498 thoughts on “PORTFOLIO CHANGE”

  3. Jayhawk91

    Gold with a bit of resistance at the 20.

    I can tell you from last summers move, pullbacks almost never presented themselves and it was so frustrating chasing.

    Last Feb’s low did seem to meander a bit and had a couple of dips…But with the dollar 3 year coming SOON. I don’t want to fart around.

  4. DG

    Gary: you had talked about adding when $HUI crosses 548. Will you add even more there, or do you have all the confirmation you need to see and that’s totally redundant?

  6. Gary

    DG,
    I’m just adding a little bit. Not enough to cause a margin call if gold decides to turn around.

    I’ll add the rest once 548 is broken.

  10. pimaCanyon

    I posted this under the last comments section before seeing the NEW POST comment, so I’m reposting here:

    Thanks, Alex! I had forgotten about the large copper component in TGB (which explains why it’s been moving up on days when other miners have gone sideways or down!).

    I have only a small position on this and it’s green (up 16% in a few weeks), so I will likely trail a stop, or even dump it and move the funds to another miner.

    Anyone else own TGB and like it? If so, do you plan to hold it thru the rest of this C wave?

  13. Avann

    Thanks Gary, I wasn’t aware that it had to fall below the previous week’s low to negate. I thought any close below the previous week high would negate it … thanks.

  17. Gary

    I kinda expect that will be the catalyst for gold going higher since everyone expects it to take gold lower. Then when the dollar turns back down the real fireworks should start.

  18. Gary

    Looks like the BoW numbers last night were predictive. There was a small amount again today which of course will disappear if we end the day positive.

  20. Romeo Bravo

    Gary, why wouldn’t you want to use options gong into the top of the C wave? I know over leveraging can be a real train wreck, but if you don’t lever up hard, go out to say June expiry, wouldn’t they work in a blow off move?

    You mentioned many months ago that A waves are good for options as well. I was wondering why not in C wave tops?

  22. Gary

    Well for me I can get all the leverage I want with a little margin. If one wants to take a few deep in the money options they could, just give them plenty of time to work in case gold throws us another curve ball.

  25. Jayhawk91

    lets not forget gold and silver got creamed in the face of a falling dollar last month. Forget about the stinking dollar, gold will move when it wants to move

  26. DG

    $store: If I may, that’s not the best way to do it. once you get a position that is likely to go higher and you get a head start in it, you need to keep it. Taking “decent” profits from something that may well rally 50-75% is a shame. If you bought it this morning at, say, 32.50 and it’s now over 34.00, set a mental stop at 32.50. Worst case you break even; best case you make a tidy pile, so your risk/reward is terrific not even counting the fact that it is very likely to go up. Taking small profits at the beginning of a bull move is a misatke, IMO

  27. pimaCanyon

    This is wild. GDXJ up nearly 6 percent! While gold is up less than 1 1/2 percent.

    I’m not all-in yet, but close. Saving a little dry powder in case we get a pullback. If no pullback, then I go all in when Gary does!

  28. Gary

    store,
    What will you do if this is the start of an intermediate move and SLW gains another 4% tomorrow. Will you chase? Will you sit and watch it get away from you?

    If an intermediate move is starting usually the worst move one can make is to lose their position.

  30. Shalom Bernanke

    I was never up more than 1.5 pts in my ES short today, and will not stay short overnight. Miners don’t look like they’re ready to pullback yet but I’ll remain patient with what I have. Another great day with them.

  31. Jayhawk91

    Possible inverse H&S on the HUI. I can see it a bit more clearly on the 4H chart. Neckline around 548..If we go there then come down a bit to the 528 area for the rt shoulder. Measure to? 598 exactly. The top number from Dec. Not saying it will stop there or if this is even valid, but fun to think it might be right.

  32. Vish

    Hi Gary,

    Assuming you haven’t added any leverage yet? If there is no pullback from here into close, you’ll wait until open tmw?

    thanks!

  33. Gary

    Yes. Usually after a huge move like today there will be a day or two of consolidation. I will add a little into any intraday pullback over the next couple of days.

  34. $store

    Gary, You are probably right. I was having the same thoughts. I feel SLW could be bought again in the middle of the month . I could be wrong.

  35. Gary

    If I’m right about this being the final leg in the C-wave then the last thing anyone wants to do is lose their position. Especially this early in the move.

  36. DG

    I don’t know if anything can stop this SPX train, but I will get another sell at the close. Clusters like this are slightly more accurate, but not much has been working these days to slow this beast down. I have to admit I have lost interest in stocks as the PM’s have started to move. My non-PM positions are tiny by comparison.

  39. DG

    Gary: Nice work. All the tinkering, false starts, and tap-dancing will be forgotten if this is really the start of the final C-wave. The goal is to not lose too much trying to get a big position that you can carry for a big ride. I will mail you a Mexican chef and a live chicken if it turns out you have helped me get there and tooday is the launch.

    DG

  42. Onlooker

    I’ll echo that DG.

    Gary’s composure through this is admirable.

    The curve ball thrown at the top – no sweat.

    The error of stopping out deep in the timing band for the interm low – handled with cool and calm. Many others would have become defensive and cautious, afraid of taking another drawdown on an entry, thus missing the opportunity. All because they couldn’t admit an error and lost their composure.

    I’ve learned much from Gary, and actually give him the credit for my NOT stopping out on the whipsaw at the bottom. I was confident enough in what I had learned from Gary and felt it wasn’t the right thing to do. And then I’ve had to confidence to load up in the last several days.

    Here’s to you Gary.

  43. ALEX

    SHAOLM

    I Haven’t liked NXG for a long time, but I looked at that chart several ways today , and It looks very good all of a sudden.

    Great volume off the bottom on a daily , AND (CRAZY) on a 5 yr wkly chart , you have a MONSTER reverse Head & Shoulders…projecting $6 minimum (for a $2+ stock).

    Today was Great…NG was SWEET! Volume & Price.

    Dinner time on East coast…good night

    Jayhawks…3 letters for you

    R-B-Y Looks quite compelling !!

  44. pimaCanyon

    I’ll echo what Onlooker and DG have said. It’s great to have Gary doing all the research and sharing the results with us! But what’s even better is that we’re all learning from Gary’s work, learning things that I believe are helping us all become better traders, especially when trading a bull market.

    Have a great evening all!

  45. Tudor

    Hey, Gary. I Bing’d Frank & Fina’s address to see what the place looked like, and it’s telling me that’s actually a Chuck E. Cheeze.

    Is there somethin’ you’re not telling us?

    🙂

  46. Gary

    Now that I think about it there is a Chucky Cheese in the same center. I would never by pass F&F for pizza though 🙂

  48. Onlooker

    To add to and elaborate on my previous comment.

    We’re all going to make mistakes. It’s how you deal with them and recover from them that makes the difference.

  49. Beanie

    JReality,

    Comparing the last 10 years to 1966-82 and assuming that the market must traverse the same way in the next 5-10 years is ridiculous and nonsensical. Furthermore, we’re not even in the same type of economy we were in then.

    When you look back at historical charts, you will always find some type of resemblance because there are very few ways charts move; you will see similar dynamics throughout history. For instance, you will always find big spike ups, followed by a crash-like spike down, followed by a dead cat bounce, followed by another selloff, and then sideways action.

    Do you remember Tim Knight doing an analog chart of the 1929 era and the present time? There were impressive resemblances. He had already scrapped the chart last year.

  50. noam

    Gary,

    in the sub post you mentioned a portfolio change. Assuming we have a minimal core position in GLD what would you advise adding?

    Same as your previous portfolio outlay and percentages?

    Thanks.

  51. Gary

    Beanie,
    We actually are in exactly the same environment. Both periods correspond to stock market bears and commodity bulls. Both periods are defined by the end of a huge productive phase (plastics and electronics in the 60’s & 70’s. Computer and internet in the 80′ & 90’s)

    Both are periods of massive debt build up to pay for expensive wars. Although the present is many multiples larger than anything the world has ever seen before.

    Both periods have been characterized by wild swings in stocks with neither being able to significantly penetrate above the nominal old highs. In inflation adjusted terms neither have even come close to their bull market highs. And both were experiencing extreme P/E compression by the 10th year.

    So I’ll ask again, and keep in mind I’m not suggesting the market will trace out a perfect pattern to match the 60/70 period, is there anything that looks different today than the last secular bear market?

  53. DG

    Beanie, I never heard back from you after you wrote:
    DG, Jeremy Gratham had been pretty good, but even he was stumped by this bull market. He thought it was done by end of 2009.

    I responded:
    Beanie: That’s it? “He’s pretty good?” He wasn’t “stumped” that the mkt went higher in 2010 because he doesn’t make short term calls, though he did make a guess in 2009. He missed the rally in 2006-2007 too, but turned out to be pretty right when he said we were dramatically overvalued. Best to have listened to him and gotten out a year early. And that’s what he is saying now. Those who ignored him in 2007 regretted it. Those who are bullish now will regret it as well according to him. Yeah, he’s “pretty good.” Perhaps that’s a euphemism for “one of the very best ever?” You’re saying you are right and he’s wrong now because he was early in 2007 and may be early now?

  55. Jayhawk91

    Alex-

    Got in 1000 RBY at 5.05. It’s a part of the Jayhawk Junior Mining fund. JJMF 😉 for that fund I’ve got RBY, MGN,XRA,EXK,BRD,GBG,

    Bigger positions in SLW, AG, SSRI, SVM, NG, HL, AXU, AGQ

    Good luck all…Hopefully we make some $ now.

  57. MLMT

    Today’s close on GLD & GDX was a bull-trap. Couple of weeks back, I had noted that GDX will trade back to 56 or so. It has done that and today it closed near the highs..

    Tomorrow, IMO, will start a new leg down for GLD & GDX.

    Worst case, GLD may have an upside of $0.50 or so left.. But I really doubt – the set up is there for GLD & GDX to gap down tomorrow.

    As always, “we shall see” 🙂

  58. David Kafrick

    It´s going to be funny if MLMT´s prediction turns out to be right. I am actually long some silver futures, so I don´t really want that to happen, but I am not all that excited about today´s move. The breakout in gold is too obvious. Lots of bulkowski readers are buying this breakout. Let´s see.

  60. David Kafrick

    Well, usually when there´s a long consolidation as we´ve had the past few days, the first breakout attempt usually is a fakeout. The most common thing to occur is for the market to attempt to break to one side, then quickly reverses and just zooms through the other side.

    What happened today is just a picture perfect entry point. Lots of traders bought the breakout at 1350 with a stop at 1320 or so. Sometimes these things end up working, but most of the time easy entries are traps.

  62. Gary

    Don’t those kind of fake outs usually come on lite volume?

    Which certainly wasn’t the case today as everything had above average volume with the one exception being SIL.

  64. Robert

    I’m not to blame for Egypt, Bernanke says

    “…higher prices reflect strong global demand for commodities due to high growth rates in the emerging economies, not to anything the Fed is doing.”

    Really Ben? It’s not like we have 2 billion more people today then we did a few weeks ago! The demand for food is the fuking same! You flat out lying POS.

    Yeah the demand for metals building infrastructure may be higher but that’s not what citizens get mad about!

  65. Rod

    Over the past 2 years I have played this stock a number times, always buying the dips and selling the tops. Well, it announced today its offering a $900M convertible senior note due 2016. The stock dropped down to $5.50 at the end of the day. The last time its been this low was back March of 2009.

    Seem to me this is a good price, especially with gold just starting to take off here again. Would like anyones thoughts on it please.

  67. Robert

    No, Ben is the man, I was obviously just kidding.

    He’s actually one of my favorite world celebrities. I’m actually going to vote for him for the Most Beautiful People 2011.

    It’s is plainly obvious that there is a global currency war, I just find it hilarious these guys, the Fed, can stand in front of the world and indirectly deny that. It just again shows you how ignorant the masses are about money in general. The reason these lies are always used is because they are believed by more people than not, BY FAR!

  68. Gary

    Rod,
    Why not just play it safe and stick to the ETF’s and SLW? You will make plenty of money and you won’t have any company specific risk. Including dilutions.

  70. TZ(5288)

    You guys thinking this has been some sort of an EASY bottom to buy and trade sure as hell haven’t been playing the same market I have.

    We’ll see about MLMT’s call, but I definitely don’t agree that gold and silver go lower. A pullback or retest of today’s breakout in a few days? Sure, very possible, however.

  71. Robert

    TZ, just a question, have you publicly ever, once, said that gold and silver will possible go down besides partially agreeing to MLMT’s scenario in that last post?

    It seems every time you post it is usually right after you have bought gold or silver futures, and you always say how much short term (daily/weekly) upwards potential there is but you never seem to address any downside risk at all.

    Now I am obviously agreeing with you that the long term is going to be mighty fine for gold and silver as long as fundamentals remain the same, but on the daily charts, and overnight, why do you even try to be so confident with predictions especially in one of the most volatile sectors? Seems like a recipe for heart failure if you ask me.

  72. TZ(5288)

    ROBERT,

    You havent’ been reading. I said my stops on my positions were at a 1-2% loss (net worth). That is now larger around 3-4% cause I tried to get in silver all week and got whipsawed multiple times. The gold futures positions have been solid throughout.

    All positions profitable and with significant profit.

    I’ve been clear about my stop levels repeatedly. And by trading the metal futures I have pretty high confidence they will execute as needed without undue slippage.

  73. Robert

    Short stops on godl and silver with massive leverage, how the hell you going to ever win with that strategy? You’ll have to perfectly time the bottom to like the half-hour on the absolute bottom day to strike it rich! Why not use less leverage with more of a room for a stop or no stop at all?

    Not trying to call you out, and you may not even be using massive leverage and tight stops anymore, but if you are I’m just trying to convince you there are better methods.

  74. Robert

    Well best of luck, seriously.

    I just wish I could teleport until 2015 when silver is over $100 and my miners have gone up 40x minimum today’s prices. I hate seeing the future that is oh so far away.

    OT, anyone:

    If I move to a different country and invest in Canadian miners while having residency in whatever country, can I possibly pay less capital gains than if I lived here in America?

  75. Robert

    TZ, hypothetical,

    If a jeanie-in-the-bottle were to tell you in 2016 gold would hit $6000, and you were about to buy futures the next day, what would you do?

    Wouldn’t the best strategy just be to buy and hold and trade D-waves, pretty much what Gary is doing? I mean if you’re a smart ass you’ll be all over the long-term options comment, but if the timing messes up a few years you could be toast.

  78. Brian

    Rod, Jag just broke an important support level on a weekly chart and appears headed for the 3.00 range. Try and grab something going the other direction. They supposedly have major problems at their Brazil mine.

  79. Brian

    I have decided to let FRG go. I think the capital can be deployed more wisely in this on going C Wave advance. Price has been established for the sale, so further appreciation seems unlikely. Maybe I will pick up shares of the new company when the D Wave hits.

  80. Shalom Bernanke

    “If I move to a different country and invest in Canadian miners while having residency in whatever country, can I possibly pay less capital gains than if I lived here in America?”-

    No, you’re taxed as an American citizen no matter where you live or where you invest. Worldwide income is taxed. The only benefit an American gets is if employed (not as a trader or investor) in a foreign country. In that case the first $93,500 is not taxed in the US if you can prove you paid taxes abroad.

  81. Robert

    Thanks for the welcome back TZ 🙂

    I’ve decided to only use these damn computers for what they’re made for…

    Anyways if you calculate silver undergoing exponential growth at 22% a year (which it has for the last 11 years), you’ll see silver will strike $60 in 2016, minimum. That is basically if you’re just playing average from what we’ve already undergone in this bull as you all know. That doesn’t take into affect bull phases which many here know more than I do about. In the mania stage we will see much higher prices.

  83. Razvan

    TZ can you show us your math on how you have 1-2%loss on x7 leveraged silver position. There is no way that is going to work unless youre Bernie Madoff or you are not leveraging your entire account.

  85. Steven

    Is anyone else concerned about tomorrow’s job numbers? I’m not even sure if I want a bad number of a good one given how wacky normal correlations have been lately. I also could envision a scenario where gold and silver have relatively different reactions (although not in absolute terms). Thoughts?

  86. Gary

    I think it’s pretty clear the market is selling dollars because Ben is printing them into oblivion, and the market is fleeing into the asset markets to protect against that devaluation.

    Everything else is meaningless.

  87. blammo

    Brian, I think selling FRG was the right move. NEM is never going to generate the kind of returns (or loss) you can get from a junior miner. I would split the sale profits and put it into two new juniors.

  89. Robert

    Gary does major collapse of dollar in 2012 fit into any of your cycles? Ironically what these oil execs usually say comes into tune with the cycles.

    FYI, LW also said in summer 2009 that stocks would go straight up for two years.

  90. TZ(5288)

    RAZ,

    I bought my main gold futures position last friday just as we were clearing 1320 and shooting vertical. I bought large with about a $3 stop. (That would be a $300 loss on a $130,000 position. Not a bad risk if it works out. It did. So far.)

    There is nothing magic about what happened. You simply have to be able to buy at a point where gold won’t retrace back down to.

    It isn’t easy. It takes work. You will miss a few times and take losses, but I’ve already said those losses aren’t too bad. But you might end up taking 15 in a row and that wouldn’t be good. So you have to find ways to increase the chances of getting those points that don’t retrace.

    So far today you could have done the SAME THING at almost anytime from 10am to noon and there is a good chance gold will never again hit any of those numbers for the duration of this wave up. You didn’t need much more than a $2-3 stop during those times to not get hit. It went vertical for 2 HOURS.

    Of course, again, the trick is to buy into those periods and not the ones that chop around.

    Instead of the two hour example today, almost ANY TIME over over the last WEEK it was *impossible* to do the same thing. Every point got retraced and whipsawed.

    So…1 week vs. 2 hours. Like I said, there is a bit of luck involved.

