World Of Wallstreet

Gold Stock Strategist Index (GSSX) Up 40.6% Year-To-Date

This index, created by the Gold Stock Strategist web site, is the closest of any index to the stocks I cover. Click here for the full article. But the picture that follows gets the message across. The Gold Stock Strategist has not been posting frequently of late, but when he does its worth listening to.

MontyHigh, www.worldofwallstreet.us

Gold: Pre-FOMC Takedown

Ok, this (price action in purple) is what persuades me that the Gold Antitrust Association (GATA) is right and that the powers that be are suppressing the price of gold.

I just got a fairly big chunk of dry powder and I expect I'll be putting a sizable (for me) long position in gold futures prior to the FED Open Market Committee news release which comes out at 2:15 today (provided another takedown occurs prior to then).

MontyHigh

Chinese Gold Buying: A Dialog With Inca Kola's Otto Rock

Inca Kola's Otto Rock shares his perspective on Chinese gold buying (click here). My summary of his thoughts are: its not that big a deal and it clearly demonstrates how the gold investing world is filled with less than useless "pumpers" who shamelessly seek attention by seizing on any idea (whether consistent with earlier pronouncements or not) to back the idea that gold is going to the moon.

Editor's Note: That kind of telling people what they want to hear to get attention perfectly fits the bill of the false prophets which Jeremiah and other bible prophets rail against.

In general, I agree with his perspective. And as usual, Otto's thinking  got me going. Here's the reply I left him (with some revisions):
"I like your post because it brings out the data and tries to put it in perspective. I also really admire your BS detector.

I agree that the supply / demand shift (from Chinese buying) is not that significant (although it is bullish). But I think the psychological factors are what are important.

From your data 81 tonnes is about 3% of mining supply. When the Magellan Mine in Australia closed the world lost 3% of mined lead (pb) supply and the price of pb more than doubled.

So a 3% swing for a normal commodity is a big deal if the demand is inelastic. Here's where your discussion of gold being different is important.

Because of the huge above ground inventory, I agree that a 3% swing in mine supply isn't as important for gold as it is for other commodities.

Still it helps, along with the falling mine supply every where else except China.

But what really counts is the pschological factors and whether someone holding that inventory will want to let go.

I think the psychology is 'if the Chinese (who are pretty smart) are diversifying into gold more then maybe I (a country, an institution or a private investor) should diversify into gold more thus increasing investor demand'.

Finally, the fact that China is buying as much gold as it can without sending the price "to da moon, Alice, to the moon", provides protection against IMF and central bank dumping. I think we can count on the Chinese, with their trillions of rapidly being diluted dollars, to mop up as much as anyone is willing to dump as real protection against a price collapse.

This cuts both ways as, the Asians aren't momentum investors (I'm told) and only buy when the price is low. So, in general I think Chinese buying is bullish but will not lead to any kind of parabolic, to the moon scenario, and would tend to dampen any such move.

So, its the psychological factors that are important here.

Hope this rambling adds a little light and some new ideas."

Overall, I consider the Chinese buying to be fundamentally, long-term, a bullish thing, especially if you are investing in gold in a way where you make money with steady gold prices rather than requiring large upward moves. That's what I'm doing with Jr gold mining producers and near producers.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Bob Hoye's Current Intermediate Outlook

Best bit of straight-ahead analysis I've seen lately.

http://www.321gold.com/editorials/hoye/hoye042509.html

I would summarize it as:

• Base metals - seasonally bearish.
• Gold - bullish.
• General Markets - bearish.
• Interest Rates And Credit Spreads - I don't get it.
• USD - bullish as "distress returns".
• Global Warming - bearish on missing sunspots.

MontyHigh, www.worldofwallstreet.us

Noteworthy Charts 4/25/2009

I know that everybody and their brother has blogs with technical analysis. I do this primarily so that I actually pay attention to what the charts are telling me. I hope you, dear reader, find some value here. I think a couple of them are reasonably unusual and informative.

Two weeks ago the gold chart was looking pretty bearish. Here were the bearish factors I saw:

• Double-Top - reasonably well formed with the tops in Mar 08 and Feb 09. This bearish factor is still in place.
• 50 day moving average breakdown.
• 61.8% fibonacci breakdown (where the fibonacci high of Mar 08 and the low of Nov 08).
• Trendline breakdown.
• Psychologically important $900 round number breakdown.
• RSI turns down from 50 moving towards, but not beyond the 30 oversold level. 
• Break down of support that looked like a ill-formed head and shoulders pattern.

The fundamentals improved a little over their already very strong situation (monetary growth, negative real interest rates, etc.) with:

• The return of Indian buying with the price of gold under $900. This puts a floor under the price of gold.
• The unveiling of ongoing Chinese buying and the movement of that bought gold into their monetary reserves (see previous post).

