Graceland Updates 4am-7am

Oct 31, 2009

1. The stock market. Two weeks ago Bloomberg would not quote a single bear. It APPEARED there were NONE. Yet the insiders continued to sell “too early” as the media kept harping on their “error”. Let’s quickly review the action over the past 8 months:

2. As the Dow ploughed into 8000 on the road to 6500, I initiated a buy pyramid while warning that the system was close to shutting down. As my Dow buys came in, my trips to remove assets from the banking system occurred with similar increasing frequency. Not exactly a confidence builder to be buying the Dow while the headlines scream one horror after another and 90% of the gold community is wildly shorting the Dow with leveraged bear funds.

3. Regardless, the beat-down ended on a massive changing of the guard at Dow 6500. The volume was climactic. The cash register soon began ringing as the Dow staged the most powerful rally in about 70 years, while the public stood there in shock. At Dow 9000 the shorts were capitulating en masse, an literal inferno of losses, and I began a Dow short range pyramid, again sensing some sort of mass capitulation. Almost immediately, the RATE of the mkt’s rise slowed to a crawl.

4. It’s important to understand that you WANT the market to turn well before your final planned entry point, because the question becomes: Do you want to be the greatest market timer of all time, or do you just want to lay in a bunch of short positions, and book profit on them? I’ll take the latter. Obviously yesterday was kachingo city for my short positions, and a number of you wrote in blown away that your mood turned from “it can’t fall” to “I can’t count all the money, it’s pouring in!”.

5. I’ve repeatedly said “we’ve had a markets wipeout, not an economic wipeout, that is still to come”. The destruction of CIT group, which thankfully appears to be light on OTCDs, is coming combined with the destruction of the commercial real estate market. Whether you agree or not, I think it’s important to understand my viewpoint that this gold market is about fear, not greed. I listen carefully to those who speak of a 3^rd spec phase, but I don’t need any evidnce for their claims. I believe many gold writers simply HAPPEN to LOVE gold, so their fantasies of a coming bubble in gold with an Alice in Wonderland public happily buying away, well, they have not predicted much, but if they are long, they are correct in action, which is all that matters in the end measure.

6. A gold price at THOUSANDS of dollars an ounce is VERY possible, yet that is not a gold bubble. The implosion of CIT group takes the gold battle OUT of the market and INTO the STREET. Joe Public is about to feel gold in its role of PUNISHER, in full battle mode action.

7. I believe that in time, many gold price prophets will wake up too late to the reality of what gold is, a control mechanism. When a govt and its people lessen the controlling influence of gold, inefficiency grows like wildfire. Picture a thermostat to adjust the temperature in your home. You can turn it up or down. If you act like an idiot and turn it all the way down or all the way up, you will either freeze or boil.

8. The banksters encouraged the govt and the people to turn the gold thermostat off for decades! And the idiots did!!! You see the result out your window. There is only one solution to the crisis: Turning back ON the gold thermostat. The thermostat is the cover ratio, the ratio of gold to money supply.

9. Some writers have laid down possible gold targets based on using various measurements of money supply. They have come up with targets of $30,000 and more. Some have infinite targets. But what they all get wrong is they are using a 100% cover ratio. That’s like turning the thermostat to max and leaving it there. A full cover ratio would send the US dollar to near zero in one second. And global nuclear war would follow one second later. The gold ratio will return, it must return to avoid financial and physical Armageddon. But not a 100% ratio. The ratio involves tying the EXISTING GOLD HELD BUY THE US TREASURY (AND MAYBE OTHER TREASURIES) TO THE PERCENTAGE GROWTH IN THE MONEY SUPPLY. SO IF YOU PRINT 2% MORE DOLLARS, YOU NEED TO EITHER INCREASE THE EXISTING SUPPLY OF GOLD HELD BY THE TREASURY BY 2% OR INCREASE THE GOLD PRICE BY 2%.

