World Of Wallstreet

Gold Bugs Outside Of The Mainstream On Cyprus

I live outside of the heart-of-empire (Washington, DC). A friend at church is high-level bureaucrat with one of the large government pension administrations, one that manages money in the "mainstream way".

I asked this person about the importance of Cyprus and the seizure of depositor's money. The response was something like: "Are you kidding? Cyprus is a completely in-consequential pip-squeek.".

Meanwhile, the respected Mr. Gold (Jim Sinclair), is saying that this is Cyprus is the beginning of the biggest disaster of our lifetimes, e.g. "There’s absolutely no question that when it’s confirmed that the depositors’ loss of money is not a tax, not a new way of making things whole, but in fact the actual disaster that the global banking system is currently in, you will have a move toward physical gold greater than anyone on this planet now believes is possible.  We will also witness the beginning of a level of fear and panic not seen in this world since 1929."

I synthesize this justaposition as follows:

• The mainstream has discounted and basically forgotten about Cyprus.
• Its going to be a while before anything really crazy starts ripping the financial world apart.
• Sinclair is right about crazy things happening, but as usual with him, but just not right away.

MontyHigh, www.worldofwallstreet.us

 

They Are Printing Like Crazy, Why Isn't Gold Zooming?

This post from the admirable Jesse gives the answer, which I oversimplify as: "because the printed money is going to the Banksters who are hoarding it for themselves".

The post is the most important post I've read in months and months as far as advancing my understanding of the precious metals markets. Is there anything you have read, as far as investing goes, that are worth re-reading weeks later? Leave me a comment and a link.

MontyHigh, www.worldofwallstreet.us

Best Resource Scarcity (generalized Peak-Oil) Read Of 2012

Jeremy Grantham's (a top-rated money manager who seems to think out-of-the-box and follows the data) has produced the best piece I've read this year on the general topic of Resource Scarcity of which Peak Oil is a key component. Click here for the piece, which begins with a 2 page summary that starting with: "The U.S. GDP growth rate1 that we have become accustomed to for over a hundred years – in excess of 3%
a year – is not just hiding behind temporary setbacks. It is gone forever. Yet most business people (and the Fed) assume that economic growth will recover to its old rates.".

If you are a young engineer who wants to make a difference with your life I'd start with "Possible Positive Responses to the Resource Squeeze" page 13.

As a recent Global Warming agnostic, I found "Rising Environmental Costs" to be particularly of interest.

This is good information that helps me to continue to refine my world-view and macro-economic outlook, but it has not triggered an immediate change in my investing portfolio.

Trying to pass on the good stuff to you, dear reader,

MontyHigh, www.worldofwallstreet.us

Thoughts For Engineering Majors And Graduates Inspired By Ambrose Evans Pritchard And The ASPO-USA Peak Oil Conference

NOTE: This piece was originally an email to my two engineering major sons.

"We just heard the International Energy Agency saying the United States would overtake Saudi Arabia by 2017, which is only five years away, to become the world’s biggest oil producer, essentially because of the shale gas and shale oil revolution. Because of shale gas they will be very soon self-sufficient in gas and they will probably become a net exporter of gas before long– so the whole energy structure of the world is changing. Natural gas prices in America are about a third or a quarter of prices in Europe, and about a fifth or sixth of prices in Japan. That gap will narrow, but because there aren’t enough plants to ship liquefied natural gas you can’t transport this gas very easily, this gap is going to remain for a long time. This could be a huge advantage to the American chemical industry, the American plastics industry and the American glass industry, to half a dozen industries where America will have a structural advantage for probably ten to fifteen years over competitors in Asia and in Europe."

Having been to the recent ASPO-USA Peak Oil conference in Austin TX, I conclude:
(a) Natural gas prices in the USA are unsustainably low and will rise, but even with the rise the US will have a major advantage in industries that depend heavily on natural gas for at least a decade. These industries are a good place to be if you care about serving your country and being able to raise a family. The USA's oil and gas production will have booms and busts but are also a good place to be if you are a young engineer.
(b) The world-wide oil industry (and the USA's shale-oil in particular) can produce marginally more oil provided their customers can pay more for it than they are currently paying. There's no collapse coming, but there is a slow-burn for at least a decade as oil prices continue to rise and choke off economic growth. I expect roughly flat oil production with virtually non-existent economic growth for the developed world for the forseeable future. Jeff Rubin is the first guy I've heard suggesting this (about 4 years ago) and he is being proved right.
--
MontyHigh, www.worldofwallstreet.us

P.S., Pritchard's piece is fairly long and not exactly an easy read, but was worth my effort.

P.P.S., I myself am looking for the right opportunity to "get longer" natural gas (and to a lesser extent crude oil) futures dated a few years out. DO YOUR OWN DUE DILIGENCE. THIS IS NOT ADVICE.

Best Of The Web: China Takes Over As Top Trading Partner

Check this out from the Daily Pfenning:

Hat tip to Jerome11 on Investor Village for pointing this out.

What do you make for the USA's prospects for continued ascendency?

MontyHigh, www.worldofwallstreet.us

Spengler Provides A Clear Set Of Data Documenting The USA's Decline

Click here for the article. Here's an example chart showing Chinese exports to the USA vs to the rest of Asia. China does not need the USA to export to like it used to. The article includes several other graphs showing the declining importance of the USA to Asia.

"The times, they are a changing", Bob Dylan. 

MontyHigh, www.worldofwallstreet.us

Spengler Provides A Clear Set Of Data Documenting The USA's Decline

Click here for the article. Here's an example of the data. China does not need the USA to export to like it used to. The article includes several other graphs showing the declining importance of the USA to Asia.

"The times, they are a changing", Bob Dylan. 

MontyHigh, www.worldofwallstreet.us

What Kind Of Job Cannot Be Replaced By Computer?

Here's a menacing article if you care about ordinary people: http://www.nytimes.com/2012/11/24/science/scientists-see-advances-in-deep-learning-a-part-of-artificial-intelligence.html

Ok, now what kind of jobs have already been eliminated or are no longer needed nearly as much:

• Most manufacturing jobs.
• Most secretarial jobs.
• Many waitering jobs (e.g. Panera doesn't have waiters).

Now, what's on the horizon to be eliminated:

• Drivers (bus, taxi, truck...).
• Retail checkout - replaced by self-checkout and security cameras and RFID.
• Retail shelf-packing - seems eminently robotable.
• Most night-watchman type security jobs.
• Most customer service phone handling jobs - via WATSON jeopardy jobs.
• Most low-end sales jobs - via Amazon search with reviews (nicely manipulated by AI programs to maximize Amazon profits). 
• Low-end translators and sign-language interpreters.

What's left:

• High-end people skills - personal trainers, high-end sales, health-care...
• High-end mental skills - engineers, scientists, lawyers, marketers, health-care...
• Portable, Adaptable Manual Skills - electricians, carpenters, plumbers, etc.

It seems that a smaller and smaller slice of the population will be able to compete for the fewer and fewer jobs that can't be automated away.

Are we coming to James Dines's "End Of Jobs" era for most of the population?

Leave me a comment with jobs I left out or where I'm wrong?

MontyHigh, www.worldofwallstreet.us

 

Bankrupt After 200 To 1 Leverage And No Orange Jump Suits

This kind of post is what makes Internet message boards great (click thru or here for the whole post):

Got your eyes open, dear reader?

MontyHigh, www.worldofwallstreet.us

Chart Thoughts

Here's my thoughts based on a quick review of the charts. Consider:

• buying some S&P 500 call options - its gone down several days in a row and the election year seasonals are strong and Burt Dohmen of the Wellington Letter says stocks are going to launch if Romney is elected. 
• shorting GORO - production numbers should come out this week and they could trigger another disasterous stock price plunge.
• lightening up on OGC.TO - just looks too overbought among what recently were overbought gold stocks.
• putting in stink bids or AST.V - I think the mine will eventually get bid.
• consider buying those ROMNEY stocks I have in mind, including Hecla Mining.
• put in stink bids for some other favored gold miners (SMF.TO,
• U.TO looks absolutely dismal. Go back to finding some Uranium miners that "won't go to zero" and get ready to buy that as Uranium continues to fall in price. 

Just some ideas.

MontyHigh, www.worldofwallstreet.us

California And Retirement: A Plan To Funnel More Taxpayer Money To Govt And Wall Street

Here's the beginning of the New York times article:

Here's the setup:

• People aren't saving enough for retirement.
• Or they are too dumb to manage their own savings.

Here's the sting:

• "Eligible employees would have 3 percent of pay deducted from their paychecks, unless they opted out. The employee contributions would be pooled and conservatively managed by professional investment managers chosen by the state through a bid process."

Ok, what are these "professional investment managers" going to invest in (buy that is)? Its got to be "conservative", that is, whatever is approved by the powers that be. They'll buy whatever the powers that be are selling: e.g. government bonds at 1.5% when money printing is raging or whatever corporate toilet paper wall-street is selling that hasn't a chance of beating inflation. 

This is basically just another government/wall-street grab of citizen money under the guise of "We're from the government and we're here to help you".

MontyHigh, www.worldofwallstreet.us

 

Long Term USA Federal Government Revenues And Spending As Percent Of GDP Graphs

I think the above graph is helpful. There's a few more here.

Thankyou, Econbrowser. My interpretation is that the problem is too much entitlement spending, not too little taxes (see other graphs thru the link) but that cutting entitlement spending is politically untenable, especially with the baby boomers entering the retirement / high health care usage stage of their lives. So, I expect we'll see continued deficits, money printing, negative interest rates and a rising price of gold with big doses of class warfware. 

MontyHigh, www.worldofwallstreet.us

 

 

Best Of The Web: Dumpster Diving For GDP Forecast

Here's the chart of the month:

Here's the link to the Zero Hedge post explaining it: http://www.zerohedge.com/news/chart-day-garbage-shall-set-you-free-gdp-manipulation

MontyHigh, www.worldofwallstreet.us

 

Its Different This Time: The USA's Post-War Period Is Over

This graph (hat-tip Mish) indicates that it really is different this time. What is happening to the US economy is unlike anything in the post-war period.

