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Passing The Time

179
Mon, Aug 1, 2011 - 3:07pm

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.

Mike Maloney Schools Bankers on Deflation, Oil Price Crash, Gold and Silver (Part 1 of 2)
(PART 2!) Mike Maloney Schools Bankers on Deflation, Oil Price Crash, Gold and Silver

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.

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.

F**K The Fed - From the Award-Winning "The CONSPIRACY Project"
High School musical - We're all in this together

About the Author

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  179 Comments

¤ · Aug 2, 2011 - 12:41am

@bruinjoe93...your first supposition was way off base regarding TF imo. Don't mistake passion and frustration with emotional weakness and a inability to trade. If you've been following TF for awhile you would know what he's about and what he's not. I think I can say that comfortably.

Your second statement regarding silver consolidating is correct imo.

Nigel Black · Aug 2, 2011 - 12:42am

It is very sad (in my books) when the Prime Minister of Russia, Vladimir Putin, has become more credible than the President of the United States of America, Barack Obama. Very sad.

God help America. God help us all.

TheGoodDoctor maravich44 · Aug 2, 2011 - 12:46am

@maravich44 Yeah Hank wanted to help with the mortgages but changed his mind and just did cash injections "even though the banks didn't need the money". (probably the biggest farce of the whole TARP scandal) 234 trillion in derivatives on JPMorgan, Goldman Sachs, HSBC, Bank of America, and Citigroup books would show differently. Yes trillion. Globally there are 1.5 quadrillion in derivatives. But I digress.

Hank is enemy #1 in this whole deal as far as I am concerned. He protected Wall Street firms while burying enemy firms of Goldman Sachs. And then to write revisionist history in the form of books and movies. It sickens me to no end. No one held accountable, no one in jail. I actually feel bad for Madoff since he is basically a fall guy for Wall Street excesses. Not that I agree with what he did, just that other crimes far worse have not been punished.

There are connections with Hank and his time with Goldman Sachs to Chinese banks too that were shown some love during his tenure as Treasury Secretary.

Considering the audit to the Federal Reserve and 16 trillion in bailouts to foreign banks and corporations, well that is another can of worms completely. You just wonder when someone will go to jail, when some sort of justice will be served. Maybe the US will feel it can just default after all the bailouts they have given. I don't know but it is sickening.

¤ · Aug 2, 2011 - 12:48am

It ain't going to be pretty...

Paul B. Farrell Archives | Email alerts

Aug. 2, 2011, 12:01 a.m. EDT

Commodities casino makes losers of us all

Commentary: Don’t count on China to keep this bubble intact

https://www.marketwatch.com/story/commodities-casino-makes-losers-of-us-...

maravich44 TheGoodDoctor · Aug 2, 2011 - 12:49am

among thieves and bodies buried, It runs deep. Cool Runnings Bro.

Irish-Mic TruthPreeminent · Aug 2, 2011 - 12:50am

Right on, TruthPreeminent. Slow and steady, and then we get rollin'. BTW, I liked that closing gasp in the Maloney video about silver's "inverted head and shoulders."

To segue, on a related front. 

Without regard to the ultimate legislation about to be passed, what is not often discussed - though it is universally experienced by each of us here - is a significantly increased, and relevant, everyday discussion that necessarily invites comment from us in our every day lives about what we each have studied, know, believe, and can back up, in spades (on a bad day), every time, without fail. Though we typically make believers of a mere fraction of folks we meet, the recent, increased, daily chatter and kitchen banter is bound to grow our collective audience and, ultimately, spawn a grass roots swell. I think this is very positive. Indeed, I have recently noticed an increase in the number of acquaintances and friends who bring up (unsolicited) the subject of fiat, and PMs, having briefly discussed these issues with me before in the past. I try not to proselytize, or jeopardize friendships over these matters, except perhaps for a few dear friends whom I cannot bear to see lose everything for which they have worked so hard. In any event, what I'm ultimately trying to convey is I believe this broader discourse forced by our recent debt ceiling "compromise" is, at least in this respect, a good thing. Good luck and goodnight to all.

bbdgoco · Aug 2, 2011 - 12:55am

I'm not sure divine intervention will rescue us at this point. We seem to be on a collusion course with destiny.