10. In practical terms, the dollar will be so mangled, as will all paper currencies, that a price increase in gold alone will not be strong enough of a control mechanism by itself to halt the carnage. I believe it will be necessary to increase the amount of gold held by the treasury. And even if it isn’t needed, I think it will be done. Where will the needed gold come from? Answer: The same people it was sold to at $250-$400 an ounce: The banksters. Only they won’t be taking $400 an ounce for it, will they…

11. Attention systems traders. All things are relative. The banksters maintain vast assets OUTSIDE of the financial markets. The average Joe Blow has his money IN the system. When analysing an item like gold, it’s critical not to place charts and numbers and ratios above PEOPLE. Particularly people who are experts in the field of: Chart Painting. Picture a market as a closed room. Inside are the participants, trading away with their systems on leverage. Then suddenly a hand reaches in with 10 times more money than all the participants and starts selling. Price begins to fall. The banksters have the money to manipulate all gold charts. And they do. If price is near a tendline or a pivot point, they can act with enough volume to push price to giving traders sell or buy signals. And then reverse their actions, destroying those traders.

12. The carry trade began very recently and it began in WEAK HANDS. Margined hands. Leveraged hands. Fundster hands. It began after massive USD price weakness.

13. The GOOD NEWS for YOU is that the entire carry trade is being TRANSFERRED. From weak hands to STRONG hands. YOU don’t want to be buying gold large while funds are doing the same thing. If the funds are betting the dollar will tank, that is not an action you want to engage in. Now the BANKSTERS are taking the short dollar carry trade positions as the fundsters are BLOWN OUT. If you BAIL on a trade, SOMEBODY buys it. If MOST institutions are IN the carry trade, and they have to bail, WHO buys? And how WILLING are they to buy?

14. However high this USD rally goes, it is GOOD NEWS. Because it means the banksters are getting short the USD and doing it MONSTER STYLE. To take on that kind of massive risk means only one thing:

15. GOLD REVALUATION. Notice the talk in the gold community now about worries that the Euro central bank may try to devalue the Euro against the USD?

16. Even some of the public bought into the carry trade as the funds did. They should have PYRAMIDED [multiple small-buy points at weakness down to zero] into it, not plopped [one large buy] in. Now they get to be IN the meat grinder as the banksters work to take the fundster positions for themselves. How would YOU feel if you just bought the stk mkt, after reading this weeks’ Bloomberg “News”?

17. Real estate mkt destruction, CIT group, Stk Mkt 40% overvalued, and now a central bank meeting with ALL major bank CEOs over salaries.

18. Do you think that meeting is really about salaries? I don’t. I think it’s about devaluing the US dollar against gold. The TIMING is PERFECT. “Oh no, the CIT group blowout caught us all by surprise, we have to get the economy started, but it’s not just the US economy, it’s all economies. We’re at risk of trade and currency wars which will only make the problems worse! We’ve got to restart spending, but how? If we lowered all currencies against the value of businesses and assets, that’s the solution, we’re saved, now people will start spending, (the idiots will want ANYTHING but paper money after they realize its on fire!) yes let’s cut the value of all the currencies against gold, because gold is the asset of assets, the one against which all others are truly measured. If gold rises 50%, so does real estate (ok so what if it rises only 20%, what’s a little dilution amongst pals), and the otcds go back in the black and we can use mark to market accounting again (of course we’ll have to arrange a few trillion in payments to the banksters for not doing a repo on the otcd losers, we thank the banksters for their patience which we revalued the otcds back in to the black with the dollar devaluation/gold revaluation. Thank you banksters for helping out by taking the carry trade. For some reason the fundsters sold out on a little price strength and caused the dollar to rise temporarily. These evil fundsters could have killed the recovery if you great banksters hadn’t taken their positions as they bailed!)”