The technical situation has also improved with:

• A double-bounce off the 50% fibonnacci and 200 day moving average - the results of a bounce off the 200 day moving average has been very bullish for gold over the last few years (check for yourself). The double bounce also indicates a double-bottom. If the double-bottoms were further apart they would be more significant. I think this double-bounce is based on the fundamental fact that Indian buying kicks with gold under $900.
• A jump back above the psychologically important $900 value.
• A jump back above the 68% fibonacci number targetting a retest of the all time high of $1034.
• Bullish MACD crossover.

I know that some pretty respected commentators (Jeffrey Christian in Puplava's Financial Sense podcast today, David Morgan and others) are short-term bearish on the price of gold, but I'm somewhat relieved and am planning on holding at this point.

Large-cap gold mining stocks (as seen in the $HUI) look better with 50 day and 200 day moving average crossovers and with the RSI moving above 50 and with the $HUI forming a higher low.

The $HUI:$GOLD ratio chart shows the relative strength of large-cap gold mining stocks compared to the price of gold. It looks to me that the performance of gold mining stocks relative to gold itself bottomed last November and is reverting to historical levels. Its nice to see that trend line hold and the 200 day moving average cross over. At this point, I see, based on the last few years that commodities and financial markets have been strongly trending and that the 200 day moving average has been pretty good at capturing those trends. I expect, given the huge moves made recently that the next set of moves will also be large and that this trending factor will continue. As such, I have been paying more attention to 200 day moving average crossovers.

Here we have a look at the Dow Jones Industrial Average ($INDU) comparing the 2000 Internet Bubble crash with the 2008 Housing Bubble Crash. The S&P 500 chart looks very similar. Would be interesting to look at this in real (inflation adjusted) dollars, but I don't know how to do that. Any way, here's some observations:

• The 08 crash (so far) is worse than the 00 crash (at least for $INDU).
• The 00 bottom was shown to be in when there was a downturn that made a lower low. It occurred around 4.5 months after the lowest bottom. We have yet to see any kind of a higher bottom from the 08 crash, much less anything that far from the Mar 09 low.
• My conclusion is that the bottom is probably not in. 
• NOTE: The volume bars (coming in from the right) show that there are a tonne of people who will heave a sigh of relief at not being losers and sell their stocks if the DJIA makes it between 10,500 and 11,000 anytime soon. If we actually get there it would be a good place to go short.

Silver looks pretty good having broken back above the 200 day moving average and the 61.8% fibonnacci line. Its also at a critical point and, if it can get above the 50 day moving average (and thus above that trend line) it will look very strong to retest that $14.5 recent high.

The USD, short-term, looks like its in trouble and a down day Monday would probably confirm it. Here's what's bearish:

• Popped over the 50 day moving average and immediately broke back down through it.
• Tested that 61.8% fibonacci number and immediately crashed down through the 50% and 38.1% fibonacci number. This targets the recent low just below 83.
• Broke through that trend line and closed just below it.

It seems likely to me that if the USD closes lower on Monday that it will go all the way below 83 which, in the longer term charts, would signal and even lower fall.

Currency markets are supposed to be the most driven by technicals of any of the markets so we could see a significant down-turn in the $USD. This has classically been bullish for precious metals.

30 Year US Treasury interest rates are taking an ominous turn upward breaking out above recent highs and the 200 day moving average. If this continues (or worse yet accelerates) its bad for lots of things:

• The US Dollar, as who is going to buy long-term US treasury bonds when rising interest rates cut their value. Argentina's 2001 currency collapse was preceded by rising interest rates.
• The US government deficit as rising interest rates mean higher payments on existing debts.
• Any kind of housing or commercial real-estate as a rising 30 year treasury pushes mortgage rates higher.
• The overall economy as rising interest rates slow down economic activity.

Copper is at a strategic point having completed its first down week in quite a while. It bounced off the psychologically important $2.25 level (having been pretty overbought as seen by the RSI), bounced right off that 200 day moving average and is clinging to that psychologically important $2.00 level. Another couple of closes below $2.00 could be bad.

Fundamentally, I see short term copper being strong because the LME inventory levels continue to fall. On the other hand, just about every existing copper mine can stay open at $2.00 copper. So long term, I just don't see copper staying above $2.00 until the global economy picks back up. I just don't see how the price can stay at a price that maintains supply when demand has fallen so much. We'll see.

Well, that's just the indices and the commodities. I may post a set of charts on individual stocks tomorrow.

MontyHigh, www.worldofwallstreet.us

In Case You've Been Living Under A Rock: China Announced It Has Been Buying Gold

and has added them to their monetary reserves. This announcement came out yesterday. This seems like a step towards making their currency a global reserve currency (like the US dollar and, to a lesser extent, the Euro).

http://jessescrossroadscafe.blogspot.com/2009/04/china-admits-to-significantly-building.html

Its clear that this is bullish for gold, because China has a tonne of US dollars ($2 Trillion?) that it wishes were invested in something that will hold its value. They would also like to increase the stature of the Yuan and backing it (at least partially) with gold serves this purpose.