How a legislative body of a few hundred can ignore simple facts that are apparent to 300 million people, ignore the wishes of those people and knowingly do what they know is wrong and will eventual harm us all is beyond comprehension.

terri5125 · Aug 2, 2011 - 12:58am

Larry-- time for you to write a book...you are that good!!

TheGoodDoctor mouser · Aug 2, 2011 - 12:58am

@mouser I was just suggesting that the hyperinflation could happen quickly because of the dollar being the world's reserve currency and the dumping of the dollar. And I meant in terms of how quick it could happen. I'm pretty sure we are agreeing on everything.

My thought is how much more brazen can the US be by exporting inflation to the world before the world decides that the US deserves a middle finger? Personally I think that is the MO. Inflate until the world thinks we are no longer worthy of being the world's reserve currency. Then fix it to a global standard, likely to be convertible from each local currency to trade globally. Probably based on a basked of currencies and commodities.

Certainly agree that if the global middle classes don't buy US that we will be on the island you suggest. The only part of my portfolio that is US based is about 20% geared toward large cap dividend paying global companies like Coke, Pepsi, Caterpillar, McD's, General Mills etc. Those companies that have a substantial amount of their business and growth overseas. Meaning 30% + or so.

Turdle GG · Aug 2, 2011 - 12:59am

My comments are in italics, FWIW

At its meeting today, the Board decided to leave the cash rate unchanged at 4.75 per cent.

The global economy is continuing its expansion, but the pace of growth slowed in the June quarter [​quite an understatement!frown]. The supply-chain disruptions from the Japanese earthquake and the dampening effects of high commodity prices on income and spending in major countries both contributed to the slowing. It is still not clear how persistent this slower growth will be [well, how do you think it is going to turn around?indecision]. The supply-chain disruptions are now gradually abating and commodity prices have softened of late, though they generally remain high. In China most indications suggest only a mild slowdown so far [you have your fingers crossed, don't you?blush].

The central scenario for the world economy over the next couple of years envisaged by most forecasters [most of whom have been wrong consistentlycrying] remains one of growth below the pace of 2010, but at or above long-term averages. Downside risks have increased, however, as concerns have grown over the outlook for the public finances of both Europe and the United States.

Australia's terms of trade are now at very high levels and national income has been growing strongly [please, oh, please, our Chinese masters, do not make any misstepsbroken heart]. Investment in the resources sector is picking up very strongly and some related service sectors are enjoying better than average conditions. But in other sectors, cautious behaviour by households and the high level of the exchange rate are having a noticeable dampening effect [how about the 150% private debt to GDP? Isn't that the real problem?angry]. The impetus from earlier Australian Government spending programs is now also abating, as had been intended. [so, what's next?frown]

The resumption of coal production continues, but a full recovery of flood-affected production now looks unlikely before early next year. Precautionary behaviour [aka survival tacticsyes] by households also looks likely to keep some areas of demand weaker in the near term than earlier expected. Overall, growth in real GDP through 2011 is now likely to be at about trend. Over the medium term, overall growth is still likely to be at trend or higher, unless the world economy deteriorates noticeably.

Growth in employment has moderated and the unemployment rate has been little changed, near 5 per cent, for some time now. Reports of skills shortages remain confined, at this point, to the resources and related sectors. After the significant decline in 2009, growth in wages has returned to rates seen prior to the downturn, though productivity growth remains weak.

Year-ended CPI inflation has been high, affected by the extreme weather events earlier in the year [it's only the weather, Bernanke's policies have nothing to do with it...laugh]. As these effects reverse over the next couple of quarters, CPI inflation should decline [not if Ben can help itwink]. But measures that give a better indication of the trend in inflation have begun to rise over the past six months, after declining for the previous two years. While they have, to date, remained consistent with the 2–3 per cent target on a year-ended basis, the Board remains concerned about the medium-term outlook for inflation.

It is appropriate under such circumstances for monetary policy to exert a degree of restraint. Most financial indicators suggest that it has been doing so, as a result of the Board's decisions last year. Credit growth has declined over recent months and is very subdued by historical standards [which period of history are you referring to, not the orgy of the last 10 years, i hopedevil], even with evidence of greater willingness to lend. Most asset prices, including housing prices, have also softened over recent months. The exchange rate is high. Each of these variables is affected by other factors as well, but together they point to financial conditions being tighter than normal.

