Graceland Updates 4am-7am

Sep 24, 2009

1. Silver. I received many emails on silver in the past. Many of you bought into $13 and I encouraged that. I bought as well. Many of you have been running your pgens and booking profit as I have. Many built core positions.

2. In the 1970s it was a time for 80-90% silver, 10-20% gold. That was the TIME for silver. Today the ERA for GOLD. Those of you focusing just on silver’s potential REWARD and ignoring the REAL risks are making an error, possibly a fatal one. A couple of you asked me yesterday if silver would soar if gold is locked to the US dollar in a new gold standard.

3. The answer is: NO. Not only would silver not soar, it could crash in a crash WORSE than 1980. That crash could occur so fast you might not be able to exit at anything but a huge loss.

4. Should the US dollar enter a kind of final free-fall, a stealth or outright devaluation against gold, silver could do a moon shot upside as that happens.

5. Be VERY aware that the moonshot would be occurring while the global economy would be doing a nosedive like the US dollar. If you think silver will be soaring in a deflationary environment, however, you may be making a very large error. The US dollar would be falling while the US Central Bank prints US dollars at a semi-hyperinflationary rate to counteract the deflationary freefall in the economy.

6. Hyperinflations, whether full or limited, tend to END with a CRASH. Silver is an industrial item. It tends to rise and fall WITH the stock market. By locking the US dollar to gold, it would signal the end of the hyperinflationary/money printing period, and all asset prices would TANK. ALL except GOLD. The stk mkt would look like a hand grenade went off inside a light bulb. Real estate prices would fare even worse than the stock mkt. Silver would fare no differently than the stk or commodity markets.

7. You may read the writings/rantings of those who say, “no, this time will be different, silver won’t fall down while every other asset price on the planet tanks”. Maybe so. Would I bet any money on THAT? No.

8. This is the bottom line in the metals market: “Gold is MONEY. Silver is a GAME” – Jim Sinclair. The hunt brothers carried around 10,000 silver contracts in the last bull market. Jim carried about 6000. Jim sold at about $35. The hunt brothers lost everything. Jim owned the clearing house where the hunts traded. The hunts bought MORE as Jim sold. When the owner of the music hall locks the doors with you inside, do you turn UP the music, or try to break out of there? Jim asked the hunts to LEAVE, to move their account OUT. THAT should have been (along with a VERTICAL price rise and people lined up in the STREET buying) a signal to the hunts to consider selling, not buying. Why did Jim ask the hunts to leave? I’ll answer that with another question. If YOU were in Jim’s place, and you somehow KNEW the bull mkt was soon to blow up, would YOU want to be RESPONSIBLE for $2 billion in ultra leveraged silver futures on the long side? If a retail commodity or stock brokerage client gets a margin call, and can’t pay, the brokerage is liable to the clearing house for that money. If the brokerage can’t pay, the clearing house is liable to the exchange, in this case the comex, for that money. In 1980 $2 billion was like 10 billion today, or even 20 billion.

9. If you think you have the silver market all figured out, if you want to completely ignore the current warnings of the 2^nd largest silver trader in the world’s last bull market (and the most successful in terms of profits booked)and want to play “I’ve got a guaranteed system to win the silver lotto”, feel free to go ahead. My suggestion, instead, is that you use current strength and in silver, current outperformance by silver against gold, to reduce your silver position and replace that sold with GOLD, with an end goal of around 30% of your total metal holdings in silver, 70% in gold. If you “fly” in this bull mkt with 70% gold and 30% silver on your metals plane, you have massive upside exposure for a silver super spike, while maintaining massive downside protection with gold, the world’s lowest risk investment.

10. You don’t need to hit the 30% marker in the next 10 seconds. The possible hyperinflationary spike hasn’t even started, let alone ended. But if you can’t mentally and emotionally sell any silver now after it just DOULBED from $8 while gold rose 50% from 680, how will you do so when a real super spike occurs?

11. I mention past leaders, both winners and losers, of bull/bear markets because NOTHING EVER CHANGES IN MARKETS. Except the size of the wins and losses, and the names of the players. Embrace the past, study it, try to get into the minds of the players to some extent. Why would the hunts buy more silver as Jim booted their account out? The answer has to be: They weren’t thinking. They were WANTING. Wanting more money.

12. Focus on what the market is OFFERING you, not what you DEMAND out of it. “I need A,B,C” is the first thing an investor says to a financial advisor. The advisor’s next question should be, “how much drawdown can you handle?”

13. For those of you who are traders, there is very good money to be made simply watching the gold to silver ratio. As gold outperforms silver on the downside to a greater and greater extent, you can pyramid out of SOME gold and into silver. Then as silver outperforms, you pyramid out of silver and into gold.

14. Your key indicators are: The stock market and the US dollar. When the stock market appears like it could roll over and head down, while silver has been vastly outperforming gold, that’s a key signal to book profit in silver.

