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

 

Still In The System?

I am, according to Mr. Jim Sinclair's definition:

"Dear CIGAs,

We will expand on this over time, but you are “out of the system” if:

1. Your equities are held in certificate form.

2. You have no Federal retirement funds.

3. You have no CDs and investments in bonds.

4. You have modest money deposited among selected BRICs countries.

5. You store your own precious metals.

6. You have no mortgage obligations.

7. You keep cash on hand for 6 months expenses.

8. You have no consumer debt at all.

9. You have a small hobby farm for protein and veggies outside of where you are living with no mortgage debt, set up green.

10. You have a gas, diesel or electric car with high fuel mileage for the farm.

11. You have a generator with large fuel capacity for the farm.

12. You do not live in a major metropolitan area."

I'm posting this here so I can easily find it later.

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

Jim Sinclair Meeting Report

Last Thursday I attended Jim Sinclair's "private meeting". Here's a photo of about half the audience taken from my position in the Q&A line. I'd guess there were about 2,000 in attendance.

Here's the outline of what happened from my view point:

• Meeting was scheduled from 2:00PM to 5:00PM.
• I arrived at 1:30PM. Sinclair was in sitting the front with a microphone. 20 people were lined up waiting their turn to ask a question.
• The guy sitting next to me said this started at 12:30 and had been going non-stop.
• No change and no breaks until after I got my question in right at 5:00PM (after waiting in line an hour) and nearly missing my train home.
• Who knows how long it continued after I headed for the train station. 
• It only cost $40. I'm convinced the guy is quite sincere in his statements that the purpose for his web site and one of the main activities of his life is to help his readers and stockholders.

I came away with no revelations, but with some real clarifications of how Mr. Sinclair sees things. What follows is my topical synthesis of the individual Q & A notes I took. These are paraphrases of what I heard, not verbatim quotes based on transcribed recordings. In the 10 minutes it takes you to read this you can glean nearly all I got from a 18 hour investment of time. I'm going to put in bold print anything significant that I had not previously gotten from reading Sinclair's web site.

THE SYSTEM:

Q: Who are these people who you describe controlling things and making the decisions about the end-game and manipulating interest rates and prices and the system? Are they shadowy people or groups behind the scenes or the big names you see in the headlines?

A: Its the big names you see in the headlines, Goldman Sachs people, J.P. Morgan...

Q: Is the entire system a ponzi scheme?

A: Its like Sodom and Gomorrah but Sodom and Gomorrah were a lot more fun.

We've fallen deeply as far as morality is concerned. Its unsustainable. There will eventually be a move back to morality. Finance today is a criminal enterprise. I'd be horrified if one of my children were to go into finance.

Q: Will the gap between the rich and the middle-class narrow?

A: The wealth of these insiders is humonguous. I know these people and was their partner. I wouldn't want to be them. They won't stop till they die.

Q: How do we get rid of the banksters?

A: The only way to do this is to shrink their profit margins, but its not going to happen. We are stuck with these guys until they die. You have to protect yourself until then.

Q: The Bankers control the federal reserve. Now they are trying to control China. When are they ever going to lose their grip?

A: They are becoming fat and lazy and although they are geniuses, subsequent generations revert to the mean. They wanted to be billionaires and find they are trillionaires. The Chinese and the Russians won't let them take over their countries. The BRICs will take over. The BRICs execute bankers. What they are doing is unsustainable. They'll never get the one, universal-currency under their control that they seek.

 

NOTE: Over the counter derivatives cannot be cleared because each contract is different.

GEOPOLITICAL:

Q: Is the Bankster controlled west going to attack Iran?

A: War costs big money. Without a real recovery its too hard to do an Iran attack. Its not attractive to them today.

Q: Why is China buying so much gold (100 tonnes/month)?

A: Because they are going to be the ones making the rules.

Q: Saudi Arabia?

A: Its waning. All they do is buy people off.

QE:

NOTE: There is no other tool that QE, so it will continue to be used.

Q: With their currently policies they are risking the entire Federal Reserve system which is the basis for all their influence. Why are they risking it?

A: They (especially Bernanke) don't think QE will go to infinity. The expect a large, sustained increase in business activity that will allow the economy to grow its way out of QE and the rising debt. They (he) are surprised there has not been a robust recovery, but Sinclair does not expect one.

Q: The financial press is talking about the timing for when QE will be rolled back. If they "printed money" has already been blown onf welfare and defnese, how will they pull the money back?

A: Its either more QE or a large, sustained increase in business activity.

Q: QE has been supporting the bond market. When will the bond market break?

A: Its not going to break because QE is going to infinity. You can only break the bond market when its major buyer, the Federal Reserve, stops buying. You can watch the bond market for clues to when QE is waxing and waning.

US DOLLAR:

Q: You've called for the US Dollar to fall but its been rising.

A: The Euro will out-perform the US Dollar because they are already biting the bullet and doing austerity while the USA has gotten close to starting austerity.

Q: How long can the US keep a monopoly with the USD as the means of setting the price of commodities.

A: This is already change and its very important. The monoploy the US dollar has as the means of settling international transactions is crucial to the support and the major fundamental factor for a dropping US dollar is the falling market share it has for the settlement of international transactions.

China plans a century ahead. They aren't going to stop buying gold. They are going from gold being 2% of foreign reserves to 15% of foreign reserves although part of this increase will be due to a rise in the price of gold. 

END-GAME:

NOTE: Gold will balance the central bank balance sheet. To balance the current balance sheet would be a very large number, but before that time liabilities will be written off.

NOTE: The end of this is in the 2020 to 2021 timeframe.

Q: When is the tipping point to the end-game?

A: We have already tipped, but don't stop your life. Instead, be ready to duck. The hyperinflation/collapse is a 3 month event.

Q: Why is the veolcity of money not rising?

A: Confidence in a currency is tied to the value of the currency. When confidence is lost you inflation and a rising velocity of money.

Q: What are the ultimate numbers for gold?

A: Anything above $4500/oz given current debt levels, etc. has gold overvalued and gold is a sale at such a price. Anything under $3100 leaves gold undervalued and a buy.

NOTE: In my life, I have one job left to do. That is notifying CIGAs (my readers) when gold becomes overvalued.

CONFISCACTION:

Q: What about another round of confiscation of gold:

A: Confiscation happen in the 1930s so that they could do QE. They needed the gold and the ability tos et the price of gold to increase the money supply. Today they don't need to confiscate gold to do QE.

Q: What about punitive windfall taxes on gold profits.

A: I can say about taxes because they are taxing everyone.

PAPER VS PHYSICAL GOLD:

NOTE: The change in the paper gold price over the last two weeks (when gold stopped falling) was driven by the physical market.

NOTE: As long as the price of gold is made in the paper markets the supply is unlimited. You can't corner a paper market.

SILVER:

NOTE: Silver will rise, but it isn't a monetary metal.

Q: What will the ultimate gold/silver ratio be?

A: The gold/siver ratio is not predictive. Silver above $50/oz makes me uneasy. I was there when they took down the Hunt brothers, remember?