Any kind of long-term planning based on the post-war economic track-record is now worthless. Anything you might be depending upon (pensions, annuities, standard retirement-planning) based on that kind of planning is no longer dependable.

So, fundamentally, what is it that is different?:

• Too much debt finally starting to bite.
• The post-war economic edge the USA had has significantly dimished and it can't expect to be "number 1" in everything any more because that edge was an anomoly (not truly "normal").
• Peak oil and resource scarcity is starting to bite.
• The corruption of the political system and its relative size are now big enough that the parasite is killing the host.
• The modern technology has eliminated the possibility of high-paying work for a large share of Americans by either automating it out of existence (e.g. word-processing, email, calendar software and voice mail obsoleting secretaries, minimizing the number of book-keepers, auto workers, etc.) or by making it too easy to off-shore them to cheaper labor (programmers, call-centers, assembly-line).
• All of the above.

What's the best hope for this turning around? How should I play it (adapt to it) and help those who I might influence adapt to it? These are the questions I'm asking.

MontyHigh, www.worldofwallstreet.us

P.S., The above chart is the best supporting evidence for the idea that, for main-street, the recession never ended. What's your best table/graph supporting that idea?

What To Do If S&P 500 April Is A Down Month?

It looks like the general stock market may have a its first down month in a while this month. I don't own any of this, but I thought it worth taking a look at. What happens after the first down month after one or more up months?

Well, here's what's happened lately:

Even including the 2008 crash months the average is a gain if you hold on tight for two months. Post-crash (6/1/2009 on) the results have been quite satisfying with only one trade for a loss out of seven. Think this might be worth a twirl? Maybe worth a twirl as long as you don't think this is the start of another 2008-like situation.

MontyHigh, www.worldofwallstreet.us

Post-Crash S&P500 Overbought Comparables

Today we find the daily RSI for the S&P 500 being overbought (above 70 and then not falling below 60) for a month. What's the likelihood for a correction and how big might that correction be? The chart below looks at all of the comparable situations since the 2008 crash.

There are three such comparable situations. The gray boxes over the comparable situations are of the same width as how far we have gotten through the current situation. What happens beyond (rightward) of the gray boxes shows what happened in the comparable situations beyond where we are now in the current situation.

The three situations are as follows:

• March 2010 - the S&P 500 continued to advance about a couple weeks further and around 3.5% higher and then went into the "flash crash" correction with an good initial bottom 14% down from the high about a month further out. If memory serves, emotions were quite high up until the flash crash. THIS SEEMS LIKE A GOOD POSSIBLE PATTERN FOR THE CURRENT SITUATION.
• October 2010 - the S&P 500 barely achieved a post-crash high false break-out and then corrected around 4.5%. By the way, comparable situations in Dec 2004 and Oct 2006 are somewhat similar to this one. In the current situation we just exceeded the July high and are almost to the post-crash high. THIS SEEMS LIKE A GOOD POSSIBLE PATTERN FOR THE CURRENT SITUATION.
• December 2010 - the S&P 500 continued from the post-October 2010 correction and hesitated around the equivalent of where we are now now and then continued up another 5 weeks and another 5% higher prior to  correcting 7% from the high to below the equivalent of where we are now a month later. THIS SEEMS LIKE A DEFINITE POSSIBILITY FOR THE CURRENT SITUATION IF THE RISK-ON TRADE STAYS ON.

I'm currently protecting my January gains in gold mining stocks with a S&P 500 put options position. I expect I'll hold that position and exit using one of the following criteria:

• STOP LOSS - no correction for at least 6 weeks. If this occurs none of the prior three situations parallels the current one.
• STOP LOSS - no correction and another 6% S&P 500 rise to $1443.If this occurs none of the prior three situations parallels the current one.
• EXPECTED EXIT - a correction begins without a sustained $1370 breakout and the correction falls at least 4%. If this occurs the Oct 2010 comparable pattern is being followed.
• EXPECTED EXIT - a correction begins after a $1370 sustained breakout and the correction falls at least 6%. If this occurs either the Mar 2010 or the Dec 2010 comparable pattern is being followed.

We'll see what happens.

MontyHigh, www.worldofwallstreet.us

For Debbi:

Download 00TenStupid00

Download ZMcCaffrey001

Hussman's 2012 Outlook And Mainstream Retirement Planning Alternatives

Here's a dressed up version of an email I just sent out to my two brothers and sister. I'm running about 40% of my 80-something mother's retirement money (the part not locked up in trusts):

"Here's a good piece by the best of the mainstream investment columnists: http://www.hussman.net/wmc/wmc120103.htm. Being mainstream, Hussman does not take into account out of the mainstream risks, including.:

• risks to the whole system from the fraudulent fiat-currency system,
• risks to the middle-class from the "banksters" (the banking, corporate, government elite running the system) or
• Peak Oil.

The key fact in this piece is that the best you can expect from passive, 100% invested in the stock-market investing for the next decade is 4.9% returns minus management fees and taxes compounded annually. I believe Hussman is talking about real returns computed by deflating with the bogus government manipulated CPI numbers, but I'm not sure.

There are a few takeaways from this article:

• The best estimate of what to expect from the investing of our dear mother's retirement money is 2.4% (i.e. 4.9% minus say 1.5% for management expenses minus another 1% for taxes) for the next 10 years. If she lives on what she expects to spend (around $50K/year) and actually gets this return then she should be able to make it to around 100 without running out of money, but without leaving much behind when split four ways.
• The best estimate of what to expect from your own retirement savings (401K or IRA) is 3.4% (4.9% minus something like 1.5% for management expenses).
• Bruce, with his US Post Office pension, should compare what the pension fund is expecting to the article's 4.9% to evaluate the likelihood of his retirement payouts taking a hair-cut.
• If this article seems like boring, complete gobbledy-gook then you should ask yourself how best to take responsibility for your retirement planning. There are no low-risk approaches unless you already have saved way more than you'll need. You can either:
  • save retirement money in tax-protected accounts (IRAs and 401Ks) and live frugally enough to get by on:
    • the gains (losses) from the passive, globally diversified approach (ETFs or Mutual Funds), probably around 3.4%. The risk here is that situation is worse than the best mainstream guy's estimate and "THEY" are going to plunder those tax-deferred savings accounts.
    • the gains (losses) from a top-gun who can play to win with your money without risking it all and who has enough integrity or personal connection to you to actually look out for your interests and save enough. Finding such a guy is harder than it sounds. There's a big straight jacket on your guy if what he's running is in a tax-deferred account. The risk here is either that he plunders your money (e.g. Madoff) or that he isn't really a top-gun and he loses a bunch of your money or "THEY" are going to plunder the tax-deferred savings.
  • spend a few thousand hours spinning up to become a top-gun yourself and retire on your "winnings" from your own savings. The risk here is that you don't actually become a top-gun and don't have "winnings" to retire on or that the investing system is so rigged that small-time top-guns can't make real money.
  • save in the form of physical gold enough and live frugally enough to get by on a fixed number of oz of gold per year. The risk here is that the physical gold is stolen, taxed to death or confiscated by the government or that it doesn't hold its value over the long-term.
  • plan on working as long as your are able and depending on family thereafter.
  • some other thing that doesn't occur to me right now.
  Respectfully and with much love..."

MontyHigh, www.worldofwallstreet.us

 

Does Credit Have To Expand Over Time To Prevent Monetary System Collapse?

How often do you watch a youtube multiple times? Especially an educational one? This is one I watched once and it had enough important information that I had to watch it multiple times to see if it really made sense.

Michael Maloney explains in this long tube (click here) how the fiat, fractional-reserve monetary system works. This is the system used by the USA and virtually the whole world. Maloney claims thats that credit has to continuously expand or the system collapses. Can you help me figure out if he's right?

There's four segments that need to be considered. The first two are gimmees and definitely accurate. The key idea of the third and fourth segments are what you can help me figure out.

Starting at 20:55 and continuing to 22:15 he provides an explanation of how a non-fractional-reserve gold-standard money system used to work. This is good background material, but not particularly relevant as its been a hundred years since any country used that system.

From 22:15 to 28:06 he provides an excellent introduction to how a fiat, fractional-reserve money system works. This is something that is hard to understand, hard to believe but true and quite important. Do you get it? I accept that this explanation is accurate and reasonably complete. He doesn't mention that it is the threat of force (police and military) that is the reason why this system must be accepted by the population.

From 29:59 to 32:12 he claims that because interest is required on all of the money borrowed into existence money that the total amount of debt has to increase every month or the system starts to collapse. 

From 45:09 to 46:34 explains why he thinks the total amount of debt has to increase and why this is unsustainable and must end in a debt collapse. This is because there is more money owed (amount borrowed plus interest) than is created by borrowing (the amount borrowed) and as the debt comes due (debt plus interest) and is paid or rolled over the relative amount of debt to currency in existence increases. This animation is the thing I couldn't stop thinking about and brought me back to this youtube and caused me to write this post.

Ok, so that is the background to the claim and here is the claim under consideration (starting at 31:56) verbatim: "This system requires that we go deeper into debt every month than we were the previous month; we have to always borrow more currency into existence than we are extinguishing every single month or the whole things starts to collapse". That is an exact quote. Here it is abbreviated with fixed up syntax: "This system requires that we go deeper into debt every month ... or the whole things starts to collapse".

Help me here. Is that claim true? And does "the whole thing starts to collapse" imply that the whole thing must collapse or merely that ongoing intervention is required to keep it from collapsing and that continued intervention is inherent in the system.