This means, as I see it, that they are buying and will continue to buy gold. Should the IMF (or some central bank) dump gold on the market, China will be happy to buy it all. That puts a big floor under the price of gold.

But, there's another way of looking at this. A very successful investing strategy over the last few years has been to invest in resource companies that produce things that China buys. This has included miners (iron ore, coal, copper, zinc, lead, platinum, etc.), oil, fertilizer (e.g. Potash Corp), etc. Now we find out that this also includes gold miners. It seems likely that, unlike these other resources that have taken quite a hit due to falling demand, the Chinese are likely to continue to accumulate gold.

So, again, we have a big floor under the price of gold.

Overall, this reinforces my investing strategy which is to invest in resource stocks which are set to make a tonne of money at current resource prices when the outlook for their resource is bullish. With this strategy, I don't need the resource to go up in price, I just need it to stay relatively close to its current price. If that happens, the stocks should go up as they benefit from those big earnings.

Right now, I'm in Jr producing gold miners and this floor under the price of gold serves to protect that investment and increase the probability that they will continue to "print money".

MontyHigh, www.worldofwallstreet.us

Minefinders (MFL.TO / MFN): Want More Than Just The Spin?

I've covered Minefinders quite a bit here, primarily lately as a reference for comparing valuations with other Junior gold producers.

I just read the Otto Rock (of Inca Kola News) No BS report and it opened my eyes quite a bit. It only costs $10. If you've been following Minefinders and have been tracking what various commentators (e.g. Jim Puplava of Financial Sense and John Doody of Gold-Stock Analyst) were saying about the protests that slowed up the mine opening, you'll learn quite a bit (about both Minefinders and those commentators).

Here's the link to Otto's No BS site: http://www.incakolanews.blogspot.com/2008/09/ottos-nobs-bespoke-analysis-service.html

MontyHigh

P.S., World Of Wallstreet is strictly an educational project and I get no financial benefits from this recommendation.

Think The Consumer Is About To Spend More?

Consumer spending is the key to economic growth in the USA (with consumer spending at 70% of GDP). If the recession is going to bottom, the consumer will have to increase spending. What does this chart (from trends.google.com) tell you about the outlook for increasing consumer spending?

MontyHigh, www.worldofwallstreet.us

Off Topic: Karl Denninger Inspired Bumper Sticker

I'm planning on printing up a bunch of these and will let you know how to get one when I have them in-hand. It will be a removable bumper sticker so that it shouldn't permanently damage your paint.

MontyHigh

FWIW: What I've Been Doing And What I'm Thinking

Well, its pretty clear that:

1. I missed a pretty big pop in the general markets and in copper stocks that began around my birthday in early march.
2. That I missed a good chance to trade out of precious metal stocks around the time David Morgan suggested doing so.
3. New Guinea Gold Corp (NGG.V) is right up there with Golden Star Resources as a stock that has deeply disappointed its stockholders including me. I sold the rest of my holding yesterday after they announced dismal Q1 production from their starter mine (bringing into question their solvency once again) and announcing, as I read it, that they don't really know what is wrong. 

For what its worth, I got a big enough pop early in Q1 that my brokerage accounts are up 16% since the start of the year, which is not bad at all.

So, what am I doing? Well some things haven't changed:

• I'm diversified in that I have a quite lucrative, seemingly secure day-job and that I hold a paid-off house that is still worth a couple years pre-tax wages of the above lucrative day-job. 
• I'm still almost entirely investing in Jr producing gold mining stocks.

When I look at the gold situation I see:

• The technicals look bad short-term (but are strong long-term).
• Sentiment is bad short-term as the general sentiment is growing that the worst is behind us with the global recession reducing the attractiveness of the safety trade.
• The fundamentals are still strong as Indian buying is kicking in to support the price of gold and as the global recession has not yet, in my view gotten close to the bottom. Finally, central banks are printing a bunch of money that I think will show up in inflation. I expect the inflation to really show up right about the time the year-over-year energy prices stop falling (late 2009). 
• The interventionals are short-term improving (as there is no immediate threat of a gold-break out triggering a loss in confidence in the fiat-financial system) but have not noticeably changed long-term with the "no change we can believe in" Clinton-retreads in control of Obama's economic policy.

Right now I'm reading "Ahead Of The Curve", by Ellis. Its a book about economic forecasting. The guy makes the following points (going from memory):

• Consumer spending is roughly 70% of the USA economy and thus drives the USA economy. 
• Whenever you see any kind of economic number you need to look at the change in the number year-over-year to eliminate noise (and, in my view, spinning in the form of seasonal adjustments).
• The quarterly GDP numbers Personal Consumption Expenditures (PCE) is the key leading indicator for the USA economy. It has been plunging and year-over-year is negative (very rare) and below anything on the chart. This indicates that the worst for the economy is not over.