PHYSICAL GOLD:

NOTE: The managers of storage companies are not saints and the temptation is great. The gold community will see great scandals in the area of physical storage wrong-doing.

Q: Is PSLV (Sprott's Physical Gold Trust) as safe as gold in a safe-deposit box.

A: No. Sprott won't steal it, but no security is as safe as holding physical.

Q: What's your favorite security as a means of holding gold?

A: Central fund of Canada.

Q: What do you make of the Perth Mint for gold storage?

A: The cost of going from unallocated to allocated gold is too high.

Q: Gata claims that the US treasury and too-big-to-fail banks are tyring to suppress the price of gold.

A: Yes, that's their job. Proof of this is huge price drops during times of low liquidity. But the physical market trumps this manipulation. The transition from a manipulatable paper market to the physical market setting the price is underway. The Russian buying of physical gold has and will increase because to the Cyprus situation. Sprott has proved that thhe treasury does not have all its gold.

THE BOTTOM TO RECENTLY FALLING GOLD PRICE:

Q: What's the trigger for the next big up-move for gold?

A: A close about $1613.20.

NOTE: The hedge funds were informed that the fix was in to steal deposits as a way of phasing out QE. The events in Cyprus nullify that. QE is the only tool and gold will rise. Yes, its that simple.

Q: What happened when gold recently rose to $1764 and then fell off down into the $1500s?

A: That was when the funds were gold that the bail outs would go to bail-ins where depositor money would be confiscated as a way of avoiding further QE. That game is over now.

NOTE: If Sinclair goes completely silent... That means something big has happened and its time to sell.

 

GOLD MINING STOCKS:

Q: Do you like the miners?

A: Yes, they are just so oversold and so undervalued. Sinclair especially likes and admires Rob McEwan partly because so much of his personal wealth is invested in his company.

Q: Won't gold mining companies be nationalized?

A: Only if companies are greedy and don't share with governments.

Q: Precious metal stocks... In 2006 Newmonth was a 40$ stock that earned $1.20/share. Now its a 40$ stock that earns 4$ / share. Why has the price moved up with earnings?

A:

• Newmont  should double its dividend and slash its expenses.
• There's been a huge headwind of hedge funds shorting gold miners with the expectiona that costs will rise faster than the price of gold.
• The management of gold companies is completely self-serving. They should be serving the share holder.Management of gold stocks stink.
• Mining is hard, ghosh darn it. Only people who like pain would do it.

TRADING:

• Sell Gold when you see a Rhino horn on the weekly chart. Buy gold when you see a fishing line on the weekly chart.
• Cycles - Sinclair doesn't buy exact cycle theories, but uses them to detect divergences of a market from ordinary seasonal variation as a clue to trend changes.

IRAS:

You must have an exit-plan for 2015. With IRAs you have 3 years at the most, maybe 2 years.

Q: I'm a 59 year old guy. Should I take the tax hit that comes with taking my money out of an IRA, even a physical gold IRA.

A: Sinclair's answer is basically, yes... take the tax hit.

NOTE: Should the government stop being able to do QE, that's when they'll confiscate IRAs, pensions and other retirement savings.

TANZANIAN ROYALTY:

NOTE: I wanted the most gold I could get with no change of a margin call. That's whhy I go into a mining exploartion company. I've got my gold out of North America in Africa. I've helped out the Tanazanian government enough and have shaped the deal with generous sharing of the governement so I don't expect any kind of mine nationalization as there has never been a profitable nationalized mine.

Tanzanian Royalty has four surface project ready to go that are too valuable to give away. Sinclair is striving to get them into production as soon as possible using contract miners. He won't dilute the stock but will find a way to finance the projects using a portion of the produced gold.

Hope you found this helpful,

MontyHigh, www.worldofwallstreet.us

 

Upcoming Gold Interventionals: Lookout For Monday And Tuesday

There's usually a takedown on Gold (and especially Gold stocks) on Monday (download the price history for GLD and GDX from finance.yahoo.com and dump them in a spreadsheet and see for yourself). Its started early this week because the big interventionals are Monday and Tuesday:

• Monday - Bernanke Speaks at the London School Of Economics (can't let gold let him look bad when he speaks).
• Monday - Cyprus is supposedly "saved" (or almost "saved").
• Tuesday - Durable Goods, expect "better than expected" headlines. 
• Tuesday - Cyprus banks supposedly reopen (only you can't take significant money out).

Nothing else significant next week. I'm expecting some under $1600 action next week (scare out the recent gold buyers) with a close above $1600 (as the physical buyers pickup whatever they can get).

What are you expecting?

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Eric Sprott, Do Western Central Banks Have Any Gold Left??? Part II

Best piece of pure gold fundamentals I've seen in months: Eric Sprott, Do Western Central Banks Have Any Gold Left??? Part II

MontyHigh, www.worldofwallstreet.us

 

 

Gold Situation Arguably Worse Than 2008

Here's a weekly chart of the price of gold for this entire bull run to date.

The weekly RSI is now worse (lower) than at any previous point in the bull run and, specifically, worse than the depths to the global financial crisis.

In 2008, gold's RSI made three sub-40 plunges. The price of gold dropped 9.3% from the low of the first plunge to the ultimate weekly low coincident with the third plunge. An equivalent further plunge, if it follows from here, puts gold at $1432. The lesson here: The gold price may have significantly further to drop.

Let's take a look at the current price chart to see how that $1432 fits into the picture.

Green Line: $1432 coincides with very strong support in the form of the 2010 high price of gold. This seems like a very reasonable target that the price of gold could achieve very quickly with the selling that would occur on the price going below recent lows ($1520), BUT...

Blue Rectangles: Gold has been trading in a range since the 2011 highs and if the lows are blown out (sub $1520), the measured target is the low $1300s. Yikes! I need to manage risk so that I don't "blow up" if that happens.

Let's go back to the 2008 situation as a pattern for a reasonably painful 2013 scenario.

Here's a closer look at the three sub-40 weekly RSI lows of 2008. For the purpose of painting a 2013 scenario, I assume that the first RSI low is equivalent to this week's RSI low.

• It took 11 weeks to go from the first sub-40 weekly RSI low to the ultimate low (targeting May 10 2013 for the 2013 lows). LESSON: The pain could go on for quite a while.
• The drop into the first and second RSI lows occurred with high volume. The final drop occurred with low volume. This week's drop occurred with reasonably high volume. LESSON: This may not be the end of the pain.
• Volume seems pretty important judging the strength of post-low RSI bounces. LESSON: Lighten bounce-related trading positions at the end of the first week without higher volume than the previous week.
• Quite a nice bounce occurs eventually. Going out to the equivalent of the end of Nov 2013 we see a 23% price rise from the first low RSI price targeting an end of Nov 2013 equivalent price of $1955/oz. If the gold bull market is intact this is not an unreasonable target. 

Here's the second worst weekly RSI (after the 2008 weekly RSIs). From a Macro Economic / sentiment standpoint it seems closer to the current situation with the stock market hitting new highs after the worst of the Internet bubble crash occurring a year and a half earlier and with unemployment beginning to get better.