    This isn’t appropriate for many. It is a technique among thousands that simply seems suitable to how I like to play. It has it’s own risks like anything and I’ve taken a fair share of knocks using it. (I will be accumulating more of a turkey/stock approach after this next D wave).

    Finally, you can’t do what I have described well with something that doesn’t trade 24hrs with stops that you are pretty sure will work when hit (without slippage). Try this on SLW and you will get killed.

    Buyer beware. Not recommending this for anybody, but I hope it answers your question.

  94. TZ(5288)

    RAZ,

    In short, do you see how during **anytime** today from about 10am to noon you could have bought gold futures with a $3 stop and NOT gotten taken out?

    If you want to own gold using my technique here the only question you ask is: “Ok. I want gold. If wrong, how much am I willing to LOSE.?”

    A $3 stop is $300/contract. So if I’m willing to gamble $6000 on a trade I can buy…20 contracts.

    Thus, you would have:
    20 contracts = $2,660,000 in value
    ($1330 x 100 x 20)

    That would require:
    about $140,000 to make the trade.
    (about $7000 per contract)

    The $3 stop, if hit, would cost:
    $6000 (20 x $3 x $100)

    You are risking about 4% of your money if you are completely max fully margined at almost 20x.

    **Which is utterly insane**.

    So if your account is $500,000 instead. Then you would be about 5x leveraged on gold,
    risking $6000 on the trade if wrong,
    or a bit over 1% of your net worth.

    That’s an example of how a high leverage position with reasonable risk could have been entered today.

    Warning: I’m not recommending anybody do this and there are issues I have not covered here and exceptions that increase the risk. There still can be gaps in gold. Your stop might have large slippage. Etc. But it is an example.

  95. Gary

    Poly,
    You conveniently left out the tail from Jan. 20th. If you draw the lines properly it turns into a rising channel.

    Be careful you aren’t finding reasons to avoid honoring your stops. That’s how little losses turn into big losses especially when trying to fight the cyclical trend.

  96. TZ(5288)

    RAZ,

    If you could find a way to enter with a $1.50 stop you could get 40 contracts.

    If you need a $6 stop based on your read of the charts you must settle for 10 contracts.

    A $12 stop only 5.

    The numbers are inversely related.

    A $0 stop would mean infinite leverage (but there is always slippage in a stop so this doesn’t work as you get closer to zero).

    $60 stop would mean a SINGLE contract. Is gold likely to hit a stop $60 lower? Prob not, so you never get a loss….but you only profit from ONE contract.

    See the tradeoff?

    So the game is:
    a) you have to get a buy which doesn’t go lower than wherever you put your stop

    b) you have to pick a stop as close as you can but not so close that it get’s hit. The closer you *correctly* pick, the higher the leverage you can take.

    Bit of poker, but that’s the game.
    (I continue to warn that I don’t recommend this to anybody. Buyer beware. It isn’t as easy as I make it sound and you will find that out very quickly.)

  98. Dan

    TZ,
    Do you have an opinion which broker has the least slippage? TOS seems at times to have a lot of slippage at times.

  99. Gary

    If the alligator has your leg it’s usually better to sacrifice the leg than let him take the whole body under 🙂

  103. OptionsOnly

    I noticed in one of Doc’s comments that he was all for trading in the futures markets. I’d like to start out small with 1 contract of the emini silver, SIH11. Any suggestions on links, advice, etc.? Anyone who is actively trading the futures currently, I’m willing to learn more. I’ve been trading for 5 years, stocks and options. Thanks

  104. Beanie

    DG,

    Gratham is generally pretty good, but if he still holds his current stance he will miss a huge bull market coming right up. John Paulson, who has the Midas touch, was right about the market the last 4 years (and made a personal income of $13 billion) is bullish on the economy. Having Paulson confirm my market view is totally awesome. The bull market continues.

  107. TZ(5288)

    RAZ,

    A $3 stop is admittedly very small. I know that. I have only mentioned it cause that is what I used initially on friday. I adjust as necessary.

    An example of how I think from your reply is….

    Your $20 stop bet is equal to SIX $3 stop bets.

    Playing with a $3 stop allows many multiples of leverage over what you can do with $20 stop.

    The gentleman’s wager, then, is whether with 6 tries I could get an entry that held vs you trying a *single* time. If I can (only once is necessary), then the gains will far exceed what you must enter to allow a $20 stop. And remember, you only have a SINGLE trade you can make.

    We have simply each stated our preferences and neither is right or wrong. They are just different ways of looking at the problem and aligning them with different personalities and risk profiles.

  109. Onlooker

    Poly

    IMO you should just cut loose the short position and get that capital to work in PMs. That’s what I did on Tuesday, when the breadth was stronger than I would expect if we were about to tip over.

    Regardless, I realized it was not smart to continue to fight that battle when I could put it to work in the newborn interm gold cycle.

    I know, I know, Gary; it wasn’t smart to be there in the first place. I’ve learned, really!

    I’ve already recouped almost half of those losses, and another 3% or so in gold (5% in silver; maybe less, just a rough guess) and I’ll be whole again on that piece of capital and on to bigger gains. And rid of worrying about the equity market, to boot.

    As Gary often points out, it’s best to put your capital to work in the secular bull, especially in a fresh new interm cycle.

    Just my opinion. But don’t keep that position just to try to “conquer” the stock market; i.e. a “crusade.” It’ll make you feel smart to have successfully shorted, but who cares when your gains will most likely be smaller than they would in a bunch of miners, right?

    I feel your pain, and I’m not judging. Just an intervention. 🙂

  110. Gary

    FWIW here is the problem with huge leverage, even if you get the direction and timing right. And it’s what causes almost every trader that goes down this path to lose money.

    Let’s say you get a perfect entry, which you will need if you are going to leverage heavily. And let’s say the trade goes in the right direction initially. If you are leveraged heavily enough you could easily turn $100,000 into $400,000 very quickly.

    Sounds like a dream come true doesn’t it?

    But here’s what happens.

    Because you are leveraged so large any little wiggle can and will turn that $400,000 into $150,000 in the blink of an eye. Almost no one can control their emotions when they see that kind of drawdown especially after such a wonderful start.

    They freak out and sell before they give back all those wonderful profits.

    Now they are back to having to time another perfect entry. Unfortunately the perfect entry came and went. Usually what happens now is right after they sell then the market moves back up again and they are forced to buy higher. Emotionally they are kicking themselves for not holding their position.

    Stress is starting to build. The decision making process starts to become more and more emotional instead of logical.

    Then of course as soon as they buy higher a little wiggle turns their $150,000 into $90,000. Now they are down despite the trade going in the right direction.

    You do that one more time and you have a loss that you can’t recover from.

    I’ll say it again. Huge leverage always ends in a blown out account. There are never any exceptions to this rule…never.

    Folks we are all going to make fortunes off this bull market. All one needs is a little patience. Ask yourself do you really want to blow the greatest opportunity you are ever going to get because you couldn’t control your greed?

  111. Rob

    Gary,

    If someone bought shares of SLW at the intermediate cycle low in gold, and then sold them at the intermediate cycle high, wouldn’t they be better off than someone who trades like a madman, always trying to ‘win’?

  113. Sandy

    Gary,

    With the current move in Gold, is probability for move down to 1300 or 1265 minimal or is it still high.

    I was trying to work out on maximum possible drawdown in my mind and will appreciate your feedback on this.

  114. kmisak

    Rod, you posted a few hours ago about JAG, asking opinons. Looking at it over the past year, there is no reason to expect it to suddenly change and be a leader instead of a laggard. I think it will continue to grossly underperform.

    Want a gold junior at a discount? Look at GUY – I’m pretty sure it will zoom back up soon. The gold is there and this company is on track to mining it. You should make a much bigger gain than the black widow JAG, IMHO.

    Personally, I’m putting the money on the silver mining table; it did way better for me than gold miners overall in the last wave, and I agree with Gary that this will continue.

    K

  115. DG

    TZ: I really can never understand why people keep saying “you have to get the bottom perfectly.” You simply don’t. You just need to buy at a point where the thing doesn’t go against you. If you look at any chart there are TONS of places and times where the item started in a direction and kept going. Whether it is at a bottom or not is irrelevant. An item bottoms at 30. You buy it at 70 on the way to 1000, and it goes from 70 to 75 straight-away without pulling back. Now you are safe. What does the fact that it bottomed at 30 have to do with anything? Oh well. What you are doing is perfectly clear to me, and I remain puzzled by all this “perfect timing” talk that tries to make it sound like magic. And yes, it is for the emotionally stable and disciplined. Good luck!

  116. Gary

    Of course in real time one has no idea whether 70 is going to be a good entry or not. With really tight stops you can hit a whole bunch of 69’s before you catch a 70.

  117. DG

    Gary: What do you make of the fact that the level of bearishness in the U.S. Treasury market is at one of the highest levels in many years (according to sentimentrader.com)? Seems like everyone “knows” Treasurys are doomed.

    MLMT: You posted gold is about to get killed. Any reason for this opinion or just gut feeling?

  118. Gary

    DG,
    I don’t really pay that much attention to bonds. Most of the time the bond cycle appears to run in correlation with stocks but not always.

    I guess I would have to study the bond cycle in depth before I really could form an opinion one way or the other.

    I will say that the move down into the three year cycle low on the dollar index seems to be driving everything. There seems to be a relentless exit out of dollars and into anything that offers protection from the Fed.

    In that scenario it makes sense that bond holders would be running for the hills.

  119. DG

    Gary: Again, a slightly silly example. If you really have “no idea” whether 70 is a good buy point, then don’t buy! If you assume complete incompetence at picking spots the strategy won’t work! But there are lots of people (myself included) who are able to pick spots and do way better than random. I just posted FCX as a short at 57.50 Tuesday and it went all the way to 57.58 before caving in. That’s .1% against me. I toughed it out. I covered because i am not bearish, but had I been I could hold it for months. If TZ got a good entry point he may make enough on this gold trade to be set for life. Seems like a good plan to me! All it has to do is not pull all the way back to his entry point. Hardly random with this good head start.

  120. Gary

    DG,
    That assumes he can control his emotions when the inevitable swings occur. If not then the very scenario I outlined will happen.

    You make it sound easy to pick these no draw down entries but I can say without a doubt that I couldn’t do it and I’ve been trading and investing for a long time.

    99% of traders are not going to be able to pick entries with no draw down. Assuming that because you can do it (I suspect it took you 20 years to learn) that it’s easy is like me saying you should easily be able to Clean & Jerk 200 lbs.

    For me it’s a warm up but for 99% of the population it’s an impossibility.

  122. Bede

    Gary,

    In the long term chart of gold with the last 8 times the Blees rating hit 95 or higher marked with the red arrows, you didn’t say anything about the fact that this is the only time that the price hasn’t at least touched the 200 dma. What, if anything, do you make of that?

    TIA

  123. Gary

    Bede,
    What does the 200 DMA have to do with the Blees rating? The Blees rating is a measure of net commercial futures contracts.

  124. DG

    No it’s not easy and yes it has taken me 20 years, but the appeal of one trade netting you 300% is pretty good. And of course you have to master your emotions (you have done a pretty good job of that it seems, so that part is possible, eh?) I should add that I do not myself trade this way because I do not trade futures (though TZ is warming me up to the idea.) I bet if you put the time into studying entry points that you have into studying cycles you’d be good at that too (anyone who can do excellently at both gold trading cycles and lifting knows how to work and knows cycles to study). All I’m really saying is that it’s a perfectly valid system. I just get a little
    put off by the casual dismissal of the approach. Hell, almost anything really worth doing is done well by only a small percentage of people. ‘Nuff said.

  125. Sandy

    Gary,

    My question got missed out, hence repeating.

    With the current move in Gold, is probability for move down to 1300 or 1265 minimal or is it still high.

    I was trying to work out on maximum possible drawdown in my mind and will appreciate your feedback on this.

    I don’t mind 3-4 % but would be very scared of 10-15 %!

  126. Gary

    Let me put it this way. I’ve never seen anybody yet that used huge leverage that didn’t eventually blow out their account. No one.

    Occasionally a huge trade works. Sometimes it works several times. But what always happens is that those victories convince the trader that he was smart when he was really just lucky.

    So he continues trading huge leverage thinking he’s immune to the law of averages. Ultimately he or she hits a losing streak or loses control of her emotions and that leverage ends their account.

    So if some one wants to play Russian Roulette with their capital I won’t stop them. But I will certainly let everyone on here, especially the novice traders who are most at risk of trying to imitate this strategy, know the ultimate outcome if they start down this path.

  127. Gary

    Sandy,
    I tend to think we probably do have a bottom. But if you aren’t capable of holding through a drawdown to sub $1300 then lighten up on position size so that you can.

  128. Bede

    Gary,

    I didn’t mean that the blees rating and the 200 dma had a direct link. It just seems to me that you linked the blees rating to bullishness in the commercial traders, and I thought that the fact that they weren’t willing to wait for the price to hit the 200 dma, when they had been willing to wait before then–well, it seemed to me a sign of the hunger to “get on board.”

  129. james r

    I agree with MLMT.

    I think what we have here is a bull trap : O

    I think gold will still correct below 1300 in the next cycle.

    Reason:

    1. Big money has not bought this rally.

    2. Dollar will go higher.

    3. Markets will correct.

    4. A very nasty bear flag in GDX

    James

  131. RA

    James,

    My 2cents response to your points:

    1. The COT readings indicate big money sentiment – or am I missing something?

    2. Dollar may rally but not for more than a few days I reckon.

    3. Markets will correct but when and by how much in the face of a dollar collapse? Besides, the market correlation with mining stocks may not exist in the face of major dollar decline.

    4. GDX may have a bear flag but how reliable is the pattern in light of all the other indications? Besides, how much is the downside even if you are right? 3-5%? I think the risk is greater to the upside.

    I think better to be in with a reasonable position than out 🙂

  133. james r

    Hi Ra,

    I didn’t see huge volume today. The volume was higher than normal, but not huge. SIL was below average and the others less
    than 1 1/2 X.

    I think it was retail chasing.

    I sold out yesterday with a tidy profit.

    So we will see.

    Good luck to you!

  134. RA

    James,

    Thanks and good luck to you too!

    If you (and MLMT – GDX to 44) are right, I will hold and add when GDX = 44.

    I will also add more if GDX breaks the trend of lower lows and lower highs.

  136. Gary

    James,
    Why not hold your position with a stop below the recent low. If the stop is hit then you have good odds of being able to get in at 50.

    If this is the intermediate bottom then you certainly don’t want to lose your position. You want to be adding to it.

  137. ike

    James,

    The gap at 44 is 17.6% below the 200 MA.

    Gold is showing all the signs of starting up the next intermdiate cycle.

    A stop below 52.46 should be fine.

    Once GDX breaks above the 50 MA — then the real pparty starts.

  139. sophia

    Gary,

    I know that you will consider me as a whimp, but I sold my Gold April at 1350….Cash is king in this kind of market, I will reload lower….sorry… 🙂

  141. Gary

    Sophia,
    What do you do if you never get a lower price?

    If this was an intermediate low, and I think the odds are good that it was, then you just got your chance to reload lower.

    As long as you aren’t leveraged then you can’t get knocked out of your position.

    It is a bull market after all. If you make a timing mistake the bull will correct it.

    Emotions are an investors worst enemy. Someone comes on and says THIS IS A BULL TRAP.

    Your emotions take over and fear of losing any profit causes you to bail out of a winning position.

    If one were thinking clearly they would weigh the odds and make a logical decision.

    Is gold deep into an intermediate cycle? Yes it’s actually pushed slightly past the normal timing band so it is very deep in the cycle.

    Is gold deep in the daily cycle? Yes gold is very deep into the daily cycle.

    Has gold formed a daily swing low? Yes

    Has gold formed a weekly swing low? Yes

    Have down trend lines been broken? Yes, across the entire sector.

    Are the mining stocks participating? Yes, and they are leading.

    Has the sector regained the 10 DMA? Yes and in the case of silver and miners the 20 DMA and the 10 is starting to turn up.

    Have the fundamentals changed? No they have gotten better.

    Now for the cons: Someone who’s crystal ball doesn’t work any better than anyone else’s says this is a bull trap. No particular reason given other than gut feel.

    So I have to ask do you decide logically based on what is happening, knowing that the bull will correct any timing mistake anyway…or do you make a decision based on someone you don’t even know’s best guess?

  144. Gary

    On the topic of leverage that we were discussing last night I want to relate a story that took place a couple of months ago.

    A trader joined the SMT in late Nov. early Dec. He emailed me right after joining to tell me he joined because he needed help spotting exits. He also wanted to brag about how much money he had made during the recent rally. He said he was up 400 or 600%, I don’t remember which it was.

    I immediately realized he was going all in on options and advised him to be happy with his winnings and sell those options.

    He informed me there was no way he was going to sell. He was sure silver was going to the moon by January.

    Then of course we had a big dip in Dec. His 600% vanished in the blink of an eye.

    Now keep in mind he joined the SMT so he could learn when to exit. When I told him to exit he ignored me. Makes one wonder why he joined in the first place if he knew what the future held.

    If he had followed my advice he would have kept all his profits and if he had jettisoned the leverage strategy he would have kept those profits for the rest of the bull market and multiplied them many times.

    Instead he became angry, emailed me that the service was worthless and wanted his money back.

    Amazing huh since if he had listened to me he would have kept his winnings?

    He made the catastrophic mistake of thinking that he was smart when in reality he was just lucky. When his luck ran out he lost everything.

    This is the evil lure of leverage. One or two big victories and your emotions take control, you convince yourself your smarter than the market. That the law of averages doesn’t apply to you.

    Then when your luck runs out you lose it all.

    I’ve been doing this a long time and I have yet to see anyone survive the leverage temptation.

    Massive leverage is just like a casino if you stay at the table long enough the house will take all your money.

  147. Patrik

    Hi Gary!

    Nice call again. I listen to you and got a much lower leverage this time. I can stand a move down now. Thanks for that. 100% invested at the moment.

