Graceland Updates 4am-7am

May 24, 2010

1. Gold Juniors and Gold Reality: After being inserted into your financial coffins in 2006 in the junior gold stocks meltdown, then having it nailed shut in 2008 with the OTC derivatives blowout and non-stop dilution, many of you are thinking, “forget about a gold parabola, my question is just whether the banksters are going to now bury my junior golds coffin with a new meltdown.”

2. “Lehman 2”, the mauling of the Euro, has caused a wave of terror to sweep not just the gold community, but the mainstream community, where “2008 all over again” is “unacceptable” to Elmer Fudd Public Investor. Of course, that’s what the banksters want him to think, so he goes on a cash accumulation craze, while they go on a cash exiting sell program.

3. It’s important to understand the fundamentals behind a “gold parabolic rise”. The worst investors in the gold community chant things like “China is going to buy big forever!”, “the comex is about to go down!”. These statements sound great and get a lot of cheers. Do they build you any wealth? No. These things ARE factors in the gold bull, and in the coming gold parabola, but without the collapse of the bond market, it’s going to be difficult to generate the kind of inflation numbers that institutions look at, numbers that will cause a tidal wave of liquidity out of paper money and into gold. It’s coming, just not on the time frames most investors set on their personal parabola alarm clock timers.

4. Gold is headed higher just on Asian demand over time, but that demand is not a factor in producing a gold parabola. A parabola is an explosion of the gold price in a short period of time. The mainstream community, in contrast, believes QE, quantitative easing, can go on forever. With no consequences.

5. The fact is that govt inflation numbers are low to negative. While I personally believe many of the shadow stats numbers, the situation is a de facto marking to model of inflation numbers by govts, and it is the govt numbers that the institutional players follow when placing money.

6. The deflationists are essentially correct in how they view the markets, the govt and central bankster “fight” is against deflation, not inflation. I term it asset price destruction, not just deflation. The main current medicine used by central banksters and govts to halt the asset price destruction is: Quantitative Easing, QE. That followed the failure of the interest rate cuts medicine. My view: The gold community is FAR too early in their general view of “what’s next”.

7. Look back in time. If you bought a pack of juniors in 2006 and 2008 you were EARLY. Likewise, the gold community shorted US t-bonds, trying to call the top. They failed. The bond market is arguably in a bear market now (I think it is), but that bear has barely started. The Gman and the central banksters are still battling asset destruction with quantitative easing. Most of you know more mortgage investments were bought by the Fed recently.

8. QE will be stepped up until the Fed sees consistent 2% inflation in the govt numbers. They don’t care about YOU. They don’t care if 2% govt numbers are 10%, 20% or 30% real numbers.

9. It’s very difficult to accept that markets can move on numbers “outside of reality”, and fall into the trap that “any day now, the chicken will come home to roost”. Keep in mind that the level of govt interference and spending reached a point of MADNESS back in the 1970s, and it was all supposed to collapse then. 40yrs later, the Global Gman is ACCELERATING the madness.

10. No chicken has come home to roost. Be very careful about ‘knowing’ what is coming in markets. Focus on price response more than analysis. The situation is much more serious now, but there are still many many trillions in “wiggle room” that the various govt “doctors” have with QE, before that QE “medicine” for the asset price destruction disease, starts to KILL THE ECONOMY, the PATIENT.

11. The deflationists see the numbers, see the failure of the govts and banks to reverse the implosion of debt. The inflationist think “any day now, this will cause huge inflation”. Neither are correct in their focus. The level of money printing, QE, and debt issuance that will cause a downward spiral in the US dollar is much less than the deflationists think, but much more than the inflationists believe. Be a realist if you want to build wealth.

12. TIME is the great humbler of all market gurus and investors. Investors demand too much from timers, and timers believe too much in their own abilities and timing tools. That’s why it’s so critical that you feather in and out of positions, preferably in a pyramid formation, rather than plop in and out. You can be wrong in your analysis for 10, 20, 30 years. 5000 stoplosses later, as you can’t leave the analysis game (sore) alone, you have financial gangrene. Your tactics must allow you to build wealth regardless of the correctness of your analysis.

13. Your targeted markets WILL see huge bull and bear markets over time. The big wealth is made being able to stay on the buy on the bear into huge weakness, have the patience to endure the time needed to transition to a bull, and then feather out you profit booking into a huge bull market. Unfortunately, most of the time, no market “fits the bill”. If you are following stock indexes, govt bonds, paperbug currencies, gold/silver, energy and commodities, you WILL see situations where huge bear and bull markets develop. Tremendous patience is required.

14. It is a waste of time guessing when the bond market will break and collapse, and send gold parabolic. The juniors should perform extremely well over time even without a gold bullion parabola, due to the demand from but dilution may weigh on the party.

15. I spent a fair bit of time talking about the public investors last week. That theme has served its purpose and is done for now. I do whatever it takes to ensure you stay on the buy into weakness and maintain a reasonably rational mindset, and stay on the sell into strength.

16. I believe that the latest gold fall saw the largest number of gu subs ever maintain your “poise”. I don’t wish “Elmer Fudd public investor” any harm. Yes, he laughed at most of you as you bought gold and you asked your advisors about the levels of the stock market in the late 1990s while they called your concerns “ridiculous”, as they “knew” that “bear markets are from the old days. The govt has eliminated such things”. Still, “two wrongs don’t make a right”. We’re all only as good as our latest actions in the market and we must do want it takes to maintain this level of professionalism in our actions. You all did a generally FANTASTIC job of managing the latest “it’s all over, sell it all now to us before you lose everything” bankster game in the gold market, last week. So I have to believe the Elmer Fudd analogies played a significant role in maintaining that professionalism of action. Now we move on, to a focus this week on rationally analyzing the bond market and the US dollar.

17. Today is a Canadian holiday, so I’m making this a short update, although I’ll be posting stuff on the site all day long. I’ll feeling very strong, having rested myself tremendously over the week-end. The gold bears might want to take care this week. Gold may have a major upside surprise for these embittered losers. Gold already hit 1190 last night, up $24 from the $1166 lows.

18. It’s already KACHINGO TIME for many of you in gold this morning.

19. That is ONE HUNDRED PERCENT directly related to your professional actions on the buy last week. IF gold breaks 1166, you definitely want MORE GOLD.

S “golden holiday” T out…

I’ll start with coverage on the site of the bond market. Let’s rationally look at what’s going on there, and what specific actions could realistically trigger a gold parabola, and MARK them, rather than just moaning, “oh when is gold going vertical, I need it now.”

Thank-you

Stewart Thomson

Graceland Updates