Gold arguably was hit in 2004 because systemic risk was deemed to be fading. That seems like the best explanation for the current gold price decline. The sentiment is that the system is no longer at risk.

In 2004, the weekly RSI low marked the 2004 price of gold low with a big run up in the price of gold occurring as inflation picked up in the second half of 2004 (look at the weekly RSI going overbought there). This seems like a likely scenario for 2013, in my opinion.

At this point, my own situation is: Don't invest like I invest. I'm pretty heavily leveraged to the price of gold (with options and junior gold producer stocks) and have taken a pretty big hit. I'm hoping to lighten on an upcoming bounce (which I think is coming) to the point where I can tolerate a gold price dive to $1432 and below and then ride out the rest of 2013 holding most of my options and junior producer gold stocks.

Best wishes to you, dear reader.

MontyHigh, www.worldofwallstreet.us

 

Off-Topic: Elizabeth Warren For President

Hat-Tip to jsmineset.com.

This is off-topic only to the degree that it is "political" and deals with policy, that is, what "should" be questions. It is very much on-topic as far as refining one's world view on the role of the Banksters. Their role is to run things with the G-man and occasionally make a payment to the G-man. Penalties do not go further. They are Too-Big-To-Fail, To-Big-For-Trial and, of-course, Too-Big-To-Jail.

MontyHigh, www.worldofwallstreet.us

 

Home Sick, Here's Two Recs...

Greg Hunter's interviews are usually worth a listen, but this one with Yra Harris has tonnes of little insights that you just won't hear anywhere else, click here. Click thru and give someone like Hunter a donation when you get something of value.

 

I'm always looking for out-of-the-mainstream thinking that ends up being true and significant. This guy Dr. Joseph P. Farrell reaches some conclusions that seem completely off the wall, but I've recently found he looks at data no one else does and he's got a real skill for coming up with speculations from this data that seem worth pondering. I'm going with the short punchy articles and staying away from the "chatty" youtubes. 

MontyHigh, www.worldofwallstreet.us

 

Sir Isaac Newton Screws Up The Gold / Silver Ratio

One often sees things like the following (from this evening's Harvey Organ post):

There's often this implication that, if the greatest scientific genius of all time says the price should be 15.5 oz of silver to buy one oz of gold, then that is the right value and, of course, silver is due out-perform gold by 3 to 1 sometime soon as the ratio reverts to the genius divined value.

Bet you never saw this bit of wikipedia's biography of Sir Isaac:

"As Master of the Mint in 1717 in the "Law of Queen Anne" Newton moved the Pound Sterling de facto from the silver standard to the gold standard by setting the bimetallic relationship between gold coins and the silver penny in favour of gold. This caused silver sterling coin to be melted and shipped out of Britain."

Pretty funny don't you think? Either:

• The world's greatest genius screwed up this one OR
• The world's greatest genius had some kind of hidden agenda that drove his policy setting.

Now, if you could buy an oz of gold with 15.5 oz of silver and all the silver left the country then that price was too high! Apparently you could buy an oz of gold for significantly less that 15.5 oz of silver outside of England. So, Sir Isaac screwed up by having his 15.5 ratio being too high! Silver bulls should be even more jazzed!

Now, this 1717 setting of the rate immediately follows the Spanish Hapsburg empire, funded by a flood of New World precious metals. So, one would guess that this low ratio has something to do with the relative richness of easily accessed New World mines at that time.

So, what the ratio of ore richness now a days. Let's look at underground mine reopeners that are pure gold and pure silver because they previously were uneconomic and now someone thinks they are economic. Thus they represent the marginal cost of producing another oz gold or silver.

Here's the first couple that come to mind:

• Aurcana's shafter mine in USA, TX - measured 8.5 silver oz per USA one (291 g/tonne).
• The ill-fated Metanor Bachelor Lake underground mine - 7.8 g/tonne.

Using these data points and assuming the cost to mine an underground tonne is the roughly the same we get an estimate for the ratio of the marginal cost of producing another oz of gold relative to an oz of silver. That yields a ratio of 37. I think this is a better target ratio for the modern-day gold / silver ratio than Sir Isaac's.

The ratio is currently 53 to 1.  So perhaps there is some more out-performance (say 40%) to look forward to when it comes to silver.

What do you think? This is my first post in a while, but at least its original and has some actual historical and empirical data behind it.

MontyHigh, www.worldofwallstreet.us

P.S.Here's another gold data point (this time a California re-opener): http://www.huffingtonpost.com/2012/12/17/california-molten-gold_n_2318534.html. From the company web site they are targeting 12.7 g/tonne resulting in a gold / silver ratio of 23. Better yet for silver bugs.

My Profile As Sent To Stewart Thompson, Graceland Updates

What follows is an email I wrote to Stewart Thompson, proprietor of the Graceland Updates subscription service.

Covered Call Options For Gold/Silver... Skip If Busy

Stewart, your service is freeing up a lot of my time to do some actually creative and productive engineering. Thanks much. 

At this point my main strategy for 2013 is to hold a bunch of Dec $1500 gold call options (but not so much I can't take a fall to $1432 or lower) and to hold a bunch of gold miners.

Anyway, I'm thinking about using your HSR resistance points to sell gold call options (covered by the Dec gold call options). Might you comment on that as a way of doing short term trading in an upcoming update?

Thought you might like a profile of one of your subscribers (skip if too busy):

• Became a Christian during the 70s Jesus freak days as a teenager. Am now a father of 6 with 3 in college and 2 to go.
• Been an engineer doing satellite communications my entire career at Hughes. Inventor of around 60 patents mainly about making the Internet go faster over satellite. 
• Was team leader over 50 engineers at one point, but that wasn't much fun. Found myself sitting in meetings deciding which problems were worth working on and who should work on them.
• Got a twenty-bagger aggressively trading over the last ten years after my 401K rolled over to an IRA in 2003 and I received a six-figure retention bonus. Started knowing nothing about investing, read dozens of books, thousands of Internet articles, wrote and operated a non-profitable automated trading system, ended up making the big bucks with Jr base metal miners and Jr gold miners mainly between 2007 to 2011. 2011 got that final double using a kicker of gold and silver call options. Much of my learning history is on my website, www.worldofwallstreet.us, that I don't expect you to visit.
• The twenty-bagger is now down to a 10-bagger. I have too high a risk tolerance. 
• After making the big bucks and accumulating much more than enough I discovered that it didn't really change much. Didn't help my marriage, make new friends, help me have "fun", etc. Furthermore, giving big chunks away, while a good thing, was not really very satisfying. I found that what I really wanted to do was write code and create new networking solutions. 
• I am now a full Vice-President, but with no one reporting to me. I wrote every line of code in the drive-train of a new kind of networking router in the last two years. I often spend all day in my office "playing legos" without speaking to another person. I guess it takes all kinds.
• I'm relying on your service to help keep me from turning my ten-bagger back into a five or less bagger and to free up some of the 30+ hours a week I was spending on investing/trading for engineering and family. Your approach and service is a big part of helping me to fulfill my real calling(s). I am still taking complete responsibility for my own investing decisions and do not follow your service blindly.

