Graceland Updates 4am-7am

May 17, 2010

1. If there was ever a video that comes close to summing up the financial and political “big picture”, this one, sent by one of you, certainly does. The Biggest Picture It’s LONG, and I like short statements rather than long ones, but somebody had to do this….

2. I’ve referred to the battle of the Gold Parabola versus current gold technicals. We might be in a situation like in the late 1970s, where technical indicators like MACD gave sell signals and traders went short, only to find the down side price action short lived while the MACD “impossibly” went to one new buy signal crossover after another, at higher and higher levels.

3. Silver has built a very small head and shoulders top. I called it a “tactical” shortsale into the neckline, which sits around 19.37, but tactical plays are generally “against the box”, meaning against a much larger core long position. The technical target is only 18.87, which is HSR (horizontal support or resistance). My suggestion is that you use this weakness to buy a limited amount of silver in a pyramid formation into this weakness.

4. Unfortunately, nothing comes easily in the markets, except losses. The short term technical situation of the gold market is overbought.

5. You’ve sold into this strength, and are buying it back already. My view is that 21.50 for silver is much like 1033 for gold; once price goes over there, it will mark “the end” for the public. It will seem too expensive and they’ll just watch from the sidelines, telling themselves stories while taking zero action.

6. Instead of screaming “buy me more” as silver crashed into $8, the public screamed “sell me out, it’s going to zero, I know it is!”, and they liquidated. I don’t believe the public is coming back to either gold or silver. This isn’t a bull market about inflation of goods, but one about possible destruction of the financial system and, I believe, the very existence of governments.

7. When a 100% tax rate cannot eliminate a national deficit, never mind the debt, the system is broken and the only “repair” that can work is time, like when a fire crew decides to let a fire burn out because it’s too intense for their tactics to have any effect.

8. The public doesn’t like to face realities like the one where there is no solution to their problems, which is today’s reality; they want to believe the Gman is God, which is what the banksters want the public to believe so they can be milked for eternity.

9. Bear markets end with the public OUT of the market. While I’m a stock market bull in terms of price, I still believe that in 5-10 years, the public will be much more OUT of the market, than they are now, totally out in fact. I’m not a stk mkt bull because I think things are improving, although there is a corporate recovery. I’m probably a bigger financial system bear than the stock market bears are themselves.

10. I believe we have only seen the very tip of the money printing iceberg. The focus to date has been QE, quantitative easing. QE is mainly govt and central bank buying of assets to flood the system with liquidity, with low-interest rate money. There’s a difference between QE and aggressive money printing.

11. QE has opened the door to $1500 and $2000 gold. Maybe $3000. If QE fails, and I believe odds are slightly greater than 50% that it will, the next step is not aggressive money printing. It’s gold revaluation. That is the lock of gold to paper money. If THAT lock fails, aggressive money printing is the next and final step, one that is basically an admission that the problem is out of control, and the helplessness of the Gman will be apparent to all at that point.

12. Serious PANIC would develop in a money printing situation. The standard of living would be dropping catastrophically, and the last thing on Elmer Fudd’s mind would be his stock market investments. He’d be liquidating them to pay bills.

13. Having said that, a revaluation and gold lock, is a major step. The jury is still out on QE, and there is room for a LOT more QE before it can be judged a success or failure.

14. Personally, I think that if QE “succeeds”, it only sets things up for a much bigger crisis down the road, as various national govts will then believe the economic recovery means they can continue to spend and borrow to infinity.

15. If QE “succeeds” we get inflation of goods. That’s gold-positive. If QE fails, we get dollar devaluation of some form. That’s even better for gold.

16. Gold remains the greatest asset to own. What the deflationists don’t understand is that if the quadrillion dollar pile of otc derivatives are marked to market, the financial system closes one second after that marking. There isn’t enough money in the central banks or govt coffers to do the massive amt of QE needed to push otc derivatives contracts back up to levels where they are in the black. There IS enough money to produce trillions in QE to trigger a corporate recovery in profits, and that is exactly what has happened. A corporate profits recovery, and an otc derivatives price recovery, do NOT go hand in hand. The former needed, and got, several trillion dollars. OTC derivatives, including those held by US state and municipal govts, probably total a MINIMUM of $100 trillion globally. Govts can’t produce that level of QE. It’s IMPOSSIBLE.

17. It’s unknown what effect a dollar devaluation/gold revaluation would have on real estate prices, which ultimately determine the pricing of the otc derivatives. My concern is that if institutional money managers begin to feel the renewed push at QE is failing, it could usher in an attack on the bond market. I think talk would emerge about the need for major dollar devaluation and that could fuel a massive stock market rally while the economy deteriorates.