In addition, I believe the banking profits (which are what has been driving the stock market recovery) are bogus as the latest accounting rules changes allow the banks to hide their losses. Further more, house prices are continuing to fall hard with a build up in a new class of mortgage resets coming this fall and lasting for more than a year. That's bad for banks and bad for consumer spending.

So, I'm planning on going with the long-term outlook and sticking with my gold positions (since they are so illiquid) at least as long as the Indian buying continues and will revisit this decision should the gold 200-day moving average get punctured.

By the way, I'm short a copper future with an entry at $2.174 and a stop at $2.25 and a target of $2.01. Will exit early if the LME inventory levels don't fall next week.

MontyHigh, www.worldofwallstreet.us

Ancient Wisdom: "... The Borrower Becomes The Lender's Slave"

That's the saying (from about 3000 years ago) that I keep thinking about. It kept me from doing what seemed like a good trade: "Mortgage house on a 30 fixed 4.3% rate and invest the money".

Here's another bit of ancient wisdom: "Owe nothing to anyone except to love one another", the Apostle Paul, circa 58 AD.

MontyHigh

"Several Important Questions": Reader Question And Answer

I'm honored to have a reader leave a comment with a bunch of questions. Here's the questions (italics) with my responses in bold.

Hello,

I have several important questions for you:

1. Do you believe that gold stocks will tank in May this year? by that i mean that you must sell all your gold stocks because the gold price in May, June, July and August will decline immense?

A: Well, I'm really honored to have you ask me these questions. Anyone listening to me should consider that I'm just a software engineer who has been trying hard to figure out this investing thing. In the year leading up to July 2007 I made 3 million$ in Jr base metal mining stocks (nearly a triple) which has subsequently evaporated from holding too long and then moving to Jr gold producers as a safe have (which turned out to not be safe). So, I tend to go with what I believe in "all out" which results in very high volatility. I'm willing to take these risks because I consider myself diversified by having a lucrative, fairly secure day-job and by having a substantial, paid-off house. 

So, firstly, you don't want to invest like me. You really need to form your own convictions and take responsibility for your own investment decisions.

You ask if I think gold stocks will tank in May this year. My answer is: I really don't know, but the stocks I hold should be able to print money if gold holds above $800. I expect to dump if I reach the conclusion that gold looks like it will drop below $800. I think the basic fundamentals for gold are really strong, with quantitative easing eventually leading to significant inflation and with big chances of other investments going to zero in the mean time. Finally, I like the fact that Asian buying (India, Vietnam, China) seems like its beginning to kick in and support a gold price of $880. Still, there's definitely a chance of a breakdown and I'm not going down with the ship, so I'm watching really, really carefully.  

2. I hear everywhere that when inflation kicks in gold stocks will be worthless because the capital cost of gold mining will be huge and therefore the profits of these gold miners will be minimal.

Hard to know what will happen when inflation kicks in, but at $800 gold my gold mining Jrs should be able to print money. I think inflation drives inflation hedges like gold faster than gold mining costs (chief of which is salaries, secondarily crude oil). Anyway, look at Inca Kola's piece on gold mining vs gold (click here). His clear conclusion is that mining stocks are leveraged to the price of gold, so a rising price of gold (even if triggered by inflation) should be really good for the stocks I'm holding. 

3. They say that there is now deflation, accroding to Jay Taylor gold stocks do extremely well in a deflationary environment. When will this deflationary influence end in the gold stock market.

I've heard Jay Taylor on gold stocks and deflation and the only data point I've seen is the Homestake Mining stock chart. That's just a data point. Homestake had a huge find that was barely economic at the start of the depression and that benefitted from falling mining prices. I consider it to be just a data point. But... my Jr mining stocks should be able to print money at $800 gold, so I'm holding as long as that seems like a good bet.

But really, you ask "when will deflation... end". That's the five dollar question that nobody really knows the answer to. My plan is to hold stocks that are making a tonne of money at current gold prices and to bail should the price of gold soften "too much".

4. Is it smart to sell your gold stocks end of April and buy back these same gold stocks in May, June, July and August because prices of these stocks will be low and cheap again.

Hard to say, but the stocks I'm holding are very illiquid and I expect to take a 5 to 10% hit every time I trade in and out, so I try not to do that. I'm really watching the gold chart carefully and if I think support has broken, I'm bailing and I don't know what I'll do next.

Beneath i have some gold stocks of which i am thinking to take also a position, i hope you can advice which stocks you think are worth taking a position in.