At today's meeting, the Board considered whether the recent information warranted further policy tightening. On balance, the Board judged that it was prudent to maintain the current setting of monetary policy, particularly in view of the acute sense of uncertainty in global financial markets over recent weeks. In future meetings, the Board will continue to assess carefully the evolving outlook for growth and inflation.

[As usual, no mention of gold or sound money in generalenlightened]

TheGoodDoctor ¤ · Aug 2, 2011 - 1:06am

@DPH I think that is why the US is just going full steam ahead with the devaluation of the dollar. They don't give a shit. They don't care what Putin says and like you said they know that they will inflict pain along the way. The US is shooting themselves in the foot.

See my post about the BRIC's trading in their own currencies.

TheGoodDoctor mouser · Aug 2, 2011 - 1:11am

@mouser PS It is very telling that the BRICs only want to use their currencies to trade amongst themselves. To buy oil or commodities first the local currency must be converted to dollars and then the commodities or oil are purchased. So, now they all want to forgo that step and just trade amongst themselves. I see it as the first volley to rid the world of the dollar as the world's reserve currency.

maravich44 TheGoodDoctor · Aug 2, 2011 - 1:17am

: and The Chinese are anxious, aroused and able.

steeled question · Aug 2, 2011 - 2:00am

hat tip to you for that link 545 vs. 300,000,000 People -By Charlie Reese~ most excellent article!

gdnchg · Aug 2, 2011 - 2:11am

Marcus, weren't you the one screaming for everyone to go all in claiming that silver would hit triple digits soon. Recent price action does that support this.

Turd, I appreciate all you do, but didn't you say that silver would run to $42 this week?

Hey James Turk, still waiting for the explosion in PM prices this summer.....

what does this teach us? don't believe the hype.

Turdle GG · Aug 2, 2011 - 2:26am

Gold climbed $125 last month, which is 8%. Silver jumped 15%. I'll happily call that a nice little one month explosion. That was July. Just one month of the northern summer, which is not over yet.

Titus Andronicus Turdle GG · Aug 2, 2011 - 2:27am

Damn! You beat me!

gdnchg · Aug 2, 2011 - 2:33am

@gdnchg: I agree with you, I don't believe the hype. But, the premise to your statement is that one first had to have either heard or read the hype. That is the very first thing that has to happen. THEN, one must also recognize that such information is indeed hype. Gold and silver are up. That is a fact, not hype. Does that not then require critical thinking? Sure. So, listen to it all, read it all, then make intelligent decisions as to what seems to be hype vs. that which is useful. This forum is an excellent place to get both. The debt ceiling drama was a perfect example. No, the country was not going to implode, not yet anyway. Yes, the political drama was very shrill, but the stakes were (are) so high. So, what was learned? PM's took a hit, and will recover nicely just as we all knew. Debt has not magically disappeared; hence, QE3 to infinity will continue. PM's will continue their gradual, but volatile rise. Manipulation will never cease; we are, after all, humans, subject to emotions like greed and fear. So, my advice is to relax and enjoy the ride. Watch out for paper shenanigans, and be careful of margin. Otherwise, keep stacking and preparing.

Turdle GG · Aug 2, 2011 - 2:37am

i cheated by copying and pasting the numbers from James Turk's latest KWN piece...

Titus Andronicus gdnchg · Aug 2, 2011 - 2:37am

On July 1st, Gold was under $1500 and silver was under $34.

That is a gain of $125 (8%) and $5.50 (16%), respectively, during the seasonally worst month of the year!

The explosion is already here, and the summer has just begun.

I wonder what goes though your mind as you type such asininities?

snick · Aug 2, 2011 - 3:18am

found this reading the news this morning, thought you might be interested. "South Korea's central bank has confirmed it has made its first purchase of gold in 13 years."

https://www.bbc.co.uk/news/business-14368064

Kumanari · Aug 2, 2011 - 3:38am

It's called free will, I listened to Turd, Turk and others. I then chose to open a futures option account last week of June buying sept, dec, mar and may calls and a few puts, au and ag, because I don't understand "waiting" for breakouts and confirmations. I do understand stupidcheap premiums and sentiment. I no longer have ANY losses, luck chance I don't know. What I do know is that Turd and others have VALUE, it is up to you to decide to go with them or near them or counter. Summer ends Sept. 21st, so there is still TIME for this to blow up in your face. You get 3 min in the BLAMER"S BOX.

raulv GoldenTurds · Aug 2, 2011 - 3:49am

I believe Maloney might be talking about deflation, however we are going to experience hyperinflation.