It seems to me that:

1. the total amount of debt in the system can be reduced by default or debt forgiveness. For example, what happens to someone's debt when they die? It will never be paid back. Whoever the debt is owed to must write the debt off and thus the total debt in the system is reduced.
2. the debt, including interest, owed by the US treasury to the Federal Reserve is in a different category from other debt in that nothing bad seems to happen if the US treasury defaults on that debt. So, let's call total effective debt the total amount of debt minus the amount owed by the US treasury to the Federal Reserve.
3. the amount of money relative to the total effective debt can be expanded by having the Federal Reserve print money (buy US treasury debt) and having the US treasury hand the money out as it sees fit (ordinarily directly to its pals especially to the war industry).

So it seems to me that the system is not unsustainable in that it must end. It seems me that the system is economically inefficient in that economic distortions take place when the US treasury spends money (hands out money) to its pals where that money is wasted rather then invested in more productive activities that a free market select. Should we call that handing out of money to pals malinvestment or looting? In either case it sounds like stagflation to me, not a deflationary collapse and not a hyperinflationary collapse.

So, help me. Am I wrong and is the system inherently destined for deflationary or hyperinflationary collapse or is a "slow burn" (to use Catherine Austin Fitts terminology) ongoing fall in the middle-class standard of living another alternative that can be sustained for years or decades? What is it about the system's operation that I don't get that means that a collapse MUST happen?

MontyHigh, www.worldofwallstreet.us

Euro Crisis: Its Different This Time

I'm hardly an expert, but it seems to me that something significant has changed as far as the Euro crisis is concerned. In the past, the media buzz would be about the Merkel and Sarkozy team. Sarkozy and Merkel would always be meeting, talking, preparing for important meetings, having plans to come up with plans with racy, hopeful headlines coming out every few days. I just don't hear any such buzz.

I think Merkel has dug in her heals and said "No More" to German financed bail outs while everyone else, including Sarkozy, are asking for more. Is this just a negotiating standstill of some kind? Or, is everyone off trying to figure out how their country handles what comes next by themselves? I think the danger of a "Lehman" moment for the Euro crisis is now higher than it ever has been.

What do you think?

MontyHigh, www.worldofwallstreet.us

They're Baaack: Super Committee Reentering Mass Psychology

Its time to reprise this post from a Sept 24 as I'm starting hear a little buzz about this Super Committee in the mainstream media. Seems like if there ever was a trade the rumor situation, this is it. Here's how its going to go (I expect):

1. The looming, incomprehensible, dark and painful US debt situation creeps back into the mass psychology with lots of scary stories about "No Deal" and the end of the world as we know it (closing national parks, kids without school teachers, social security checks not mailed...) - short the dollar, short the US stock market.
2. Culminating right up to that first dead-line (right before Thanksgiving) - cover before Thanksgiving go long US bank stocks in the face of great fear.
3. Deal gets announced the weekend after Thanksgiving - dollar up, US stock market up (especially bank stocks).
4. Go back to number 1 for the lead up to the next deadline (Christmas).

A Look Ahead To Year End: That Debt Ceiling Super Committee Thing's Timetable...

Here's a link to a newspaper article covering the Debt Ceiling supercommittee timetable. Looks like things start really getting hot around Thanksgiving. For me, the rich part is that even if they don't agree on cuts the automatic cuts don't start until Jan 2013 (after the election). I guess that's why they call them "politicians". 

Here's some highlights from the article:

Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction.

Dec. 2: Deadline for the committee to submit report and legislative language to the president and Congress.

Dec. 23: Deadline for both houses to vote on the committee bill.

Jan. 15, 2012: Date that the "trigger" leading to $1.2 trillion of future spending cuts goes into effect, if the committee's legislation has not been enacted.

If you are trading you may want to keep this timetable in mind.

MontyHigh, www.worldofwallstreet.us

Chart Of The Day: Want Some 2008 Crash Insurance?

My savings took a giant hit (~70%) from my top in 2007 to the bottom 2008. That was before I started using technical analysis. That can happen when you depend just on fundamental analysis and your analysis is WRONG. I don't ever want to have that happen again.

The above chart shows that there was something I could have done to profit from the big crash in 2008. Go long gold and short copper. Gold as a store of value in times of fear and uncertainty. Copper as a commodity whose price is sure to get hit hard in a major economic slow down. The chart shows that ratio making a continuous move that could more than double what you have at risk, supported the whole way by a very tight 20-day moving average.

The fundamental buzz around copper concerns the almost certainty of a significant recession in Europe (China's biggest export market) along with scary anecdotal stories out of China itself regarding a potential housing bust.

I've already long and strong (but not heavily leveraged) gold with various kinds paper and physical gold. I expect I'm going to play that 20 day moving average on the long gold short copper trade with a decent sized percentage of my networth at risk via the futures market as both a big economic/market hit insurance trade with an expectation of profit. A decent size position, but not anything that could blow me up.

Of course, I'm not recommending any such thing for anyone else, this post is merely pointing out an interesting looking chart that shows you want to look for if another major downleg in this Great Recession resumes.

MontyHigh, www.worldofwallstreet.us

Guest Post From Anonymous: "Forget Peak Oil... The Biggest Blowup Of Our Lifetimes Is Here"

Just got this from someone who tried to keep me from taking the big hit in 2008.  Woulda, coulda, shoulda listened to him then. Last time he was early by a few months but the executioner eventually came. I'm putting it up pretty much unedited with some simple substitution for the most forceful language. I really appreciate him thinking of me and will probably be taking some forceful action after pondering this some more.

Monty, ANONYMOUS here.

Forget peak oil - the freaking biggest blowup of our lifetimes is here('08 was just the start obviously!) . Europe is going to bust and maybe go 100% fascist - we will know in the next few weeks. Oil and commodoties are going to crash like an asteroid. Here is some tidbits of what I'm seeing:
- The proposed solution to the Euro. financial crisis is .... a CDO of subprime Sovereigns ! You can't make this stuff up.
 -- The bond market bitch slapped the Marxist/Fascists Eurocrats and ran the Italian 10yr through the Maginot line of 6% after the announcement of the CDO of Subslime Sovereigns. This was epic ! wake the freak up ! That is like a gigaton nuke going off - Europe is smoked just like when Bear Sterns subprime went in Feb '07 was the push over the cliff, we have it now for Europe. We now wait for the thud at the bottom of the cliff !  Of course, the equity market is drunk and has no clue - just like in '07 until its gets the 2x4 in its face. The bond Vigilantes finally woke up after a 30-yr slumber. They gave the royal finger to the Marxist/Fascist Money-printing subhuman NWOists (New World Order). They see that all the kings men(FED, ECB,IMF, Eu, etc) don't have enough money to pay ! - unless they print. The bazooka is shooting blanks !!!! The bond market is telling this loud and clear. The Emperor has no clothes.

-- Greece tries the referendum route (Iceland) and the pressure causes them to cancel (Ireland). What the freak! Big stakes gamesmanship and pressure!  Greece is still insolvent - only question will the Greeks win(debt repudiation) or the subhumans ( endless austerity and debt slavery while the cartel buys up every Greek asset on the cheap) ?

-- Merkel mumbles about war ! What the freak !
-- Why ? Deutsche Bank is toast. They only have 1% tangible equity. This is why CDS on Greece cannot be paid. I bet they sold a stuffload of protection on Euro-periphery. The Germans are going to be made debt slaves -- screaming and kicking but the bitch is hell bent of making all the germans slaves to the cartel. Merkel is Obama in white woman clothing. 
-- The theft is now getting open and rampant in the last 5 years. Look at MF Global. I bet they got margin calls when Italian bonds shot up and so they stole more money to pay it. My guess is they feared the repo man on the other side of that trade more than they feared the "law". hahaha - the law is for shmucks. That repo man can obliterate Iraq , kill presidents, and give the nobel peace prize to a war mongering marxist. The cartel never loses - the "small" people with the MFG accounts lose. The last days were full of fraudulent transfer.
-- Who is leader is 21st centuary finance ? Zimbabwe ! They led the way into money printing. Given their standards, the Nobel Committe should give a Nobel Prize in Economics to the Finance Minister of Zimbabwe.
-- When Europe blows and that is now just a few months away at most, all banks worldwide will be insolvent by definition.
-- Freak commodities. Buy Gold and Silver , Guns and Bullets, Beans and farts...well you get what I mean . When the Germans murmur war, and contracts worth tens of billions ($37B in Gross GreeK CDS) are thrown in the dust bin, and looting goes on right and left, and the NWOist are making their powerplay to own the world , is thinking about anything else even sane ? Greece should say no debt! and move on, but that would cause Deutsche Bank and the French banks to go under. Then, the ECB would print $3T at least. Worldwide leverage needs to drop in 1/2 very roughly. That's really tens of Trillions, we are going to get there one way (money printing) or another (deflationary depression) or both! The gig is up. Watch the Itl. 10-yr

--Solutions do exist, but they won't be taken because the cartel is too greedy and they control the politicians. Their forefathers were restrained after the Depression, but the current generation has no memory so they are going to blow it up. The politicians are figure heads and toys of the cartel. There are few, too few brave ones and as we have seen , they all get pushed out of the way one way or the other. These greedy freaks are going to blow it all up. When I say Cartel, I mean they use Wall Street just as they use the Military-Industrial Complex...these are the tools of the International Cartel.

-- China has started its move into depression. They lent money out of '08 which was actually something I didn't think they could do, but now the 3-yr credit cycle is coming with a thud. I expect 10-15% drop in GDP in China before its over . Freak peak oil. Its peak misery, you won't be able to give away that dino-stuff.

So if the subhuman cartel prints like crazy -which I think is the path, then we should get some serious inflation at some point, but we need to see the full deflationary shock first that will cause them to print like crazy as the insolvency runs into the trillions (already there, but only partially printed) and then maybe into the tens of trillions...the losses worldwide should be and maybe already are in the tens of trillions as the credit bubble deflates. This should take 5-7 years to play out fully before the debts are wiped and/or currencies reconstituted. Redback $-bills anyone ?

Didn't Take Long To Fill That Gap!