19. I don’t think there will be an official revaluation, but there could be. It would more likely come as a unified general statement mentioning gold indirectly, a statement of the need for assets and companies to be valued generally higher against major currencies as a group.

20. I don’t think the revaluation will work to restart the economy. There will be another “pop”, but there will against [again] be no recovery. Things will slide to ANOTHER new economic low.

21. Then Big Ben will look in the mirror and say, “It’s time for me to be a MAN. It’s time for me to show that deflationary punk who’s boss. I am. Want to play rough? Ok, ok, I’ll play rough. Say hello to my little friend. My Electronic Printing Press. In HyperInflationary Mode! I’ll print the deflationary punk out of existence!” And he WILL. He’ll turn the thing on like a can of raid on an ant.

22. Here’s the kicker. Nobody in the public will want dollars at that point. All central banks will join “Ben the Fireman and hose down the global deflationary fire with their printing press.

23. Think about that point: Nobody will want dollars. Nobody except the banksters, that is. If a new gold cover ratio were to be announced at that point of “maximum firehosing”, whatever entity that held those dollars could see a TREMENDOUS surge in value against asset prices. There would be a deflationary collapse of a semi-hyperinlfationary asset bubble. I’m talking potential actions like silver going from $200 to $20 in 24 hrs while the market is CLOSED. If you aren’t out, you aren’t getting out. Oil from $500 to $50 in 24 hrs.

24. I’m not making any price point predictions, I’m letting you know what kind of VIOLENT price action to expect. Remember Jim Sinclair’s words: 97% of the gold community will not believe him when he says it’s over. In a hyperinflation or semi hyperinflation, calling the top is impossible. It is only called by those on the INSIDE. Those playing with their Elliot Wave and French Curve machines will be stomped on by REAL MEN who leave NOTHING on the table for the next guy.

25. A hyperinflationary bubble is NOT a speculative bubble. It’s a SUPPLY SIDE event. Not a DEMAND event. An increase in supply of worldwide paper currency paper

26. Prediction: the coming bread and suicide lines will be smaller than the lines of price chasers lined up to buy stocks, real estate, and now one paper currency over another. But not that much smaller…

27. If you are playing a semi-hyperinflation in non-gold assets, you will NEVER get out when it turns down. Because there won’t be any turn down. The markets will be TURNED OFF and you’ll get up the next day DEAD. If you think silver took a fall in 1980 that is NOTHING compared to what is coming in a hyperinflationary crash. The banksters have planned all this for decades and have thought every detail through.

28. The time to leave the general commodity assets behind, and hold your fort with only GOLD will be when it gets “crazy”. The public will be totally depressed. Gold will be leaping $100 a day, everyday. They will be selling dollars for food, not for junior gold stocks. A guy in a BREAD LINE is buying junior golds? Junior golds are going to the stratosphere, but not because of some idiot on the bread line reading a drill report which his kids tug at his leg crying “daddy I’m hungry”. Junior Golds are going to the stratophere because of one reason: Big Ben’s Nuclear Powered Printing Press. This is the gold rapture, not the gold party. Those in party mode risk going down for the count along with the public. If Van Eck pulls off an [gold juniors] ETF that survives the system risk bombs that will be going off non-stop, THAT could be sold later to buy yourself a BLOCK of houses in YOUR neighbourhood. I firmly believe this to be LIKELY, not just possible.

29. Some of you have asked if I’ll let you know when you can buy the Van Eck Fund, should it get approved. Of course I will, and I’m asking anyone who hears the news or news of a pending date, to send it to me IMMEDIATELY, and I’ll notify everyone.

30. Would I dump an IRA and buy physical gold with it? No. But if I had no physical now, I’d consider an action to dump 10% of it and buy physical gold with the proceeds of that. That’s a solid insurance policy against the tornado in motion.

31. From today forwards, make sure you hold SOME cash and gold outside of the system. All the time. Don’t flip it when gold has a little price move.