15. Now, at this point I can already “see” some of you metals gamblers making your way to the gambling deck on the metals ship, thinking, “well, I can see the logic here, so maybe what I should be doing right now is SHORTING silver with leverage while BUYING gold with leverage. I’m not against that, but moving from physical silver to gold, or even from long paper silver to less long silver and more long paper gold… is far different from shorting silver and buying gold, both on leverage. In terms of RISK.

16. What if there is only a small reaction in the gold price now, and then the head and shoulders activates, the Dow soars (the MACD on the MONTHLY Dow chart is giving a massive BUY signal right now), the USD tanks instead of rallying, gold leaps up, and silver goes into gap-up mode?

17. What happens is this: The investor who sold SOME silver and bot SOME gold with those proceeds is happy. They make money, but less than they would have with all silver. The leveraged gambler who is caught short silver and long gold may face a stoploss or a very destructive drawdown.

18. Decide what you can HANDLE if your scenario goes all wrong. Every professional metals trader in the world knows the UPSIDE in silver, as does every amateur. They read the same silver writers that you do, and they believe in the same possible upside. Where the rubber meets the road is in terms of understanding and managing the downside.

19. Generally speaking, yesterday felt like a day at the “markets volatility test track”. A large volume hit came into the markets near the end of the day. The Dow spiked to over 9900, then was hammered lower. What appeared to be an upside breakout was turned into a possible downside reversal. It felt like the bankers were roaring around in their volatility cars, almost taunting everyone, with “hey, how does that feel, it’s up we go, or is it down we go?” Just lock yourself into that “I only respond to my pre-set buy and sell points” mode. All else will soon fail you, completely.

20. When everyone becomes bullish or bearish on an item you have a situation of great danger. That is the situation of the stock market right now. The insiders are madly selling and the banksters are telling everyone how wonderful everything is. The sentiment levels on the stock market show there are only 6 bears for every 94 bulls. What that means, generally, is that 94 people are buying from 6 people.

21. Because there are so few bears, by definition those bears must be carrying enough stock to feed all those bulls. Whenever sentiment indicators reach extremes, the odds are 99% that you are in a situation of the rich selling to the poor, relatively speaking. The few feeding the many.

22. I believe what you are seeing now in the US dollar, with only 3% bulls, is a similar situation. The sellers of USD are feeding it to fewer and fewer buyers. Yet price isn’t dropping that fast. This suggests accumulation of dollars by massively strong hands with the ability to buy at vastly lower prices.

23. Does that mean gold has to turn down? No. I see what is coming, and this is just a guess, I see it as a FLIP. The bankers want to jam the US dollar upside, to cause a short covering bail. They would then take over the short positions just in time for the next intermediate leg down on the dollar. Even if they can’t pull that off, it doesn’t matter, because when the dollar does bottom, 76 wont be a disastrous buy point. Like buying gold at 400 on the way down was a VERY good deal for them.

24. Reminder that this is Thursday. Chick Goslin’s “buy oil thurs, sell Friday” gambles have a pretty good track record.

25. Hi ho hi ho it’s into the pgen on the website we go….

Cheers,

Thank-you

Stewart Thomson

Graceland Updates

Sep 25 2009

1. Today’s update is fairly long. I want to give you more detail on my view of the inflation/deflation situation, related to its prime mover, the OTC derivatives. First, something a little lighter: September is winding to a close. We booked massive gold profits in a very short period of time, coming from the 930 surge, but of course the pgen buys were largest at 910, or for some of you, the exact low at 905. I don’t like posting charts in the emails, as many of your emails reject the letter when it has pictures in it. I’ll post this on the website and resend the letter to those of you it bounces to without this. But here we are going into October, the Pgen has systematically booked profit into the highs at 1020-1025, and it is a machine. It can’t “know” that the peak seasonally for gold at this time of the year is the end of Sept.

[To see the chart below, the jpg file must be in the same folder/directory as this document. -FNC]

2. Obviously this is not a “bail, it’s all over!” chart. It’s an oscillator. My suggestion is you use it for your MIND, not for your market ORDERS.

3. What this chart says to me is: “Stewart, the next few weeks, maybe even a month or two, could provide some very nice fills on gold buys. Maybe you’ll put a few USD pucks in the net while you’re at it.”

4. If you look at the JANUARY portion of the chart, you can see that is when gold makes its seasonal HIGH. The kachingo party from 905 to 1025 may be seen as a warmup for the arrival of a Golden Santa.

5. To PAY for this Christmas party requires buying gold at lower prices than whatever the possible Dec/Jan sell points turn out to be. Reloading your pgen buys on weakness with profits from gold you sold into 1025 and potentially from coming USD sells should insure your golden Christmas party is fully paid for. In advance. The gold price chaser is like the giant house mortgage holder. Fuelled by greed and a fantasy that he can DEMAND certain market returns together with a gold price market will salute him and say, “Yes Sir, I’ll get you those returns you want, right away Sir.”