The technical analysis folks believe that gaps in the price history (where there's a gap between one day's trading range and the next) tend to get filled. This chart shows a nice-sized gap in the general stock market between last Thursday and Friday. We now have quite a gap opening up today with "Bernanke Speaks" two-day FOMC meeting results tomorrow.

I was feeling quite scared this morning. Usually that means the bottom is just about in. I expect I'll find some kind of bounce trade to put on this morning. Maybe medium-smallish position in S&P 500 futures.

MontyHigh, www.worldofwallstreet.us

This Week's Deal Doesn't Fix The Europe Debt Crisis

Havey Organ has a great column today (click here) although you might want to skip down to where his survey of Europe Debt Crisis Deal reviews starts. Here's a few of the money quotes (most from this one report from The Economic Collapse:

• "people have begun to closely examine the details of the European debt deal, they have started to realize that this "debt deal" is really just a "managed" Greek debt default."
• "But investors are not stupid.  Greece was allowed to default.  If Italy or Spain or Portugal gets into serious trouble it is likely that they will be allowed to default too."
• "The big message that Europe is sending to investors is that when individual nations get into debt trouble they will be allowed to default and investors will be forced to take huge haircuts. As this reality starts to dawn on investors, they are going to start demanding much higher returns on European bonds. In fact, we are already starting to see this happen. The yield on two year Spanish bonds increased by more than 6 percent today. The yield on two year Italian bonds increased by more than 7 percent today. So what are nations such as Italy, Spain, Portugal and Ireland going to do when it costs them much more to borrow money?"

There's much more in Harvey's column worth scanning.

MontyHigh, www.worldofwallstreet.us

 

They Are Begging For The Printing Press. Got Gold?

I'm guessing we'll get both:

1. An undeniable second-dip recession that is plenty painful and, like the previous one, doesn't seem to go away.
2. Plenty of money-printing out of Bernanke.

MontyHigh, www.worldofwallstreet.us

P.S., A joke:

"Multiple choice. Which is these does not belong with the others?:

(a) Herpes

(b) Aids

(c) Syphillus

(d) High USA unemployment.

ANSWER: (c) Syphillus. You can't get rid of the others."

Fully Bamboozled At This Point...

I had the morning off from church this week taking care of the 10 year old with a cold. That explains all of the posts. For the first time in a week I've had a chance to consider the markets with some intensity.

Here's my findings:

• Overall Impression - I'm feeling quite bamboozled at this point. My general modus-operandi is to do nothing when confused with potentially really bad results. This time I'm going to lighten substantially on some of everything if things don't get clearer to me soon.
• Macro Buzz - This buzz is from reading the news. It says either:

• the Europeans come up with a plausible plan and the risk on inflationary trade is on (Dollar down, US Stocks Up, Commodities Up, Gold Up [but not as much as stocks), Silver up. OR
• they don't (Dollar up, US Stocks Down, Commodities Down, Gold probably down, Silver down).

I guess we'll hear something tonight. I expect an overnight pop thru the morning as they'll definitely have some kind of semi-positive sounding news, but that the deflation trade will show up by the New York close if they aren't close to a plausible plan. I think all this Euro Crisis Macro buzz stuff is obvious to anyone paying attention to the markets. I also think it takes a continuous stream of bad news to keep the fear trade going. No news is good news which pretty much accounts for the recent "risk on" trading action.

There's also very quietly some bearish noise coming out of China which I think is responsible for Copper and other commodity weakness beyond what is expected from the Euro Crisis stuff. This is not fully taken into account by financial press or average money manager. If we get a relief rally, I don't expect commodities to lead.

• Now based on the charts, here's what I see:
  • US stocks broke above their recent trading range but there's stiff resistance within a couple of percentage points. What happens short term depends on the European situation. A move thru the remaining resistance at S&P $1260 is bullish and it will be time to abandon any bearish stock positions.
  • Emerging markets are flat out trending down and ugly. I think this is related to the China macro buzz. They are dragging commodities with them.
  • Everything seems to trade around the US dollar which seems to be weakening.
  • The recent collapse in 30-year US treasury yields (and now their rapid recovery) is signaling that the Euro situation will blow over (I think). 
  • Gold looks ok as long as the 150 day moving average holds. The commitment of trade report is bullish.
  • Silver's chart looks like a bear flag to me. A breakdown under $30 that holds signals another big silver price collapse. I don't buy the Eric Sprott story, yet.

By the end of this week the European situation should be clearer and I expect either to have eliminated my S&P 500 put options hedges or will have lightened up on the gold futures options and cut my core gold stock positions.

Perhaps I'll supplement this post tonight with with some charts, time permitting.

MontyHigh, www.worldofwallstreet.us

No Bid

There is one interesting thing to report from Friday's trading. I'm currently holding a bunch of S&P 500 $1300 Dec 16, 2011 put options as a hedge against deflation taking gold down with everything else.

That's what derivatives are for right? To limit risk.

Well, with the S&P 500 closing on its high Friday in what I consider a "What Will They Come Up With Over The Weekend?" short-covering rally, I decided to lighten up on those put options. Now, these put options are in the money. They have intrinsic value.

Looking at my screen I saw: No Bid for those put options. Let me be clear: Nobody was willing to put up any kind of price (even much less than their intrinsic value) for even one of those put options.

I should have gotten a screen capture for you, dear reader, but the thought did not occur to me.

I considered S&P 500 put options to be pretty liquid, that is, that I could sell them if I wanted to, even under pretty extreme circumstances. Wrong.

That's the problem with "Mark To Market" accounting, you need to have a "bid" under the item to know what its market value is. If seemingly ordinary, short-term, in-the-money S&P 500 put options go no-bid under pretty much ordinary market conditions (the S&P 500 was only up 2%), then just imagine how hard it is to get the market value for all the crazy stuff the "too-big to fail" banks trade:

• Credit-Default Swaps on all sort of little things (individual corporate bonds, Greek sovereign bonds of all types, etc.).
• Hedges on every kind of interest rate.
• Who knows what else they are holding. 

In addition to counter-party risk (where the other party may default and so a paper asset loses some or all of its value), there is "no bid" risk, where you can't find somebody to buy your asset (at any price) when you suddenly need to. At this point I have to conclude that when "The big one" comes, everything is going to go "No Bid", at least temporarily. The May 2010 "Flash Crash" was not even close to "the big one" and yet all kinds of seemingly substantial assets (large-cap stocks and bonds) went no-bid. When the big one comes the banks and markets will be closed. Remember, the markets closed for a week after 9/11 and were closed for months during the outbreak of WWI.

Here's a definition for a "safe haven asset": An asset that can be held for months providing a precise amount of "buying power" at any time under just about any circumstance.

The recent 20%+ rapid rise (and drop) in the price of gold demonstrates that it is not that perfect as a safe haven: It doesn't provide a "precise" amount of buying time over months.

Physical gold, owned with clear title and stored in a safe, accessible location, is a safe haven if you relax the defintion to: substantial "buying power"... This is because gold, thus held, has:

• No counter party risk AND
• Lower "no bid" risk than just about anything. I expect that even during "the big one" that physical gold will still have purchasing power.

Based on what I've learned, the questions I have to ask myself at this point are:

1. How much of my savings do I want to keep out of the banking system in actual Federal Reserve Notes (Franklins) against a temporary bank/market closure. The answer is probably enough to get by for a couple of weeks, but not more because "THEY" typically close the banks so "THEY" can revalue down the currency.
2. How much of my savings do I want to keep in assets other than "physical gold safely and accessibly stored"? At this point the answer is: enough to provide a way of increasing wealth in the face of "financial repression" that is government taxes and government manipulated low interest rates and high inflation. I want to have more than enough to share. On the other hand I want enough in physical gold safely and accessibly stored to make it through "the big one". The amount of physical I want is increasing as the relative risk of the "big one" coming soon seems to be rising.
   

There should be quite a flow of money into physical gold as the desire for this kind of safe-haven increases. Its quite bullish for the price of gold, I think.

MontyHigh, www.worldofwallstreet.us

P.S., Given Friday's big short-covering rally, "THEY" better come up with something good overnight or its back down we on Monday, I expect.

 

Question Provoking Charts

Here's my tour throught "the usual charts" highlighting the charts that make me ask questions. They seem to all revolve around the fundamental question: Has the European sovereign debt crisis been contained or are we in the lull before the storm? Leave me a comment if you have any answers.

Banking stocks have been consistently lagging the general stock market for a while. I watch this ratio because banking stocks are a leading indicator for the general stock market according to Gary Biiwii and others.  Can this trend continue and is it too late to trade with a long/short strategy? If nothing else, I think a sustained piercing of the 50-day moving average will probably indicate that the bottom is in for banking stocks and that tradable entry point has arrived.

I've been accumulating Dec 2011 S&P 500 $1300 put options because there's a good chance the current relief rally is about spent and because options seem to be a lot cheaper when the underlying short-term trend is still against them. At what point should I throw in the towel and take a loss if the general stock market keeps rising? When the resistance around that 50% fibonacci and 50 day moving average is taken out and held over a weekend thru a Monday?

The above, way too busy, weekly chart shows the $SPX about to run into a tonne of resistance. Once again, can it fight thru and what criteria (price, time, volume, etc) for broken resistance should I use?

I've been watching the 30-year treasury yield hoping it will give a good signal when the panic stock market selling has concluded (click here for the full analysis). We nearly got a "go long" the stock market signal last week. Should I have reversed my S&P 500 puts position and gone long assuming that the entry criteria were met well enough? In 2008 jumping the gun would have started the trade out with an unsustainable draw-down even though it ultimately would have proved profitable.

Here's another look at long-term treasury yields. Looks like a lot of money is to be made going short. I wonder how expensive TLT puts are?

The US dollar has consistently been moving in the opposite direction of the general stock market (and many other markets), has stopped its rapid rise and retraced 50% of its rise and is at resistance? Will it bounce or will it fall and will it continue to push the S&P 500 in the opposite direction?

