New Highs Today

Fri, Apr 5, 2013 - 10:36am

No, not in gold or silver, of course. Nope, today saw a new high in the LSHI!

Of course, longtime Turdites know what the LSHI is but, if you need a refresher, you can find the definition on the Turdisms page.

Oh boy that was fun. Joe Kernen throws it to "Hampton Pearson at the Labor Department" and ole Hampton proceeds to drop a bomb on the Fort Lee crowd that left them speechless. He might as well have blasted some 14-megaton flatulence the way the room went silent in shock! The Shill looked like a deer in the headlights. Austen Goonsby went into SPIN overdrive and, of course, LIESman began to sweat profusely.

What does it all mean? The U.S. economy sucks and it ain't getting any better. Period. End of story.

And please, please, please...DO NOT BUY THIS GARBAGE ABOUT QE∞ ENDING. It can't and it won't.

And recall....and I say this with 100% certainty because I heard it with my own two ears...The Bernank said that:

  1. He might look at "slowing the asset purchases" when unemployment falls to 6.5%.
  2. He doesn't expect 6.5% unemployment until mid-2015, at the earliest.

And, regardless, it doesn't matter. QE∞ isn't about growth or jobs or anything economic. It's about providing a constant bid in the bond market so that rates stay at 2% or lower. Again...Period. End of story.

I could go into the specifics of the lousy data but why? You've probably read about it elsewhere and if you haven't, I can just give you this link. It pretty much tells you all you need to know:

So let's turn the discussion back to gold and silver. That they haven't exploded higher today is due to several factors, one that I'll show you below. Primarily, though, sentiment is lousy and momentum is all to the short side. Therefore, it's very difficult to turn things around in one day. IT WILL TURN. AND SOON. But it's always going to be unlikely that such a major shift can occur in one day. So, we wait. And we continue to buy at these deeply-discounted prices. And we add to our stacks.

Now check this out. This is outrageous! When the headlines hit at 8:30 EDT, gold prices immediately jumped as new orders hit and a few buy-stops were triggered. Then, while we were still between 8:30 and 8:31, gold sharply reversed and fell back by $14! There is only one way for this to have happened so quickly: A huge sell order was placed above the market BEFORE the news with the intent of capping any surprise rally and blunting the momentum. If you ever wanted direct evidence that the metals are manipulated and managed, there you have it. And sadly, it worked. Halting the rally at 1575 emboldened the shorts to drive it back down and now, as I type, gold is still just $1565 and silver is up a measly 19¢ and barely over $27.

So, here we sit. The metals should be screaming higher but there not. So what else is new? They should have been screaming higher since October. And though we've bounced a bit today, we are clearly still not out of the woods for a drop below $1525 and $26. Today's action helps and I suppose that The Washout is slightly less likely today than it was yesterday. But we must remain guarded and on the lookout.

The first thing gold needs to do is to hold these gains and close today back above $1560. It then needs to stay above $1560 next week. Still, though, it would be foolish to "call a bottom" before gold gets back above $1625. Silver, too. As you can see on the chart below, every time this year it has had a chance to form a bottom, it has failed. Now our first target is $28. Don't even think about getting excited/optimistic until that level is regained and, frankly, don't get confident that a bottom is in until price is back above $29.40. That's a long way from $27.

Anyway, the moral of the story remains the same: Just stay patient and keep adding to your stack. You are on the right side of this. The end of the Great Keynesian Experiment continues to unfold right before our eyes. Do not lose courage or be swayed by the day-to-day machinations of the Cartel-controlled "markets". They don't matter. All that matters is that you continue to add to your financial protection by the accumulation of physical precious metal. One more time...Period. End of story.


About the Author

turd [at] tfmetalsreport [dot] com ()


The Watchman
Apr 5, 2013 - 1:24pm
Apr 5, 2013 - 1:25pm


Lol! How cool is that?

Apr 5, 2013 - 1:28pm


Superb sign. Agreed. Still laughing.

Apr 5, 2013 - 1:29pm

@Strongsidejedi re: SS accounting . . .

I agree with your being outraged over a new CPI calc to lower SS benefits.

But, this is old-hat stuff. The hedonics being used now are a world of difference from what they were when Clinton was prez.

In essence, the CPI as used now represents about half what it did when Clinton was using his cigar as a dipping pole.

Apr 5, 2013 - 1:32pm
Apr 5, 2013 - 1:33pm

North Korea

I have a few South Korean friends and I frequently visit Seoul for business, all I can say is that most South Koreans are saying that these skirmishes are nothing new. I've visited the Panmunjon and the DMZ a few years ago and the tension and mutual dislike was quite noticeable, but if you look at the history, it's nothing new either.

Don't forget that North Korea is deeply impoverished and right now winter supplies are running low while the summer crops still needs to be harvested. A hungry People is a dangerous People so all this sable rattling by Kim Jung Un could be a deliberate ploy/circus to keep the North Korean People distracted. (basically a "bread and games/circuses" tactic to keep the people distracted, but then without the bread because there is no bread... )

Of course nobody can look inside the head of a lunatic in control of a totalitarian state, but if Kim Jung Un has any rational way of thinking he will know that a real war will not be to his advantage, unless he's completely blocked into a corner.

Apr 5, 2013 - 1:34pm

@Fulgerite re: the real dip . . .

"For me, such a Black Swan event will be the moment to buy the real dip. Of course one can never time these things perfectly"


You assume that there will be physical available to buy after such an event.

You trust quite a bit in a system that you say is ready to fail.

Do you think there is a decent chance that gold sales might be banned by governments? Or that sellers may decide to stop selling "til the dust clears?"

Anybody fool enough to take that sort of chance deserves what they will likely get--nothing.