1. Pediment Exploration, PEZ
2. Castle Gold, CSG - Got a bunch of this and I like it.
3. Alexis Minerals, AMC
4. Allied Nevada Gold, ANV
5. Starcore International Mines, SAM - Risky play. They have a crappy, marginal mine and have had trouble getting it profitable. They are not big enough that they will ever be taken over. I recall some cases where it seemed to me that management cared more about themselves than stockholders.
6. Romarco Minerals, R
7. Hawthorne Gold, HGC
8. Sangold, SGR - Great rocks. Who knows how many oz though? Everybody and their brother is following it and is in already. Plus, have you visited the stockhouse board? What a swamp pit! I have stayed away (when I could have made money) because I just don't see how I have an edge. With this one, I woulda, coulda, shoulda.
9. New Guinea Gold, NGG - Terribly undervalued if they can get their starter mine working, but they keeping failing to do so. I've trimmed my holdings down to where I don't really mind if they go to zero. Production results for Q1 are due this week. If they are at 3500 oz or higher for the quarter then my confidence rises some. 
10. AuEx Ventures, XAU
11. Animas Resources, ANI
12. Vista Gold, VGZ
13. Wesdome Gold, WDO
14. Eastmain resources, ER
15. Clifton Star, CFO
16. Canplats, CPQ
17. Premier Gold, PG
18. Rubicon Minerals, RMX
19. Andean Resources, AND
20. Lydian International, LYD
21. PDX Resources, PLG

Don't know anything about the rest of these. Other gold stocks I'm long on include: Gold Resource Corp, Dynasty Metals and Mining, Semafo, Troy Resources, Oceana Gold Corporation, La Mancha Resources and CGA Mining. I also hold some Impact Silver just because I really admire their management.

I want to thank you in advance.

I'm honored to have you ask my opinion, but one thing I realized about 5 years ago: Nobody cares about your money the way you do. I made a decision to take responsibility for my own investing decisions.

I sincerely would like your opinions.

Best of luck Ruud

I'll use this post as an excuse to put up my gold Jr fundamentals chart. The first chart is the stocks that I consider reference stocks to compare the others with (black), the second chart is my "less risky" favorites (blue, which are all probably too risky for a typical investor), followed by my "risky" favorites (green), followed by others that I've done in-depth due-diligence upon, but do not currently have large holdings of (dark red). All estimates are for 2010 and the price to operating cash flow is based on $800 gold.

Best wishes,

MontyHigh, www.worldofwallstreet.us 

Off Topic: My First Encounter With The Supernatual

Author's note: I wrote this around 30 years ago about an event that took place around 35 years ago. It remains the most important day of my life.

My mother sat me down. "Doug, your farther and I are getting a divorce."  I was an upper middle class teenager, who had really everything he wanted, but wasn't happy.  These words were the camel that broke the straw's back. I had no idea they were even having troubles.

I told my only real friend. He was so freaked out he literally just walked away.  I phoned my girlfriend incoherently pleading for help.  She came over with this guy who was always making moves on her.  I told her to get lost. My brother's druggie friends hanging out in the basement wanted to help, "Here, smoke this". I knew that was no solution.

I had nowhere to turn. I ran out of the house and ran and ran till exhausted and flopped down next to the pavement. These same druggies had just discovered something new I couldn't accept, "all you have to do is believe that Jesus died for your sins, and rose from the dead and you're going to heaven". I didn't believe in anything, certainly not a heaven, but I thought that religion said you had to be good to get there.

I had nowhere to turn and nothing to lose. "Oh God", I cried, "if you're real, Jesus, if you're real, help me through this night". That is when it happenned, my first encounter. Out of nowhere and immediatly, I was bathed with this strange peace. I could physically feel it right after being emotionally clubbed with a two by four. It was not from within, I could feel the love of God pouring over me. I knew that Jesus was real. I knew, even though still hurt, that I would be all right.

Although I never before believed that there was anything out there, no God, no life after death, since that night I have been from my heart sure that Jesus really is the Son of God and that by believing in Him I would go to heaven.

I didn't know it at the time, but in the days that followed it became clear that Jesus was irreversibly transforming my life. Before, I just plain didn't like almost all people. All I really cared about was myself. Days later I would walk down the street from within there was a warmth, an affection for everyone I saw and met.

I discovered Jesus said, "It is more blessed (happier) to give than to receive". I experienced this joy as more of my life became devoted to helping others. I discovered that I could communicate with God by talking to Him and he would answer through the Bible, daily experiences and other believers. I experience the supernatural daily as I and other believers are changed to be more like Jesus. That strange peace, though not always as overwhelming, is yet with me.

Jesus said, "if anyone is thirsty let him come to me and drink. He who believes in me, out of his heart will flow rivers of living water". My life with Jesus is the best thing I've found. I have written its start, not to sell or persuade, but as honestly as I could, communicating what to me really matters. Millions of others have had supernatural encounters with Jesus. Perhaps you could too. Start by asking him to show you that he's real or by reading his story in the New Testament or by contacting me...

MontyHigh

Troy Resources Buys The Argentine Casposo Project: How Much Is An Exploration Oz Of Gold Worth?

Just a data point. Troy Resources (TRY.TO), a company that specializes in profitably opening and operating smallish gold mines, recently bought the Casposo project putting a solid project for its next mine into its project pipeline.