FWIW, the monthly US dollar chart looks pretty bearish to me being unable to stay across that trend line.

China took a week off from cratering. Shorting this was certainly a lost opportunity. Will its recovery continue next week? How can the S&P 500 diverge if it can't?

Copper's weekly RSI says the bottom may be in. Time to buy some futures or futures options? Use recent lows as a stop.  

So far, so good with the analysis of whether gold has bottomed (click here). I expect it has, but like most of the charts shown so far it depends on this question: Has the European debt crisis been contained or is it going to trigger another, bigger panic? If its contained then I expect the bottom is in for many markets and were ready for a multi-month rally. If not we should have another major leg down in everything, I expect. Until I get a little more clarity, I expect I'll hold my S&P 500 puts even if the S&P 500 moves a bit higher.

This is going to be, I expect, a very interesting week.

MontyHigh, www.worldofwallstreet.us

European Debt Crisis: No News Is Good News?

In the mainstream financial news its "No News Is Good News".

You might not buy that after reading Harvey Organ's excerpts of Zero-Hedge posts. Sounds pretty grim to this non-expert. Here's some headlines:

You may have noticed that I'm not posting that often. This is because:

• I don't have much to say that I'm not reading in other bigger, out-of-the-mainstream news sources (Jesse, Harvey, King World News, Dave From Denver, ...).
• I've had my head down working til my eyes bleed on my basically a hobby day job. I'm in the rare position of nearly single-handedly coming up with a technical innovation and new product that is the best hope of giving a struggling three-hundred job division a competitive edge. Its amazing fun except when I over-do it.

FWIW, I'm holding $1500 Dec 12 gold futures call options, PHYS and $1300 S&P 500 Dec 11 puts in my trading account, a bunch of PHYS and my core gold miners in my investing account and some gold and silver offshore with GoldMoney.com. I'm not so sure about the S&P 500 puts. Not including taxes I'm up around 20% year-to-date.

MontyHigh, www.worldofwallstreet.us

Interventional Trading, Updated: Bernanke Testifies, S&P500 About To Break Down

It turns out there's a big interventional coming up tomorrow: Bernanke Testifies before a hostile US congress.

Add in that the S&P 500 chart is breaking down.

Add in that my own internal emotional meter is on real fear for the general stock market and US economy even though I don't own US stocks and my day-job (which I don't really need) is secure.

Together I conclude the risk/reward is good for a small, short-term trade betting THEY can push the US stock market up. I just went long ES Dec futures with a nominal value of about 10% of total portfoio value at $1087.75. Will unload around when Bernanke ends his testimony tomorrow. If the move is up strong then I'll hold until near tomorrow's close. Look for an update (for better or worse) after I exit.

This kind of trade would make a lot more sense if it were back-tested. I guess its time to start gathering data for "Bernanke Testifies" days.

MontyHigh, www.worldofwallstreet.us

Update 11:51, Oct 4 - out for a small profit (.2% ish) at $1190.25. I knew that gold was a typical "Bernanke Speaks" interventional but didn't trade it. Gold is down 2.2%. Woulda, coulda, shoulda.

A Look Ahead To Year End: That Debt Ceiling Super Committee Thing's Timetable...

Here's a link to a newspaper article covering the Debt Ceiling supercommittee timetable. Looks like things start really getting hot around Thanksgiving. For me, the rich part is that even if they don't agree on cuts the automatic cuts don't start until Jan 2013 (after the election). I guess that's why they call them "politicians". 

Here's some highlights from the article:

Nov. 23: Deadline for the committee to vote on a plan with $1.5 trillion in deficit reduction.

Dec. 2: Deadline for the committee to submit report and legislative language to the president and Congress.

Dec. 23: Deadline for both houses to vote on the committee bill.

Jan. 15, 2012: Date that the "trigger" leading to $1.2 trillion of future spending cuts goes into effect, if the committee's legislation has not been enacted.

If you are trading you may want to keep this timetable in mind.

MontyHigh, www.worldofwallstreet.us

Be Afraid, Be Very Afraid: Seen This Movie Before?

Seen this chart before?

 30-year treasury yield says its the 2008 crash, all over again [or something worse]. Beats me if it really is, but this is an indicator that something crazy is going on. Hold on tight, because some crazy stuff is happening.

Right now I'm quite heavily leveraged long gold with call options. If support breaks I'll be taking a big loss and running for cover. I'm expecting that at least part of that European flight to safety goes into gold.

On the other hand, my recent post on this chart (click here), says that once that 30 year yield has truly bottomed that an opportunity to go long the general stock market is at hand. I'm waiting for that signal.

MontyHigh, www.worldofwallstreet.us

 

Trading The Gary Biiwii's Most-Valuable Chart

Of all the news letters I receive, Gary Biiwii's is the one I really look forward to every week. I would characterize Biiwii's method as using technical analysis (especially ratio charts) to make macroeconomic assessments and then to invest in individual stocks according.

The following chart of his I consider to be worth, by itself, the subscription price since I started subscribing a couple of years ago. The chart shows the long-term US interest rate trend. While remaining below the moving average the trend is intact. When interest rates approach that EMA the powers-that-be have to put a scare into the stock market to avoid an inflation break-out. When interest rates fall well below that EMA the powers-that-be are free to "juice the system" with money printing. 

Right now we seem to be getting to the point where they are "free to juice". UPDATE: should have said "where have to juice the system to prevent a deflationary collapse". This is pretty remarkable given that at the beginning of this year it was looking like this multi-decade trend was about to change. Let's analyze what happens when conditions are favorable for juicing and see if we can come up with a nice multi-month general US stock market trading system.

The above chart, using a 25% envelope around the 100 month EMA identifies the nine previous occasions where the 30 year interest rate fell a comparable distance from the EMA as the current situation. All of them, except the 1995 case, seem to have occurred during scary economic times.

By far, the worst (furthest from the EMA) was the 2008 global financial crisis. To my eye, the second worst was the 1998 Russian financial crisis. The 1993 recession and 2003 jobless recovery also seemed bad. The others were barely touches of the lower envelope. We can't tell about the current situation, but it looks like its going to be one of those "bad" ones and could be the worst yet. What comes next is going to be really interesting. 

Up until now at least, all of these situations came to an end and things eventually got better than they were at their worst point. So, the questions at this point (now that we are in a such a situation) are:

• How can we determine where the bottom of the situation is? and
• How shall we trade the bounce off the situation bottom low.

Now let's try out a simple trading system based on the idea that when 30-year treasury rates get below that envelope things are really scary and the stock market is near a bottom. The trading system is:

1. Wait until the bottom envelope is touched or pierced - that is until Investors are quite scared and have done a flight to safety. This criteria has been satisfied by the current situation.
   
2. Enter (go long) the SPX (what investors have run away from as too risky) at the close of the first white candle thereafter - that is, after the worst of the fear is over and money has started leaving 30-year treasuries. It could take a few months for this to occur. The longest previous time from the (1) to (2) was for the 1993 panic which was four months. 1998 and 2009 took three months. In the current situation we just satisfied (1) this month (which is just beginning) and now we are waiting to see how big and bad and long this current situation is. I think its a big one and that we are looking at an end of November entrance, but that's just a guess.
3. Exit at the close of two successive red candles - that is, after the relief is over and when fear is starting up again. This takes at least two months (two red candles) but was 28, 29 and 14 months for the three biggest events.

The results this trading system can be seen below. I like the high winning percentage and the fact that the biggest percentage winners were associated with the most drastic events. I'm not real happy with the "Max Loss Before Exit" column. Some of these drawdowns are quite big relative to the trade's ultimate gain. I expect I'll be studying this a lot more closely as the current situation unfolds and will probably put some kind of trade of this type on when conditions seem favorable.

What do you think? Is this current situation going to be a big one? How will you determine when the bottom is in?

MontyHigh, www.worldofwallstreet.us

Here's the spreadsheet: Download 20110910biiwii30yrtlt

Monday Mornings Are For Suckers

Usually no real news occurs over the weekend, but the suckers get all riled up about whatever the current news hype / analysis and react first thing Monday morning. This can be for the general market or for individual stocks/commodities. 

The skilled players are on top of their game, have analyzed the real news before the close on Friday and so don't have to do any trading Monday morning. The very short-term skilled players "fade" the sucker's Monday morning enthusiasm.

This weekend the big hype item is: "Oh oh, these politicians don't look like they can work anything out before the debt ceiling deadline". The result is a pop in the price of gold and a drop in the general stock market. 

The fade seems to be working out this morning. I'm not playing it, but neither did I get psyched out of Friday's short August gold call options hedge trade (click here) either. It remains to be seen whether that trade will make a profit, but at least I didn't panic out when gold was over $1620. 

MontyHigh, www.worldofwallstreet.us

 

What Do They Buy When Its Gasoline's Price That Has Risen?

Here's (click here) an explanation of how the new CPI measurement (that implicitly cuts social security benefits) is supposed to work: "But back to the Gang of Six. You’re probably wondering how they save $500 billion with the stroke of a pen, changing the way CPI is calculated. Easy, as the Washington Post explained a couple of months ago. Instead of saying that consumers will continue to buy apples when the price of apples doubles, you assume they will start buying pears, which are now cheaper than apples."

So my question is [whether the price of gasoline rises because of Peak Oil or money printing (or both)]: what happens when its the price of gas that goes up? I guess they are expected to drive a smaller car (here comes those whole family New Delhi motor scooters to the USA). 

MontyHigh, www.worldofwallstreet.us

Debt Ceiling: What's Coming Up

Here's the money quote from today's Washington Post article (click here):

"The current timeline, according to aides in both parties, would call for the Senate to unveil its bipartisan plan later this week and begin to consider it Saturday. With a week of parliamentary hurdles to clear, the Senate could pass its bill by July 29, leaving the House just four days to consider whether to approve the plan before Aug. 2, when the country would no longer be able to pay its bills."