Warm regards,

MontyHigh, www.worldofwallstreet.us

2013 Gold Options Expiration Calendar

For short-term trading a good thing to keep in mind. I'm posting this here because its not that easy to find and I keep an eye on it. I expect I'll be selling some covered calls this year.

MontyHigh, www.worldofwallstreet.us

Once Again, Is The Gold Bull Market Over? And, What If It Isn't?

First, I don't see any fundamental reason to think the gold bull market is over. Here's the bullish fundamentals that come immediately to mind:

• Nearly global negative real-interest rates - bullish for gold as there is no loss of "interest" from holding the metal.
• Nearly global intentional dilution of the currencies that compete with gold (US dollar, Euro, Japanese Yen, Chinese Yuan...).
• Unpayable government debt and commitments that are often "defaulted" on by inflating the debt away.
• Central bank gold buying.
• No substantial growth in gold-mine production.
• A global financial system that is inherently unstable and could collapse.
• The growing use of gold as the International means of payment for nation-states excommunicated from the Western Banking system (Iran, Libya, Venzuela, etc.).
• A continued falling of mined gold ore-grade with risining mining input costs (oil, steel, labor, government taxes, royalties, etc.).

What am I missing? Has anything fundamentally changed to end the gold bull market?

Of course, its quite possible to misjudge the fundamentals (as I did with base-metals in 2008), so let's take a peek at the monthly gold chart to see if anything has really changed.

Here's some observations:

• The moving averages indicate that the gold bull market has not broken and that the 2011 correction is not as grave as the 2008 financial crisis. Until the 24-moth moving average is broken (at least), there's not strong technical reason to think that the bull-market is broken.
• The 19-month rate of change (top panel) confirms that the 2011 correction is not as significant as the 2008 financial crisis in that the rate of change is higher than the depths of the 2008 financial crisis. The 19-month duration was chosen as the minimum duration that remained above zero thruout the 2008 crisis.
• The 12-month rate-of-change (2nd from top) is similar to the 19-month rate of change in that the 2011 correction is not as severe (still positive) compared to the 2008 crisis.
• The RSI is similar to the moving averages.
• CONCLUSION: The 2011 correction is not as severe as the 2008 global financial crisis and the 2008 crisis did not end the bull market. Therefore, the evidence weighs in favor of the gold bull market not being over.

Now, if its not over what can we expect, going forward? That's where the arrows above come in:

• Red arrows identify years ending with significantly less than double-digit gains (NOTE: years ended with negative growth thruout the bull market and, unless the Banksters pull a fast one over the next week, 2012 will end with positive, but less than double-digit gains.
• Green arrows identify the year-ends following-red arrows. They provide a historical basis for estimating the next year's gold price action if what follows this year-end is similar to what followed the red-arrow year ends. The results were:
  • 2002 - 24.5%, yielding an extrapolated closing price for 2013 of $2,064.
  • 2005 - 18.5%, yielding an extrapolated closing price for 2013 of $1,965.
  • 2009 - 24.0%, yielding an extrapolated closing price for 2013 of $2,056.
•  Gray arrows identify monthly closes which are not end-of-year, but like the current situation are are months ending with clearly less than double-digit year-over-year gains.

The table and graph that follows provides the following year's percentage gain for each monthly ending with the 12-month rate of change significantly less than double-digits.

I've been doing this kind of back-testing of trading systems for years now, and I don't recall ever seeing such a simple system provide 24 consecutive cases of double-digit gains spread over 13 years. This is an example of why I'm so "dialed-in" to precious metals trading/investing. The banksters' manipulation of gold:

• puts extra down-side "short-term" volatility into precious metals prices (take Tues/Wed of this week as an example) and
  
• blocks big one-day up price moves especially when fundamentally bullish events occur,
  
• BUT ends up with a more consistent long-term trend than any other market I've seen.

Of course, any expectation for double-digit future gains depends on the present bull market and its unusual price action continuing. It might be over. Do you think it might be over? Do your own due-diligence.

MontyHigh, www.worldofwallstreet.us

 

Off Topic: Where's The Link? A Christmas Complaint

Here's Drudge's big headline this morning:

Here's the Reuters story Drudge links to (you can just scan this):

The story continues quite a while, but no quote from the Pope covers even one complete sentence.

HERE'S MY COMPLAINT: WHERE IS THE LINK TO THE PRIMARY SOURCE? ALMOST EVERY NEWS STORY IS BASED UPON SOME NEW RELEASE BY SOME PERSON OR ENTERPRISE, BUT THE DARN NEWS MEDIA ALMOST NEVER PROVIDE LINKS TO THE NEWS RELEASE ITSELF. THAT IS, THE NEWS MEDIA ALMOST NEVER LET ANYONE ACTUALLY SPEAK FOR HIMSELF.

For what is worth, here's the link to the Pope's speech (click here). It took me about 10 minutes to google it up. I recommend you read a couple of paragraphs just to get a taste of what you are missing. I'm a Christian, but not a Roman. Still, the Pope's homily is the best christian message I've seen this season that wasn't in a leather-bound book. WHY WON'T THESE NEWS MEDIA GIVE US LINKS TO PRIMARY SOURCES SO WE CAN MAKE UP OUR OWN MINDS ABOUT WHAT PEOPLE ARE SAYING?

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

QE And The Price Of Gold

Hat tip to Harvey Organ and Zero Hedge for the above chart identifying when QE was previously announced in the USA. So, let's use GLD prices as a proxy to see what happens to the price of gold after QE is announced. Click Download 20121212gldqechart for my spreadsheet.

This first chart show what happenned immediately (well the first 60 trading days, roughly 3 months) after the QE announcement:

• 19 days out we see that QE is not a magic elixir for the price of gold with the price of gold falling steadily after the QE1 Treasury purchase (Orange) and the other three QEs staying basic flat.
• By 60 days out (roughly 3 months) only QE1 Mortgage Backed Securities (BLUE) shows any significant price rise. The price is basically flat for the other three cases.
• CONCLUSION 1: Don't expect an immediate jump in the price of gold just because of the QE announcement. 

The second chart shows roughly one year (250 trading days) out. A year out, all three of the QEs that started at least a year in the past show a double-digit rise in the price of gold with two of them showing quite substantial rises (but the two QE1 cover much of the same period of time). Who knows what the future will bring, but my best guess (and best investing judgment) is to expect a double-digit rise in the price of gold about a year from now. This is not investment advice. Do your own due-diligence.

MontyHigh, www.worldofwallstreet.us

P.S., Here's the same chart using the SPY ETF (dividends included) as a proxy for the S&P 500 (US large-cap stocks).

On the surface the results look very similar, but I'd note that BLUE and ORANGE cover basically the same period of time (2009).

P.P.S., Here's the same chart for gold miners (the GDX ETF):

 

Best Of The Web: Brent Cook On The Dismal State Of Gold Miners And Explorers

Here's a pretty valuable piece by Brent Cook if you are looking to Junior gold miners (as I am) for leverage to the price of gold. Be careful out there.