6. Think about the NUMBER ONE statement made by investors and financial advisors alike: “My investment GOALS are..” Translation: “My PRICE DEMANDS are…”

7. “I can’t handle a few thousand points fall on the Dow, I can’t handle a $100 downmove on gold, but I can DEMAND the market gives me the price I want, when I want it. And I demand my investment advisors do that for me too. I demand unlimited upside with no downside.” -99% of investors, who have ZERO respect for: QUEEN PRICE. You can bow to Queen Price now. Or….you can flaunt her requests like 99% of investors do.

8. Which is why 99% of them are complete market bustouts.

9. The price “disrespectors” quickly find that Queen Price has grabbed them by the hair, put their terrified face into the ground, and then it’s “off with the idiot’s financial head.” I personally like the idea of bowing in advance to Queen Price, the idea of maintaining a certain level of respect, which may explain why I still have a head. Question: If Queen Price chops off your head, if you glued it back onto your neck, would that work ?

10. Hyperinflation. Remember Ben Bernanke’s words, “we’re going to make a profit on all these investments”, referring to the worthless OTC derivatives he stuck to the taxpayer, handing the bankers trillions in cash and t-bonds in return.

11. Something struck me about Dr. Berananke’s tone as me made that statement. He seemed very sure. He tends to stammer when he lies, in my opinion. When he made his bizarre “profit on the totally worthless otc derivatives” statement, he seemed very sure of himself, not a liar. He may be correct.

12. Here’s why: Should the next economic downturn occur, shall we say, slightly sooner than the public thinks, should the crisis actually not be over, but only just beginning, Dr. B may be forced to start printing money, even after revaluing gold upwards. I’m talking about serious money printing. Here’s the kicker:

13. In hyperinflationary incidents, the prices of all assets rise, but many FAIL to keep up with the rise in the gold price. Real estate is on the list of FAILURES. So, what the banksters’ lead manager, Dr. Bernanke, may have planned is a reflation of the otc derivatives against the US dollar.

14. If house prices rose to their former highs, or exceeded them, Dr. Bernanke’s prediction of making a profit on the currently completely worthless otc derivatives would come TRUE.

15. The “minor problem” for Joe Public is that the profit would be just a technical profit. In terms of real dollars, that profit could actually a massive loss, trillions of real dollars.

16. Let’s say the average house price is $300,000 in a certain area. Let’s then say the OTC derivatives need a $500,000 house price to come onside. If Dr. Bernanke were able to print enough money to start a general inflation, in time the otc derivatives WOULD come on side, and the taxpayers would make a profit.

17. What Dr. Pinocchio accidentally forgets to mention is that his bosses have ZERO intention of letting the taxpayer make a REAL profit. They want what they’re legally owed for placing their money on the winning side of the trade.

18. If your house price doubled tomorrow morning, but in terms of OUNCES OF GOLD (REAL DOLLARS) to buy that house, it took 10 times more ounces, did the taxpayer win?

19. No. He LOST. Bigtime. This is the plan, I believe, the bankers have for Joe Real Estate Investor and for the holders of the other side of the trade of their otc derivatives. And it is why the fraud accounting was legalized. While the bankers would make a few trillion if the entire system blew up, since gold would rise probably to $100,000 an ounce or higher, that’s a COMMUNIST type play with limited upside.

20. Communists see the financial world as a limited size pot of money. Just as an employee only knows to cut expenses to increase their money, whereas a business owner focuses on revenues. You can only cut costs so far. Revenues, theoretically, can be increased logarithmically and to an unlimited degree.

21. Think about that point carefully, particularly if you ARE a business owner. Most gold analysts are not hardcore business owners. They see the bankers through THEIR eyes, not the eyes of a business owner. Bankers understand the unlimited growth potential that the world’s human beings are capable of producing. There is vastly more money in running a massive ongoing SKIM operation, than a wipeout “gimme it all now” game.

22. The game the bankers are playing with OTC derivatives, and the ongoing game they play with the public, is much like the ‘don’t kill the golden goose” game mainland China’s Gman played with Hong Kong. When mainland China’s govt took over Hong Kong, many panicked. They pictured a pillaging operation. That never happened. A casino is a similar analogy. If the average player loses $10 of every $100 they bet, they may return and lose more than $100 over time. If their $100 “pot” is taken from them in one shot, most will never return to play.

23. If mark to market accounting was utilized today, all banks would shut down tomorrow morning. All YOUR money would be gone. All of it. The stock market would close, because if it opened the price of the Dow would be: ZERO. Tens of trillions in losses, maybe hundreds of trillions, would be announced. Gold could skyrocket to tens of thousands of dollars an ounce in 24hrs, as all business would close. Mass starvation and war would occur immediately.