    The thing is that it seems that a lot of people think that this bottom cant be it for gold and silver..Maybe it is to easy for them.

    But it depends who you asking..Some people for sure didnt think that it was easy to find a bottom..

    And in this case I think its little scary..You did the right call again..And maybe some people think that you cant always be right..lol!

    Maybe they think so because they are afraid for the stockmarket to fall a lot soon and take gold and silver lower. That scares me also..

    Some kind of flashcrash and silver and gold go down 3-4%..Pang! But you cant either sit and wait and silver just go higher and higher and higher..

    But the dollar rises and it seems that commodities dont care about it. Thats good and support the 3 year cycle low.

    The jobreport today wasnt that good..But if its not good investors think that Bernanke will launch QE3 så that maybe support the market..Silver is moving higher..:-)

    Gary one more question about the yield. If the jobreport came in higher then expected..Then probably the yield/Rent go up?

    Thats not good and maybe thats why the report is in no mans land..?

    Have a nice Weekend all!

  148. sophia

    Gary,

    I know that if I follow the plan, I will be OK, but the last few months have been difficult, so now, I see money, I take it…It is the wrong approach for big money, but I need to be able to stay in the game andI feel better like that….Gold is very volatile, you nailed it pretty well since I have been following you, but I don’t have enough conjones…

  149. Gary

    Sophia,
    Then you are betting too big.You need to have a smaller position so you can think logically.

    Obviously 100% invested is too large for you. Scale back to 50% so you can take your emotions out of the equation and give yourself a chance to ride this bull.

  152. Ollie

    Gary, i know it’s way to early to start talking about exit strategies at the end of the C-Wave, however I don’t feel I have a strong exit plan.

    I usually wait for a large run up patiently and the first time I see a large down candle with large volume (like the one early Nov) I exit all my positions…only to see a few more downdays and then my previous shares rocket away from me…

    Do you think it’s better to scale out in 25% increments? …what’s worked for you at the end of prev. C-Waves?

    Thanks

  153. Gary

    James,
    So just put a stop under your position at the pivot and you are protected both ways. If it’s hit you will get to re-enter lower. If not then you are in for the ride.

  154. Gary

    Ollie,
    I will go over what we need to look for at C-wave tops in the nightly reports once we get closer to the top.

    This will only be week one of a new intermediate cycle so obviously we don’t need to worry about exit strategies for two to three months yet.

  157. ALEX

    To anyone who sold

    I understand the concept of ‘scaling in’ when gold goes down…BUT, what if it just keeps going up for a bit.

    Sometimes when the train leaves the station…more and more buying pushes it higher and higher. THEN when one who sold finally says, “HEY , that wasnt a bear flag!” They buy…it pulls back a bit , they then panic and sell for a loss…then it goes up again!

    Thats when the BULL bucks off weak hands.

    15 minutes into the day GDX had 1,250,000 volume!!! If it continues, it would be 4 million in the 1st hour. Thats 1/2 the AVG DAILY VOL. lately , in one hour.

    Something to consider.

    p.s. waited 15 mins before sending this…GDX has over 2 million @10.a.m. Thats buying demand.

  161. Sandy

    Gary,

    Sounds good. I am 75 % in, hence not overly worried but do want to get to 100 % soon.

    Great job keeping everybody focused.

  162. Gurvir

    Just took a $11,000 hit on S&P short. I know Gary has been saying not to short but I took my gamble convincing myself that it would drop hard. It pretty much erased my earnings from the last 3 months.

    Hopefully this will be the last expensive lesson and others take more precaution as well!

    Up $3000 on gold and silver since yesterday and hopefully this leg up will bring me back to decent gains.

  164. DG

    Tim: O.K., I am going to get and read that book by Wray. I advise a lot of people on finances and the world economy, so I feel obligated to read it. I am always happy to have my mind changed and head-in-the-sand is an unimpressive posture. I’ll get back to you after if you are still here. Thanks.

  165. pimaCanyon

    Tough call re pullback…

    SLW, GDXJ, and GDX are all touching the top of their new uptrending channels that began at the recent lows. Those charts would indicate a pullback, or at least a sideways consolidation.

    However, the uptrending channels in both gold and silver have more room on the upside, so those charts would suggest more upside is possible (but not necessarily guaranteed!).

    I’m am in, but still have some dry powder. I plan to wait till later today, and more likely till Monday or Tuesday, before buying more.

  167. pimaCanyon

    T&J,

    I believe you posted a link to an article that had a couple of charts showing how consistently POMO days have pushed the stock market higher.

    I went thru the comments here at Gary’s blog, but couldn’t find it.

    If you have that article bookmarked, can you repost the link?

    Thanks!

    (PS I also plan to read more about MMT. Some weeks ago I read some online articles by Mosler and they were eye openers for me.

    But I still come back to the practical problem: No one understands MMT. Even many economists don’t get it. How will it ever be possible for the politicians to do the right thing with spending and taxes if they are still thinking of the US as if it were a big household and needs to keep a balanced budget?)

  168. DG

    No, Tim, I think it’s fine. We discuss lots of other stuff here. The other thread was just going on too long. Little side things are fine as long as they don’t overwhelm everything else. Plus, the topic engenders a lot of passion around here, so it was a bad combination. Catch you later… (hopefully I’ll finish it this year!)

  169. DG

    Damn, Alex. I went out for a minute and missed that little pop in FCX. I would have reshorted it at 57.40 and will if it get there again. Stop at 57.65, so nice and tight.

  170. pimaCanyon

    T&J,

    Many folks on this blog are also interested in the overall stock market. So the article on POMO should be useful, even though the primary interest here is in the PM bull market.

  171. JD

    @gurvir

    Me too. About 1% of my account. My indicators said Mkt would go down beginning about mid Nov ’10. Gary said no at the time and continued to say no. Had to see who was right. He was. Lesson learned.

  174. Gurvir

    @JD

    kinda makes me feel better that I am not the only one! 🙂 Funny thing is last week on Friday when it dropped to low 1260 I was only down $4000 and I continued to wait hoping it would drop lower. Then as it started heading back up I added a few more contracts thinking it would tank on the job report today. So hard controlling these stupid emotions.

  176. DG

    Pima: A few reasons 1. It is much more copper (and molybdenum) than gold and copper has already gone nuts 2. the chart pattern 3. I have an easy place for a super tight stop. I’ll trade almost anything that allows a sensible tight stop.

    There was a guy in Market Wizards who said you could throw a dart at the WSJ, hit a stock, and tell him whether to buy it or short it and he’d still make money! It’s all about risk management and letting winners run while cutting losers.

  177. pimaCanyon

    Regarding Cramer’s “buy gold now!” call: I don’t follow him. I know some folks like to think of him as a contrarian indicator and he gets a lot of ridicule.

    However, does anyone know his actual track record? How many of his calls are losers versus how many winners? Is he really that bad that we can use him as a contrarian indicator–sell when he says buy and vice versa–and actually make money doing that?

  178. ALEX

    T&J

    I have an idea for you… If GARY finds it agreeable… You mentioned –

    “Maybe just respond in the comment section of the article so as to respect the wishes of this blog to not debate anything else but gold.”

    Some here enjoy both, but just wish we could separate thew two so we could follow more of a 1 theme at a time thread. You know…

    one asks a question about an immediate gold trade and has to surf through lengthy other debated subject matter before finding Garys answer…so

    Why not come on here when you are to have a discussion and direct anyone who wants to discuss YOUR economic ideas to THE LAST POST..you understand what I mean??

    Like you ask any interested to go to…”energy, No Thanks” post and blog there. THAT WAY..we ALL can blog comments in a continuous and complaint free environment.

  179. JD

    @gurvir
    If it’s any consolation, I do believe in the whole QEII/POMO effect on the mkt, courtesy zerohedge. I think it’s manipulated. OTOH, Gary’s dollar cycle stuff is compelling, and does indicate support for mkt. Good luck from here on.

  180. Gary

    For the record I don’t mind discussing/debating other topics besides gold and the stock market.

    I was never the one complaining about the debate. Actually I was actively participating in it.

  182. Daniel

    Yeah that MMT debate was fun to read– It did take up quite a bit of space though!! Reminded me a little of the Inflation/Deflation debate a while back :))

  183. fubsy_cooter

    CNBC just flashed an interesting and suprising piece of data.
    #1 asset owned by ETFs is gold at over 6% of total assets.
    #4 is silver at over 1% of total assets owned.

    AAPL #2
    Exxon #3

    I’m not happy to learn this.

  184. Poly

    Gurvir,

    I hear you, in the same boat here, a good 5 figure “paper loss” on S&P for me too, although I’ve still stubbornly stayed the course, giving today a chance to work down as I worked a correlation to last April suggesting a top could take this long to materialize.
    I know Gary is still spot on about finding excuses not to stop out, but the fool in me believes today is still a good candidate for a turning point and the market will want to close lower today. Worse case I get out before the close for a “loss to remember”.

    Catching up on reads, thanks for the comments Onlooker. Actually I’m already fully invested in my miner positions, got in last week and earlier in this week and took good deep in the money positions on GDXJ, SLV and SIL. Time to sit back and watch.

  185. pimaCanyon

    thanks, DG. Good luck with it!

    What do you think of the Euro??

    I cut half my EUO position a couple of days ago at a loss, but just sold the other half at a profit. Looks to me like the Euro had an impulsive 5 waves down to this morning’s low (from the 2/1 high), which also touched the bottom of a an uptrending channel. IF the Euro is now in a downtrend, then we would expect a retracement back to 1.3666 or even 1.37, before heading lower again.

    I’d consider reshorting there, but if the dollar is headed lower into its 3 year low, then it’s unlikely the Euro will continue in a sustained downtrend

  186. DG

    Pima: I saw an article that did a statistical analysis of his calls and it showed that you were better off fading him (in the short run) than following him, but it wasn’t overwhelming.

    Alex: Yeah, I’ve been practicing my dart throwing. I may have to stop though. Last week I dropped a dart on my foot and it stuck so I tried to short it, but gave up because I couldn’t borrow it. And damn, there goes FCX again (without me).

  187. ALEX

    Gary

    Yes, and I didnt think you minded it that day.

    I did notice that some subs were frustrated trying to ask you a question and felt the other debate was time consuming…

    so I just thought of a fix for the problem ( if it was a problem, as T7J’s comment implied). I’m sure any who like both would jump back and forth from blog discussion to blog discussion.

  189. Avann

    Gary, regarding your story of the guy who didn’t listen.
    I found you out for the same reason … to help me time my exits.
    Not to diminish your entry’s but I feel entry’s (for me anyway) are easier to time (as you always say the bull will correct bad timing). … it’s the exit that always gives me issues.
    My story is similar but reversed … I lost a lot of money (profits) when I did not know when to get out … got frustrated and started looking for someone who actually had the timing right.
    That’s how I found you … when you say sell … I sell.
    Thank you.

  190. Gary

    I have doubts about the accuracy of that data. The percentage of Rydex funds in gold compared to all other sectors is down to 12% from a high of 35% a couple of months ago.

  191. DG

    Pima: No opinion on FXE now. It did what I thought it would do and worked off the overbought extreme. The $ looks sick so maybe FXE rallies again…? If Gary’s $ 3 year cycle low happens you don’t want to be long EUO. My heart is in short China (FXP) as that country is already in a bear market and they are raising rates to kill inflation which is usually miserable for equities. These are toys to keep me amused compared to my long PM’s though.

  193. JD

    @dg
    Don’t know if anyone here is old enough to remember, but WSJ used to have an occasional column where they’d have monkeys throw darts at stock charts. Very often, monkey’s picks were better than pros. Got to be so embarrassing that they dropped the column. True story.

  194. Gary

    Poly,
    FWIW it looks like the dollar has finally found a cycle bottom. The temporary bounce should be the best opportunity for the stock market to drift lower. Timing the bottom of that correction and the top of the dollar rally could be tough though.

  195. ALEX

    PIMA C called channel lines as overhead resist , and since then , many have turned away from there ( nice observation Pima)

    Could be a buying opportunity for some ( nice call also Gary, who advised waiting until the morning excitement died down).

    I know this because my portfolio was up up and down like a ship in a storm, being 100% in

  196. Poly

    Thanks Gary, appreciate it. I agree, I’m not trying to be at all greedy here, but I’ve drawn “another” line in the sand and believe I might be able to get out with only losing a foot. Looking for possibly a 2-4% turn down in the S&P over the next 4-5 day dollar rally.

    I’ve also got to place some faith in some sort of S&P daily cycle bottom here to escape.

  198. DG

    JD: Yeah I remember that. I believe after they canned the column the monkeys wound up running some large money-center banks in NY.

  199. Gary

    Actually the miners are just following gold.

    Like I said the normal pattern after a huge day like yesterday would be for the sector to either form a small bull flag or trade sideways for a couple of days before another push higher.

  201. DG

    Let’s see if my double-sell signal from yesterday and Wed. works. If we get down 1% today or Monday I will cover as that would fulfill the signal and we seem to be unable to go down for more than a few hours.

  204. Gary

    H,
    That’s up to you. Don’t add so much that you get a margin call if gold drops back down.

    We need the final confirmation of higher highs and higher lows before going to full leverage (the definition of full leverage will of course be different for everyone. For me it’s 130%)

  205. Gary

    Gold isn’t even close to the 10 DMA yet. Usually at the beginning of a major move the 10 is tested (often just intraday). That will shake off a lot of weak hands.

    It’s also usually the last buying opportunity for those able to control their emotions and take advantage of the dip. It’s probably a little early still to look for a test of the 10 though.

    What is apparent is that we now have a daily cycle bottom. The pivot at $1307 should not get violated if the intermediate bottom is in place.

    One could put a stop below $1307 and protect against another leg down and if hit the odds would again be good for a lower re-entry.

  206. Tim and Jeanene

    Thanks Redwine for the link. I read it and they miss because the key difference is that both Argentina and Zimbabwe printed money to satisy foreign currency denominated debt.

    Key difference.

  209. mylifemytrade

    Did you guys notice how much did GLD go up above yesterday’s close – $0.50 🙂

    And look at the reaction there..

    I suspect that we will again rise into close today… and possibly close near the highs of the day so far… as far as GLD is concerned.

  210. Gary

    Tim,
    Just curious. Isn’t debt… debt no matter what currency it’s denominated in?

    Money is a store of productivity. No matter how much you print it doesn’t increase productivity. We are seeing a glaring example of that right now in QE2’s complete failure to improve the job market.

    Just because one’s debt is denominated in their own currency still doesn’t change the fact that it takes real productivity to pay off the debt.

    The act of printing money just devalues the currency meaning one needs more and more dollars to buy the same amount of goods (inflation).

    Ultimately money printing is a hidden tax on the general population, that when it gets out of control causes social unrest (Egypt and the middle east) and finally economic collapse. (Oil at $147 poisoned the economy sending it spiraling down into the worst recession since the depression)

  211. David Kafrick

    If gold manages to go to 1323 before retracing as much as 15 points or so, that would be really bearish. We could be going under 1280 if that happens.

    In up trends it’s more common to have an early spike down that gets reversed immediately, than this kind of action of spiking up and quickly reversing.

  212. ALEX

    FWIW

    A few Juniors bucking the sell or looking good chart-wise ( for those who care about indiv juniors)

    PZG, CGR, MVG, mgn, NG still has decent volume and closed todays gap,axu

    also liked the chart of CDY yesterday…

  214. mylifemytrade

    I am not an EW follower… but in my opinion, the upcoming downleg in gold will be even more severe than what we just saw. I dont think we had a day when gold dropped 50-60 dollars… IMO we will see such days next week…

  215. Gary

    Actually after a big move like we saw yesterday it’s not unusual for emotional traders to push it higher at the open. It’s also not unusual for hedge funds to take profits after a big move like yesterday and this morning causing a pull back.

    If the initial move rises far enough, quick enough we usually see a small profit taking event (the move back down to the 10 day moving average).

    If the intermediate cycle low is in though that profit taking event is met with heavy buying pressure.

  217. Gary

    I tend to think if gold was going to have another move down the miners would not have led this move and certainly not with above average volume.

  220. Gary

    The fact that the miners diverged significantly at the final low was also a clue that the bottom was probably forming.

    Then add in the 100 Blees rating on the COT, the trend breaks, the weekly swing, the resistance to the dollar rally and I think one has to be long here.

  221. Tim and Jeanene

    Gary – yes and no.

    For you and me and states and cities, debt is a burden.

    For the issuer of the currency, bond issuance and taxes are a way to suck up reserves, not function. We wrongly assume that the government needs to use our taxes to pay debt and other expenses to function.

    This is actually not the case.

    Treasury bond sales merely allow households and banks to hold bonds rather than currency and get a return on their money for giving up liquidity. It is an inflation dampener in our current monetary system. Accounting proves that deficit spending must create the same amount of aggregate savings in the world. Not even those in functional finance would deny that a government surplus reduces private sector income and net saving. When the government retires a bond, it merely substitutes non-interest-earning government liabilities for interest-earning liabilities; this simply restores the fiat money removed from the system by taxes and bond sales. If you want inflation to really hit, stop taxes, and stop issuing debt instruments that soak up fiat and take it off the market.

    Where you and I may have to use debt to finance spending over and above our income, the government does not need to. The system was created on the old gold standard, which, if you didn’t have enough gold, you would have to borrow by going into debt to spend more than the gold you had as a country. This is no longer the case. Debt issuance finances nothing. All they do now is drain excess reserves. It is a tool to target rates. As Lerner stated “the government should borrow money only if it is desirable that the public should have less money and more bonds.

    Government can just spend, they don’t need to call up China and ask them to borrow money. They don’t have a credit limit like a household does.

    Where it can lead to problems is if they spend so much to create demand for something that is larger than the supply capability of the target item. Currently, commodities are getting bid because of this AND because speculators are getting wrong the monetary system and thinking America will collapse. Buy real assets is the mantra.

