Graceland Updates 4am-7am
Email: s2p3t4@sympatico.ca
Nov 20 2010
1. For those who didn’t check the Sogen posting on the website last night: Ambrose Pritchard has reported that Sogen, one of the world’s most powerful banks, has laid out a disaster scenario. One that fits with Jim Rogers’ currency crisis forecast, a forecast forgotten by the gold community. Wherever you live, make sure you have taken proper insurance actions. Those who have spent their real estate bargain dollars on commercial and residential “bargains” instead of on farmland may get a real estate education they really didn’t think was possible in the coming 12 months.
2. Sogen lays down an “impossible” ACCELERATION of the US dollar on the downside and an acceleration of the gold price on the upside. That fits with what I see on the gold monthly chart and the US dollar monthly chart. I would give 70% odds to this: Everything the gold community WANTED the Dow to do at Dow 6500, is what the US dollar WILL do in Jan 2010.
3. But let’s talk about today. I like to play with people’s minds. So long as I do it in a good way, you benefit. Because the ideal mental state to make money is a state of MILD CONFUSION. The worst traders in the world are generally those who are SURE of their view. Markets rise and fall on liquidity flows and nothing else. Certain views and perceptions cause money flows to occur, but in the end it is the flow of money from one item to another that determines the bid/ask pricing. (Except of course, with OTC derivatives, where pricing is set to model and then kept secret to help us all).
4. YOU only built a huge factory. What did Mr. Bernanke build? Yet he’s decided that you are too “childish” to know what he is doing with YOUR MONEY. Imagine if you had a stockholders annual meeting and you said, “If I tell you what our financial statements are, you’ll sell your stock, so therefore I’m not telling you. My stock is too important for you to sell”. What what YOU say to THAT guy? Dr. Pinocchio actually said THAT. Dr. Ron Paul is LIVID and now he making some real progress. The BLOB that is government is making some heavyweight enemies that are picking up on what Ron Paul is talking about. What the economists don’t understand while operating their “great debate” over inflation and deflation, whether the fed should raise, lower, whatever, what they don’t understand is that for millions of Americans the bigger issue has nothing to do with inflation or deflation. It’s about FREEDOM. That’s something that comes from the heart. Not the brain. And in a death fight, it is the strength of heart that ultimately determines the victor. Ron Paul isn’t finished. He’s only just starting. And I believe he has a lot more heart than President Obama has brain. The problem for President Obama is that Ron Paul also has a lot of brain. Let’s stay tuned in our ringside seats…
5. I have been knocking the gold price bears. Still, I’ve sold into the gold strength while buying a small USD position into weakness.
6. The daily gold and weekly gold charts have become massively overbought on the RSI in terms of LEVELS.
7. Amateur investors, instead of taking profit into price and indicator level strength, generally tend to either IGNORE it or even buy wildly, but many enter huge trades in the OPPOSITE DIRECTION, which is the classic “calling the top”. Indicators can stay overbought for some period of time, and during that time price can rise substantially, sometimes more than all the price increase that occurred up to the point where RSI went to the overbought position.
8. The reality is that the gold price is exhibiting a small French curve formation from 905. Jim Sinclair calls this a “Rhino Horn”. Mrs. Gold Rhino’s horn, right now, looks like a souvlaki stick loaded with speared gold bears.
9. Click here now to view the Gold Bear Souvlaki Chart
10. One of you reported to me yesterday that you ignored the pgen and tried some “action trades” with a “spread bettor”. You lost heavily. Then you bought all the individual components of the GDXJ with $500,000. That is of course VASTLY BETTER than buying the index itself. Even better still is to take delivery of 30% of those certs and store them with a lawyer and file records with your insurance company and accountant. When you take delivery you don’t stare at the item like you do with an account statement online.
11. I should mention that this sub owns HUNDREDS OF KILOS OF GOLD. Not hundreds of ounces. Hundreds of KILOS. Those of you who are flipping out of MOST of your gold positions trying to TRADE and TIME this market with HUGE CHUNKS of your money should LEARN something from the richer subs.