FWIW, I'm mainly concentrating on Junior producers now, with Romarco Minerals (R.TO), Rubicon Minerals and Golden Queen (GQM.TO) as my only advanced explorers. My top Junior produces are Rio Alta (RIO.TO), Semafo (SMF.TO, San Gold (SGR.TO), Troy Resources (TRY.TO), B2Gold (BTO.TO), Oceana Gold (OGC.TO) and New Gold (NGD.TO). Some of these should be classified as mid-cap producers. 

Warm regards,

MontyHigh, www.worldofwallstreet.us

Download 01 Breakaway Civilization with Dr. J

Download Start_ 2012-08-23 11_00_05

Download CPR-RBaker-15Sept12

Download 01 The Zelig of American History,201

 

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

It Can't Happen Here? Can It?

Another saturday hat tip to Harvey Organ:

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

Peak Oil And US Oil Self-Sufficiency: You Don't Have To A Geologist To Smell The BS

Jim Sinclair, the ex-Wall Street aka Mr. Gold: "Right now US self sufficient oil production is pure MOPE first for the incumbent and secondarily to try to buoy markets." NOTE: MOPE is "Management Of Perception Economics".

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

 

Gold: 12 Month Rate Of Change

If you think the gold bull market is intact you might find the next graph encouraging.

Here's some observations:

1. Over the course of this bull market the end-of-month year-over-year rate of change has rarely been negative. CONCLUSION: If the bull market is intact, if you can hold for a year you'll have "made money".
2. The Rate Of Change has only been negative three times and one month later it jumped back to positive. CONCLUSION: Multiple consecutive months of negative year-over-year rate of change might signal the end of the gold bull market. Keep an eye out for this if you are invested in gold.
3. The worst the Rate Of Change has been has been -10%. CONCLUSION: A year-over-year rate of change worse than 10% might signal an end of the gold bull market. Keep an eye out for this if you are invested in gold.
4. The correction from last year's overextended gold run, from a year-over-year rate of change standpoint, is almost as bad as the 2008 price action and could end up worse. CONCLUSION: The gold bull market being intact is not a "sure-thing". Keep an eye on what happens next if you are invested in gold.
5. Green lines capture the one year performance of gold when coming down to a 5% or lower year-over-year rate of change (like it was for May, June, August, October and will probably end up at the end of this month). The table that follows provides those results in tabular format.

I don't know "for sure" that the gold bull-market is intact, but if it is then perhaps now is a good time to "go long". What do you think? This is not financial advice and everyone must take responsibility for their own investing decisions. I am long gold, silver and gold and silver mining stocks.

MontyHigh, www.worldofwallstreet.us

P.S., Here's my take on silver. It has a little bit better peformance in similar situations, but not enough for me to justify its extra volatility. I like gold better than silver right now. 

Gold Interventionals: Option Expiration Tuesday November 27

Bernanke also speaks Tuesday, but its doesn't seem like an important speech. Q3 GDP revision on Thursday.

I like the day after options expiration for entries. That's about when then need to control the price of gold for maximizing bankster gold option writing profits lifts with one last push down to get those who exercised options to dump their gold futures. That's my best guess on why the day after options expiration seems empirically attractive for entry.

MontyHigh, www.worldofwallstreet.us

Best Of The Web: Saturday Harvey... Great Again

Harvey has the best steadily published gold fundamentals commentary I've found. Its always particularly good on Saturdays. Its better than a $300/yr+ newsletter I'm currently subscribed to (but expect not to renew).

You are paying attention aren't you?

That's pretty rich about Austria's gold being gone, don't you think?

MontyHigh, www.worldofwallstreet.us

Off Topic: How Did Genghis Khan Get His Bad Reputation?

Maybe it was with quotes like this: "Man's greatest good fortune is to chase and defeat his enemy, seize his total possessions, leave his married women weeping and wailing, ride his gelding, use his women as a nightshirt and support, gazing upon and kissing their rosy breasts, sucking their lips which are as sweet as the berries of their breasts.",

Hat tip to Bill Bonner,

MontyHigh, www.worldofwallstreet.us

Gold: Why No Price Rise For Over A Year? Let The Mr. Biwii Explain

Here's something worth reading: http://biiwii.com/wordpress/2012/11/22/macro-geek-interlude/

Here's a teaser:

I think this one blog post is worth the price of Mr. Biiwii's annual subscription service NFTRH.

MontyHigh, www.worldofwallstreet.us

Gold: Brazil Central Bank Buys 17 Tonnes Of Gold... Is It Significant?

You can easily google headlines like this:

I saw one Internet commenter question its significance:

Here's my analysis:

• 17 tonnes per month / (2700 tonnes per year / 12 months per year) = 7.5% shift in the global demand/supply balance.
• In 2006, the demand supply balance of lead (pb) shifted 3% when Ivernia's Magellan Lead Mine was closed for environmental reasons. Of course, that was at the height of the pre-crash commodity run-up, but still this indicates that a 3% shift can be quite significant.
• The price of lead quadrupled (see below).
• Brazil's buying alone constitutes twice the impact of that mine closure (provided Brazil continues buying). Of course, other emerging market central banks can be expected to follow Brazil's lead increasing this demand/supply shift.
• I conclude that the Brail Gold buy is quite significant (bullish for gold, of course).

 

Here's another example of a sudden demand/supply shift: The Arabian Spring cuts off Libyan Oil production. The following graph gives us how much oil was cut off:

So, that's a 1.5 mbpd shift in the 85 mbpd global oil market. That's 1.8% shift or roughly half the shift of the closure of the Magellan Lead mine. Here's the oil price impact:

That's something like a 40% shift in the price of oil. A 40% shift in the price of gold targets $2400 gold. The Brazil Central Bank buying shift is four times bigger than the shift from the Arab spring. Yes, I think the Brazillian Central Bank gold buying is significant.

MontyHigh, www.worldofwallstreet.us

Peak Oil And Conspiracy Theory Come Together

This quote brings together two of my favorite topics (note: Steven Chu is the USA Secretary of Energy):

"At that time, David Fridley, an expert on oil economics, worked under Chu. In an interview given in 2009, Fridley claims, "[Chu] was my boss...He knows all about peak oil, but he can't talk about it. If the government announced that peak oil was threatening our economy, Wall Street would crash. He just can't say anything about it." It is interesting to note that Chu based his projections for peak oil on the calculations of Colin Campbell, an expert oil industry geologist, who supposedly based his estimates on the confidential data of the consulting firm Information Handling Services (IHS)... The data and estimates of IHS on the global oil reserves are significantly less than those published in the public domain...
~ Tariel Morrigan, "Peak Energy, Climate Change, and the Collapse of Global Civilization: The Current Peak Oil Crisis""

This from a reader-supplied comment on the recent Tad Patzek post addressing the bogus "Saudi America" headlines you've been reading.

Now, what else of importance do they "know all about" but aren't telling us because it might perturb the status quo?