The project seems kind of small to me and seem to have good grades given that it is open mostly open pittable oz. The lack of any significant "inferred oz" means to me that there is no exploration upside. This is perfect for Troy Resources.

This is of interest to anyone investing in Jr Gold Explorers as it provides a data point for valuing exploration projects. The table below provides the key facts. I remember the data point simply as $50 / measured and indicated oz and $60 / proven and probable oz.

MontyHigh

TIC Data Vs Debt Seems Important: Is it?

http://jsmineset.com/index.php/2009/04/10/jims-mailbox-120/

 

The graphs say, if I get it right, that foreigners are no longer funding USA debt. Seems like a prelude to a currency collapse or hyperinflation, but I'm not that expert on this. 

 

It seems important. Is it?

 

MontyHigh

"economy showing 'glimmers of hope'": They Only Lie When They Breathe

The mainstream financial press really, really wants YOU to believe that things are getting better. I'm not exactly sure why but its clear that they care more about that then helping you understand the truth.

I realized yesterday that a corollary of "Too Big To Fail" is "To Big To Listen To". I realized this as I was tuning in (as I do occasionally) to see what Rush Limbaugh is buzzing about.

After being disgusted by the trivialities he was focusing on (once again), I made the connection: Limbaugh did a 500 million $ deal. That makes him part of the financial system that has been corrupted by the banksters, regardless of how he's trying to spin you. If he were telling the truth about what is really important (about how the big financial guys have completely corrupted both parties) he wouldn't be on all those stations and he wouldn't have pulled in a 500 million $ pay check.

So, let's look at the "glimmers of hope" the mainstream writer cites in the "glimmers of hope" story (click here for the full, original story):
"The backdrop for Friday's was the still-fragile economy that has begun to show hints of a possible recovery, including a strong profit forecast from Wells Fargo & Co., a drop in claims for unemployment benefits and predictions of solid April sales from several retailers."

Here are our author's points, one-by-one:

• "strong profit forecast from Wells Fargo & Co" - this isn't real. With real-estate prices still tanking in California, the only way Wells Fargo can be talking about strong profits is via accounting deception made possible by the politically forced change in accounting rules from the reasonably accurate "mark-to-market" method to the "however the banker wants to value it" method. This is like you announcing to your spouse that your 401K went up in the first quarter because you think the underlying value of the stocks your mutual funds hold went up regardless of the actual price declines in those stocks. 
• "a drop in claims for unemployment benefits" - this isn't a glimmer of hope. Its noise. Its deception. Just do a year over year comparison instead of week over week (click here for the actual press release). At 654K vs 358K, initial jobless claims are up over 82% year over year. Does that look like things are getting better? Anyway, you shouldn't be looking at jobless claims for a glimmer of hope. Employment is a lagging indicator, not a leading indicator. So this point is doubly deceptive.
• "predictions of solid April sales from several retailer" - now at least we are talking about a leading indicator. Consumer spending is the key area to look at when looking for a bottom in the economy (see Ahead Of The Curve, by Ellis, the book I'm currently reading) as consumer sales are 70% of the economy. Most retailers just announced same store sales down 5% or more year over year (click here). Even Walmart, the one company that has benefited the most from reduced consumer spending as folks try to save money by shifting to cheaper stuff. Walmart's recent sales are down 1.6% year over year (click here). Now part of this is due to Easter shifting from March to April, but still the facts are that even Walmart sales are down year over year (did this ever happen prior to this crisis?) and most other retailers are down at least 5% year over year when this leading indicator has been positive year-over-year right through other recent recessions. 

I had no idea, when I started taking investing seriously about 5 years ago, how much of what it takes to be an effective investor is one's ability to identify when someone is intentionally deceiving you. When you are talking about major politicians (either party) or the mainstream financial press, I've come to realize  "they only lie when they breathe".

MontyHigh, www.worldofwallstreet.us

Best Of The Web, Argentina's Salbuchi On Financial Collapse: "Been There / Done That"

Here's the best bit of gloom and doom I've run into lately. Uses his experience with Argentina's various collapses to project what's coming up for the USA. There's a kicker of an ending starting around 3:45 into part 2. The guy doesn't look very scary, does he? You know, the calmer they seem, the scarier they are when they really get going.

Part 1, click here
Part 2, click here

I've got a special interest in Argentina. Once again, here's a link (click here) to my piece comparing Argentina's latest collapse with the USA's situation.

MontyHigh

Unlightening: Bought Back In Yesterday About Half-Way

FWIW, I bought back in yesterday about half-way and now have about 15% cash. I like the overnight support and evidence of Indian buying. I don't like what looks like a head and shoulders pattern on the daily gold chart.

Its very expensive getting in and out of these Jr stocks (say 5% hit). I didn't lighten up as far as I did to make money but rather to protect myself against major damage. Now that all of the fundamentals have lined up (money growth, sub-inflation rate interest rates and Asian gold buying), I'm not so afraid.

In retrospect, it would have turned out better if I'd just been "long and strong".