12. There’s a REASON why they are rich. Phase yourself into gold on weakness and shave off some into strength. If you sold “too much” into the strength, then buy “too much” back into weakness. There is no “average price” that matters, what matters is getting a handle on RASH actions.
13. The rich take rash actions in the markets, yes. But they are not very eager to do it with large percentages of their net worth. Putting 50% of your money into gold at $300 an ounce is not a rash action. Take HUGE risk with a TINY amt of money. COMPOUND what WORKS with larger monies.
14. What WORKS is LAYERING into major asset classes on weakness and phasing out of them with SOME money on strength.
15. The time will come to attack the bond mkt on the buy side. That time is not now. But this is a much different market than other bond market “finales”. While it SEEMS that the fed bond buy program is nearing at end, I personally would not bet MONEY on that EVENT. The smarter strategy is probably the spread trade outlined by Sogen if you “gotta play”.
16. I’ve noted the junk bond market appears could be nearing the end of its party. If the t-bond tanks, junk bonds are DEAD. Sogen outlines the possibility that t-bonds could continue to rise while junk bonds melt. I’d be comfortable with a long t-bonds short junk bonds spread trade. Just as the nasdaq and lower quality stocks blew up “before and more” than the Dow did, the same principle applies to ALL markets. A long Dow short Nasdaq trade worked in 2000. A long gold short gold stocks trade worked in 2008. If you are skinny, you starve to death before somebody fat does, it’s that simple. There is nobody fatter than gold bullion. Here’s a look at the two bond markets, t-bonds and junk. Note the falling RSI highs on the JUNK:
17. Antal Fekete is famous for his “gold basis” theory. I’m more interested in his theory that t-bonds could go vastly HIGHER, even to numbers like 500. Markets move on liquidity. If printed money continues to be pumped into the t-bond faster than it comes out, price goes higher. I THINK the buy bond program is in the process of ending, but I’m not acting in the t-bond market on that thought.
18. If you are going to ATTACK a market item, you want to attack a WEAK opponent. Don’t be like public attempting to beat on gold bullion as their master play. “I’m smarter than 5000 years of history, gold is useless because my Gman says so!” Pick an item that is weak fundamentally. Like junk bonds.
19. Here is the short term silver chart. Silver Very Short Term Chart
20. There is a small head and shoulders pattern I’ve been watching. This fits with the gold French curve as an item that could sell off hard IF it does sell off. Do NOT sell silver NOW because it MIGHT sell off hard. If you didn’t sell INTO the strength, don’t play top caller now. Instead place BUY orders for MORE at lower prices. What if there is NO selloff? What if price soars to 20? Don’t act like the silver BLOB. Act like the silver SCULPTOR.
21. I’m meeting my bank trader friend for lunch today. For new subs, he’s formerly the largest bond trader in Canada and took his masters degree on the Toronto real estate mkt. He’s not exactly bullish on real estate here, to put it mildly. He noted it took 20 years for prices to recover after 1929. Canadians are HOPING what is transpiring with their largest trading partner does not happen to them. It’s fine to hope, so long as you are ALREADY PREPARED for the OPPOSITE of your hopes. My suggestion to the Northern Hopesters: Look at your portfolio. Is there Nortel shrapnel in there? If so, maybe you should stop betting money on what your fellow Nortel investors know can’t happen in real estate, and focus on being prepared for all possibilities.
22. I’ll post part 2 of the gold juniors astroblast video today. I’ll talk about some of the keys to look for to build a “concentration” portfolio of 5 juniors. Then I”ll hold a vote amongst the subs and post the results. I’ll post the vote on the site tomorrow.
23. The dealer I mentioned yesterday has buy orders every $10 down to the 1025 low of the initial neckline pullback. I told him this morning I believe that is the best risk reward play in the market in the world. Buy aggressively into the neckline. Maybe we get there, maybe we don’t.
24. He told me he got into gold in 1999 as an insurance thing. Think about that over the weekend. Think in terms of risk and reward will look after itself!
Cheers
st
Stewart Thomson
Graceland Updates