24. The bankers would have their gold, but that’s all they would have.

25. Today, the net worth of the world outside of the bankers, under mark to market accounting, is probably near zero, and more likely less than zero.

26. This is a boring point but it is key to understanding the OTC derivatives situation: Ben Bernanke is the manager for the current job the bankers want done. That job is to PRETEND to reflate the public’s assets, but the main reflation will be an inflation of the banksters’ assets. Against the public’s assets. Picture your favourite stock falling from the $50 price you paid on MARGIN to a price of $5 very quickly. You now OWE the brokerage money. You don’t have the money. The brokerage liquidates your position. When a stock is sold, money transfers from the account of the buyer to the account of the seller. Let’s say that instead of liquidating you (like the otc derivatives loser), the brokerage says, “we’ll loan you $200,000 to carry your position at 12% a year, take it or leave it, or we take your house and all your possessions.” You take the deal. Over the next 3 years, Dr. Bernanke prints more and more money. The value of the dollar buys less and less. The stock rises back in price to $50, but now $50 only buys what $5 bought before.

27. You lost money. You paid interest, your stock is back to what you paid, but it’s real worth is peanuts.

28. THAT is what the bankers have planned for YOU in the coming years, a reflation of your assets to the old price, but a DEFLATION in terms of REAL WORTH.

29. If something goes wrong with the bankers’ reflation plan, and mark to market accounting is forcibly restored, they still win, if you call holding an underground vault of gold while living in a bunker “winning”. I don’t think that is the win the bankers are seeking…. I suspect President Obama would over ride any attempts to restore such accounting. Regardless, those holding gold are the only winners in ALL scenarios. Once the great reflation is underway, mark to market accounting will likely return, in stages. As it has for eternity, gold again is proving itself as the ultimate investment.

30. Bank stocks, real estate, and perhaps soon bonds, will probably undergo unprecedented dilution and deflation in real terms, for many many years. Some on the fringe edge of the gold community believe the bankers want a massive reduction in global population. They look at starvation and war as the tools the bankers will use to accomplish that goal. Many of the bankers have stated they DO want a major global population reduction of several billion people, not simple as a goal, but as a policy. A real deflation in the net worth of the public is a far simpler tool, one that enriches the bankers without risking life and limb, since for every seller there has to be a buyer.

31. It is a tool that works with TIME. The reason for holding physical gold is primarily in case I’m either wrong or if the bankers make a mistake. If the super-reflation fails (but in theory it can’t as the amt of dollars that can be printed is UNLIMITED), economic armageddon would occur within a 24 hour period from the point of failure, that being via the exact marking to market of hundreds of trillions in otc derivatives.

32. Physical gold, food, fuel. Those would be the only items of any real value until a global barter system got put in place. I would suspect Bin Laden is looking to find a way to trigger a failure to reflate the otc derivatives. Just as a REAL gold standard should have been put in place at the BOTTOM of the gold market, mark to market accounting should have been put in place then. A SUDDEN announcement, an real and true audited marking to market of the otc derivatives NOW, would cause INSTANT destruction of the entire wealth of the non-banking world.

33. The bankers’ reflation “solution” is the boa constrictor approach. As home prices decline in real value, the public will have less children, believing that without a large home, they can’t run a family. Just as an investor grows tired of looking at a stock, they will grow tired of watching their home go down in real value. The “new savings generation” is really the generation of: “I’m a slave to a thousand cuts of asset dilution and slow motion liquidation”.

34. Did you see the news on the California muni bond issue of about $5 billion, paying about 1% interest? A STORM of PUBLIC investors lined up to get their guaranteed 1%. Do you know how totally PATHETIC that is? These same people DEMANDED 20% a year FOREVER in the stock market. Now they are grovelling on their knees for a 1% handout from the Gman.

35. The money matures next spring, and by that time their dollars will have been diluted by the Gman. It will be another booked loss for them, but they’ll once again refuse to face the mirror. I would guess at that point the bankers start instructing the public to buy gold.

36. OK, I seem to have a bit of a handle on producing these technical videos after some “interesting” problems. Sometimes it would take me 3 hours to upload a single 10 minute video as the software seemed to have its own mind. I didn’t like the videos at first, but I do now.

37. I’ll be posting natural gas, silver, and beginning some technical analysis and portfolio allocation instructional videos today.

38. Reminder that oil has fallen TEN DOLLARS from the recent high at 76. If oil falls 15% (it just did), is it a good idea to buy ZERO oil? That seems to be the mindset in the gold community. I see a big lineup of gold bugs at the “I’ll get it cheaper later” door. Maybe so. Or maybe…

39. There is no tomorrow.

See you out there,

Stewart Thomson

Graceland Updates