    Markets will correct this imbalance over time as more acres will be devoted to planting, and more technology will create commodity efficiency and farming. It will be painful in the short term, but it is not a permanent situation.

    I would agree that money printing does in fact devalue our currency, but the key point can not be forgotten, as long as an hour of work produces more dollars because of inflation, it won’t matter in the end to productive citizens. It is the reason why retirees need to own stocks too. They can no longer participate in hourly work, therefore they need to invest in those that can.

  222. Movax2

    T/J

    You argue that printing results in wealth creation (I find it hard anyone would, but I think you are serious.)

    You make up a scenario where that money helps (legit) businesses as it is spent.

    You forget to think of the alternative.

    You agree that printing increases prices. You argue that is an increase in demand from business (good thing). In a proper business environment, they would invest and spend that money on resources, capital investments and labor to turn a profit. This is an assumption.

    I would argue, that if business or investment community knows (are told by the fed, or can figure it out) there is more money printing, they see investing as uncertain, but they see that commodity prices are very likely to rise.

    Why take a risk of trying to increase wealth in such an uncertain environment? If I was a rich business man, I would simply invest in a leveraged commodity ETF. All one has to do is bet on commodities to make money (It’s so certain that leverage is a no-brainer.) In fact , if one has a lot of cash, one SHOULD bet on things of stable value to avoid losing purchasing power.

    With all this cash, you have a gigantic paper economy of bets on this and that, and no need to create a business to make a profit.

  224. DG

    Gary: I think the point is that before we have inflation we need to see capacity utilization much much higher. If companies have tons of excess capacity prices simply won’t rise. People like to say “There’s inflation in commodity X or Y” but with low CU the costs are not getting passed on except sporadically. I fact, we have had tons of printing, commodities have zoomed, and inflation is modest. When CU gets to 90%+ we’ll have a problem, but not until then…or so the argument goes if i understand it.

  225. ALEX

    and the C.O.T. / BLEES reading doesn’t really justify it…so IF IF IF it ever happened , it woulds reverse immediately… I.M.H.O.

    Shake-out…POSSIBLY , not likely. GDX & HUI hit support perfectly from its previous break out of MAJOR resistance (3 yr)…Now should be MAJOR support.

    Not afraid of a little pullback/not thinking big pullback likely anyways.

    Stop trying to buy my shares 🙂

  226. Gary

    “Accounting proves that deficit spending must create the same amount of aggregate savings in the world.”

    Pure nonsense.

    Only if deficit spending is financed with savings. If the debt is financed by monetizing then you end up with severe inflation.

    That is exactly what is happening right now. The Fed is currently the largest holder of US treasury bonds. We are monetizing the debt and it is creating surging inflation worldwide which is in turn creating social unrest in in poorer countries where food and energy are a large part of income.

  227. Tim and Jeanene

    To expand:

    Debt under the gold standard was bad, because it meant truly that we owed money in a foreign currency: gold. We could default because we had to come up with more gold to pay off the debts.

    This led to printing notes promising to pay in gold. This would lead to hyper inflation today if the world demanded delivery of the gold. Today, we don’t have to worry about the current level of our debt or the interest on the debt, only that the money may get mis-allocated and take the marekets time to adjust. By Weimar and Zimbabwe taking on foreign denomnated debt, they did this same thing we could have done on the gold standard.

    It is also why you will continue to see the Eurozone struggle. Countries gave up their soveriegn rights and agreed to use a foreign currency, the Euro, yet their debts are now denominated foreign currencies.

  228. DG

    Tim: Is there any level of printing that creates a problem? Can Cap Util suddenly zoom higher as people decide to get rid of their dollars? Does velocity of money not matter (it’s negative now)?

  229. Tim and Jeanene

    That’s wrong Gary –

    You equate deficit spending with QEII

    Deficit spending is spending more on goods and services (think war) than you take in for taxes.

    IF the government spends $1 trillion but only takes in $900 billion in taxes, there is a $100 billion deficit. Confress currently requires that we issue $100 billion in bonds to “pay” for this, but that is only because that WAS required back in the gold standard days.

    Today – it is not. It is more a formality than necessity.

    It’s the way it works. It is also why you will NEVER see a failed Treasury auction.

  230. David Kafrick

    Tim,

    What you just said made perfect sense to me. 🙂

    In my opinion gold and commodities are in a bull market not because the world will end or nearly collapse or because of hyperinflation, but simply because that is the public’s perception.

  231. Tim and Jeanene

    DG – yes this is a level in whcih money printing becomes a problem, and yes velocity of money is key.

    Read my article, I give an example of the price of an automobile doubling overnight and how it can happen.

    I also show how more wealth can be created though from mis-allocated capital.

  232. Gary

    DG,
    Again pure nonsense. One assume that inflation can only occur in a society with full employment that is operating at full capacity. That somehow inflation can only occur if wages are rising.

    History is clear that the worst inflations occur under conditions of high unemployment. We are seeing it right now. Unemployment is stubbornly high yet we see surging commodity prices across the board.

    The cause is obvious. The Fed is giving away free money to the banking system. Instead of making loans the banks are putting that capital to =work in asset markets causing prices to rise.

    This is having the opposite effect. Instead of creating jobs it is causing profit margins to be squeezed so companies are reducing operating costs in other areas. Usually the biggest cost for any business other than input costs is payroll expense.

    Anyone can clearly see inflationary pressures are rising despite the fact that capacity utilization is low and unemployment is high.

    Just basic Austrian economics. It’s predicted everything perfectly so far.

  233. Haggerty

    FYI

    My old turkey portfolio is an account with Europacific (Peter Schiffs firm) I convinced a friend of mine to open an account there and he was telling me his guy there is expecting a possible large pullback because of the unrest in Egypt next week. I really hope he’s wrong too.

  234. Tim and Jeanene

    Movax –

    If that was the case – we should have fallen apart a very long time ago. The debt and money supply continue to go up and up, and so do wages and productivity. I would argue that if the economy around the world continues to grow and the population grows and demands more, you will see the US “debt” in the $20 trillion range, and we still won’t have any problems “affording” it.

  236. Gary

    I most certainly do not equate deficit spending with QE.

    QE is a governments last ditch effort to pay for deficits when foreign or domestic sources run dry.

    That is where we are today. It’s the reason the Fed has to monetize US debt. Because no one else in the world in their right mind wants to lend a bankrupt country money at 3%.

  237. DG

    Gary: I am not talking about employment. If there is inflation why is CU so low? If people are “getting rid of their dollars” why are factories not making stuff to fill that demand? Forget employment.

  239. Jayhawk91

    Sandy,

    Your dip is here, maybe add half of your 25%?

    I’m officially sick of SSRI and HL already.

    I need go into a come for 2-3 months and stop looking at these charts.

    Wake me up when the C-wave is over.

  242. ALEX

    I love the bull/bear debate in Gold today…

    and JAYHAWKS , I zoomed in on that chart, its a good one! Thx

    add THAT to the blees / C.O.T. / Miners off the bottom with good volume, GDX Support retest…etc etc and it looks nice for Gold bullish action.

    Healthy pullbacks are always welcome, the markets BREATH in and out, Flow in and out like the tide. Time will tell.

  243. Gary

    Capacity utilization is low because true demand is low. Just printing money isn’t creating jobs. If people don’t have a job they certainly aren’t going to be out buying stuff at the mall (well unless they are putting it on credit cards)

    But therein lies the problem. We have been putting everything on credit cards for decades and it’s not just the population but also the country. At some point the bills actually have to be paid back.

    If an average person can’t pay his bills he goes bankrupt. If a country can’t pay it’s bills it starts printing which is a temporary fix until the currency and the bond markets break.

    Once that happens its game over. Just ask Greece? Without another bailout Greece would be in total chaos right now.

    Unfortunately if the US hits the point of no return there is no one big enough to bail us out.

  244. Jayhawk91

    Alex-

    Pull up any of these silver charts-SlW, SVM, HL, etc.

    Look at the 4 hour chart. They have the channel going up, but also a cup formation. Most are at the lid of the cup & ready to make a handle. The handle part would be the pull back to the lower part of the channel. Speculating, we will see. Maybe even get if formed this afternoon? I have about 20% to put in.

  245. ALEX

    JAYHAWKS

    I have a prediction for you..HL closes UP today. Maybe hits $9.60 then up??It will turn up soon.

    Boy is that throwing myself out there or what?!! 🙂

  248. Gary

    Sophia,
    The dollar is bouncing out of a daily cycle low. It’s still too early for an intermediate or three year cycle low so the odds are very high this will be a brief (3-8 day) bounce that will roll over and continue the collapse into the three year cycle bottom.

  249. Jayhawk91

    Everybody is leaning towards a dollar pop and that 3 year trend line holding. I think a plunge through the line may play out since everyone thinks the opposite will happen.

    Saw this quote on Seeking Alpha-

    Israel Friedman ( Ted Butler’s mentor)

    “I will give you my calculation. It will be a gradual explosion of prices and slowly the users and the new investors will eat up the world visible silver, which today is around 500 million ounces. In my calculation the first 100 million ounces of visible silver will disappear at a price of $60 to $100 an ounce. The second 100 million ounces will disappear by $250, and the third 100 million ounces will disappear between $250 and the price of gold ounce for ounce.”

  250. ALEX

    SANDY…Or anyone else

    were you completely out? Its not my business, so excuse my advice here, but Gold is in a Bull market, and two months from now we will be FAR higher than here. So even if you just add SOMETHING NOW to call your ‘core’ position, it MAY go down a bit this week, but you will be WAY up later. If it goes down, and you re brave , you can add to it. 🙂

    a quote from the article I just posted talked about having no ‘core’ position now..and here’s what the article said…

    “There’s a saying in mining company circles about being present in order to take part in a business decision: “If you’re out of the room, you’re out of the deal.” So, if you want to stay “in the room” you had better be diligent about holding onto your core positions as long as you can.”

    Best wishes

  251. DG

    Gary: You are not addressing the fact that Greece cannot print since their currency is not under their control. Ours is. Their debt was in a foreign currency; ours is not. I am NOT convinced of this but to my eye, no one has actually poked a hole in the argument. Also, if people lost confidence in the dollar CU would zoom, whether people “had money” or not because whatever money was around would be turned into goods, which is just not happening.

  252. Movax2

    T/S

    We do see that. (Investment in financial instruments instead of real wealth production.) It comes in cycles. Cycles of inflation and poor business growth. Then relative confidence in the system and stable prices and legit growth. (Ending in too much mal-investment of course).

    The paper market and financial world (along with the gov) becomes bigger every cycle while real wealth producing business is relatively smaller. Tell me the derivative market is a product of successful business?

  253. Gary

    DG,
    Why would anyone produce any goods if input costs were higher than profit margins?

    I’m heading out to go climbing. I’ll let the rest of you argue about why in theory something can’t happen even though it is happening right in front of your eyes 🙂

  254. Gold Lion

    Alex,

    Great little article. I forwarded a link to a client that KEEPS wanting me to trade this market. I refuse because I don’t want to lose my psychological egde. That is why all the talk of trading in and out bugs me. I am in many mining company stocks at near 2008 bottom prices and DO NOT wanna lose my positions at all.

  256. Sandy

    Alex,

    I am 75 % invested with portfolio holdings mimicking Gary’s personal portfolio.

    I want to time the other 25 % to the extent I can, especially if gold plunges once again.

  258. Redwine

    Tim,

    Gary said:
    “Again pure nonsense. One assume that inflation can only occur in a society with full employment that is operating at full capacity. That somehow inflation can only occur if wages are rising.”

    This hits the nail on the head. Look at pictures of Weimar and Zimbabwe hyperinflation and what you see is a depression with high unemployment just as you would see in pictures of the Great Depression.

  259. David Kafrick

    It´s hard to have a good debate about MMT when people keep mentioning examples from the gold standard era and from countries like Zimbabwe, Greece and Germany. The whole argument behind MMT is that the situation of the U.S. post gold standard is completely different from the gold standard era and also totally different from countries that have debt denominated in foreign currencies.

  260. TZ(5288)

    Market looks fine. Nice whipsaw to teach a lesson to those who got late to the party.

    I suspect we rally from here into the close reversing much of the damage.

  261. ALEX

    Sandy

    OH! Thats good! I thought you were completely out…

    again, best wishes!

    GOLDEN LION

    Another really good article ( I had to read it twice to really get it fully) was here…

    http://thedailygold.com/featured/when-and-how-gold-will-begin-its-bubble/?p=5759/

    BASICALLY…He thinks that gold has been going up , even when stocks and Bonds have rallied,(SO MAYBE less funds participating) but now (2011-2012)he feels bonds are going to turn bearish with the Stockmkt, and says Funds should be forced into precious metals…causing major acceleration for the nxt few yrs.

  262. Redwine

    DK

    Greek debt not denominated in a foreign currency any more than Californias.

    Great Depression, Weimar, Zimbabwe weren’t during any gold standard. A gold standard would be more likely to create a deflationary depression.

  263. Tim and Jeanene

    David K –

    Yes – that is the basic foundation for understanding the current system. Collapse arguments never go far enough to get outside the box their mind has put them in that we are like a household.

    The government is not a household – that is key to unlocking the truth of our national debt and the reason we won’t have a failed auction or a bond market “collapse”

  264. Tim and Jeanene

    Redwine –

    All those examples though owed money in foreign currency.

    Because they could not gain revenue by taxing their citizens more in order to pay the debt, they went to printing their money and then going to the FX market (or the equivalent in Weimar’s case) and bought the currency with their printed money in which they owed. Hyper-inflation is an FX phenomena, not a condfidence phenomena.

  265. Redwine

    Tim

    How do you explain the fact that Weimar and Zimbabwe deflations occured without high CU. Their situations were identical to the Great Depression with high unemployment.

  266. Power Corrupts

    I was cold called by some investment outfit I never heard of last night. They were pitching GOLD. Anecdotal evidence the third stage of this great bull market is beginning…

  269. TZ(5288)

    NOTE: i don’t mean that we are going to shoot up to new highs by the close, just that we we are unlikely to close flat today with bearish spikes on things.

    The weekly’s look good and buyers will come in before 4pm, I would say.

  270. LowTax

    Regarding MMT, I think you guys are missing the forest for the trees. There’s truth to the monetary mechanism behind MMT – our government does not need anybody to lend it money. But this is true only up to a point as T/J has admitted. Our present situation is not as easy to brush off as MMT would have you believe though – as T/J noted, our government does not need loans or tax money BUT THE US POPULATION does need income. And it needs lots of income for the growth we are used to.

    The private sector has accumulated too much debt (same as in Japan in the 90’s) and must work it off, PRODUCTIVELY! And just as in Japan, the government is in a Catch 22 – it lowers rates and sells bonds to the Fed to stiumlate new debt-fueled growth on its own and that allows the private sector to heal its balance sheet. Meanwhile, the government’s balance sheet goes to hell. This has been going on in Japan for two decades with no end in sight (230% debt/gdp?).

    The problem? Even the slightest wiggle in rates will cause the interest payments to soar and swamp revenues. At that point, if the country does not wish to collapse, it must devalue the currency. And that’s purely printing of money in the eyes of foreign investors who buy our bonds. They will dump and the Fed will be forced to buy them all to keep rates from skyrocketing. At that point the US dollar will cease to be the reserve currency – we will be a banana republic. Commodities, especially oil, will soar, and this will kill our economy.

    Regarding cap util – since the private sector is loaded with debt, cap util cannot go up, regardless of rates. There is no credit capacity left on the consumer balance sheet – this can been seen in charts of the new debt it takes to raise gdp by 1 dollar (efficacy of debt). And without COLA increases, the printed money cannot circulate to households and the money flows into commodities, squeezing margins of corporations. Cap Util is again hit negatively – input costs soar while consumers have to pay more for basic needs – no disposable income is left.

    MMT works. It has worked for decades. But it has hit a wall – the government may have no limit on debt but the consumer does and he is broken. At the least, this will be similar to the 70’s stagflation – no growth and high commodity prices.

  272. blammo

    Golden Lion, I agree with you. I too am choosing not to trade this market (typically I would have faded the open) because, as you say, “I don’t want to lose my psychological edge.” If you start mixing up your methods it becomes mentally confusing *especially* when emotions enter the equation.

    I am currently only 65% invested because I know that is my personal comfort level. I will add higher (or lower) so that I have a cost basis that always stays comfortably green (I personally can’t handle draw downs).

    And Alex, I like your quote, reminds me of the Facebook story, where one of the early players (Winklevoss) was taken out when they changed the company name simply because he was not in the meeting (I think he ended up with only a few tens of millions rather than hundreds).

    Also, you are a good short term trader, I’m surprised you are 100% invested and don’t leave yourself some trading capital.

  273. DG

    Tim: I think LowTax makes some good points. Do we not need the consumer to buy to push up CU? With housing crushed, where will that come from? And if input commodity prices exceed the cost able to be charged for a good…?

    And now I’m out for a while but will read when I return.

  274. Haggerty

    Nike,

    No the guy at Europacific told my friend to hold back on picking up miners till next week, because he felt there could be a possible pullback because of the concerns in Egypt. I really hope he’s wrong because I’m balls deep.

  277. ALEX

    Blammo

    Yes, that story with Facebook was quite like that quote…didnt even think of that, but I guess that proves it’s truth.

    And as for me being 100%-

    I didnt say I’d STAY 100% Now through spring 😉

    Last Aug to Nov ( and I guess more so Nov to now) I would ride a trade as long as it looks favorable. I am currently 100% (but part of that is REE and AVL…I may sell those and buy more NG or AXU ifthings look good that way.

    When the P.M.’s BOTTOM & run , I trade A LOT LESS! They do the work , and I get more free time!! YAY! But in Nov to now…I view certain stock ‘set-ups’ as a row of pistons!!