I think Maloney is quite right, but in terms of dollars he might be a bit wrong -or tried to explain wrongfully.

My guess is that measured in GOLD, you might be able to buy Gas for less at the pump -this works because the price of gold will be way to high, and gasoline has to be sold in order for the industry to work. Stop thinking in dollar terms and start thinking in Gold Oz. terms, this will help you understand the analogy.

How many ounces of gold do you need to buy a car?

I just saw that Mercedes that's featured in the new transformers cgi orgasm fest from Michael Bay, according to that movie -so far for dumb facts- that car goes for 200k, this means you need 125 oz of gold to buy that car (at 1600 / oz) 

In the near future to buy the equivalent of that car, you will need maybe 50 oz of gold, however each oz of gold will be worth a lot more, lets say 5000 per oz. = 250,000 usd

raulv · Aug 2, 2011 - 4:39am

I was just analyzing the silver graph, and saw an inverse shoulder head shoulder pattern starting to form.

Analysis is from 1996 up until now, on a Monthly graph.

Taking our previous high of almost 50 / oz, that is our "arm", the shoulder goes to 32 in may, now we're almost 40, which will account for the end of the shoulder. 

What we're about to see now is the NECK (remember this is an inverse formation), so we should go to aprox 25, and as soon we get to 25 (head), we'll reverse to 42 (neck), then 35 (shoulder). 

After 35, we might look at silver in the 60s or more.

This is of course a wild guess, and I could be very wrong.

gdnchg Titus Andronicus · Aug 2, 2011 - 4:54am

you consider 8% and 16% an explosion? far cry from Turk's 50% explosion.

No titus, it's you who are stooooooooooooooooooopid.

stoneeh · Aug 2, 2011 - 5:52am

gdnchg, don't believe the hype - that's why you shouldn't have bought a year ago at 18$ when Turk and Sprott were calling for 50$ silver, eh? ;) My prediction if you must mention it was triple digits sometime this year, not necessarily on a year closing basis.. I still think we have a better than 50:50 shot at that.

Larry: "The silver margins were hiked once again last night"

They were not. Still at 21,6k initial, 16k maintenance. Silvergoldsilver Blog posted a screenshot of Interactive Brokers warning of a coming margin hike at the exchanges. We'll just have to see about that. But as of now, no margin increase in silver, and the last margin change in gold was actually a margin decrease.

- Markus with a k :)

Larry · Aug 2, 2011 - 7:19am

Yes, it was on SGS and we'll have to see about that. But if they didn't they sure wanted to. Here's the linkage:

https://silvergoldsilver.blogspot.com/2011/07/here-we-go-again-ib-raised-silver.html

Larry · Aug 2, 2011 - 7:25am

Aw shucks, thanks Maravich and Terri. There are a couple articles and books I’m in various stages of, but they’re non-fiction and time consuming to research for accurate detail.

Fiction kinda rolls out quicker, easier, is more fun and I suppose therapeutic too… a release from the constraints of accuracy. At least until I read it later, see all the typos and such and too late to edit online. Note to self: read and edit before clicking ‘save’ and calling it a night. And always check with Markus for accuracy on margin hikes. :)

Writing a non-fiction accounting (not even possible) of the shenanigans today with the Fed, Wall Street, Washington, Central Bank, Big Ag, Big Pharm, etc. and connecting the dots would surely be considered fiction to most of the population. I was tempted in 2008 but didn’t want to go there 24/7. Probably drive the writer mad too. Maybe that’s what happened to Armstrong? :)

Shill · Aug 2, 2011 - 7:28am

If we see silver @ $25 I will buy you a yellow hat. Besides if it did go to $25 ( no fundamental reason why it should ) considering all the money printing going on, many and not just us here in America would buy it by the truck load. Charts are nice tools and I use them myself, but nothing is as it seems in these markets, take yesterday as a prime example of how quick patterns can change, nothing is written in stone.

Be well

PS: This would also imply a stronger dollar...not going to happen.

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