ben Bernanke can always counter it with more QE. Screw the fictional "money multiplier", does anyone think that the Bernank WON'T basically print physical cash and hand out if necessary? The man and the system is so vested in their neo-keynesian-monetarist bullcrap synthesis that stepping aside and letting deflation happen would be admitting that the entire system, their entire careers and life work has not only been worthless, but about as destructive as a major war.

Again, I ask you - where is this deflation going to come from? Balance sheet fraud is publicly accepted - so no bank goes under until it gets a cash flow problem. You can have a mega-bank with assets worth $0, as long as it takes in an equal amount of money that goes out, according to FASB its solvent! Just mark some dog-poo to unicorn valuations and voíla!

Debt-deflation can only happen when banks have to cover defaulting loans. They aren't doing it, they keep the loans and pretend they are worth face value. Besides, once QE3 gets rolling, the Bernank will probably buy every outstanding Treasury Bond, Note and Bill, followed by half the S&P500, and then moving on to any asset that isn't nailed down including wooden ponies.

Deflation? Where? When? How?

The deflation can always be solved with a decent dosis of hyperinflation. Thus, I think oil $1000 is more likely than oil $10. But then again, I'm just a mad-hatter.

GoldistheFuture's picture

Good Video to complement your videos!

Marcus's picture

What a trillion dollars looks like...

this is serious money...

http://usdebt.kleptocracy.us/

¤'s picture

Todays market swings

Whoever  (EE) was positioned on the other sides of all the swings today in all of the markets mad must have made a  killing.

That was some crazy action.  Looking at the Dow and other indexes. It almost looks like they are trying to get the market back to "zero"  or close to it so that it was mostly a neutral trading day by days end.

Tell me the markets are not steered to a conclusion most of the time or for vast stretches during the day. Crazy! 

DaddyO's picture

Mike Maloney can get off on tangents...

I've known Mike Maloney for years and have watched him slice an dice many people and organizations to ribbons. A lot of his shtick is to say outrageous and some what true statements to get a rise from his victims. Mike has a grasp of the overall facts of the great Keynesian ponzi scheme that few will ever have. I have put together several video conferences with Mike over the years and always marvel at his deep understanding of the difference between money and currency. If you happen to call currency, money with Mike in the room or on the phone, he will promptly correct you in a most unceremoniously harsh fashion.

Always great theater and well worth the time to watch...

DaddyO

Fleve's picture

Well now...

It's not as if we need a miracle to still see 42. If congress still screws up, which, it bears remembering, it sure is bound by convention to do, we could easily see a rapid rise.

On the other hand, I feel like I've again been taken in by the overall euphoria. Generally, its been my experience that when everyone is euphoric and calling for the next target up higher, I should sell rather than stick to it. It's easy to fall prey to euphoria and, I guess, quite common even here. Teaches me to be a bit more pessimistic during the upside in the future instead, as it's always a shame to have to come down from projections for a target up higher with, instead, projections for a possible bottom; and it sure wouldn't harm to sell higher rather than follow a price lower.

buzlightening's picture

Doom Central sewage go round

Global fiat debt based monetary system is one giant cesspool. All anyone is doing in the paper fiat system go round, outside of accumulating assets of monetary store of value while fiat has perceived value, is stacking up turd piles. In the end you can't polish a turd. It stinks and will always stink for what it is; paper ponzi fiat fraud.

I Wazere's picture

quoting from abcnews.go.com

The U.S. Mint in Philadelphia is a big, noisy, busy operation, capable of minting nearly 2 million presidential dollar coins daily. But most of those coins go into storage, never seeing the light of day. Costing 32 cents apiece to produce, these manganese brass dollars have proven unpopular with a public that prefers paper.

(...)

In their most recent annual report to Congress, the Federal Reserve says the coins are piling up so quickly they will need to spend $650,000 to build a new vault in Dallas to hold them. Shipping the coins to the new secure facility will cost an additional $3 million.

(,,,)

Meanwhile, the coins keep coming off the production lines, already more than a billion made and counting. The Fed's report estimates that they could have more than $2 billion in excess $1 coins by the time the program is expected to end five years from now.

http://abcnews.go.com/Politics/us-mint-wasting-money-making-money/story?id=14052997

VWBug5000's picture

@ Dr Durden

Wanna know why silver can't get above $40?

http://www.google.com/finance?client=ob&q=NYSE:JPM

Compare that to PSLV and it is like looking into a mirror. Eerie.

So It Goes's picture

Passing the time

Bill Fleckenstein wrote in his 7/26 daily rap:

"While it can easily be argued that many people who make a lot of money could pay more, you are not going to be able to balance the budget on the back of the top 5% of earners in this country, or any other small subset."

This is a most important observation and here is a bit of color for illustration.

I was talking to an older retired US Marine pilot who stated that he is very busy these days flying private planes and sailing private yachts down to South America. Apparently no customs are declared and these vehicles can be loaded with valuables including bullion.  He gets cash and a one way airline ticket back.

I take away two points.

1.  The big and smart money is ahead of any government plans.  They will preserve their wealth, will not be taxed to death, and do not have unending loyalty to the US.

2.  Even the little guys who used to have the moral compass to die for their country see the deceit and cheating of the government.  Now even they are willing to circumvent taxes and laws. The moral hazard is hitting Main Street and the fabric holding together our society is rapidly eroding.

It is going to get very messy.  :-(

Prepare for the worst now - keep in mind the big picture - keep stacking

woewa's picture

S&P Thin air money

They are already using thin air money to support SPX, easy to see. Esp. today. SPX & Dow just stopped at projected stops. What a surprise. Despite UST exploding. Surprise 2.