    Say I like 5 stock chart patterns… Some hit top,while others bottom at the same time, so I rotate in and out and in. But Aug to Nov’s P.M. run, I seldom did that… Unless it was Obvious,straight up kind of run ( and I sold NG and NAK WAY TOO EARLY looking back 🙂

  278. Tim and Jeanene

    DG –

    Yes, which is why I am not too afraid of roaring inflation.

    Sure, if we only rate inflation in commodity prices, then we have it.

    What is more likely to happen is companies will lose margin, which means they lose money, which means they fire people, and deflation takes hold again….

    or – they raise prices and lose market share, and people stop buying even more.

    Government spending at the moment needs to take the place of the demand collapse from the consumers. MMT is very clear that government offsets the spending patterns of the consumer base. The government could consume all the excess capacity. Unfortunately, most politicians don’e understand MMT, and instead they buy bonds, which is in effect giving money to the primary dealers who turn around and buy stocks. So the stock market goes up, but end demand does nothing.

    Maybe if citizens all sell their stocks, they will have the money to go buy, but instead, they are just paying down debt. So we are in a vicious circle. Government could get us out of this mess by using the billions going into POMO/Stock buying and instead spend money at companies to increase the water infrastructure and repair the roads. This will require companies to need to hire, which puts money in peoples hands via a paycheck and causes them to spend, which then reduces the need for the government to not need to spend as much.

    I have argued on here before, the answer is lower taxes and more government spending, not government investing in financial markets. Unfortunately, each political party only gets half the equation right, so we are left to figure out where the boom and busts will be. At the moment – we are getting asset bubbles again. They will collapse – commodites included, but the government will not. Nor the bond market.

  279. LowTax

    I want to add something about MMT – I DO agree with T/J that talk of hyperinflation is probably premature. The US has quite a bit of wiggle room in my opinion before things get out of hand. And I don’t think the Fed will allow hyperinflation – they DO have the ability to stop it. It would just be very painful.

    What I think will happen is we will have slow growth and relatively high inflation for some time. The private sector will work off their debt while the government will devalue the dollar. Our ‘creditors’ like China and Japan will have to take a haircut on their Treasuries. Rates will rise. But I think the Fed will manage to keep rates from going crazy.

    Could I be wrong? You bet. While the US has room to maneuver, I don’t think Japan does and things could spill over to our side. If rates go up even mildly over there, they are toast. The slightest wiggle in rates will swamp their revenues and the yen will die. T/J is correct to point out the role of investor misconceptions but those misconceptions can become a self-fulfilling prophecy. Hyperinflation is a loss of confidence in the currency, and NOT printing of too much money. If the government cannot maintain the faith in the currency, it will die. There’s nothing in MMT that deals with faith – that’s religion 🙂

    What does this mean for gold? It’s a poor inflation hedge. But that doesn’t matter (forest for the trees again). What matters is perception – as governments careen toward the cliff edge, gold will soar. It’s an uncertainty hedge.

  281. LowTax

    Let me add one more thing 🙂

    T/J is advocating Richard Koo’s position to the letter. For those interested, here is a primer on balance sheet recessions with the same advice T/J is giving – government should spend on infrastructure and not fund speculative banks:

    http://www.zerohedge.com/article/primer-balance-sheet-recessions

    Will it work? Nobody really knows and T/J needs to face up to that. We are in unchartered waters – there is no debate about that. There is no data showing that it will work. In fact, I think the opposite is true. Japan has not gotten anywhere in 20 years except in more debt. No recovery is evident.

  282. LowTax

    DavidK, very true. We trade the perception of uncertainty. But that perception will become reality if it is strong enough. It’s also why Gary is completely correct about the gold bull.

  283. Tim and Jeanene

    Great post LowTax –

    But this point:

    If the government cannot maintain the faith in the currency, it will die.

    Most don’t have faith already, but they are forced under coercion to still take them, or go to jail. It has more to do with us not being free men than to say we will lose confidence. I would bet most Americans don’t have faith in our government – or its money. They just don’t want to go to jail. As long as the government forces payment of taxes in toilet paper, Kimberly Clark will do well!

  285. Tim and Jeanene

    So a better way to say it would be:

    “If the government fails to continue to force business to be done in Us Dollars…..”

    Nothing to do with maintaining confidence

  286. ALEX

    JAYHAWKS

    I forgot to mention I looked at your Jayhawks Junior’s fund..ALL of those I have owned at one time 🙂

    I think GBG is really looking good RIGHT NOW. On a 6 month chart wkly w/color volumes, all you see is GREEN volume..sweet! Even HL looks GREAT on THAT chart too 🙂

    I just looked at these gold stocks on 6 month wkly’s and its scary (in a good way)where these things can be projecting they could run too (Given 3-4 months!) 🙂

    SLW , NG , AG , etc

    I’m gone 4 the day…CYA!

  287. blammo

    LowTax, the way you define it, China *is* practicing MMT, and they are using their own currency. They are pumping all their excess capacity into infrastructure (roads, ghost cities, etc.) but it appears (from here) like they are losing the battle against inflation.

    I have always been an advocate of governments investing in infrastructure during recessions (Hoover Dam). Not sure why this MMT thing is considered revolutionary or why it needs to be explained with obfuscatory language.

  288. ALEX

    OBFUSCATORY!!!

    THAT is the word of the day 🙂

    Had to look that up…see, STILL learning something new everday!

    nice one-Blammo

  289. LowTax

    T/J – you need to remember that dollars can be exchanged at any time, hence the coercsion by government is null. What I mean is that if I loose faith in the currency, I will store my wealth in hard assets (which I already do). It doesn’t matter if they are numerated in dollars or that I have to pay taxes in dollars. I simply sell a part and exchange it into dollars to pay taxes or buy goods. This transaction allows me to store wealth ‘outside’ of the dollar’s value except for the brief moment of the transaction. The coercsion is meaningless in terms of commodities. If enoug people ‘flee’ the dollar by buying gold, the dollar will fail. It makes no difference that the US Treasury only accepts dollars. I will be happy to add more zeroes to the end of my checks.

  290. David Kafrick

    LowTax said:

    “But that perception will become reality if it is strong enough”

    Very true. In the economic and financial world, reality and people´s perception about the future of reality are constantly influencing each other. Even if there is no “fundamental” reason for inflation to occur, if enough people mistakenly believe that inflation will occur, the prophecy will get fulfilled.

  291. LowTax

    blammo, re China, remember that the yuan is pegged to the dollar. So as the dollar falls, inflation rises in China. Also, remember that China is an industrial machine, unlike the US which sells mainly services. As such, they are much more sensitive to commodity price increases.

    But I disagree with the assertion that China is practicing MMT – the government balance sheet is relatively clean. They are not taking out debt or printing money to fund infrastructure. They are using their hard earned reserves.

    As to the efficacy of stimulus spending during recessions, all the literature I have read argues against it being worthwhile. I’m not likely to waver on that point. In fact, I think it’s a large part of why we’re here in the first place.

  296. wmp

    Out of the box this morning PM’s were higher then the sell off coincided with a CNBC report that an anouncement regarding Mubarik was imminent..presumably his immediate resignation. The announcement never came and PM’s for the most have been floating since. Is this a coincidence or should we expect a “sell the news” reaction to a Mubarik departure?

  297. Jerred

    WMP,

    The first issue would be listening to CNBC for any type of trading ideas.

    Second, I dont trade news, I trade the reaction to the news based on areas to do business.

    I think we consolidate the breakout over the next couple of days with a downside bias.

    Just to clarify – I do not anticipate a large move lower but a grind before we move higher.

    I think next week will lead to some great buying opportunities.

  298. Wes

    T&J,

    Gary sees the US dollar plunging primarily because of QE. Does MMT (or you) have anything to say on this issue ?

    TIA

  300. fubsy_cooter

    Just looking over some charts as we end the week. What is obvious is that on all past intermediate bottoms there have been reversals and breakouts providing opptys to add to positions. The consensus on the thread seems to be that if you don’t buy now you will have to chase. Clearly that hasn’t been the case in the past.

    Currently 70% invested, and will add incrementally on pullbacks and breakouts.

  301. wmp

    Jerred,

    First, I don’t listen to CNBC to get trading “ideas”. It’s a simple question: will this action create a reaction that offers a lower point to add to positions? Will the market sell the news?

    Sidebar: if you “react” to the news you’re either buying or selling the news. Quit playing samantics.

  303. ALEX

    CHECK THIS OUT

    My uranium stocks were down ALL DAY, look at a 1 or 2 day chart / 5 minute

    for UEC , URZ , URRE

    HUGE VOLUME came in and for example

    UEC was down .20 all day , end of day it went straight up a dollar from there in 20 minutes on large volume. They all did…Something happened…maybe Gold will do this soon??

    Out for now, cya!

    Oh, Jayhawks, I got your HL 1/2 right 🙂 We’ll try again Monday

  304. Jerred

    WMP,

    I am just a dumb trader that trades a very simplistic view.

    The market is a pure auction and allows me to do business in certain areas. When it moves to those areas i do business.

    Outside those areas i twittle my thumbs.

    I think the news/pomo/(enter any event) is just an excuse for traders to blame somebody else for their mistakes.

  307. TZ(5288)

    MLMT,

    The odds of your ‘metals crash back down’ scenario are significantly lower now.

    By holding two days (and even retesting the breakout levels of yesterday) the ‘going up’ prob has gone higher.

    Furthermore, a weekly close has more substance than a daily close, so that by closing today on fri it has further cemented up vs “bull trap and crash lower”.

    Your odds go MUCH much lower if next week is up or flat.

    You know my position and how i’m betting.

  309. Done

    Does anyone have bullion? I’m planning to get some at the end of the D wave. Are there any good sites anyone can recommend or do people buy from jewelry stores or something? Where can I get silver coins everyone talks about and how much should I expect to pay above spot? Thanks!

  311. Keys

    Anybody thinking about the romance of MMT, should understand its most practical statement. Sovereign debts don’t matter. If this is true MMT is true in its spirit, if this is false then MMT is false. In order to test MMT in this subject one must understand currency in terms of purchasing power….this is real. If you believe anything else you are venturing off into magical land again. MMT doesn’t make sense…USD debt in specific has ruined purchasing power. Anybody can see that….the clear answer is if a nation defaults it ends there, and if a nation goes the way of Germany we get inflation and it ends this way. Debts do matter…if you don’t think so, then sell your gold…also don’t look in your pocket, or at the riots of the world, or the fact that at current rates it only takes 40 years for dollar savings to wash out to nothing.

    Anyways a word to the wise, don’t fall for this….study it if you wish, but foolish to fall for it. Reality defines theory, not the other way around. Sounds like MBS accounting again.

  313. Driver

    Done,

    Is the bottom of the D wave suppose to be lower or higher than where we are now in the C wave? I don’t remember if Gary has answered that question, but it might be good to know his thoughts before you decide when to buy.

  318. Driver

    Done,

    I recall Gary mentioning golddealer.com. This is where I will probably buy mine. They are local and I heard of them years ago.

  319. Jayhawk91

    Alex-

    Interesting on URRE. I had 1000 shares but sold them this AM! Oops.

    Put that money into silver miners. I’m fully loaded now, top off my positions with some AGQ today.

    Do you use leverage Alex? I’ve not so far, but might add a little.

  321. Tim and Jeanene

    Keys –

    Two problems with your argument….. first – you use Germany as a comparison to the US. This is two different situations.

    Next, you use purchasing power loss as proof that debt is devaluing the dollar.

    I addressed this in my article, but will post it here:

    The US Dollar Has Lost 96% of its Purchasing Power – Thus Printing Makes Us Poorer

    This argument only covers one side of the story. While each individual dollar buys less goods, the argument is incomplete. To bust this myth, we just need to look at how much time it requires to pay for those goods. Instead of looking at how many dollars it takes to buy a candy bar today compared to 30 years ago, I would challenge you to instead value the candy bar in hours of labor to obtain it. While it might take many more dollars to buy that candy bar, you get many more dollars for each 60 minutes of work. So even though the Candy bar costs 1000% more, it may take you 30% less work now to buy it. Therefore, you are in fact richer, even though the value of your dollar does not go as far. For a more detailed discussion on this topic, see this article I wrote: seekingalpha.com/article/248003-the-end-of-america-not-quite

    Don’t listen to individuals who state that their own experience is one of losing wealth to inflation. One example is not a good sample to base decisions on. As a whole, our nation, over the past 3-4 decades of being off the gold standard, has seen wages outpace the loss of purchasing power. I am not saying if this will continue in the future, but I like America’s chances of creating new businesses and obtaining productivity gains.

  322. T.J. Rand

    Done-

    I use Apmex, with good results.

    But you may want to think about the risk you are controlling for by buying physical. If it is simply to protect against lost purchasing power/wealth, you could buy physical gold or silver through GoldMoney…with the advantage that it is held in vaults in London, Zurich or Hong Kong (your choice). Or you can buy certificates/physical at the Perth Mint, where your Gold/silver is guaranteed by the gov’t of western Australia. Or if you don’t trust these vaults, you could buy gold/larger silver bullion bars to store yourself. Of course, there you will need to determine whether you are worried about bank risk, such that you store the bullion at home rather than in a bank SD box. Or there are also private, non-bank vaults in different parts of the country.

    At the other extreme, if you are protecting against the risk of societal breakdown (and I’m not saying I’m an advocate of this POV) such that you might need the silver for barter/transactions, you’ll want to buy 1 oz coins as a small unit of measure.

    Have fun.

  323. Gary

    Let me put it this way. Never in all of history has any country or empire been able to print or borrow their way out of a debt spiral.

    One can dream up all the fancy theories they want. They can massage the data to get the answer they are looking for. But the pure and simple truth is that in all of history it’s never worked.

    Now you have to ask yourself, does the act of concocting a theory to explain why this time it will different really guarantee that it will be?

    Or will reality crush the theory just like it’s crushed every theory in history. And will this time not be different. Remember the four most dangerous words in investing, or economics for that matter, are “this time is different”.

    Up until the 30’s government had always taken the approach of letting the market run it’s course. Depressions were almost always short and followed by periods of tremendous growth.

    It wasn’t until the 30’s that government tried to “fix the problem”. The end result was a depression that lasted all the way through WWII.

    Yes we spent money on infrastructure to create jobs and yes it didn’t work then either.

    Just paying someone to dig a ditch is doing nothing more than taking money out of one pocket and putting it into another.

    Building infrastructure for the sake of creating jobs. Is not a productive use of capital and it’s not a sustainable industry.

    In order to create true demand and permanent job growth we need new industries producing real products. Just printing money isn’t going to do that as has been made painfully clear.

    So one can argue over these nonsense theories all day but in the end the laws of nature are going to force a reckoning and history will just end up repeating again.

  324. Tim and Jeanene

    Gary –

    Repeating again? You still fail to provide and example from history of when the entire world has been on a coordinated floating exchange rate system? All examples you can give from history shows countries fail because currency was tied to something.

    Next you state: “Just paying someone to dig a ditch is doing nothing more than taking money out of one pocket and putting it into another.”

    With all due respect as the man of the blog, you still are not getting the current monetary system. If you think that the government needs to tax some in order to pay others, you are not grasping what taxes actually do on the national level. You still haven’t taken time to understand the monetary reality in which we live.

  325. Keys

    If someone from 1900s saved $100 and passed it on, it would be worthless. So the productive hours of my relative is worthless due to debt creation. Inflation robs the savers…I already know this.

    Reality again…the reason we have microwaves, is because people are poorer…We moved from a one parent income to a two parent income as a natural result of being poorer…and when that wasn’t enough we went in debt…man, I just ain’t going to buy this nonsense. So no wages have not kept up with inflation…and if an argument is made otherwise, I will let you discuss your thoery with any mom with a young one being forced to go back to work.

  326. Avann

    Agh!!! Every Tim says that salaries have kept with inflation I just wanna scream. That is the most out of touch statistic that he spews! I’ll post some studies later. Right now I’m gonna enjoy my weekend.

  327. Gary

    Every country that has tried this has found a way to debase their currency. Rome even went so far has to clip the coins.

    Just because a currency is “backed” doesn’t mean it can’t be debased. History is littered with collapsed currencies that started out being backed by gold or salt or sea shells and every one of them ultimately became worthless, usually in less than 40 years.

    You seem to think that because the entire world is making the same mistake that somehow that means magic will all of a sudden work.

    I guarantee it won’t. We are already seeing the unintended consequences. Commodity prices are spiking the dollar is collapsing the bond market is selling off.

    Food prices are rising causing social unrest around the world.

    The evidence is right in front of you yet you insist on sticking to a theory that is obviously failing.

    Like I said, it’s never different.

  328. Redwine

    T & J

    Inflating paper/electronic currency is a hidden tax (theft) on pretty much everyone, especially savers. If you don’t get this you really have no grasp of the obvious. This is just third grade logic. It’s you who needs to spend time contemplating this issue.

  329. Tim and Jeanene

    First of all keys – I don’t really gain anything if you do buy it or not. I am just stating the reality in which we live, not selling an idea. Now to look at your arguments:

    “If someone from 1900s saved $100 and passed it on, it would be worthless. So the productive hours of my relative is worthless due to debt creation. Inflation robs the savers…I already know this.”

    Agree. But that same $100 invested in those who still produce is worth what? I am not a big fan of holding cash. If someone can’t work due to age, they better make sure they have a portion of their money invested in the productivity of America. Bonds are nothing more than a different type of cash. A holding tool for cash that pays a little more interest than cash. If you can not prodcue an hour of work to obtain paper dollars, then you need to put money with those who can. Otherwise – you are right, you will fall behind.

    “Reality again…the reason we have microwaves, is because people are poorer…We moved from a one parent income to a two parent income as a natural result of being poorer…and when that wasn’t enough we went in debt…man, I just ain’t going to buy this nonsense. So no wages have not kept up with inflation…and if an argument is made otherwise, I will let you discuss your thoery with any mom with a young one being forced to go back to work.”