My cynical summary of the story is something like the following:

• Those country rube Tea-Partiers that just got elected into the house want to change the status quo [COMPLETELY UNACCEPTABLE], SO...
• So, THEY will use their under-control Senate to make sure nothing happens which really changes the status-quo.
• THEY will get THEIR plan worked out in the Senate with no time left for the House to debate or change anything.
• And force those country rubes to either take-it-or-leave it where leaving it will be trumpeted by THEIR MEDIA MONOPOLY as THE END OF WESTERN CIVILIZATION AND ALL WE HOLD DEAR.

I think that about summarizes the plan. I hope what the Senate comes up with has tax increases so that we can really put the house tea-partiers to the test and see whether they have real convictions or whether they are COMPROMISERS like all the rest. 

From a trading perspective that means that "THE RABBIT COMES OUT OF THE HAT" over the weekend of JUL 30 and 31. This means the moment of maximum fear is the close Jul 29. I expect I will have lightened up my trading positions (or hedged them by shorting futures) before the close Jul 29.

What am I missing.  

MontyHigh, www.worldofwallstreet.us

 

Do They Think You Are A Mushroom?

If not, why do they think they can keep you in the dark by dumping headlines like this on you:

When actually the stock market is down when viewed by any objective measure given that the value of a dollar is down more than the amount that the stock market is up:

MontyHigh, www.worldofwallstreet.us

 

Mini-Rant: Who Is The Editor Of The BLS Employement Situation Report?

Here's the lead sentence from the actual government report (emphasis added): "Nonfarm payroll employment was essentially unchanged in June (+18,000), and the unemployment rate was little changed at 9.2 percent, the U.S. Bureau of Labor Statistics reported today."

I wonder who it was that did the final edit on that first sentence. 

I find this to be flat out dishonest as the unemployment rate rose from last month's 9.1 percent. This is while we should be in a "recovery" where the unemployment rate should be falling hard. 

This level of spin discredits everything the governement says (including the numbers). 

MontyHigh, www.worldofwallstreet.us

 

 

Let The Charts Talk: We Are At A Scary Decision Point

Here's a tour of the charts as I see them. My overall impression is that most things (but not the dollar) will probably bounce this week because if "THEY" let them continue to fall the mass psychology may turn quite bearish.

Comments follow each chart.

I see that the USD has bounced to a higher high off that oversold low. This reversal looks like it has quite a ways to go as the situation in Europe looks scarier and scarier. Just look how far it bounced from similar over sold conditions in 2008 and 2009. Even the bounce from the bottom in 2010 targets 78. As the dollar rises all of the "Risk On" securities (stocks, commodities, even gold and silver) have suffered in the past. As you can see in 2008 and 2009 gold suffered (although a lot less than ordinary commodities), but in 2010 it continue to reach all time highs as the dollar bounced off a low. I'm expecting not much downward action in gold, but lots of downward action in other things (including Silver) as the dollar continues to rise. We'll see.

The bank stocks broke down from a falling wedge in may and now have broken down from a flag formation. They are down hard year-to-date. This targets a further fall to $42. The RSI is not yet oversold. Banking stocks are a leading indicator for the economy and overall stock market.

Semiconductors, the other leading sector I follow, is similar to the banks, but has not broken down from the flag yet. Semiconductors are down year-to-date.

The S&P 500 seems to have one of those flag patterns, but its MACD looks oversold and its at the 200 day SMA support. That 200 day support is right at the point where the S&P would be down year-to-date. That would be a very bad message for the mass psychology. "THEY" don't want the masses to panic. This chart makes me guess that a bounce off that 200 day support will occur. If not, things could crash downward.

Brazil, the leading emerging market commodity producer, is at the bottom of a multi-month trading range. A breakdown here would be quite bearish for the global economy.

China has broken down out of a symmetrical triangle but has not yet broken down through horizontal support. 

Junk bonds are falling relative higher quality bonds after having topped in early April 11. That signals a downturn in the economy. Run for cover on a breakdown below 1.10.

On the line chart above, the CCI seems to have broken down thru a head and shoulder's pattern. Right below it is support in the form of the 2008 top. If the dollar keeps rising this will probably break down. Once again we are at the point of a big downturn of all the "Risk On" trades.

The CRB has a similar view of commodities, but the head and shoulder's breakdown is even clearer. 

"THEY" pushed crude oil down and slightly thru its 200 day moving average. "THEY" want it to continue down even though its at nice horizontal support. If it continues to go down then we know that "THEY" want a little panic in the markets if it gets them relief on the inflation front.

I think I'll put my thoughts on precious metals into another post. To summarize, I see the global markets at the point of a major breakdown, but without quite having fallen off the cliff yet. I expect to see a rebound this week because I don't think "THEY" don't want the mass psychology to get too scared. If multiple of the above charts break down next week then we could be looking at another crash type scenario.

FWIW, I'm long unleveraged gold with some silver (PHYS and CEF) with some gold miners (GORO, GOZ.TO, DMM.TO mainly) with some crude oil futures (which were making money) and some S&P 500 call options (which were making money) and some cash. The danger I see could affect all of these and I expect I'll be lightening up ono everything but the gold stocks if we see continued downward motions. I would have lightened up on Friday, but I was tied up during the market close.

Do you see it the way I see it?

MontyHigh, www.worldofwallstreet.us

 

Still Think US Federal Government Treasury Bonds Are Safe?

When you are going for a mortgage for a home, the banker wants to know whether you have the income available to support the monthly payments. The basic metric is Debt / Income. 

What is the equivalent of "income" for the US Federal Government (or any other government for that matter)? Surely not GDP (the income of the whole darn country) because the governement could never capture 100% of GDP for the purpose of supporting debt. Rather, the best proxy for income would be tax receipts.

So, that's the debt / tax receipts ratio. In 2010 total taxes were 2.174 trillion dollars. The total federal debt is 14.351 trillion dollars resulting in a debt / tax receipts ratio of 6.6 to 1. So that's like giving a 660K$ mortgage to a couple with $100K of income. I guess they do that. 

But, the Federal Government is already obligated to pay a fraction of its income (taxes) to support other things. This is analogous to a couple where the Dad has child support payments to make for children from an earlier relationship. Let's say that Social Security and Medicare fit that category (leaving out Defense, Medicaid, food stamps and other spending typically classified as "untouchable"). In 2010 Social Security and Medicare totaled .985 trillion dollars. So a revised debt / discretionary income ratio is now 12 to 1. That's like allowing a couple with a 50K$ year income (after subtracting child care payments) get a mortgage for a 600K$ house. That seems really stupid, especially after what just happened to home mortgages. 

But... Is the US Federal deficit borrowing really being used to purchase a tangible asset like a house which can be foreclosed on? No, it isn't. So, purchasing a US government treasury bond is like giving yet another loan to $100K/year couple who has 50K$/year of childcare obligations for children from an earlier relationship and which already has 600K$ of uncollateralized debt (e.g. credit card debt) even though they are spending 60% (3.55 trillion dollars / 2.174 trillion dollars) more than their income and have shown no intention to change.

Who would do that even for a family member? Do you still think treasury bonds are safe? I'm not a financial expert, so please explain to me how I have this wrong. 

MontyHigh, www.worldofwallstreet.us

 

Best Of The Web: Graham Summers, Why the “Is QE 3 Coming?” Debate is a Moot Point

Here's a link to an eye-opening post by Graham Summers: http://www.zerohedge.com/article/why-%E2%80%9C-qe-3-coming%E2%80%9D-debate-moot-point-pt-2

Here's the quote introducing the graph that follows: "The global derivatives market is completely unregulated and frankly no one knows how big it is. However, we DO know that US commercial banks alone have over $230 TRILLION in notional value derivatives on their balance sheets. Of this $230 trillion, 94%+ sits on just four banks’ balance sheets. They are:"

YES, MARTHA, THE Y-AXIS UNITS ARE TRILLIONS!

The piece is short, the writing and thinking is powerful, there's too much I'd like to quote so read the whole thing. I'll close with the money quote:

"In fact, derivatives based on interest rates represent 84% of ALL derivatives in the US. So with that in mind, it is clear the Fed will be engaging in QE 3 and QE 4 and on and on for as long as it can. The reason? Because if the Fed loses control of the interest rate curve, it could trigger a systemic collapse that is FOUR TIMES as large as that of 2008."

MontyHigh, www.worldofwallstreet.us

 

 

Trading Update: Wind Change Breaks (Pun Intended), I Reckon

Contrary to my expectations, the S&P 500 merely retested the cup and handle break out and the retest has held. The chart is bullish. I closed all my general stock market short positions (ES puts, short AAPL, short RVBD, short copper futures) for small losses.

The silver call options are doing just fine and I have already taken some cash back out (by moving form $36 to $38 call options) once. Around 3:30PM I have to decide whether "Its Different This Time" and Silver can keep going or whether I should bank the profits and wait for another entry. That's going to be a tough one.

Still have some gold miners, the short PSLV/long SBT.UN arbitrage trade and a bunch of cash besides the Silver options.

Just keeping anyone who might be interested up to date. Being a good trader means being good at admitting when you are wrong, I reckon.

MontyHigh, www.worldofwallstreet.us

Wind Is Changing

"But suddenly he stood looking up like some startled woodland animal snuffling a strange air. A light came into his eyes. 'Wind is changing!' he cried, and with that, in a twinkling as it seemed, he and his fellows had vanished into the glooms, never to be seen by any Rider of Rohan again", J.R.R. Tolkien, The Return Of The King.

I think the inflation trade is probably over for a while and that we are in for at least a whiff of deflation. Here's my evidence:

The U.S. dollar has stopped falling and, looking at the first gray box as a similar situation, is set to pop for about a month.

On the macro economic front we have a bunch of "the economy is slowing to a stall or worse" including:

• Q1 GDP growth with a 1 handle (and likely to be revised lower).
• Initial jobless claims now securely back above 400K / week (above the rising unemployment threshold).
• Slow downs in various economic measures (Fed Reserve regional reports, ISM manufacturing, ISM service index, the leading economic indicators, etc.).