Helicopter Ben & friends just can't afford to lose this game. At least not to lose the game on stock markets. They will lose via PM, for sure. But paper price markets can be manipulated for a long time.

Nevertheless the ponzi end is near (2012).

Watch out:

Dr G's picture

That's all those

That's all those gubermint coins are good for. Frequent flier miles. Just watch out for those blackout days!

¤'s picture

Any Predictions? Pass or fail vote?

I'm going with the Tea Party actually making a difference and it doesn't pass.  Temporary market chaos soon thereafter throughout the evening. POSX coming back down to Earth.

Nothing would suprise me at this point.

matthenue's picture

o_0

the post was going so well.... and then high school musical turned up.

Iowegian's picture

New Reserve Currency?

Got Gold?

http://www.traderdannorcini.blogspot.com/

http://www.reuters.com/article/2011/08/01/us-russia-putin-usa-idUSTRE77052R20110801

Cannot blame these countries for hating the Dollar.  There can be no denying that the US is using its reserve currency status to live beyond its means via deficit spending with the rest of the world footing the bill. 

Gold will continue to regain its status as the ultimate "Reserve" as there is no other viable alternative.   Look for more such headlines going forward.

kingbee4's picture

Mike Maloney

Mike seems to contradict himself.  He explains how the value of the dollar will go to zero like Zimbabwe, but then says that commodities will deflate in value (he shows corn, oil, ect. dropping).  I don't see how you can have both?  Am I missing something in his rational?

bensgone's picture

We are defaulting on our national debt right now !!

These fools get up before the American people in their one minute speeches before congress and declare they have prevented a default by adding to the debt. The fact is we are defaulting on the debt by adding to it.  Such fools and idiots are they that believe this nonsense spouted by virtually every member of congress. Every unbacked fiat dollar printed is a default on the debt. QE1, 2, and three are massive defaults on the debt. Raising the debt limit on our national budget is a massive default on the debt.

The consequences of this massive default are:

1. Most savings that any American has accumulated is being robbed by rampant inflation

2. Most Social Security recipients will not soon be able to buy a hamburger with their monthly check and will retire in poverty if they have no other savings or income protected from the ravages of inflation.

3. Those paying into the system whether social security or tax will never receive the benefits of those payments in the form of a  program promising some future contractual consideration implied therein.

4. There will result from this insane folly a complete destruction of not only the dollar but this nations economy, as well as the standard of living that goes with it.

5. There is a huge risk we will lose what remains of our liberty and freedom.

So, the next time you hear some idiot say that congress has saved this nation from default on the debt by creating even more debt, just realize the true nature and depth of these liars and their deceit and/or abject ignorance of all things economic.

Such is the price we pay for accepting the Keynesian concept of money and debt.

Mudsharkbytes's picture

Someday All This Will Be Yours!

Elsewhere - in a similar vein:

GoldenTurds's picture

Mike Maloney question (great video)

I have a similar question.

If everything deflates, oil goes to 10....doesn't gold go to 400 and silver back to 10?

I guess at least oil, gold, silver will have a value and fiat will burn to keep us warm.

Dr G's picture

@DPH

I'll throw my hat into the ring for a "doesn't pass" in the House as well.

Especially since Biden just stated that the tea-partiers are "like terrorists". I'd love to see him get further enraged and spout off some more rhetoric that will come back to bite him in the rear (http://www.politico.com/news/stories/0811/60421.html).

buzlightening's picture

ROTFL

Mudsharkbytes =hilarious

Gibboslv's picture

HELLO, at long last!!

Hi, I'm a very long lurker on this site and feel as if its time to say hello formally..... So HELLO.  First of all let me thank our fearless leader "The Turd" I have witnessed all of his great calls and seen the crap he has had to endure when the unforeseen has happened, I mean FFS no one has a crystal ball..... Do they???  So Thank you TF for all of your hard work and effort you put into this site.  (You have come a hell of a long way since the early days of Along The Watchtower.... I do miss that blog BTW, yea i know same thing here but it's all grown up!! Anyway i was on another forum today and noticed a thread saying Silver is not money.  As usual all these technical guys come up with explanations of for and against and me in my somewhat drunken state came up with this.... Sorry for the UK Bias but I am from UK after all...........  Should the title of the thread not read "Silver is NOT fiat?" In this instance the OP would be correct. Silver has been money in the past, just because thePTB have robbed the people of it in the last 80 years or so it's not worth any less actually its worth more! Metals have and always will be money. ALL coins with any REAL value over the years have been taken away from us. Pre 1920 U.K. Silver coins .925 Pre 1946 Silver coins .500 Pre 1992 1p/2p Copper, all now made with cheap crap metal. Scrap value of £1 coin is 5p Scrap value of Pre 1992 2x2p is 8p ish.. Robbing us!! In the coming years we will see worthless fiat becoming even more worthless with high inflation, this is the last step in the desperate attempt to rob every person of their wealth. Be prepared!

ScottJ's picture

Spending Problem - Sleeping Problem?

“We have negotiated with terrorists,” an angry Doyle said, according to sources in the room. “This small group of terrorists have made it impossible to spend any money.”

...

Biden told Democratic lawmakers that the deal would take away the tea party’s “weapon of mass destruction” — the threat of a default on U.S. debt obligations.

 

Divide And Conquer -- Don't buy into the games

stoneeh's picture

Bob Chapman is a nut. -

Bob Chapman is a nut.

- Markus

¤'s picture

Welcome Gibboslv...

...to the TFMetals jungle. Crank it!

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