32. Don’t day trade your fire insurance policy during a fire for a quick profit…

33. I’m meeting Sad Sack this morning. For those of you who don’t know, SS is a very good businessman, very progold, passionate about life….and, unfortunately, a market “maniac”. But he’s made SOME improvement. I’m going to try and gauge that improvement this morning. I’m looking into building some contrary opinion proprietary indicators, with some substantial data and indicators based on weekly surveys with a thousand investors and brokers in the public realm. I have two of you in mind that may have a few ideas on this front, both with doctorate degrees in psychiatry. I’m looking towards detailed weekly data surveyors turned into chartable indicators, all designed to produce specific buy and sell signals with percentage allocations of risk capital clearly delineated. Note that the dictionary defines psychiatry as the study of mental disorders. A very interesting question: Is up-price chasing and down-price bailing a mental disorder? I don’t know the answer, I’ll leave that to the doctors.

34. But I do know this: It is definitely a financial disorder…

35. Imagine you have a THOUSAND Sad Sacks in front of you. You are watching their actions, you are following the movement of their MIND on a CHART with indicators like MACD that actually give crossover buy and sell signals. You know these people are total LOSERS in the market. You know their general market positions and their weekly general market actions. This what I’m aiming towards, another notch in our banker-type gun.

36. Stay focused on the gold juniors. When I get back from “mission sad sack” I’ll be posting TWENTY of them on the site that you sent me.

37. I’m going to put together our own Graceland Juniors Index. We’ll do it by poll. We’ll post one stock on the site every day if possible, and you can give it a yes or no vote as to whether it should be in the index. I want to work quickly and I’ll need superman’s help to reload the poll daily and log the results, or at least show me how to do it. The goal is 40 stocks in 40 days. Then we’ll choose the top 10. I may be able to put a link in the letter that takes you right to the poll. I don’t want a 2 thousand stock index. 10 is fine. They will be arithmetically weighted. I don’t like weighting one company over another myself, but I think if you play the juniors passionately it’s CRITICAL that you do that. There would be some kind of maintenance schedule where the index is reviewed.

38. About 90% of you believe gold will trade at $1400 or higher by Dec 31, 2010. If you are correct, and $1400 was my bet in the poll (I really don’t care where it goes as long as it is to either my buy or sell points but 1400 is my guess), I would suggest that the juniors are going to be SPECTACULAR as the dollar MELTS.

39. What I’m hoping to do is to develop the pogen, the portfolio generator, into essentially your personal juniors index generator. I don’t want you to try and do what I do in the mkt. Two people can buy the same item on the same day in the same % and end up with totally difference performance results. What I want to do is supply tactics that work with your personality to maximize YOUR performance in the market by using the same TACTICS I use, not the same buy and sell points. Since I focus on MAJOR MARKETS and SECTORS, odds are astronomically high that if I’m buying oil, for example, then if you are in oil stocks, if I’m correct with my pgen on oil, your oil stocks are likely to do ok. Getting into too much focus on “what about this one” takes me away from where they ALL are going, and when I’m selling oil into strength and you are buying oil stocks into strength because of some story at the company, generally, I WILL WIN AND YOU WILL LOSE. I’m fairly clear about what I’m doing in the major markets, either buying or selling. You KNOW if the gold market is up $30, I’m a seller. PERIOD. If it’s down I’m at least a buyer of SOMETHING. Small price moves mean small buys. PERIOD. That’s a key difference between what I do and the other writers do. A difference that is THE difference between you making good money and losing badly.

40. Subscriber Stormin Gold Norman is working hard on this project right now. Done right, you’ll be able to “rate” your junior stock with various criteria. The pogen will then suggest a WEIGHTING for that stock. You’ll also be able to feed the Graceland Index into that pogen and customize it to YOUR weightings. I’ll keep you posted.

Cheers

Stewart Thomson

Graceland Updates

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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form. Giving clarity of each point and saving valuable reading time.

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