    I have already stated on here a few times, but I would argue that this has more to do with materialism than reality. A lot of those moms live in much nicer and bigger homes than their parents. If the majority were willing to live in single pane windowed homes with formica countertops and only have one family car, chances are – they probably could live on one income. If they decided to wash their clothes for free on the washboard and hang them out to dry, and garden for their food and milk the cow, things might be cheaper as well. That argument has so mnay holes, but it sure seems logical on the surface.

  330. Natanarchist

    Tim, so you want us to believe that two parent working families are the result of materialism? Is that your final answer? Can’t think of any others…like the most important reason why we have two parent working?

  331. Tim and Jeanene

    Gary – the bond market is collapsing? It is about the same level today as it was a decade ago.

    It is moving down sure, but collapsing?

    “History is littered with collapsed currencies that started out being backed by gold or salt or sea shells and every one of them ultimately became worthless, usually in less than 40 years.”

    That is the problem, they are tied to things, and remain tied to things. We are truly floating now against other currencies. Maybe you are right, but the whole fiat system will have to collapse at the same time.

    And the commodity issue will right itself. We had food riots three years ago too. It is not going to be a permanent part of life as you seem to want to project. I think you said just because something is happening now – you can’t project it as constant into the future.

    Commodities are a great trade right now. The key word is trade, not investment.

  333. Movax2

    T/J

    What is the role of money in society?
    I always thought it was to facilitate trade – in other words make barter easier. In such a role it also becomes a store of value.

    You seem to promote the idea of it being neither, that it is only good for investment, and it’s loss of value is a good thing.

    Fine.. from that standpoint the dollar has, is and will collapse, the argument is more about the timeline. I feel it is accelerating and POG agrees with me.

  334. Gary

    I said the dollar is collapsing. The bond market is selling off.

    Of course nothing is permanent. I’m not sure how you got permanent from what I said.

    There will come a time when we will sell our gold and buy stocks again.

    The goal of any successful investor is to spot the big turning points.

    The stock and commodity markets had one in 2000. The bond market had one in 2009.

  335. Movax2

    The whole fiat system could collapse, if the USD is still the reserve currency and it collapses. All other currencies are part of the ame system. I expect it will be removed as the reserve currency before it’s ultimate end, whatever it may be.

  336. Tim and Jeanene

    “What is the role of money in society?
    I always thought it was to facilitate trade – in other words make barter easier. In such a role it also becomes a store of value.”

    True money is – barter for example allows your produced goods to exchange for other produced goods, therefore goods could be money.

    Paper dollars though are not fully about bartering. They are forced upon us. I dare anyone here who thinks a collapse is coming to stop using them. Stop exchanging goods and services for them. Pay the IRS in gold coins for your tax obligation. Report to us how well that goes.

  337. Daniel

    T & J
    who says we will quit using themin a collapse? We will just have to use wads, bucketfuls, or more whatever? We will still be using a store of value that stores less value and buys less product?

  338. Redwine

    T & J

    You don’t even have a grasp of the basics. Money is 3 things:

    1) Numeraire…unit of measure of value.

    2) Medium of exchange…lubricant.

    3) Store of value…wealth savings.

    How can you pontificate here w/o even a basic understanding of the subject?

  339. Tim and Jeanene

    Sure Redwine – I just don’t get the monetary system….. thanks for shedding light on the subject.

    Money is defined many ways by many different people, so I doubt your dictionary definition is germane to the subject.

    The truth of the matter is that paper dollars are the currency of coercion at the moment, no matter how you want to define money.

    In jail, cigarettes are money – so should I say cigarettes?

    Please spare everyone the personal attacks. You have been very personal in your posts of which I have tried patiently to answer, but it seems pointless to continue conversing with you at least.

  345. Nick

    T/J:

    I am going to take a stab at expressing your views a little differently:

    1. $$$ or Gold or Cigarettes should not be “hoarded” but exchanged freely between people, businesses and Govt. via Spending and Investment.

    2. With rates @ ZERO, this is precisely what the FED is doing: Discouraging Savings while encouraging Investment (or Trading or Speculation).

    3. However, while the Fed can force people to NOT save (via ZERO interest), it cannot force people to spend money where the FED wants people to.

    4. Hence, we are getting Food and Commodity inflation and not an increase in Housing prices.

    5. Over time, as a new industry is born, money will flow from commodities to this new industry creating another Secular Bull.

    6. The $$$ will not collapse against other currencies since they are all floating. However, since the FED is forcing people out of Dollars, and into commodities for now, the $$$ will fall against Gold.

    7. Bonds will not collapse, since the FED can buy all they want, be it 600B or 6 Trillion.

    In summary, the FED will temporarily debase the $$$ against commodities and not against other currencies. It is best for everyone to not hold $$$ in today’s environment but stocks or Commodities. Bonds will gradually sell off. Commodity spike will be temporary since all this hot money will flow into Savings/ New Industry when rates start rising and a new industry is born.

    I believe Gary shares this same outlook. Maybe the difference lies in:

    1. Will the $$$ collapse, and if so against what?

    2. Will rising commodity prices come to the US from the developing world? And if so, what will happen to stocks and bonds?

  347. Wes

    T&J,

    I think you are correct about the way the system currently works, but there seems to be something basically immoral about a government system that bases retirement on wages earned years ago, and charges current prices for things.

    On another note, you may have missed my question about Gary’s thoughts that the dollar is about to fall substantially as a result of QE. Any comments on this ?

  348. Natanarchist

    I don’t know why guys bother arguing this MMT. its just State Socialism dressed up in another name. It will work until it doesn’t, no matter what its proponents tell you. Humans have a pretty good record of rejecting bondage. Just give it time.

  349. Beanie

    LowTax,

    When I say the market, I always mean the SPX and Dow Jones. I’ve never invested in gold, and don’t intend to. Gold is a fear trade. Being a bull that I am, I don’t see it as a good investment. I can’t analyze gold in any standard metrics. It’s a fear trade — a ponzi fear trade, as far as I’m concerned.

  350. Gary

    Was there any fear from 2002 to 2007? Of course not, yet gold made a huge move from $255 to $1025.

    So what did happen during this period that could have possibly driven gold up over 300%?

    The Fed began to debase the dollar in the foolish attempt to halt the secular bear market. The dollar index in that time has dropped from a high of 120 to a low in March of 08 of 71.

    The dollar lost 40% of it’s purchasing power. It’s why a gallon of gas costs over $3 instead of $1. It why a loaf of bread costs almost $4.50 instead of $1.50. It’s why the government can’t make pennies out of copper anymore because the metal is worth more than 1 cent.

    The stock market has actually declined in the last 10 years, both nominally and in inflation adjusted terms.

    Mining stocks however gained way over 1000% percent during this period. Even an investment in gold has massively outperformed stocks. It’s why the Dow:gold ratio has dropped from a high of 42 in 2000 to the current level of 9.

    Beanie you have got to be one of the most unsophisticated investors I’ve ever seen. And I mean that in the nicest way possible.

    You really need to pull your head out of the sand and get in tune with the big secular trends.

  351. Nick

    T and J:

    In addition to Wes’s question on the $$$, 3 more questions for you:

    1. Do you see another leg down in stocks in 2011/ 2012/2013, which takes out the march low? Or do you see us hitting 2007 highs before making any new lows?

    2. Do you see the current environment as deflationary or inflationary? FRom reading one of your links:
    http://www.creditwritedowns.com/2010/05/mmt-hyperinflation-in-the-usa.html

    While hyperinflation is not a concern in US, how about oil getting back to $150? and rising cotton, sugar, wheat etc, prices reducing discretionary incomes?

    3. Lastly, with 9% unemployment, what needs to be done to get it down to 5-6%?

  352. David

    I suspect that Beanie is like Tim Knight in that his image of himself is more important than making money. They happen to apply different labels to themselves, but in each case they are driven by a need to feel superior to others. This is why neither of them ever question their own decisions — in Beanie’s case, participating in a lost decade in stocks, and in Timmy’s case, shorting the entire 2009-2011 rally. Neither one seems to ask themselves how they missed a secular bull market that would have reaped thousands of percentage points in gains over the last ten years. To do so would require that they question their own biases. They are both driven by the conviction that they will
    be vindicated at some point in the future.

    They represent a cautionary tale about how investors bring their own egos to the market and insist that it bend to our will.

  353. DG

    David: well said about beanie. I have had the same thought. Beanie: Since you have said you will never invest in gold why are you blogging on a gold trading site? Is it just to have a forum to spout your stuff? Are you trying to educate us? Why not post on a bearish stock site where at least your comments are relevant. It really does seem that it is all just about ego for you. Correct me if I am wrong. Why ARE you posting on a gold site instead of elsewhere (or maybe you just post on as many sites as you can).

  354. Keys

    “I have already stated on here a few times, but I would argue that this has more to do with materialism than reality. A lot of those moms live in much nicer and bigger homes than their parents.”

    Really? Are you serious? Thanks for making my point for me.

    Further you make my point with the need to chase returns in order to avoid the dollar. What?!?! The entire premise of MMT is that debt doesn’t matter…I argue that debt does matter because it kills the dollar over time…and you say that this is why you need to chase returns….NO…under a stable monetary system, the need to chase returns doesn’t occur. That is what a store of wealth implies…..You wrap your arguments in phrases that contradict themselves, but speak at holes in my argument…when you have just agreed with what I just said….what?!?

    Gary looking forward to another “real report”….as much as I enjoy the abstract, this stuff is driving what little sanity I have out of me…

    Bond’s drop like crazy…
    Food riots
    People excited about 9% unemployment, but is only due to people leaving the workforce
    FED without a question will try QE3 at this point(or perpetual QE2)
    Dollar dropping like a stone
    Debts don’t matter!

    Okay I am done….Time for me to go scold the US mom’s for being materialistic and tell them that they are horrible people for not wanting to stay home with their newborn children. Rich evil women that they are!

    This is really starting to sound like communism….really really close!

  355. Natanarchist

    @DG; Beanie has been posting on SMT for quite a few years. Back in ’07 he was big into the Solars and pink sheet stocks. And he is always on the long side…nothing wrong with that..however calling for ‘DOW to a million’..get ready..hurry don’t miss the train…becomes like background noise. Muzak if you will…you know it is music it just doesn’t sound right. You still holding all those Solars beanie?

  356. Slumdog

    As to inflation, those who think it’s all about PPI and not CPI are dreaming.

    Cotton is up 60% yr over yr
    Polyester is up 55-60% yr over yr

    These are current prices. If you think for one second that I as manufacturer will eat these for more than this year, you’re dreaming. For every institutional customer, the price has gone up by the full cost. For the retail, I watch as the foreign price advantage gets damaged.

    What’s happening is just what I said would happen. The dollar is declining in terms of its buying power, labor is frozen in price, and commodities have risen. The outcome is that the foreign advantage is dropping. In a few years, Americans will have lost their cushy labor lifestyle and they’ll be back at work as the foreign suppliers allocate production locally, or simply go out of business.

    This is the political agenda. It’s being carried out very well.

    If gold were merely keeping up with the other commodities, it would be at $1500-1600, now.

    As everyone smart in my world expects further price rises, except for the ignoramuses who failed to see what’s happening, the value of gold must rise to keep pace with the commodities.

    Gold has performed worse than cotton, worse that polyester, worse than many commodities.

    Silver will act on gold’s behalf as gold is hostage to political game playing.

  357. Natanarchist

    haha Keys…starting to sound like…it is State Socialism! You got it. Think big..don’t get mired in the details of the argument. Folks want to believe the “womens” movement was about liberating women…ha ha ha..WRONG…Free markets liberated women. Free markets created the labor saving products and technologies of what was “tradtional” womens work. Yes raising a family and keeping a home was work. Valuable work at that. Paid for predominantly with Cash from one wage earner. Funny how that worked. Socialists know this. Government quickly enslaved women as TAXPAYERS. The so called womens movement was financed by the elite through their Foundations to create more TAXPAYERS! (by the way, tax’s and regulations, ie: Government, is why it takes two incomes today to live similarly as it did 50 years ago.) That’s what the proponents want. The “system” could not survive in the “free market”. it requires FORCE. The system, and I am speaking about the present here, requires FORCE to sustain itself. Without a gun and badge, without the Mafia, the Cheka, the Stasi, the Gestapo, the IRS, the system crumbles immediately.

    Now go back to work and procreate please…we need more TAX’S and TAXPAYERS for the Sovereign US GOVERNMENT. Sovereign from the people too.

  358. ALEX

    Jayhawks

    Wow..I almost sold this morning too ( I own UEC)…I was looking to put the money in EXK or AXU…and I got pulled away to help a neighbor who had surgery on his knee ( we had big snow). I said I need to be back by 330…wanting to make the trade, and all uraniums started High volume push. It was fun to watch, and obviously I didnt sell yet.

    I was looking at GBG and CGR and CDY too.

    good weekend all

  360. Tim and Jeanene

    Natanarchist –

    Thank you for stating the truth! Yes indeed, that has been my point all along. We are not free men because of the tax coercing that goes on. Capitalism is somewhat “free market” in that it allows us to choose what we want to do for employment compared to communism which dictates where we work. But the end result is the same. We are slaves.

    Keys and others want to rail against me as if I am trying to say this is all a good thing. All I am saying is that this is the reality we live in. Instead of worrying about deficits and interest on the debt, American and gold bugs are concerned about the wrong things. I truly believe this is what the system wants them to worry about. Get all freaked out about debt from the nation, and it takes the focus off the real problem, coercion to pay taxes in a paper money we have no say in. That is the problem, not debt.

    Welcome to Amerika folks. Time to udnerstand the monetary system, and realize debt is not the problem, as some have mockingly said, the problem is that you are not free men. You are forced to obtain paper dollars with the threat of jail if you don’t.

    You are a slave to the system you rail against. You rail that they are “ruining” out money. I say let them if that is the road they go down. If Hitler came back to life and forced you to work for Marks, would you be ticked off if the Mark were going to hell in a handbasket? Unfortunately, the way they have the system set up, it’s probably not going to happen without revolution. Sorry, that’s just the way I see it.

  361. Tim and Jeanene

    Keys –

    Your post didn’t make much sense. I hardly see how I made your point, but if it makes you feel better, sure.

    And yes, if you want to use back in the day of the Cleaver family lifestyle, then you need to compare lifestyles. Are you going to tell me that the average American home is not bigger and better than it was in the one income family days? Are you going to tell me that the closets are not twice to 4 times larger today than they were in the 50’s? Are the cars they drive not more advanced? How many cars did the one income family have on average back in the day? Where did the typical family take vacation back in those days? The numbers are pretty clear also in regards to the amount of money we spend today on things just to survive, compared to the percentage of income they spent back then. You can crow all you want, but the stats don’t lie:

    http://seekingalpha.com/article/248003-the-end-of-america-not-quite

  362. Tim and Jeanene

    Wes –

    What is immoral is that the government requires us to pay taxes in their made up money.

    As far as the dollar – no idea where ti goes over time. One thing is certain though, the value of it is not much lower than it was 20 years ago, and yet we have “printed” trillions in that time. The trend is down now, but it has gone sideways now for 20 years in the face of much higher supply of it:

    http://www.mrci.com/pdf/dx.pdf

  363. Gary

    “One thing is certain though, the value of it is not much lower than it was 20 years ago, and yet we have “printed” trillions in that time.”

    You’ve go to be kidding right? The value compared to other devalued paper currencies is about the same but the purchasing power has been destroyed during this period.

    A gallon of gas is still a gallon of gas. That hasn’t changed in the last 100 years. So if the value of money hasn’t changed why does it take over three dollars to buy that same gallon of gas instead of a quarter?

    50 years ago the average house cost about $30,000. If the value of money hasn’t changed why does it now cost almost $200,000 for the average house? And don’t give me a load of baloney about how houses are bigger and better.

    I’m talking the same two car garage, 3 bedroom, 2000 sq. foot house.

    Other than a microwave, which one can get for under $100, a garage door opener and cordless phones the house of today doesn’t look much different than the house of the 70’s.

    Today’s flat panel TV’s still cost about the same in terms of total income as they did in the 70’s. Actually they are probably cheaper.

    The slow steady theft of inflation has gradually destroyed the purchasing power of the dollar. During the last decade this process has accelerated.

    As the country gets deeper and deeper in debt which you seem to think magically doesn’t matter the process will accelerate even faster as we are forced to print faster and faster to service the debt that doesn’t matter.

    Geez is commonsense dead in today’s society?

  364. trond56

    Gary, you agree that the real interest rate is closely correlated to the price of gold?

    An expert of this field states:

    <<<<
    a) whenever the dollar’s real short-term interest rate is below 2%, gold rallies.
    　
    b) whenever the real short-term rate is above 2%, the price of gold falls and

    c) whenever the real short-term rate holds at the equilibrium rate of 2% gold holds steady.

    d) for every one percentage point real rates differ from 2%, gold moves by eight times that amount per year (i.e. if the real rates are at 1%, gold will move up at an 8% annualized rate. If real rates are at 0%, then gold will move up at a 16% annual rate – that’s been about the story for the past decade – and, conversely, if the real rate jumps to 3%, then gold will drop at an 8% rate.

    Conclusion: In effect, gold acts like a highly-leveraged short position in U.S. Treasury bills and the breakeven point is 2% (or more precisely, a short on short-term TIPS) and for every one percentage point real rates differ from 2%, gold moves by eight times that amount per year i.e. in an 8-to-1 ratio
    <<<

    Here is a table of yield day for day on 10 year TIPS, you’ll see that the yield on 5 year tips 2 days ago was only 0.18%, while on the 10 year tips it was 1.23%

    http://www.federalreserve.gov/releases/h15/data/Business_day/H15_TCMII_Y10.txt

    5 Year tips: http://www.federalreserve.gov/releases/h15/data/Business_day/H15_TCMII_Y5.txt

    Here a stockchart of 10 year tips:
    http://stockcharts.com/h-sc/ui?s=TIP&p=D&st=2007-12-20&en=1975-12-31&id=p40289407277

    So the yields on long term treasury + on long term tips are increasing, but not the yields on short term treasury and on short term tips, and in my opinion the latter is what’s most important versus gold.

