Graceland Updates 4am-7am

Oct 19, 2009

1. A number of analysts are looking at oil again. They are putting out long term buys based on the “breakout” to “fresh highs”. Of course, that “breakout” comes after oil has soared 125% from the lows we bought into around $35, while the “fresh buy fantasizers” stood there doing NOTHING except bailing on their oil carcass.

2. The failure to focus on otc derivatives is behind most of the failed analysis in both the mainstream and the gold community. The mainstreamers are engaged in a mass head in the sand action, where if they just pretend a thousand trillions (a quadrillion) of worthless garbage does not exist, it doesn’t! They are just dying for a reason to get back into the stock market and they seriously believe that rising house prices, not rising house sales, is the cure for the all problems in the universe. What is more likely coming to them is an interest rate smackdown with a collapse of the bond market taking centre stage. Meantime, the gold community is focused on the fantasy of a Dow at ZERO with gold at INFINITY. The otc meltdown HAS occurred. The decision was made to fake-account it and an agreement was made with the banksters, the winners of most of the trades totaling a thousand trillion dollars, to pay them off over many years by sucking the money out of the taxpayers rather than shutting down most major corporations in America. The stock market meltdown has occurred. If you didn’t short the dow in the 10,000-14,000 area on the way UP in the bull mkt, don’t waste your time with it now with anything but GAMBLING money. The dow crashed 50% after the Nasdaq crashed 90%. The free money shorting the world’s stock markets game is OVER. While the Dow could go to new lows, it could be a death of a thousand cuts slow motion decline. The big money is made now buying the Dow and China’s market all the way to zero while playing with range pyramids with SMALL money on the shortside. As the US dollar collapse accelerates, the Dow could rise to 20,000 or 30,000 or even higher. An otc derivatives-fuelled markets smackdown has occurred, but what has NOT occurred is a general economy smackdown. That’s coming. What you see now in the economy is like what you saw in the markets after the nasdaq blew up. The Dow took longer to really give up the ghost. Don’t confuse a depression surrounded with money printing as meaning the stk mkt collapses to zero. A depression, yes, but with stk mkt soaring for years while the public takes turns lining up outside closed banks and slitting their wrists at home. I would guess we’re at somewhere around 10%-20% of the economic bear low, in terms of price and time.

3. Each of the MANY more stimulus packages will have less and less economic stimulus, and more and more stimulus on breaking the dollar in price against gold. A lose-lose situation for Joe Blow.

4. I KNOW the price chasing urge is biting at you in oil now. My suggestion is do what it takes to kill that urge. One strategy is to run a small oil short pyramid while running a large oil long pyramid.

5. MAKE SURE THE PRICES OVERLAP. Don’t play supertimer. The SUREST way to insert yourself into a pot of boiling oil is to waste time thinking, “yes oil is overbought so I’ll short it big NOW, then buy it big lower down.” Wrong. The pyramids should overlap, so as oil moves around you are quickly carrying some longs against some shorts. If the dollar tanks “impossibly” lower, oil could soar. Then you are shorting it more and more as you “know” it’s surely got to top any second. Just as most in the gold community were sure it had to bottom any second as it fell from 147 to 110, then to 90, then to 80, then into its coffin at 35 burying most of the writers and oil investors with it. Some of you did the reverse with natural gas recently. Buying huge blocks as it was “sure” to bottom.

6. Use the overlapping buys and shorts to calm your price chasing urges and feelings of terror in price declines. Once you are in a calm state you can focus on applying larger funds.

7. Remember, odds favour any investor will lose money over time consistently. Take a look at the gold top callers in action, once again, right now. I absolutely agree with Jon Nadler’s “keep 10% of assets in gold ALWAYS” statement. But that’s my MINIMUM. Even in a raging bear market in gold, you should still be holding 10% in my view. But HOW that 10% is placed is critical. Mentally, you wont be holding anything if you place it after a huge rise and then it goes down for 20 years. You will give up, totally demoralized. Jon asks why we’re not listening to Dennis Gartman’s top call. Gee, I don’t know, here’s one suggested answer: maybe because IF gold topped now on his cue, if it falls to his 1024 target, YOU are still UP a HUNDRED DOLLARS an ounce at that point on what you bought at 930 WHILE he made his LAST TOP CALL to SELL THERE. There’s a parade of top callers now, as I said there would be. All are focused on the gold tree, not the head and shoulders formation gold forest.. Let alone the OTCD forest. One common theme is “profit taking on short usd positions and long gold positions”. The only profit taking is being done by the banksters by shorting gold against their long physical positions. The fundsters are DEAD on their long USD positions that were price chased after blowing up in the stock market, and now they’re scrambling to get their carry trade going into massive USD weakness. The funds aren’t selling gold in size. The shorts they did put on, I think they put those on around 1048 as gold FELL into there, not as it rose.