18. The “death spiral” is a falling stock market, falling bond market, and falling dollar, and that leads to market and bank closures. The crisis isn’t over. It’s accelerating, like a stock market decline moving from the Nasdaq to the Dow. The crisis is moving from the private sector to the public sector. I don’t think a death spiral can happen unless institutional managers believe QE has failed, and even then, I think the panic would be more likely out of bonds and the dollar and into stocks as a safe haven, however mad that sounds.

19. The banksters have worked meticulously to move the public into bonds and cash. Really, in the ultimate scheme of things, it is Elmer Fudd Public that will be devalued, because what ultimately matters is who is holding the devalued asset, more than the asset itself. The governments hold paper money DEBT, not CASH, so a devaluation benefits the Gman. The creditors are ones who will suffer, so long as the govts can retain power. To Elmer Fudd in Europe, the Euro is a European problem, not an OTC derivatives problem. To Elmer Fudd in America, it is a European problem, destined never to come to US shores.

20. I did a video report on OIL on the week-end. Oil has fallen from $87 to under $70 in just 2 weeks! That’s a 19% decline! SOME oil must be bought on a 20% decline, but at the same time, it should not be assumed oil will TURN now. The current rate of decline would put oil at ZERO in just 8 more weeks. That isn’t likely to happen. Remember to CLEARLY set the amount of RISK CAPITAL you intend to employ in your oil pgen. The level of aggression you bring to the table will determine where you set the peak of your pgen. If you set it HERE, there’s a “risk” you only get a small bit of oil if this is the bottom. If you are not a consistent winner in the market, then you want to generally take less risk and focus on losing less, not making more. If oil were to decline a further 20% from here, that would put the price at aprox $56. A $70-$56 range pgen is probably a fairly conservative play, PROVIDED you understand

21. Those of you who are “heavy hitters”, who use % declines to allocate capital, and are oil players, need to step up to the oil plate every 10% or 20% down, and more so at each marker down the gridline to zero, in a pgen. We’re down 20% on oil, so all oil players, really, need to get something on the bull oil table here, while expecting substantially lower oil prices to follow your buys in this price area.

22. As the Gold Parabola does battle with the gold technicals, NOW is a great time to keep yourself a little distant from the quote screen. We can’t know how this will be resolved, but we can MANGLE ourselves guessing about it. There is no perfect solution. Put options can offer protection against a steady and aggressive price decline, but less so against a drifting correction. Aggressive profit-booking could have you positioned to take advantage of much lower prices, but what if those lower prices do NOT materialize? What if we go to redline overbought for $200-$300 of higher gold prices from HERE? Then there’s a real danger that investors try jumping back in just in time for a major smackdown.

23. I believe the best way to handle the gold market right now remains taking just enough action to ensure you can mentally and emotionally handle ANY scenario between gold 700 and gold 1400. Now is a great time to view mine reports and do research, because it reduces the emotional intensity. Again, I don’t see GREED in the market, and that suggests to me that the technical overbought situation is more likely to be worked off without any great decline in price.

24. The banksters continue to pile on long Euro positions against the fundsters in what appears to be the “madman trade of the year.” They are also massively long the British Pound. Both bets are against the dollar. When the Euro govts announced their trillion dollar bailout, speculators thought the banksters had blown it, as the euro gave up all its gains in 24 hrs.

25. Again, I want you to focus on OTC derivatives. Yes, the banksters are “adding to a loser” as they buy the euro (dmark?) into weakness. But let’s not forget the “minor detail” of HOW they are paying for their positions….

26. With money from their WINNING OTC derivatives bets against fundsters that Greece would DEFAULT. The trillion dollar bailout did not halt the euro’s decline, but it did cause the otcd bets that Greece would default to blow up.

27. Angela Merkel went from a ranting “euro to zero chicken with no head” to dead silence, as she played lead role in the trillion dollar handoff from taxpayers to banksters, to make sure the banksters got paid. The very LAST THING ON THE PLANET THE BANKSTERS ARE DOING RIGHT NOW IS “SWEATING IT” ON THEIR MASSIVE LONG EURO POSITION.

28. If history is any judge of the future (oh I forgot, I can’t say that, because the Gman has decreed that past performance is not even a POSSIBLE indication of future performance, so therefore the past 5000 years of the history of gold are meaningless according to the gman, but if history has at least a POSSIBILITY of repeating, then please consider this….) it is highly possible that a breakup (or even a non-breakup) of the Euro would feature certain “legacy assets” being handed to the taxpayers to (bag) hold for the “longterm”, while the banksters are left with a new and improved version of the euro/dmark. And I guess the only question I would then have is…

Are You Prepared?

29. I’ll post a video report on the liquidity flows for the major paper currencies on the site.

See you out there on the price grids!

Thanks

Thank-you

Stewart Thomson

Graceland Updates