  365. Gary

    I think it’s too simple to say gold is fundamentally driven by interest rates alone.

    During the last gold bull bond yields had already been rising steadily for years yet gold still entered a secular bull that didn’t top until the Dow:gold ratio dropped to 1:1 even though rates were spiking to 15% at the time.

    The entire gold bull unfolded in an environment of rising yields.

    There is always a supply and demand factor to any secular bull market. Towards the end there is always an emotional bubble phase that unfolds completely independent of underlying fundamentals.

  366. Redwine

    T & J

    “The trend is down now, but it has gone sideways now for 20 years in the face of much higher supply of it:

    http://www.mrci.com/pdf/dx.pdf“

    You’re using data from an index that compares the value of USD against a basket of other paper currencies. If you don’t see the fallacy in this approach you’re beyond hope.

  367. vuvvy

    T&J,
    You seem to have a lot of faith in official govt #’s,and a lot of faith in your MMT. Can you explain why Hank Paulson said in 2008 that our entire monetary/banking system would fail without TARP?

  368. Redwine

    T & J

    “Are you going to tell me that the average American home is not bigger and better than it was in the one income family days? Are you going to tell me that the closets are not twice to 4 times larger today than they were in the 50’s? Are the cars they drive not more advanced? How many cars did the one income family have on average back in the day?”

    Your standard of living comparisons are faulty. Even if we stipulate that standards have gone up, which we don’t, it’s faulty logic to give the credit to fiat currency. Free markets lead to competition, innovation, and higher productivity while debasing currency leads to malinvestment, over regulation, reduced innovation, and higher prices. These are opposing forces and debasing currency has obviously lowered the standard of living relative to what it could have/should have been.

    The real proof will be the SOL of retiring baby boomers for the next thirty to forty years. The young will be better off, for the reasons you previously stated, than the old since the old need to rely on their saved earnings. These saved earnings have been malinvested in paper assets that are in the process of becoming worthless. Their savings have been stolen by an Orwellian nightmare.

    Your reality is not mine. Your solution is Keynesianism on steroids. It’s like you want to stomp on the throttle, instead of the brakes, as you careen off the cliff.

  369. Tim and Jeanene

    Keys –

    I just had and epiphany to our debate in regards to needing two incomes. The reason we will go around and around is that the question was anecdotal which caused the same response. You can say it’s out of need, I can say it is out of materialism, and we both are right and wrong.

    I just need to look at my own neighbor hood to see that 8 out of 9 families we hang out with are stay at home moms. We do not live in an upper class neighborhood either- the average house was built in the 50’s and although updated and added on to, is not the wealthiest by a long shot.

    I could throw in more anecdotal evidence and state that most women are getting married later, which means they are having kids later and less of them too, but that proves nothing. I could also mention that it may have something to do with the fact that raising kids is WAY harder to do than go to work. I work from home 50% of the time and see what my wife does with 4 kids. I would want to go to work instead if I were her. In fact – our previous neighbor worked and put the kids in day care for that reason. Say care ate up most of what she earned, but she just needed a break. But that is anecdotal evidence as well.

    The truth of the matter though is that the amount of money spent on food as a % of income has collapsed, even though the value of the dollar has gone down:

    http://static.seekingalpha.com/uploads/2011/1/19/475264-12954669960272-Tim-Ayles.jpg

    and the cost of housing as a % of income has collapsed as well:

    http://static.seekingalpha.com/uploads/2011/1/19/475264-129546711972869-Tim-Ayles.jpg

  371. David Kafrick

    You guys do not understand what Tim is saying. He is not saying that the standard of living has gone up because of fiat currency, he is saying that it has gone up because of productivity and the fact that the dollar has lost value makes no difference because people’s salaries have gone up as well in terms of dollars.

    It’s just nonsense to say that a car was cheaper 100 years ago simply because it cost 1% of what it costs nowadays. You have to say that it is cheaper or more expensive by comparing it with the average salary. Inflation, as long as it is not out of control, only erodes the purchasing power of those that are not productive or don’t invest in productive people.

    By reading some of the posts, one would think that 50 or 100 years ago people lived better lives than we do. That is just not true, as a whole, we live much better and richer lives than our grandfathers. You guys are too nostalgic. The world will be just fine, and things will only get better. 🙂

  372. Tim and Jeanene

    Gary – “A gallon of gas is still a gallon of gas. That hasn’t changed in the last 100 years. So if the value of money hasn’t changed why does it take over three dollars to buy that same gallon of gas instead of a quarter?”

    Strawman argument, if you don’t look at how many hours of labor it requires to buy a gallon of gas. And does car technology get you more miles per gallon? Yup. And does.

    “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it… But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated…” – Adam Smith, The Wealth of Nations, 1776

    “What is a cynic? A man who knows the price of everything and the value of nothing.” – Oscar Wilde, Lady Windermere’s Fan, 1892.

    Oscar Wilde has you pegged.

    If you did the research, rather than just look at price you would notice a few things about gas.

    By looking at GDP per capita, the story is a bit different. In 1981, a gallon of gas took as much out of what the average consumer spent as $3.90 does in 2009. And as a share of GDP per capita, gas was even more expensive in those earlier days with it at over $4.60 in 1980 and more expensive in the earlier years.

    Let us look at relative cost to a worker to fill up using 1949 dollars. That year the 27 cents it cost for a gallon of gas, took a certain share of the worker’s wage. The interesting question is, has the cost as a share or percent of the worker’s wage increased or decreased over time? Since wages have increased faster than the price of gasoline, by 2009 an unskilled worker spends less than two-thirds as much, as a percent of wage, for a gallon of gasoline than the 1949 worker. For a production worker it is only half. The table shows that the $2.36 a worker paid in 2009 (latest available data) would be comparable to only 13 to 16 cents (in 1949 prices “share” of the wage.

    Sorry Gary – but you need to look at the whole truth, not just “prices”

  374. Gary

    Tim,
    I think where most of us have a problem is with the notion that some how according to MMT deficits don’t matter.

    Yet history has shown that they clearly do matter. When they go beyond the point of no return a country has only two choices.

    Default or debase.

    Default leads to a deflationary depression. This is the only choice a country has if their currency is backed so that the money supply can’t be expanded at will.

    If however the currency is pure fiat then the country can delay the inevitable by servicing it’s debt with the printing press. We are at that stage now. The Fed owns most of the governments debt at this point.

    Of course the problem is that just the act of printing money doesn’t create anything. If productivity doesn’t rise along with the money supply then the value of the currency starts to decline. Basic economics 101 too much supply = lower prices (or value in the case of money). That leads to inflation.

    We saw severe inflationary pressures in 08 and we are starting to experience them again.

    Inflation is a hidden tax on an economy and if allowed to continue it eventually poisons the economy sending it into a period of recession.(exactly what happened in 08).

    So in theory one can claim that deficits don’t mater but history is very clear that they do matter and if allowed to spiral out of control lead to the destruction of the nations currency or default depending on whether that nation decides to protect or destroy it’s currency.

    And it makes no difference if everyone is doing the same thing because the controlling factor isn’t the value of any one nations currency against another nations. It’s the value of any nations currency against real stuff (commodities).

    If every country in the world decides to destroy their currency together valuations of one currency against another will stay equal but valuations against commodities will go through the roof in all currencies.

    Which is exactly what is happening today.

  375. Tim and Jeanene

    Gary – you are somewhat changing direction to deficits, which I will be glad to address later today. But for the time being, are you agreeing that the price of gas is not a big deal compared to when it cost of quarter because the wage increase has more than compensated for it?

    That is a fundamental argument for moving forward to deficits.

  376. Redwine

    T & J

    I consider it a compliment and your responses are drivel anyway.
    Your belief in the state amd its ability to create wealth from thin air reminds me of the indoctrinated collectivists I ran into in Berkley during the eighties.

  377. Gary

    Tim,
    There are clearly periods where increase in income keeps up with rising prices (brought on by the steady debasement of the currency) and there are periods when income clearly doe not.

    We have been in one of those periods for the last 10 years. Part of the reason is because the Fed is expanding the money supply rapidly and is creating inflationary pressures.

    Until we get our deficit problem under control this will just continue to get worse because our only method of servicing the dept spiral is to debase our currency. AKA inflation will continue to rise.

    Eventually it will spike high enough that it will damage the economy and we will enter another recession.

    The fundamental underlying cause of the problems in the last decade has been debt. Instead of fixing the problem we keep adding to it.

    This fundamental flaw is going to drive the dollar down into a it’s three year cycle low and cause some degree of currency crisis this spring. This fundamental flaw is going to cause inflation to spike high enough to destroy the economy again. It’s the reason we can’t just print our way to prosperity like Beanie wants to believe.

    Belief in and adherence to these flawed monetary theories is the reason we’ve lost a decade, are now in a secular bear market, experienced a credit market implosion and real estate collapse, and suffered through the second worst recession since the Great Depression.

    It is also why we will suffer through an even worse collapse in the next few years.

  378. wingwalker

    I’m sure this has been answered before on this site, but as a newer investor in gold and silver I’m thinking about the tax issues around GLD & SLV. I’d rather not have potential long term gains taxed at collectable rates. Anybody have any thoughts? Are the levered etf’s taxed as collectables? Or should I just use the miners as my core position? Any thoughts appreciated.

    FYI – I’m a new subscriber to Gary’s service and looking to build my exposure to precious metals.

    Thanks

  379. Natanarchist

    @ [email protected] at least you are honest about what the system is all about. That is why I don’t bother with the details of MMT. pointless in my mind. It is just a money system for Socialism. And history shows that Socialism will collapse. It is coming sooner than folks think, that’s all. Or, it works until it doesn’t. The good thing is we will be alive when it happens.

    So, since you know the system is nothing but socialism, why is it that you prefer State Socialism to Liberty? Our version of Socialism, Corporatism is nothing but a wealth transfer from the many to the few. Why would you want to perpetuate that?

    Looking at Egypt, those people lived under government who used Force and the threat of Force on its citizens for 2 or 3 generations, just like the US Government does now. But, at some point, the people will say enough. just like you have been watching the last few weeks.

    lastly, did you notice how within neighborhoods in Cairo and other cities, citizens immediately blocked off neighborhoods and provided their own defense/protection? Imagine that..people took care of their security without the government. And that would happen in every facet of life if there was no government. Government create nothing…only people create things.

  380. David Kafrick

    Gary,

    Where I disagree with you, is about the consequences of your predictions. I think that some of the things that you and many others predict, like high inflation and debt problems, could very well happen. But I sincerely think that you overestimate the consequences of these things.

    Honestly, I’ve experienced both of these things in the country that I live (brazil) to a degree that I doubt the US will ever experience, and the scenario and its consequences was not even near to the scenario that you and others envision. It took us one decent president to get things under control, and in less than a decade things over here are better than ever. Our debt problem was worse than anything that the US will ever go through, inflation was 30% a month, the government was much more corrupt than the most cprrupt government you guys ever had, and there was no collapse. By the way, I really get tired of the word collapse. The dollar will not collapse neither will the US. Yes the dollar is in a downtrend, but it will not collapse. I will make a bet about that if you want.

  381. Movax2

    Great interview here. Jim Richards is a very smart guy. http://www.financialsense.com/contributors/ron-hera/interview-jim-rickards-on-inflation-and-currency-wars

    T/J you aren’t consistent. You say the dollar can’t collapse ’cause the government forces it on us, therefore we have faith or a need to use it.

    On the other hand you say we have to realize that debt doesn’t matter. But the government forces the debt system on us as well, so it is just as important as the dollar system.

    We have too much debt. The debt is real because everyone believes it is and the government says it is. If everyone believes the debt can’t be serviced in an increasing interest rate environment, they will run from the dollar as inflation becomes the only solution other than default.

  383. Keys

    Yes the system imposes slavery to be taxed or to be taxed with inflation……My point was and is only about the fact that MMT implies debt(deficits) don’t matter.

    You keep making my point for me but argue against it. Inflation steals…the gov in whatever form causes inflation to tax its citizens….the current method is QE and increasing debt loads.

    Under a fair system one should not have to re-invest their productive gains. That is what a store of wealth is. If your money needs to work, you are implying additional work. So by calculation
    (Original work)*(-T)^N+(invest)*(T)^N

    T=period erosion, N=number of T’s

    Simply put if I invest $100 work done and created at say 5%(pretend this is real inflation).

    The value of my job will erode to 100/1.05^100=$0.76—so down to nothing over 100 years.

    My working money would create
    100*1.05^100=13150.

    If working money were passive, maybe…but working money is work, and after 100 years it is only the money re-invested that will still exist over time. My original work has become worthless; only my return chasing still exists.

  384. Gary

    Wing,
    We are too late in the C-wave for you to worry about capital gains taxes. No tax savings is worth riding a D-wave.

    So at this point in the game just make as much profit as you can. Once we get to the bottom of the D-wave you will be able to enter and hold for over a year and avoid earned income rates on your capital gains.

  385. Natanarchist

    You’re right David K…as long as the people like you in the rest of the world keep buying into Dollar hegemony, things will go on as they are today. But one day, soon, and perhaps not you, but other people in the world, will realize how they are being ripped off with Dollar hegemony and they will reject it. Actually, they already realize it. You get to have a front row seat to see how it plays out.

    As for collapse..Iceland collapsed. The Icelandic people are still there and yes they still have a government but they don’t have the same society they did just a couple years ago. What will collapse is the system. And that will be a time to rejoice.

    The real doom and gloomers are the socialists. it is they who cry ” oh what will we do without a government, we need a government…MOMMMY”

    And socialists are easy to debate.

    It is the Socialist who fear Liberty. They fear it so much that they will kill a hundred million people to protect their ideology. I think the 20th century proved that. So remember, when you meet a Socialist, remind them of their psychopathic tendencies and their diseased minds full of hate and homicidal righteousness. Then remind them you are locked and loaded…that usually sends them off the deep end.

  386. Onlooker

    I told you guys that this MMT crap will make your head explode, because the nonsense will make you nuts! These people want you to suspend your common sense and believe that there’s really a virtual money tree. It’s like believing in a perpetual motion machine.

  387. Gary

    David,
    I think you are misunderstanding me. When I say collapse I don’t mean go to 0 by this spring.

    What I’m talking about is an aggressive move down probably below the 08 lows causing massive inflationary pressures.

    I hardly think we will have a hyperinflation anytime in the near future.

    What I’m saying is that we are on the path that leads to that outcome if we at some point don’t come to our senses and put a stop to our spiraling dept problem.

    If we let this continue to the point where we have to print just to service the interest on our dept then it’s game over.

    We aren’t there yet but we seem to be blindly heading in that direction under the false sense of security that since it hasn’t happened before it can’t happen.

    The credit markets had never imploded before either but we made policy decisions that caused that to happen two years ago.

  388. Redwine

    DK

    The Brazilian currency COLLAPSED and was eventually replaced by the Real in 1994 right? How does this fact support your argument that the USD can’t COLLAPSE?

  390. vuvvy

    Wingwalker,
    Capital gains can probably be avoided this year on GLD and SLV positions by hedging with some of the reverse PM ETF’s, and not selling GLD/SLV positions.You can also do it by shorting futures which trade in 100,33,and 10 oz positions for gold, and 5000, and 1000 oz for silver.I’m not sure about any rules (if any)for being long and short GLD/SLV in the same account but maybe can be done in separate accounts?

  391. vuvvy

    Wingwalker,
    The tax consequences are much better for futures also, so any gains made by shorting them to hedge GLD/SLV would be to your advantage. Interactive Brokers allows you to trade stocks and futures from the same account.

  393. Poly

    “Strawman argument, if you don’t look at how many hours of labor it requires to buy a gallon of gas. “

    No actaully THIS is a strawman argument.

    Why should I have to spend my income TODAY for it to maintain its worth and not be destroyed by time? If my parents or I worked a lifetime of labor, why the hell should those earned dollars be worth less in 30 years? How dare you compare it to wages 30 years in the future as justification for the increases in prices or the devaluation of the currency. You wonder why we have no savings in this country, what incentive is there to save while we stand by and watch it erode! All the while you’re perfectly content to say to me that’s just fine because if you worked today it would still by the same amount of gas!

    If this is acceptable or a consequence of MMT theory, then I want no part of it.

  394. Tim and Jeanene

    Gary you are changing the topic again:

    “We have been in one of those periods for the last 10 years. Part of the reason is because the Fed is expanding the money supply rapidly and is creating inflationary pressures. “

    This was not your point. Your point was that the value of the dollar has collapsed the past 100 years and asked why the price of gas was a quarter back in the day compared to $3.00 today. I answered and showed that it is not as big of a deal as you are making it. Now you want to look at the past ten years, and then go on about how the future will be such and such if we continue doing such and such.

    The question remains, has gas become more affordable since it cost a quarter per gallon in the face of rapidly rising prices?

    Prices are and will remain more volatile than wages both up and down. 2007-2009 proves that.

  395. Tim and Jeanene

    Gary also said: “The fundamental underlying cause of the problems in the last decade has been debt. Instead of fixing the problem we keep adding to it.”

    I fully agree, but you have to distinguish between consumer/state/municipality debt, and sovereign US national debt. Private and bank lending debt was the problem, not the US national debt.

    Big difference there. Huge actually. If you disagree, then you still put the nation in the same category as a household, which is flawed.

  396. Tim and Jeanene

    Nat:

    “So, since you know the system is nothing but socialism, why is it that you prefer State Socialism to Liberty? Our version of Socialism, Corporatism is nothing but a wealth transfer from the many to the few. Why would you want to perpetuate that? “

    Where have I ever purported to be in agreement with it? I just recognize what it is. I have said before, I do not know when or how or if it will collapse, but I do know it won’t be due to a Treasury market collapse or a currency crisis.

    Those are two very different approaches, and mine is not saying that the system is good. Just saying the reasons for collapse that most think, are off base.