Jim Puplava for the last couple of weeks has done a good job of summarizing this. Look for where he gets interviewed in the second half of his "first hour".

Dr. Copper (which has a Phd in economics) is well down off its high and has fallen under the key psychological support of $4/lb. Its LME inventories are rising from a higher low than last year (perhaps signaling over supply).

The Gold / Silver ratio has popped just like it did at the beginning of the 08 crash. A rising gold/silver ratio has, in the past, signaled an end of a speculative boom. Bob Hoye covers this in detail during his recent radio.goldseek.com interview. 

Crude oil and commodities overall have given back most of their year-to-date gains without any clear geopolitical reason for doing so. 

That's my case, we'll see whether its right or not. Putting my money where my mouth is, I have, gone short with smallish positions:

• The S&P 500 with put options.
• AAPL - because it doesn't seem to be outperforming the S&P 500 any more when it used to be a leader and while its leading revenue generator (iPhone) is facing fierce, margin-biting competition from Android phones.
• RVBD - because I just don't believe their technology lead is all that defensible. Cisco will soon come to eat their lunch.
• Copper - because I think it trends strongly and I like the stop at a breakout from that $4.10/lb resistance.

I've got stops for each of these positions and will calmly eat a small loss if the wind hasn't changed (and will add on if it has).

What think ye? Might the wind be changing?

MontyHigh, www.worldofwallstreet.us

Bernanke's Press Conference And Mahatma Ghandhi

Here's a great Ghandi quote: "First they ignore you, then they mock you, then they fight you, then... you win". 

I think the Bernanke press conference means that the Audit The Fed guys have made it to stage 3. Next comes "You win". 

MontyHigh, www.worldofwallstreet.us

 

Macroeconomic Situation: Let The Charts Talk

Just a few on the mainstream markets and commodities and then a little bit more in-depth look at the precious metals situation. I end up by providing the charts on my top mining stock holdings. Some of the charts are quite big and you may need to click thru to seem them in their full resolution.

The general US stock market is looking quite bullish having formed a perfect cup and handle formation that targets another 5% rise. This bullish outlook is representative of what I see across the board for mainstream stocks.

South Africa's stock market in particular, being a resource country, looks quite bullish its cup and handle targeting another 14% rise. I expect I'll try to find a reasonably liquid, leveraged way of playing this.

I guess its not surprising that all of these dollar denominated charts look so bullish given the way the dollar has been falling. As I see it, the dollar can drop another 3% until it reaches major support that will probably be manipulated to hold. The lower trend line says the dollar is dropping around one point a month so we have another couple of months to go before "THEY" seriously have to slow the drop.

As you can see, the US stock market has gone nowhere, year-to-date, when you remove the effects of the falling dollar.

My theory is that "THEY" are intentionally dropping the dollar because the Chinese are keeping their currency pegged to the dollar to keep the flow of jobs and industry from the USA into China. The dropping dollar is intended to cause enough painful inflation in China to force them to allow their currency to rise.

Anyway, the message I get is that the current trend can continue for a few more weeks.

The rise of commodities has slowed for a couple of months but appears set to continue rising. 

Crude oil is representative of commodities in general and had its highest weekly and monthly close since the summer 08 spike. It too looks set to continue to rise.

Copper is the main divergent example that I've found. It looks pretty weak and the break below trend-line and horizontal support, if confirmed on Monday, may be a nice setup for a short to hedge precious metal positions. I wonder how liquid the copper put options are?

On to precious metals.

Something extraordinary is happening with Silver. How long it can continue is anyone's guess. Having faked a top last Monday and having done quite nicely thru a bunch of manipulation this week (options expiration, Bernanke speaks, GDP announcement), I think Silver has further to run. I don't expect whatever happens to be mild so one needs to have a way to play this that minimizes risk.

Gold looks pretty overbought and its RSI is at the level where a mild correction followed by a multi-week consolidation begins. Another case where leveraged positions must be managed to minimize risk.

With a starting point of 8 years ago, gold and silver on this chart have about the same end point and starting point. This means they have risen proportionally by about the same amount (with silver having risen about twice as much as gold). This chart clearly illustrates how badly Silver was crushed (relative to gold) during the financial crisis and how it has now caught back up. I guess this chart argues that Silver might slow down from its parabolic rise and go back to rising approximately twice as fast as gold. 

The above three charts show hold gold has been doing relative to representatives of gold mining costs. In two of the three charts gold has been doing pretty well and has been holding its own in the third. This is bullish fundamentally for gold mining stocks.

Gold miners relative to gold itself are now trading at the bottom of a trading range. This, combined with the relatively bullish $GOLD:$COPPER, $GOLD:$CCI and $GOLD:$WTIC charts suggest that gold miners might start outperforming gold itself.

Gold miners have been frustrating me lately having lagged gold, but the above chart shows that they have survived a retest of their breakout and, if anything, the chart says they are a buy.

Without further comments, here's my top-six mining stock holdings: Gold Resource Corp (GORO), Gold Ore Resources (GOZ.TO), Medusa Mining (MLL.TO), Rio Alta Mining (RIO.V), Dynasty Metals And Mining (DMM.TO), Fortuna Silver (FVI.TO).

I invest in mining stocks on based on the long-term technicals of their underlying fundamentals (metal prices) and on the fundamentals of the individual stocks themselves. I don't use charts much on individual stocks, so you'll see some pretty ugly charts here (among some other pretty ones). 

GORO is my biggest holding by far. I know of no other miner that has the same combination of stock holder friendly management, great rocks and a no-bs intention to pay big dividends.




 

Well, that's the way I see it. The inflation trade is on and its time to party. I expect I'll mainly be holding next week (with profit-taking if they accumulate in the Gold and Silver call options), although I may open trades outside of precious metals in Copper and South Africa.

MontyHigh, www.worldofwallstreet.us

Got 12 Minutes? Federals Reserve Fraud Manipulates Down Treasury Interest Rates

This fast-paced, well-researched, youtube (click here) about how the Federal Reserve is selling put options to suppress long-term treasury interest rates is worth a peek.

The questions at the end about what might/will happen I view as an "exercise for the reader". Let's see if I "get it":

1. Someone is selling put options on long-term treasury bonds.
2. Meanwhile, the treasury is selling way too many bonds. Oversupply causes the price of treasury bonds to fall.
3. The fallen treasury price moves the put options into the money. 
4. Whoever is holding those put options exercises them.
5. Whoever has sold the put options must buy the treasury bonds at an above market price.
6. Whoever has sold the put options loses a lot of money.
7. If that somebody is the Federal Reserve then the Federal Reserve will have to print up the money to buy those treasury bonds at the above market price (and perhaps resell them resulting in a loss that is covered with part of the printed up money). 
8. Printing up money is inflationary which drives up long-term bond interest rates.
9. Rising long-term bond interest rates push down the price of long-term treasury bonds pushing more treasury puts into the money (or further into the money). 
10. Steps 4..9 repeat with escalating inflation (hyperinflation folows)?

So, once again, the Federal Reserve (and the Banksters) are "gaming" the system for short-term results making the system brittle and subject to catastrophic failure either somwhere down the road or sooner should something unexpected stress the system. 

MontyHigh, www.worldofwallstreet.us

 

 

Pre-BiiWii Scan: Let The Charts Talk... [With Quite A SCARE NARIO]

This post captures my macro-economic evaluation based on the charts that took place before looking at Gary Biiwii's weekly news letter (that does the same kind of thing only with a lot more panache). I like to form my own thoughts prior to listening to advice. Gary is quite a bit less of a risk taker than myself so he helps keep me in-line.

I hope to be putting up a separate short-term gold/silver trading post later today and I have another more philosophical "how to play what's going on" piece in mind for sometime after that. 

When I last left off (as I recall), I had concluded:

• The inflation trade is on.
• Something extraordinary is happening with silver. 

This week we'll start with "What's New" and then note what to look for as signals that the jig is up for the inflation trade (that's the SCARE NARIO) and then for confirmations and divergences of the previous conclusions.  

Here's what's new:

Gold and gold stocks have broken out (to the upside) out of triangle consolidation / continuation patterns. Gold broke out of an Ascending triangle pattern and Gold stocks out of a Symmetrical pattern (using Bulkowski's Encyclopedia of chart patterns as my reference). 

For the Gold's Ascending Triangle Bulkowski claims that, in a bull market, the security should reach its measured target 75% of the time. The measured target is around $1570 which is around 6% higher than Friday's closing price. I'm long and strong and hoping to add more call options on a pull back to anywhere near $1450. 

For Gold Stock's Symmetrical Triangle Bulkowski indicates that they should reach their measured target roughly 66% of the time. The target is $660 or roughly 10% higher than Friday's close. I'm already all in in gold (and silver) mining stocks in my IRA (more of an investing account). 

I hope you can find the generousity in your heart, dear reader, to rejoice with me. This change is both bullish for my intermediate term prospects and has managed to get my account values into the green for the first time (year-to-date) and to an all-time high. 

Well, that hopeful note ends as I bring you to this week's SCARE NARIO (start the creepy music). 