My three biggest holdings at this point are Gold Resource Corp (GORO.OB), Castle Gold Corp (CSG.V), Dynasty Metals And Mining (DMM.TO).

Gotta go,

MontyHigh

Best Of The Message Boards: BigEnergyBull On Why Its Different This Time

Just cruising through some of my favorite board posters when I found this (click here for the full message) by InvestorVillage's BigEnergyBull basically claiming Its Different This Time. "Its Different This Time" is almost never true, but this time I think the Bull's got a point.

Here's a snippet: "the fact is that this is THE FIRST TIME IN HISTORY that the developed world have entered a period of NEGATIVE DEMOGRAPHICS, and that will make this multi-generational recession event far, far worse than it would have been." (emphasis added).

MontyHigh

A Collapse Is Coming: All These Lies

Back in the mid-80's I read a piece in the Washington Post about how everyone in the Soviet Union had to lie in order to just get by. A lot of this was about the economy. It started at the shop floor about when you came to work and went home and moved up through each layer of management. They had to lie about how much they produced, what their quality was, what their costs were, etc. When I read that, I said to myself, this cannot last. No society can continue to function when everyone lies about everything. That was the first time I thought that the Soviet Union might collapse. It was around the time that everyone thought Reagan was a complete idiot for calling the Soviet Union an evil empire and calling for the wall to come down.

Now I'm seeing our own government doing the exact same thing. For just one example, check this out from the Naked Capitalism [about the latest from the FDIC about how much they insure]:

"Odd, no? Why such a small increase even though FDIC dialed up deposit insurance limits so significantly during Q4? FDIC Senior Banking Analyst Ross Waldrop told me during an interview last week that it's because so-called "temporary" increases in deposit insurance are excluded. If included, these would boost total insured deposits from $4.8 trillion to $6.2 trillion."

Here we have an insurer intentionally deceiving about how much it has insured. What's more fundamental to insurance than that? This kind of intentional deceit seems to run through everything our government puts out about the economy (and many other things as well). Its pretty clear this has been happening for at least a decade. It seems to have started with the basic things (inflation and unemployment) and now is spreading throughout all government statements.

I'm afraid to say, I'm coming to the same realization about the USA that I came to about USSR. This cannot last. There's going to be a collapse. Or there's going to be a major return to loving the truth. One or the other, I think.

I guess I could slam Obama at this point about how "transparency" was a key part of his "change we can believe in", and about how nothing has changed at all. But, I think he's just the same as his predecessors (Republicorp and Demicorp) and the entire ruling clique... only perhaps a good bit better at this B.S. than the rest.

MontyHigh, www.worldofwallstreet.us

Leave me a comment about how long this has been going on and how your country compares to the USA as far as honesty is concerned. 

Gold Outlook: Lightened More Today, Now 28% Cash

Here's the updated chart I'm following.

Here's the news from a bearish perspective:

• Confirmed breakdown thru $900 support, first fibonacci and trendline.
• Dollar moved up today.
• Trader Dan of www.jsmineset.com says that the $850 have been targetted by the recent technical action.

Hears the bullish news:

• There appears to have been at least some Indian buying in the last couple of days. I can't give you a link for this. This is probably the most important thing I'm looking for prior to moving that cash back in. The 24 hour gold chart (see below) seems to confirm this with a rise thru the Asian open followed by overnight steadiness.
• RSI is getting closer to oversold (30).
• Its somewhat rare to have more than three big red candles in a row and that's where we stand now. I expect some kind of breather in this downward movement.
• General market rally seems overextended and another downturn and renewed flight to safety may have started today.

I expect that I will stop lightening for a couple of days, but resume selling if that 200 day moving average and $850 get seriously violated.

MontyHigh

Belated Intermediate Outlook Turn: Lightening Up On Gold Jr Producers

Friday afternoon, I lightened up on my gold jr producers selling about 12% of my holdings. The long term fundamentals appear to be bullish for gold (and thus jr miners), but I don't like the short-term technical action. I admit that some of the recent bearish technical action is the result of gold cartel actions, but I don't think that invalidates technical analysis. The gold cartel triggered the gold reversal last last July and this kind of technical analysis might have protected me from the gold fall from around $900 gold all the way to under $750. This time I'm willing to lose some potential winnings. I'm playing it safe and getting out of the way (at least partially) when gold technicals turn bearish.