MontyHigh, www.worldofwallstreet.us

Chart Of The Week: About Due If Gold Bull Market Is Intact

The above weekly chart (click above chart for 1600 pixels of full detail) looks at cases where gold came down from an RSI overbought condition at a bull run high to or thru the RSI 50. It counts the number of months from the high until a new high appears.

There's a green rectangle for each such situation:

• Upper left corner is the high that gold came down from.
• Upper right corner shows the time when the new high was achieved.
• Lower edge gives the low of the correction that follows.

In the beginning of the bull run the highs were not very far above the 30 week moving average and it was 7, 8, 10 and 10 months until the new high appeared.

April 06 and Feb 08 were big affairs with plunges bigger than that of the fall from the Sep 2011 high. They also took a little longer to achieve new highs (16 months and 18 months). That would be Jan 2013 or Mar 2013 if the current correction turns out like those two corrections. So, we are just about due for a move higher in the price of gold if those corrections resemble the current one.

Going a year out from 14 months after those two highs yields price rise from $625 to $910 (46%) and from $990 to $1210 (%) giving target prices for November 2013 of $2490 and $2093 respectively.

Think the gold bull market is still intact and will stay that way another year? I myself don't see anything that has changed. Most importantly, we still have negative interest rates in terms of AAA rated bonds all around the world.

MontyHigh, www.worldofwallstreet.us

 

Off Topic: Rise Of Empire==Loss Of Liberty; Don't Drone Me, Man

From the mostly hard-left web site WhoWhatWhy (click here) a discussion of how the government is watching everything about you and why its legally impossible for find out what they know and even whether you are targeted for assination.

Sure seems like times have changed. Can those older than myself (say 70+) comment on whether the government was this invasive and non-transparent in earlier days?

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

Geopolitical: Meanwhile, Back In The Middle East...

Not directly related to investing, but related enough if you think having a predictive geo-political view of things helps your investing.

Let me know if you have a good out-of-the-mainstream news source that you find useful for understanding the world as it is.

MontyHigh, www.worldofwallstreet.us

Upcoming Gold Interventionals: Look Out For Thursday

Coming up this Thursday two interventionals:

• Bernanke Speaks - "Housing And Mortgage Markets".
• CPI (Consumer Price index).

Gold must not be allowed to hint of monetary debasement on such a day. I'm looking for a 20$ hit.

Wednesday has October retail sales and the producer price index. These could move markets as well.

I expect I'll lighten some in-the-money Dec 2012 gold call options on Tuesday and roll over most of the proceeds into Dec 2013 gold call options (with some capital set aside for "stacking") on Thursday when gold gets pushed down.

This is not financial advice. Do your own due-diligence.

Calculated risk seems to post good previews of upcoming financial news, e.g.

MontyHigh, www.worldofwallstreet.us

Possible Global Game-Changer: Cold Fusion Is Not Just For Bozos Anymore

"Cold Fusion" (aka Low Energy Nuclear Reactions, LENR) is not just for bozos anymore.

Dennis Bushnell, Chief Scientist, NASA Langley Research Center is not a bozo. I particularly found this quote amusing (emphasis added): "several labs have blown up studying LENR and windows have melted, indicating when the conditions are "right" prodigious amounts of energy can be produced and released."

The European Commission is not the home of bozos (start with page 23). Here's the money quote (emphasis added): "ENEA, SRI and NRL have been involved within review programs in the US and in Italy. The main task was to demonstrate, on the basis of signals well above the measurement uncertainties and with a cross check, the existence of the excess of heat production during electrochemical loading of deuterium in palladium cathodes. The target was achieved and the existence of the effect is no longer in doubt.".

If you want to spin up on the latest (with a positive spin), I'd spend 10 minutes on this:

The conspiracy side of me was amused by this bullet:

In general, let me know what you think about this, especially if you know of any good recent "sceptics" posts.

MontyHigh, www.worldofwallstreet.us

 

Gold: More November Seasonals

Yesterday had a 2.2% drop in the price of gold. The chart the follows provides the November seasonals following a largish drop in November.

I see that the two years most like 2012 (2003 and 2005) had quite nice outcomes to the end of the month, end of the year and ok or excellent results to the end of November the following year. 2005 seems most like 2011 with its November being about a year out from the previous seriously overbought condition. Overall, I find the results for 2003 and 2005 encouraging. The averages for all years are also encouraging, especially the gains to the end of the next year's November.

I expect I'll be trying to roll-over my Dec 2012 call options by selling on any price strength and adding Dec 13 call options on any price weakness over the next two weeks. Buying gold with the intention to hold for a year seems attractive here to me with more buying on more price weakness, but this is not a recommendation.

The only year with truly disappointing results is this last year, especially the results to the year that follows. This year is not like 2011 which was correcting violently from a huge overbought situation in August 2011. Still another disappointing lack of price movement up come Nov 2013 will be enough data to make me seriously consider whether the gold bull market is over.

Best wishes to you dear reader and do your own due-diligence and trade smaller than you think is reasonable (check out GracelandUpdates.com),

MontyHigh, www.worldofwallstreet.us

Gold: Any Days Like This One?

 

Here's a simple chart for those who think the Gold bull market is intact:

In the current gold bull run there have been three earlier days like this, where:

• The Weekly RSI came down and touched or penetrated 50 from above AND
• Where the price of gold was lower than it was a year (52 weeks) earlier. I guess that means 2012 so far has been a difficult year for precious metals investors.

In the above chart, green rectangles capture what happened from days like today (according to the above criteria) a year forward. The three occasions are:

• Early january 2005 - commodities and real-estate were stronger for longer.
• May 2007 - the global financial crisis was not yet on the horizon.
• Early April 2009 - just at the bottom of the global financial crisis. 

The table that follows details what happened over the next three weeks (to where my Dec call options expire) and for the following year assuming next year is like the year following one of those similar occasions.

Let's look a little closer at each. The one year outcome for those three prior occasions were pretty impressive (see columns F and G) with little downside (see column K). The action three weeks out from here is a little sketchy (see columns H and I).

Of course the future is uncertain and there are no guarantees that what follows from here will resemble what followed those three earlier occasions.

Best wishes to you dear reader,

MontyHigh, www.worldofwallstreet.us

P.S. Here's the charts detailing the three earlier situations.

Off Topic? A Couple Of Hugh-Hendry Sounds-Bites

Here's that interview with Hugh Hendry, big-time hedge-fund manager, that's created quite a buzz in the gold-community this week:

What caught my attention was quite different from what caught the gold community's attention. It was his self-introduction and his conclusion (click for audio clips):

Hugh Hendry Self-Introduction "If I'm to band around titles then I'm an existentialist and I'm here to tell you that God is dead. I'm sorry about that, but he's dead... that there are no rules and that we're on our own".

Hugh Hendry's Conclusion "I just want to enhance the probability that I make money come what may."