Apr 5, 2013 - 1:34pm


so far I've heard very little counter arguments against my theories


Markets down hard today (Europe more than US, but still...) and Gold and Silver are moving very nicely in a RISK-OFF environment. In Yen it will be in all-time high territory again imminently. This divergence between the risk-on market and the risk OFF metals exactly disproves your core, repeated, notion. The metals may trade as risk-on at times but that is just the effect of algos in these comatose unregulated markets. Gold and Silver are now Go-To asset classes in a way that didn't used to be the case. Again,.... (sorry everyone else) in summer 2011 the FTSE and DOW crashed and the metals motored higher (down 16% vs up 18%, a 34% decoupling in barely one month. You are just talking to yourself mate. FWIW I think we are likely to see inflation caused by increasing monetary velocity (alongside the continued growth of cost-push) sooner rather than later due to all the catatonic offshore and onshore money holed up on deposit becoming skittish. The risk reward of just hanging about in the banking system has changed - it will take a few more months to sink in properly but a whole load of that cash is going to migrate somewhere and the metals will be primary beneficiaries. your latest brilliant idea of stepping back from the fray and creating a bargain basement environment, Turdville sadly isn't actually the marginal mover of markets (!) and even if we were a financial force to be reckoned with en masse it would be as buyers of physical. Stepping back ('or even shorting' I hear you say) - there are too many big buyers who would take up your falling knife - this is going to be a shock to you but .....drumroll.....that's how a market works! and your plan has me visualising a particularly dim and rat-arsed teenager considering the merits of diving into an empty swimming pool.

Apr 5, 2013 - 1:35pm
Apr 5, 2013 - 1:36pm

Prepare for QE5: The Road to

Prepare for QE5: The Road to Financial Purgatory

By Joshua Enomoto, Founder of and contributor

Like a well-tuned Swiss watch, the financial media behemoth has been squarely focused on the sudden rise of the equities sector, in particular, the record shattering move of the Dow Jones Industrial Average. Thursday, March 28th added yet another milestone to the American bull market, with the S&P 500 index closing at 1,569 points, a session-finishing number that hasn't been seen since...well, it hasn't been seen at all, such being the way of the record break. But another bull market has also emerged (...and no, I'm not talking about Japanese stocks...), one that rarely gets mentioned because of its illogical nature.

I am referring to the US dollar.

Before the cries of hyper-inflationary policies by the inept Federal Reserve start pouring forth, let's review the facts: while the Dow Jones rose over 16% from mid-November of 2012, the US dollar saw a lift of 5% in a two-month time frame between early February and late March of 2013. While that doesn't sound like a whole lot, in the currency market, where volatility is measured in fractions, five percent might as well be a "two-bagger." Over the last three years, the spread between the dollar's absolute peak and valley measured 22%; for the Dow Jones, the spread is nearly 52%. From a simple ratio perspective, the dollar has had every bit of an impressive bull market as the Dow or the S&P500.

But how can that be?

This is where things start to get a little strange, with the present market behavior perhaps acting as a harbinger of a deflationary cycle. First, let's consider the technical chart (6-month daily) for the US dollar index:

The current level of the index has retraced nearly 84% of the July 2012 peak, suggesting that this price action is no fluke. Something has energized the paper bulls, with a rising level of support ready to catch any downside risk at the upper 80's. Also, a six-month period where the faster 50-day moving average was below the 200 finally came to an end in late March 2013. Frankly, if we were discussing gold bullion, the gurus and experts would have jumped out of the woodwork with new calls of excessively dizzying heights, yet because this is merely a "worthless fiat currency," the fervor is nonexistent.

Still, such a dramatic rise is hard to ignore. Despite one's personal bias that would argue for the contrary, the actual data points to strength in the dollar.

But can such a scenario be possible given the quantitative easing programs of the Fed? Let's consider another technical chart for the Dow Jones (3-year daily chart):

The green line represents the price action of the dollar index, which starkly demonstrates the dichotomous relationship between the currency and the equities market. However, in late February, the inverse alignment came to an abrupt end, with the dollar and the Dow making near-term highs. Dollar strength is logical at this time, given the weakness in commodities and foreign currencies, particularly the Yen and Euro pairings with the greenback. But it does necessarily imply that equities are tremendous value plays, as each successive move higher in the stock market is accompanied by an equally higher moving currency: to put it bluntly, we have entered an arbitrage condition where hedging is no longer required.

But as with any pure arbitrage movement, such circumstances rarely sustain themselves: somewhere along this journey, a turning point will emerge. Back in late 2007, when the equity indexes were also breaking records prior to the financial collapse, the dollar index was roughly around the 82 level, but making its way sharply lower, at one point getting down to 71 in the spring of '08. Immediately after the collapse, the dollar index shot up over 14% to nearly hit the 90 mark, which was reflective of the mood at the time: undervalued equities, low cost of goods, and an extremely strong currency.

The conclusion? Either the equities or the dollar moves higher from here, but not both. Forecasting the correct path, however, would inevitably lead to long-drawn debates, as no politician has the heart or the conviction to lead the country down to a deflationary cycle. Such being the present psychology, it's hard to argue against the idea that the Federal Reserve is fully committed to prevent deflation and this could very well lead to QE5.

However, the Fed is running out of ways to inflate the currency without inflating real prices (balance sheet inflation vs. street inflation). Thus, any additional loosening programs could seriously undermine the stability of the financial system, further underscoring the importance of real assets. While limiting exposure to commodities may be wise during transitional cycles, an investor should be careful in cutting exposure altogether: with so much hanging on a delicate balance, even a small investment in tangible assets could pay off exponentially.

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