Ok, so here's the reasons I'm short term lightening up (in order of importance):

• These Jr gold producers are illiquid. I can't just decide one day to get out without moving the stock price quite a ways. So, I'm lightening in a case where, if the investments were liquid (like GLD, AUY, KGC, NEM, etc.) I would wait to see what happens next.
• The daily gold chart has turned bearish in my view (along with some supporting charts like the silver). This is discussed further below.
• Expert opinion: David Morgan (whose public outlook is "perma-bull" and who is on-board with the gold cartel idea) this week advised his subscribers to sell 25% (click here) of their precious metal mining stocks. I think the guy's calls have been pretty good. Rick Ackerman, the short-term trader has recently turned bearish on gold (click here). I've been paying attention to him and he seems to make good calls.
• Seasonals - we are getting close to the "sell in may and go away" period for gold. Resource stocks (and precious metal stocks in particular) are pretty notorious for having bad summers.
• The Indians have not been buying gold for some time. I believe they are the stoppers for any downward turn in the price of gold. The subscription-based LeMetropoleCafe's Midas commentary provides a daily read on Indian buying.
• $CDNX index (the best index for tracking gold exploration stocks) looks overbought.

Here's some data that looks bullish (short and long term) for gold (and my Jr gold producer minings stocks):

• There are no events immediately coming up, that typically triggers gold cartel gold price suppression. This past week was filled with these short term events: G20 meeting, Auto industry travails and the unemployment numbers.
• The US dollar chart is turning bearish.
• Almost every fiat currency has inflationary monetary growth (M1, M2, etc.) as they attempt to stimulate their economies.
• The precious metal Jr producers should be making a lot of money even with $800 gold. NOTE: This is not really a defense for these stocks. Resource stocks have gotten clobbered when their commodities turned south even though with the reduced prices the companies were still making lots of money. This is because when a commodity price starts falling there is no telling how low it will go (witness the catastrophic falls of oil, natural gas, nickel, copper, zinc and lead). The fact that my base metal miners were making money at current prices is the main reason that I used to justify staying in base metal miners after the commodities themselves turned bearish. This kept me from getting out of those base metal miners in time to preserve significant profits. I don't want to repeat this mistake.
• The economic data shows a continued global contraction (despite the recent boyant stock market action).
• The fraudster, banksters (who got us into this mess) continue to be fully in charge of the US economic policy and so can be expected to stink up the place as they try to save themselves and their buddies at the expense of the average Joe and the USA and global economy. 

So, I see the bullish aspects of the situation, but am lightening a little based primarily on the technical action. This is my current strategy: Use technicals to get me out of positions thus protecting me from too much damage when my fundamental viewpoint might be flawed.

This is the gold chart that has the bearish things I'm seeing:

Here's the bearish things I see in this chart (in order of importance):

• Uptrend from October 08 broken.
• Inability to reach a new high in Feb 09.
• First fibonacci breakdown (fibonaccis from Mar 08 high to Oct 08 low).
• 50 day moving average break down. 
• Fell through the psychologically important $900 round number.
• Right at a bunch of support between $900 and $880. 
• Next support is around $856 where the next fibonacci lies and where the 200 day moving average lies. 
• RSI and MACD are moving gently lower but not oversold.

I confess I don't see anything clearly bullish in this chart. The main positives I see are:

• Still well above the 50% fibonacci and could easily regain the first (38%) fibonacci with one good day. This occurring and holding would change my technical outlook to neutral or bullish. 
• Price action from the Mar 08 high hit an intermediate low around 1.5 months after the high. This year we are just about 1.5 months from that the high. So, cyclically we could turn up for a while here.
• Still well above the 200 day moving average with the 50 day moving average still moving up.

So, I'm taking it day by day, holding cash. At this point I will probably continue to sell about 3-5% of my portfolio every day until we get one of the following:

• Indian buying - this the most important indicator of real, short-term fundamental support.
• Gold closing above $905-910 (I'm not sure about the actual value I'll use). This puts us above that first fibonacci which is around $898 and above the psychologically important $900 round number.
• Gold becoming oversold as indicated by a sub-30 RSI.
• The US Dollar Index falling under 82 (breaking down through that last fibonacci).

Well, I don't claim to be a great trader, but I do take responsibility for my own investing / trading decisions and this is what I'm' doing now. Leave me a comment on what you current outlook is and whether its changing.

MontyHigh, www.worldofwallstreet

Here's the overbought (see RSI) $CDNX chart.

Here's the US dollar chart.

Here's the silver chart.

Best Of The Web: Another Great Denninger

http://market-ticker.denninger.net/archives/917-April-1st-Roundup-GM-And-More.html

So, it seems to me that we are following the Argentina pattern and some time soon there will be a sudden collapse (all within 2 months) of the dollar (say 35%), a sudden ramp up in long-term interest rates (say to 25%/year) and a sudden ramp up of inflation (say to 30% / year) perhaps going higher.

That will be a crisis that will either result in massive unemployment and something like 30% of the USA population going under the poverty line and/or no-kidding hyperinflation (> 1000%/year).

Here's a link to probably the best post I've ever done about what happened in Argentina. Seems like the USA is accelerating right down the same path. Eventually (probably this year) the world's lenders will say "No More" to the USA and we'll get an Argentina style currency collapse and economic crisis.

I expect there will be looting of 401Ks and IRAs in order to keep welfare payments going.

I really think that is the most probable outcome. We'll see.

MontyHigh