If I could speak to Mr. Hendry man to man (feel free to call), I'd ask him, "Does it really makes sense to devote yourself to accumulating more of what you already have beyond the point of dimished returns"? I'd also ask him if he:

• is really completely sure that God is dead?
• has considered the full range evidence that He exists and that his Son rose from the dead.  
• pondered Pascal's wager and whether he's completely unhedged with the respect to the unlimited risk and completely unexposed to the unlimited reward that come to bear if Christianity is actually true.

Sometimes, Jesus' questions are due more attention than his declarations: "What does it profit a man to gain the whole world and lose his soul?".

The un-ending pursuit of wealth beyond any utility by "the smartest man in the room" may be an example of the wisdom of men that St. Paul is referring to when he says: "For since in the wisdom of God, the world through its wisdom did not come to know God, God was well-pleased through the foolishness of the message preached to save those who believe." and "The foolishness of God is wiser than men" and "God has chosen the foolish tings of the world to shame the wise... that no man may boast before God".

The dismissal of Christianity by the world's best educated, richest, most powerful and celebrated is not because the facts of modern science have falsified Christianity. These people have despised Christianity from the beginning. Their rejection says more about the nature of the best-educated, richest and powerful than it does about whether Christianity is true.

Warm regards to Hugh Hendry and also to you dear reader,

MontyHigh, www.worldofwallstreet.us

 

Gold: Upcoming Interventionals

There are three economic calendar events coming up in the short term that are likely to rise above the presidential election noise level:

• Friday, Oct 26 - Q3 GDP Report - as an political cynic, I expect this to come in "better than expected" and that will be used as an excuse to whack-a-mole gold down further.
• Wednesday, Oct 24 - Federal Reserve FOMC Report - don't fight the FED and don't expect much from gold (except some kind of push-down) when they speak. This will probably be low-profile as they don't want to look like they are trying to influence the election.
• Friday, Nov 2 - despite my sensitivity to recency bias, I expect a repeat of last month with a "better than expected" number. What's the point of being President and head of the executive branch if you can't push an obtuse, arbitrarily defined number in the direction you prefer. Not that anyone opposed to Obama will believe it, but it may help get a few extra leaning Obama supporters to actually show up and vote the following Tuesday.

In addition, Thursday Oct 25 is gold options expiration day. So Friday mornings are where I'm looking to deploy a little more capital if we get a further gold-price decline.

Regards,

MontyHigh, www.worldofwallstreet.us

Gold: More Pattern Matching

Ok, what in this chart does our current situation look like?

As I see it our current situation is:

• Around a year after correction from a major overbought run up.
• A correction starts after a nice recovery run hits horizontal resistance.

April 07 and Feb 09 look like parallels. Let's take a closer look with daily charts.

This correction could be a bigger, more long drawn out thing than I was thinking at the end of my earlier post this weekend (click here). At this point I don't expect to commence buying until we get darn near a $1700 price and then perhaps more when we get down near the mid $1600. And there is no need to rush things until well after the election is over and the "Fiscal Cliff" buzz starts sounding scary.

Longer term (looking at the first graph) from where we are now (3 weeks into the correction):

• April 07 + 3 Weeks To April 08 + 3 weeks saw a roughly 29% price rise targeting a price of gold roughly at $2200 a year out and
• Feb 09 + 3 weeks To Feb 10 + 3 weeks also saw a roughly 29% price rise again targeting a price of gold at $2200 a year out.

This makes me want to think longer term than just 4 months out.

Warm regard after posting rather heavily this weekend (too much time on my hands for the first time in a while).

MontyHigh, www.worldofwallstreet.us

Off Topic: Want A Genuine Encounter With God?

If so, try this:

1. Find a quiet place and time.
2. Read this softly out loud: "Behold I stand at the door and knock. If anyone hears My voice, I will come into him and dine with him and he with Me. ", Rev 3:20. 
3. Say softly out loud something like this as sincerely as you can: "Jesus, I want to know if you are real. I'm opening the door and asking you to enter my life and make yourself known to me."
4. Wait about 60 seconds and see if you sense anything.
5. Repeat about once a day for a week or two.
6. Report back to me on what you experience, both during this activity and thruout the week.

Here's what I experienced at a crisis point in my life when I tried something similar:

Best wishes,

MontyHigh, www.worldofwallstreet.us

P.S., really... let me know what you experience. I can take no matter what you find.

Download 20121021_myfirstencounterwiththesupernatural

 

Gold: Want To Understand How It Really Works? Listen To An Insider

In this recent post I asserted: "There are two ways (at least) of thinking about the growing mountains of unservicable debt (government and household) and the printing and injection of money into the too-big-to-fail banking system:

1. The banking system is in trouble and the Banksters are going to blow up soon. This is the mainstream GATA view as I understand it espoused by Bill Murphy and others.
2. The Banksters are still in control and are getting stronger concentrating and centrailizing power as more and more of the world becomes debt slaves and the debt slaves become further and further enslaved with debt. This is the view, as best I understand of Catherine Austin Fitts and Steward Thopson of Graceland Updates (my favorite subscription service).

I don't like the second view, but I think it best models the current situation. Leave me a comment summarizing your view and the data and thinking that supports it. "

Its pretty clear that I left out Jim Sinclair, the true heavy-weight of the gold community, as a proponent of view 2. He is the son of Burt Seligman (Jesse Livermore's partner), was the biggest player in the 1970s gold run and is the only true Wall Street "insider" who is speaking frankly to the gold community.

I find that his most penetrating and useful writings are quite dense and hard to understand. Still, I find that this recent Sinclair post is worth spending some time trying to decode if you have significant gold-related holdings.

Here's an example of the dense but useful writing: "I owned a metals dealer here and in London. I made a cash market for gold. I know about what I speak. There might be outside of the gold banks less than five people who understand the big short that is always being screamed about by the so called gold experts, and COT is a crock."

I had to break the underlined sentence down as follows:

• "There might be outside of the gold banks less than five people who understand the" == "Nobody understands"
• "the big short that is always being screamed about by the so called gold experts" == The big commercial (Bankster) short position in the COMEX gold futures commitment of traders report.
• "that is always being screamed about by the so called gold experts" == other gold community gurus believe this is a naked short position and that when the price of gold rises the Banksters will go bankrupt. Those gurus think this naked short position is used to suppress the price of gold.
• "and the COT is a crock" - thinking that the commitment of traders report accurately conveys what the banksters are doing and holding is completely wrong.

You'll have to read, study and decode the rest to figure out why Sinclair claims its wrong. I think that's worth my time.

Best wishes,

MontyHigh, www.worldofwallstreet.us

Did Adrian Douglas Of Market-Force-Analysis Get A Margin Call?

This is a scary post as the markets are dangerous and there's no telling where lightning will strike.

"Trade smaller than you think is reasonable. " and "It is a super crisis", Stewart Thomson.

"Do you see a man who is wise in his own eyes? There is more hope for a fool than for him.", Prov 26:12.

"A man who hardens his neck after much reproof will suddenly be broken beyond remedy.", Prov 29:1.