 
There is a lot to see in this chart:

• First of all, notice how highly correlated the stock market is to the crude oil price since the bottom in Mar 09. That is similar to crude oil and stocks up until mid-06. I expect that if crude oil continues to rise faster than the stock market that the general stock market will diverge as it did last time (NOTE: Last time it crashed). 
• Second, please notice that cup and handle formation for crude oil from mid-06 to Oct 07. From there crude oil went on a tear to its top in June 08, but stocks topped out as soon as this break out really got going. We have almost the same thing going on now and stocks may well have topped out (see the charts that follow). It seems unlikely to me that history will repeat itself so soon as the "recency bias" affects the mass psychology, including the psychology of the policy makers enough to prevent a repeat. But, I expect some kind of crazy-bad thing to follow soon, probably more of an inflationary recession than a deflationary-smelling crash. The message for me is to stay on my toes ready for a big change and get more liquid (hard because of the illiquid stocks I'm holding in my IRA). 
• Stocks clearly started falling apart after crude oil plateaued for a few months beginning in Oct 07, but gold pretty much tracked crude oil rising a little earlier than crude oil. This kind of plateauing action could start any day now this year, although gold's bullish posture may have it get skipped altogether. All hell broke loose when crude oil finally peaked at the end of June 08 and had that big down week in early July 08. Using the same timing that would be about 9 months from now or around the start of 12 (or end of 11). But, if things are going to repeat something that happened recently, I expect them to repeat sooner. Repeats can happen, but I think they usually happen with shorted timing as the traders anticipate what is next and trade sooner causing it to happen sooner. Say, perhaps mid-summer 11. Look out for a really big down week in crude oil as a "jig is up, crash coming signal". 
• Gold diverged from crude oil shortly in the middle of Q1 08, that is, shortly after the Q4 07 crude oil price rise pause, that is, shortly after crude oil started ramping up again after that pause. This kind of divergence signals another deflationary episode in my book, while having gold continue to track crude oil all the way signals more of an inflation crackup and then inflationary recession type situation. 
• The dollar was falling hard while crude oil was rising in 07 just as it has been falling hard during the recent crude oil raise. Deflation (and stock market crash) was signaled when the dollar stopped falling while crude oil kept rising in Q2 08. Look for the same thing as a signal of deflation again. Look for the dollar to continue to fall while crude oil continues to rise as an inflationary recession signal. 

Now, here's the same chart only looking at the copper action.

In 2008, copper stopped rising and fell into a range trade while crude oil continued in its last gasp rise (choking off the world economy). Here we are right now in another similar situation with copper having moved into a range trade while crude oil continues to ramp. This indicates that the jig may soon be up this time. Look for copper to pop out of the top of that trading ranging if the party is to continue. 

Well, to summarize, the inflation trade is still on, but there are lots of warnings that we are paralleling the 2008 crash, that is:

• the end is near and 
• that what follows will be quite significant (is that how you'd characterize the 2008 crash?) and not pretty at all. 

ACTION: Despite the bullish $HUI and gold charts, I've got to find a way of dancing closer to the door, that is, getting more liquid by either lightening up on gold stocks, holding more names or shifting money from illiquid Jrs to more liquid mid-cap and large-cap gold stocks or holding a combination of large-cap gold-miner options plus gold bullion via GTU or something like it. 

Well, that concludes the SCARE NARIO. Now back to looking at charts that confirm and diverge from the "Inflation is on" theme. I'll leave the "Silver is doing something extraordinary" for the upcoming Gold and Silver Short-Term Trading Plan post I hope to get around to. 

Basically a confirmation, the general stock market is bumping up against its February highs. The fact that the February highs have not been taken out leaves this as less than a full confirmation. If I wanted to take a low-percentage, but high risk to reward position that hedges my precious metals positions I would go short the S&P 500 with a stop of a daily close above $1345. Hmmm...

Divergence: The Bank Stocks and the Semiconductors ordinarily lead the general stock market, but are nowhere near their February highs. 

Confirmation: Biwii's multi-decade big change is upon us graph continues to flirt with a inflation/rising long-term interest rates signal. 

Confirmation: The US dollar chart is plenty ugly having broken down to a 74 handle! I'm kind of expecting a short-term pop back to that RSI trend line as part of an overbought and THEY DON'T WANT A DISORDERLY US DOLLAR fall move short term, but intermediate-term this is a confirmation. 

Confirmation: The $VIX, which is a measure of stock market fear, is at the bottom of its post-crash trading range. By the way, that bottom is quite a bit higher than bottoms seend during the pre-crash "Great Moderation" days. 

Confirmation: The emerging markets are off their recent bottoms with the commodity-producers sporting post-crash highs.  

Confirmation: Junk Bonds, relative to high-quality corporate bonds, show no fear as they threaten to breakout to post-crash highs. 

 

Confirmation: The commodity indexes (especially the oily CRB index) are at post-crash highs. 

Divergence: The agricultural commodities and the base metals (as represented by copper), which had been leading the commodities (and everything else) up out of the crash are nowhere near their February highs. 

Overall, I think the inflation trade is still on, but the SCARE NARIO and the divergences are clear enough that I want to be dancing closer to the door and ready for whatever ugly thing comes next. 

That's the way I see it. How do you see it? It will be real interesting to see how my superior, Gary Biiwii sees it. 

MontyHigh, www.worldofwallstreet.us

 

The Monday Morning Fade...

As I watch the tape, I think I see a tradeable pattern: "The monday morning trade". It goes something like this:

• Individual investors get jazzed up about this or that over the weekend.
• They dive in Monday morning (even pre-market) pushing the markets this way or that. 
• Later that day the markets do some significant "reversion to the mean". 

Today I see it in the S&P 500 and in Copper. Recently I've seen it with uranium stocks.

So, the trade is:

• to see what's hot pre-market on Monday and, 
• when it peaks shortly after the 9:30 open, short it.
• exit around noon. 

Anybody done any empirical studies of this or have any comments?

MontyHigh, www.worldofwallstreet.us

 

Macroeconomic Analysis: Let The Charts Talk... Inflation Trade Is Back On!

So party on, Garth! The jig is not up yet.

The gold/silver ratio went down hard making new lows again today. This is, according to my mentors, the clearest indication that the inflation trade is on. A turn up in this ratio is the thing to watch for prior to a general market downturn. 

The VIX spiked to nearly 30 and is now back down at a nice soothing under 18. Here's a quote from Richard Sipley's Market Indicators on the VIX: "...increase in the index have historically been positive for the short-term performance of the market". 

The S&P looks bullish having found support at the 100 day moving average and having a bullish MACD crossover. The fibonacci numbers say its probably headed back up to retest the recent highs. 

The banking stocks found support where the chart said they should (and right at the first fibonacci number). Its this kind of chart that makes me think there's something to fibonacci numbers. The MACD is right at a bullish crossover. The banks are first up against the wall should we get another round of real deflation so their bouncing off the support helps confirm the inflation story. 

The semi-conductors, which are market leaders similarly bounced off support and have a bullish MACD crossover. 

The S&P continues to consistenly lag the commodities. More confirmation for the "inflation trade". 

Yep, commodities look pretty darn strong. No sign of a trend change here. 

The US dollar is in a little oversold bounce, but the trend looks down and 2009 indicates that it can stay in the lower half of the RSI months more. "THEY" want the dollar to go down (to help pump US exports), but not in a disorderly fashion. 

The US 30-year bond has completed a bounce and seems headed lower. Who wants low-interest, long-term fixed rate bonds while inflation is revving up?

One discordant note is emerging markets which are no longer leading. Brazil for example seems to be consolidating in a trading range. 

Another discordant note is real-estate which isn't partying with the other girls. This chart looks like a short to me with staying above that trend line for a day or two as the stop. 

Gold mining stocks are in a symetric triangle which usually is a continuation pattern. They could break out immediately or go back down to the bottom of the triangle (around 525 or down 10% to where the 200 day moving average might be if it goes there). From there, if the pattern holds, it can be expected to turn up for another attempt to break out of the triangle. It will be very interesting to see if it can break out this week. 

Well, that's the theme I see in the charts: The current post crash march upward of all asset classes is set to continue (for at least a bit longer). 

Best wishes to you and your trading, dear reader.

MontyHigh, www.worldofwallstreet.us

 

 

Short Term Trading Plan: Dump The Uranium, Hunker Down

Here's where I stand:

(1) No silver or gold call options (got stopped out at the worst point on Friday). This doesn't look so dumb now.

(2) 42% long gold stocks, 11% long silver stocks (down from 75% long gold and silver mining stocks). I dumped, at the close yesterday, everything that was not either:

• High-grade ore core position OR
• Just too illiquid to sell.

(3) Around 32% cash.

(4) 5% long S&P 500 ES put options (short the US stock market) whose nominal value greater than (20 by about 1/3.

(5) Short copper futures whose nominal value is about 9% of total portfolio value.

(6) Long CCJ (Uranium miner) call options worth at the close yesterday around 1% of portfolio value - this seemed like an excellent move at the close yesterday, but now, given the further problems at Japanese nuclear reactors this appears to be going to zero.

So, overall I'm in a lot more conservative position than I have been. By far, the bulk of the gold and silver miners I'm holding are high-grade producers than can withstand virtually any down-turn in metal prices.

Here's the latest:

• Japanese stock market crash overnight as the size of the damage (and maybe some nuclear uncertainty/panic) kicks in. 
• World markets down hard. 
• US markets open down hard.
• Gold and silver down hard.
• Gold and silver miners (especially my Junior producers) down harder than gold and silver. 

My short-term trading plan is:

• Take the loss on the CCJ (Uranium Miner) shares. My variant perception that the nuclear power plant situation is "not that bad" and no significant radioactive material will escape was wrong. When you are wrong, admit it, get out and move on.
• Stay in the defensive position and watch the charts, especially on gold, S&P 500 and copper for a bottoming processing. 

Here's a summary of the moves I've made lately:

• Dumped the gold and silver options - not such a dumb move now.
• Went short the S&P 500 quite substantially - this worked out quite well, but it might have been luck.
• Went short copper substantially - is working well.
• Took a smallish loss on the Variant Perception trade on the Japan nuclear situation - oh well.
• Sold a bunch of gold and silver miners close to the start of a seemingly big correction - not bad, could have been done a little earlier and I should have been exiting the illiquid positions as the market became overbought.
• Decided to hold the rest of the gold and silver miners - we'll see whether this is a good decision.

At this point, I'm down quite a bit since the start of the year but am in a reasonably defensive position and don't feel very bad.

Having this down on paper helps me. Perhaps it helps you, dear reader.

MontyHigh, www.worldofwallstreet.us