8. I posted part 2 of the Gimme The Juniors Now report. Click this link to view it, thanks:

Gimme The Juniors Now Part 2 (Coer D'alene and New Gold)

9. One of the things you will notice in you will notice in that video is I talk about the problems of buying a penny stock that is trading at a high price. If you look at look at $80 a barrel, it starts to stir the price chasing juices, yet also the fear that you won‘t hold in if it falls.

10. If you look a lower priced oil etf or even a general commodity fund (many have oil as THE major component) that is priced much lower, you‘ll find yourself acting more rationally all of a sudden. The urge that ‘I gotta be in now!‘ disappears or at least lessens.

11. As an example the Rogers Intl Commodity Fund (RJI-nyse) shows a near-identical chart pattern to oil, but the price is under $8, not $80. The fact is that it is much easier to buy an item to zero when it is already close to zero. The percentage moves are often the same for a high priced item as a low priced one, but your emotional moves are not.

12. Some say, including Jim Rogers himself, we may be in for a 20 year bull market in commodities. Others say we‘re in for 20 years of recession-depression, so commodities will not really rise. Rogers counters that the money printing means that even if commodity demand falls, the usd meltdown will send commod prices higher.

13. I tend to agree with Jim Rogers, but I think for the average person even MORE important is to keep 90% of your focus on the low odds of commodities going to zero. Great GOBS of money have been missed becase commodities tend to trade more in ranges, rather than rise and rise like stocks. Stocks rise and rise and then either blow up or are bought out. Commodities tend to rise and fall, yet most investors kill themselves trying to turn them into a stock market, hoping for the mega rise.

14. Stay focused on the low risk rhythmic rising and falling of commodities, not on the demand situation. Commodities are in a general rising mode against the US dollar, but all the chart patterns and the debate of whether items like wheat will rise or fall in the short term is really meaningless.

15. Right now, the fundsters are leading the move OUT of the US dollar, after it is FAR into the bear market. The public is starting to join them in their own mini carry trade in the forex markets. Rather than buying hard assets, they are buying the commodity paper currencies. Far less risky than the aussie or the Canadian dollar is: FOOD and COMMODITIES. But the public got BURNT there. They price plopped and bailed when price went down instead of BUYING.

16. I want to quickly review the gold cover again in a few sentences. Repetition is important for learning. There is no question as to whether the banksters can halt the US dollar bear mkt with a gold cover clause. By linking a ratio (and perhaps listing that ratio in the markets as a PRODUCT to trade) of the gold held by the treasury to the rate of M3 or other money supply number, the dollar stops falling. The question isn’t whether the dollar stops falling or not, the question is whether the economy blows up like taking a gold blow torch to a hydrogen balloon, when that cover is put in place, as the otcd margin calls cant be met with printed money and default occurs. My view is the amt of dollars that still need to be printed is way higher than what we have seen to date.

17. Confiscation of gold COULD occur, because the MARKET may decide that the ratio of gold to printed money (and the ratio is against the rate of money printing, not the total dollars, meaning a 5% cover clause allows M3 to grow at 5% a year with no change in the gold PRICE, but a 6% change in M3 would mean gold is valued 1% higher or 1% more gold is bought by the treasury) is not high enough to provide confidence that the gold guaranteeing the debt is enough to convince bond buyers to buy bonds. The immediate target of such a confiscation is the ETF GLD-nyse. A thousand ton snack pack for the Gman.

18. [Technically:] The Rogers fund is overbot on the 60 min chart, the daily chart, and the weekly chart. I will post some 10 and 20 year charts for gold and US dollar on the site in a few mins. The 20 year chart for the dollar looks terrible, and fantastic for gold. The 10 year weekly chart suggests the dollar should have some kind of rally.

19. But that rally is an opportunity to buy gold, buy commodities, not a call to sell gold and commodities now in anything BUT your normal pyramid selling. There is no gold top. There are only gold top callers. If you want to buy US dollars, keep it small and do not forget you are buying an item that will be printed over and over again to cover a thousand trillion dollars in otc derivatives, of which vast sums in the tens of trillions at MINIMUM, and probably hundreds of trillions, are worth zero and in many cases far less than zero. When you get a margin call and FAIL TO PAY and then price turns up, YOU DO NOT OWN THE ITEM ANYMORE. Goldland and mainstreamland is living the fantasy that the losing side of the otc derivatives still own those bets. The losses are booked, but lied about. If the bets come on side, it is the banksters that collect now, just as a blown up commodity position with a broker is not yours anymore after your fail to meet the margin call. If the brokerage decides to take that position (or has to take it) and not liquidate it, any gains that come later are NOT YOURS. This is the same with the otc derivatives. Tens of trillions have been BOOKED as losses between the banksters and losing side of the trade, but not booked for the public to see. The banksters own BOTH sides of those trades now.

Cheers

Stewart Thomson

Graceland Updates