Adrian Douglas used to post all the time on GATA allied web sites. For example, click here, and look at the "all time great" published article trend:

• 2008 - 12 articles.
• 2009 - 19 articles.
• 2010 - 26 articles.
• 2011 - 4 articles.
• 2012 - just 1 article so far and that is from February.

The February 12, 2012 article concludes with: "The potential to turn a Junior Explorer into a company with significant resources could multiply the stock value as much as 100 times... This will be the next phase of the precious metals bull market as new equity pours into miners providing them with a flood of new capital that will seek out opportunities to grow the desperate need to increase precious metals.

Fortunes will be made in the coming frenzy as investors scramble to seek out scarce resources.".

I take this as as a "BUY GOLD MINING STOCKS, ESPECIALLY JUNIOR EXPLORERS" call.

The above chart shows that immediately after that last article was published:

• large-cap gold stocks tanked 30% and
• explorers tanked 45% and remain down 30%.

And Adrian Douglas has not been heard from since. Google News draws a complete blank.

Could Adrian be part of the 97% of the gold community that has been wiped out that Stewart Thompson of Graceland Updates (my favorite subscription service) talks about? Not everyone who has been wildly bullish in this 10 year gold bull market has lived to tell.

Its a little ironic that the two winners of Adrian's "Moron Of The Year" award that come to mind are still around and actively publishing:

• Jeffrey Christian - http://www.financialsense.com/financial-sense-newshour/guest-expert/2012/10/10/jeff-christian/gold-stock-performance-to-improve-going-forward

• Jon Nadler - http://www.kitco.com/ind/Nadler/20121019.html.

NOTE TO SELF: Watch "Hitler Gets A Margin Call" one more time. Trade smaller than seems reasonable for there but for the grace of God go I and there's no telling what may visit me.

I am not a market guru and don't trade like I trade. My risk tolerance is too high.

MontyHigh, www.worldofwallstreet.us

Gold Seasonals: Current 4 Month Outlook

Is the Gold bull market intact? I see no reason to think otherwise. There are two ways (at least) of thinking about the growing mountains of unservicable debt (government and household) and the printing and injection of money into the too-big-to-fail banking system:

1. The banking system is in trouble and the Banksters are going to blow up soon. This is the mainstream GATA view as I understand it espoused by Bill Murphy and others.
2. The Banksters are still in control and are getting stronger concentrating and centrailizing power as more and more of the world becomes debt slaves and the debt slaves become further and further enslaved with debt. This is the view, as best I understand of Catherine Austin Fitts and Steward Thopson of Graceland Updates (my favorite subscription service).

I don't like the second view, but I think it best models the current situation. Leave me a comment summarizing your view and the data and thinking that supports it. 

In either case the money-printing resulting in negative interest rates provides a simple fundamental basis for the continued Gold bull market.

First of all, if you don't care for short-term thinking and you are quite confident that the bull market is intact and isn't going to end anytime soon you can take quick peek at columns I and J in the table below and skip the rest of this. Is a 20%ish annual rise compounded from here enough for you? Just continue to buy and hold gold bullion.

I like to look at the short-term action for extra profits and to see whether things are changing as far as the bull market goes. Trees don't grow to the sky and even this gold bull market must eventually come to an end of some kind. I keep core positions in secure physical bullion and trade that fraction of my porfolio that I can tolerate "going to zero".

Regardless of why there is a Gold bull market, here's another post looking at the medium-term outlook for the price of Gold based. Its based only assuming that the current Gold bull market is intact and that past action fom similar situations provides insight into upcoming action.

In this post I look at the price action over the last 10 years from:

• The end of the next to last full week in October - that is, where we were yesterday.
• Four months forward to the end of the next to last full week in February.

When doing this kind of analysis, one must avoid cherry picking data. The start and end dates for this analysis are based on personal, practical matters:

• The start date is based on the fact that currently we've got a bit of price softness and I'm looking for a place to deploy some more capital.
• The end data is based on the idea that there are seasonal highs in the March time frame and I like to play GOLD call options to gain upside leverage and downside limited risk. The March options (which expire in late February) seem like a good trading vehicle as they are reasonably liquid. 

Here's the results in tabular form:

Here's a summary of the results in graphical form looking at what the extrapolated price action would be if the same percentage changes occurred starting with yesterday's closing price.

Here's some observations on the above table and graph:

• Column I, just buying without leverage at this time seems like a good option.
• Column B, buying and holding for the next four months seems like a good option.
• Cell G12 (and column G), there's good reason to expect that the all-time daily close high (around $1900/oz) will be taken out in the next four months. Only three of the last 10 years had percentage gains that would not achieve that if they occurred this year.
• Cells C8, C11, F8, F11 indicate that significant downside action is possible with possible downside price targets of $1549 and $1623. I don't expect this to happen because both of those years featured extravagant volatility which I don't expect in the short term, but this kind of price action is clearly possible. 
• Row 4 provides what happened during a reasonably quiet presidential election. It is the least bullish of the years. An upcoming low in the $1600s and not much upside action over the next four months is definitely possible.
• Rows 5 and 10, there are two years like this year with relatively moderate geopolitical and market volatility and with gold price strength in September and similar weakness at the entry point in time we are considering. I find these years to have the most predictive power regarding what could occur over the next four years. Would a price between $1850 and $2120 near the end of 2013 with a low between now and then of something between $1686 and $1712 be surprising to you?

This analysis leaves me feeling positive and looking to find a trading entrance.

Thank you for your attention. Feel free to leave me a comment regarding whether you find this kind of analysis worthwhile or useless. I find this useful not for "predicting the future" or "making a great call" but rather for visualizing what is possible and reasonably likely. I actually hope that not many readers find this useful as this kind of method gaining popularity would reduce or eliminate its trading utility.

MontyHigh, www.worldofwallstreet.us

Here are the graphs of each of the 10 years in order. I will be refering to them over the next few weeks to compare this year's action to other years. I consider 2005 and 2010 as most like this year, so far.

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

Off-Topic: Someone To Admire In The Political World

Pat Caddell was a key Democratic Party operative, but he's someone who cares about the truth and what's right. Pretty rare. He's mostly slamming the mainstream media's support for Obama in this, but it obviously applies to both parties. Can you find time for at least the first five minutes?

Pat Caddel is my nominee for Catherine Austin Fitts' "Hero Of The Week" Award.

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

 

Sentiment Data Point: Tungsten Gold Bar Eruptions

I don't know what's going to happen with precious metals short term.

I know that technically gold, silver and gold mining stocks are overbought on the daily charts and have been for a while.

Now we are getting the fake tungsten gold bar stories again. Is there a correlation? Is this the mainstream media pulling in the suckers or something?

 

Well, using trends.google.com what do we see? What is the history of Tungsten Gold Bar eruptions?

The first real mention was in 2009. So, here's a gold chart from 2009 on annotated for jumps from zero (or near zero) in the Tungsten / Gold search counts (SEE RED ARROWS). Apparently trends.google.com hasn't caught this week's tungsten eruption.

So, what do you think? Is this current tungsten-gold-bar eruption bullish for the price of gold?

MontyHigh, www.worldofwallstreet.us