  397. Gary

    And what I’m telling you is that in all of history government debt has mattered. Now you can believe a theory that tries to explain why this time it will be different but history is crystal clear, it’s never different.

  398. Tim and Jeanene

    Gary –

    I guess I am not following your thinking. What you said on your blog a few days ago caused me to pipe in with my economic theories when you said:

    “In their ill fated attempt to get something for nothing the Fed is going to cause a currency crisis and a massive surge in global inflation.
    The price we will all pay when the house of cards comes crashing down again will be multiples more expensive than last time.

    “The problem is debt. Hyperinflation is the result of a government debt spiral. At some point the debt becomes so large that a nation can’t even service the interest on the debt. At that point there are only two options. Either default or inflate.”

    Now you say: “I hardly think we will have a hyperinflation anytime in the near future. “

    I am sorry if I am misunderstanding, but the post a few days ago sure seemed like a call for hyperinflation.

  399. Tim and Jeanene

    “You wonder why we have no savings in this country, what incentive is there to save while we stand by and watch it erode!”

    Because poly – money shoved in a mattress does no one any good. Money invested in productivity benefits everyone. Feel free to save, but I encourage you to save in bettering productivity rather than in the mattress which does nothing.

  400. Movax2

    What? Savings is bad is it?

    Savings, when saved in a properly functioning banking system, results in investment, and economic growth. Even as corrupt as the banking system is, there are still reserve ratio requirements, and no loans if no savings.

  401. Shalom Bernanke

    Tim says, “Because poly – money shoved in a mattress does no one any good. Money invested in productivity benefits everyone.”

    Yeah, wealth for everybody and no repercussions! Tell us why you own gold then, as it’s not invested in productivity. It just sits there.

    Pretty neat concept, investing in productivity. Perhaps the Fed should double the number of dollars out there, and invest them all?

  403. Jayhawk91

    Keep this up guys! I’d love to see Gary post economic stuff over the next 2-3 months. EXACTLY what I need to put me into that coma to not freak out and sell.

  404. Tim and Jeanene

    Movax –

    I would argue savings in cash in this monetary system is neither good nor bad – just stupid. It’s unfortunate, but its the reality in which we live. If you want to keep up with the productivity of the world, in which causes prices to increase and wealth to be created. Money sitting does not create wealth. Money in motion does. Unfortunately, you show you still don’t get the monetary system in which we live if you some how think that banks need deposits in order to lend. On the gold standard, this was true. This is the loanable funds approach. In the reality of the system we live in, again, not saying I approve or don’t, banks can lend money from reserves the Fed gives them with a keystroke. This is the liquidity approach we live in. MMT has made Loanable funds approach obsolete for now.

    The Liquidity Preference LP approach and the Loanable Funds approach. In the LP approach, the equilibrium interest rate is determined in the money market where quantity of money
    demanded by the people equals the quantity of money supplied by the central bank. In the outdated loanable funds approach, the
    equilibrium interest rate equates the quantity supplied of LF, which consists of saving (s), with the quantity
    demanded for LF, which consists of investment (i) and bond financed government deficit (g – t).

  405. Movax2

    The banking system is corrupt to the point of reserves being close to meaningless, but under a proper banking system, reserves are required.

    If you are a joe blow laborer with no interest in deciding which stock to buy, and you put your money in the bank, they give you some interest. The bank can invest that money using their judgment on who will be successful. Tada!.. economic growth from savings. All three parties gain, no inflation needed. Productivity and growth!

  406. Robert

    Poly,

    You plan on exiting the short train as hopefully the markets decide to retrace a little this upcoming week due to dollar strength?

    China lending to Euro nations now is going to be a deadly catalyst for the decline in the dollar over the coming months.

  407. Tim and Jeanene

    Movax – I don’t disagree with your analysis, just again, tirelessy pointing out the reality of the current situation. Once people get it, they know how to fix it. Calling for a bond market collapse and a currency crisis is not the answer, because those won’t happen.

    Men willing to die and go to jail to no longer be a slave to the system, that will bring true change.

  408. Robert

    Also, on average, Bob Chapman has computed the dollar loses 7% yearly. It may sound really good to be making 15-25% in the markets year over year, but cut that down sizeably counting for inflation. Add to it capital gains taxes and you’re basically treading water.

  410. Redwine

    There’s a theoretical money system explained over on the fofoa.com blog called freegold. It combines the advantages of fiat maoney and gold money without chaining them together in a ‘standard’. It’s sort of equivalent to a gold standard but w/o fixing the price of gold or paper to anything else.

    No debt, public or private, would be forced to pay in gold. This would free gold from loaning and fractional reserve banking (which only serve to debase it).

    Gold would be free from capital gains or sales taxes and the act of saving, ‘hoarding’, only serves to increase its value. Perfect money for wealth preservation.

    Fiat would fill its perfect roll as lubrication for economic activity and numeraire. Fofoa calls it Reference Point Gold and to me it sounds like the next logical step in the evolution of money. The Euro is based on this concept with its reserves of gold marked to market every quarter.

    I’ve probably explained it wrong here but assure you its worth the trip if you’re so inclined.

  411. Beanie

    Gary,

    That is interesting you mentioned I’m an unsophisticated investor (and even the most unsophisticated investor you’ve ever known) just because I don’t invest in gold that I can measure how to put a PE or growth rate on it. I guess by extension you would say Warren Buffett is an unsophisticated investor also, because he doesn’t invest in gold either for the same reason I don’t invest in gold. The wealthiest and arguably the greatest investor the world has ever known is being called unsophisticated by a precious metals guy. This world definitely has gone haywire. Year after year, people (mainly bears) have called Buffett irrelevant and out of touch with reality. They call in stupid because he did not invest in the internet bubble. Yet, in the end, he’s still always the best and still the richest investor in the world.

    To this day, nobody can tell me what kind of valuation metrics they use to measure what gold is worth. The bears keep on bringing up that fed printing money and inflation is reason you should own gold. Why is gold better than owning rice and corn? Should I buy gold just because it’s going up, like the Tulip did? The only way to measure gold seems to be that since it was up a lot several decades ago, so it has to go to at least the old levels. And the fundamentals is that since the fed prints money, you gotta buy gold. Printing money causes fear in people, so gold is a fear trade, has always been.

    Gold isn’t the only thing that has gone up from 2002 to 2007. Many stocks have gone up from 2003 to 2007. Gold isn’t the only thing that has gone up multi hundred percent since the march 2009 low. In fact, many stocks have done the same (BAC, CY, LVS, MGM, and many more). Sure gold can go much higher from here, but so can stocks (and I believe they will).

  412. Robert

    MLMT,

    You have any hopefully negative views for gold/silver for this upcoming week or two?

    Or objectively, according to your indicators, what do you/they say should unfold?

  414. Robert

    Last question,

    Gary,

    What do you think the odds are silver could retrace back to $25 or even $20 in the next month to month and a half?

  415. Beanie

    Jayhawk,

    I can kinda understand that silver has an industrial side, but nonetheless that is not the side that is causing the price to skyrocket. I can see silver going much higher in the commodities bubble in the years to come, but silver is even wackier than gold. Silver pretty much follows its cousin gold wherever it goes. The supply and demand dynamics will cause silver to rise much higher than gold in the longer term, I definitely see that. But it still doesn’t justify me buying, since precious metals aren’t the only bull market out there. In fact, the semis are breaking out big time. And I believe semis are in for a multiyear bull market. At least I can measure (growth, pe, etc) the semi stocks.

  416. Tim and Jeanene

    “Tell us why you own gold then, as it’s not invested in productivity. It just sits there.”

    The Bernank – because it’s in an uptrend. I don’t own it though because the US will end overnight as most will.

    I do own stocks…… and forbid – bonds!

  417. Chicken Burrito

    Let’s not forgot the triple bottom T Knight indicator. We had three posts right there at the bottom-Short GDX with a target 47, HUI chart with a comment on shorting the miners and the creme de la creme-short silver last week.

  418. Keys

    Thanks for the debate…but I am done…Actually helped me believe more in my position in gold.

    There is enough info on this blog for smart people to make their own minds up……I prefer to accept that the USD is doomed to being reset in some fashion….Amazing after 40 years, mankind has discovered fiat money as the God sent of the world….

    I believe Robert mentioned the dollar eroding at 7% annually…Funny every time I analyze inflation or currency depreciation, this magic 7% keeps coming up…5%-8% range that is

    As an example of my recent observations.

    http://en.wikipedia.org/wiki/United_States_public_debt

    debt 2010=13.5 trillion, debt 2000=5.6 trillion…
    (13.5/5.6)^(1/10)-1=9%

    More so loosely the US seems to double its debt every 10 years.
    2^(1/10)-1=7%

    http://www.census.gov/const/uspricemon.pdf

    Take housing
    1970 average house 23k in 2010 225k
    (225/23)^(1/40)-1=6%

    http://www.data360.org/dataset.aspx?Data_Set_Id=10704

    M2 money supply
    1970=590…2010=8800
    (8800/590)^(1/40)-1=7%

    Every time I look at this stuff my best guess of dollar erosion is 7% each year. That is alot of chasing just to keep up with purchasing power….

  419. Gold Lion

    Beanie,
    It really isn’t that gold and silver is going up. In fact if you look at what an ounce of gold was able to purchase is hasn’t changed much in a 100 years. It still buys a very nice suit or the same amount of oil that it did. The problem is that the dollar is being devalued by excessive creation.

  420. Tim and Jeanene

    Keys – thats fine. No one is forcing you to debate, only to use $

    🙂

    In regards to the “devaluation of the dollar” by 7% a year…… it’s a moot point if we are losing wealth from what we can buy for an hour of labor only. If gas goes to $500 a gallon, but our wages go to $10000 and hour on average, productive citizens won’t feel it.

    As was shown to Gary – but yet no one wants to address is the fact that a gallon of gas today, even though the “price” is up over 1000%, is much less of a burden today on the average unskilled worker than it was back when the “price” was only .27

    Interesting that has been quietly ignored here.

  421. Shalom Bernanke

    So Tim believes that debasing our currency will yield much more than what we lose through debasement, if “invested in productivity”.

    Sounds good. AHhh, everything is OK. 🙂

  422. David

    Beanie,

    “The wealthiest and arguably the greatest investor the world has ever known is being called unsophisticated by a precious metals guy. This world definitely has gone haywire.”

    Gary did not call Warren Buffett unsophisticated. He called you unsophisticated. You are not Warren Buffett.

    “Year after year, people (mainly bears) have called Buffett irrelevant and out of touch with reality. They call in stupid because he did not invest in the internet bubble. “

    Bears did not call Buffett stupid for not investing in the internet bubble. Bulls did. Buffett’s refusal to invest during that period is actually a case in point in your misunderstanding of him. Buffett is a value investor. He is not a perma-bull. He invests selectively during those rare times when valuations are favorable for investment. This is what makes him different from you.

    You may also not realize that Warren Buffett has invested in precious metals:

    “On 3rd February Warren Buffett’s Berkshire Hathaway (BH) reported that it had purchased 129.7 million ounces of silver between July 1997 and January 1998. BH gave its reason for the purchases as “equilibrium between supply and demand was only likely to be established by a somewhat higher price”.

    This is yet another example of Buffett’s superior acumen — he was buying around $4-5.00, which, if he’d held the position, would have reaped a 700% gain to date. His friend Bill Gates also took a huge position in Pan American Silver. Unfortunately, Buffett was early, as value investors sometimes are. He became frustrated with his “dead money” investment and sold the position just before the silver bull started taking off. The fact remains that he spotted one of history’s great buys.

    George Soros also established a large position in gold and silver around that time, a position he maintains today. John Paulson has most of his personal wealth in gold. David Einhorn and Paul Tudor Jones are also gold bulls.

    I point this out because you have a habit of wrapping yourself in the mantle of these great investors and misrepresenting (or misunderstanding) their philosophies. This is a habit that makes you seem unsophisticated.

  423. Shalom Bernanke

    ” If gas goes to $500 a gallon, but our wages go to $10000 and hour on average, productive citizens won’t feel it.”-Tim

    Excellent point, and I agree. Everybody should go into work on Monday and demand a 100,000% raise. Now that’s investing in productivity!

  425. Tim and Jeanene

    Bernank – so you are saying that investing in productivity to overcome the cost of inflation is a bad thing?

    Not following your logic there.

    Truth remains to be renounced by you or anyone – even though the cost of gas is up over 1000% since it was 27 cents a gallon, is the burden heavier or lighter since then to the average unskilled worker?

    Tick…..tock…….tick……tock

  428. Tim and Jeanene

    Food and gas – that is usually the two used by the doom and gloom crowd – which is why I focus on it. I can’t tell you how many times I have heard:

    “CPI is a joke! They don’t look at food and gas. Go ahead and try to live your lives without those two costs!”

    I’m pretty sure you have heard of both of those and they are been used here. The proof is in the data, not in anecdotal evidence of my or your own personal example. The proof shows that, even though prices have gone way up, the burden to even the unskilled worker has come down. To the skilled worker, the burden is even lighter.

  429. vuvvy

    I think all of us here can agree that food is more important:)That takes me to my next point. Increasing amounts of people can’t even afford food as evidenced by the alarming growth rate and record # of people receiving food stamps, 43.6 million people as of Nov 2010.I’m very curious on what exactly you are basing your statistics on? How in hell can less of our incomes be going to food when such a huge portion of our population can’t even buy ANY food without govt assistance?

  430. jeff

    tz being a worker bee out here in the real world . here is my take. In 1970 my father bought a ford 3000 tractor and it ran for 3000 dollars. it took 400 hrs to pay for it. in 1992 the same size tractor was $12000 and took 950 hrs to pay for it. now the same size tractor is 23000dollars but i dont know what the going rate is at this time. now when you guys talk about productivity going up, it really just makes me go bazzerk. now i am 45. i just got done working 10 years night and day. i am #$#34 tired and now i have a 2 year old and a 4 year old and i just cant go, do more, go, do more, go do more.

  433. Avann

    Jeff, just ignore Tim. He lives in a fantasy world. I gave the Same stats and said I would provide more. But it’s pointless… This is like debating religion or politics. Complete waste of time.

  435. Avann

    But I will say this … Those socks I bought at the dollar store sure fit nice. Now where else can you get a great pair of socks for a buck? Things truly must be cheaper.

  437. Tim and Jeanene

    No Jeff – you are lazy to do the research yourself. Instead – you want to get your information from blogs and find a community to back up your biases.

    The quote earlier stands here:

    Who is a Cynic? The man who knows the price of everything but the value of nothing.

    You know the price of stuff…… but you are too lazy to figure out the cost of that stuff – food and gas – as a percentage of the average American’s income.

    vuvvy – I am using income per capita and GDP. All those food stamps are taken into consideration in the data.

    You argument is anecdotal, not concrete.

    You can say – hey – look at all the people on section 8! See – haha! I was right and Tim 0 you are wrong.

    To which I say – the proof is in the numbers, not your theories. You all accuse me of having some pretend theories, and then when you can’t refute the data, you default to theories and personal examples.

    We are going round and round again which is getting kind of dumb. Bottom line, you were shown with pretty solid math that your theories of inflation killing us all and us all being porrer as an aggregate nation is false. Go ahead and keep calling for the collapse of America and a currency crisis, hyper-inflation, and a bond market collapse. I will sit on the sidelines and just shake my head in pity that you have to wake up every day living in constant fear that it could be any day now that America will be a banana republic.

    If that is the way you want to go through life, and not figure out the truth, I actually do feel sorry for you, but understand that the weight of doom and gloom brings a sick sense of excitement for some.

  439. Tim and Jeanene

    Avann – you have provided nothing, but keep patting yourself on the back like you did.

    Please refute my numbers on gasoline using hard data rather than conjecture as everyone seems to want to argue from.

  440. jeff

    avann dollar store? wow you must be doing great. ceo? or goverment employee?. or like me and just go on a spending spree sometimes?

  441. Tim and Jeanene

    Avann Patrik and Jeff – in case you are too lazy to go find it, please shower me with your intelligence in disproving this point. USe hard data, not pure conjecture and personal examples that no one can argue from. We are talking about the nation here as a hole – not your mom or dad or uncle or your situation:

    Gary – “A gallon of gas is still a gallon of gas. That hasn’t changed in the last 100 years. So if the value of money hasn’t changed why does it take over three dollars to buy that same gallon of gas instead of a quarter?”

    Strawman argument, if you don’t look at how many hours of labor it requires to buy a gallon of gas. And does car technology get you more miles per gallon? Yup. And does.

    “The real price of every thing, what every thing really costs to the man who wants to acquire it, is the toil and trouble of acquiring it… But though labour be the real measure of the exchangeable value of all commodities, it is not that by which their value is commonly estimated…” – Adam Smith, The Wealth of Nations, 1776

    “What is a cynic? A man who knows the price of everything and the value of nothing.” – Oscar Wilde, Lady Windermere’s Fan, 1892.

    Oscar Wilde has you pegged.

    If you did the research, rather than just look at price you would notice a few things about gas.

    By looking at GDP per capita, the story is a bit different. In 1981, a gallon of gas took as much out of what the average consumer spent as $3.90 does in 2009. And as a share of GDP per capita, gas was even more expensive in those earlier days with it at over $4.60 in 1980 and more expensive in the earlier years.

    Let us look at relative cost to a worker to fill up using 1949 dollars. That year the 27 cents it cost for a gallon of gas, took a certain share of the worker’s wage. The interesting question is, has the cost as a share or percent of the worker’s wage increased or decreased over time? Since wages have increased faster than the price of gasoline, by 2009 an unskilled worker spends less than two-thirds as much, as a percent of wage, for a gallon of gasoline than the 1949 worker. For a production worker it is only half. The table shows that the $2.36 a worker paid in 2009 (latest available data) would be comparable to only 13 to 16 cents (in 1949 prices “share” of the wage.

    Sorry Gary – but you need to look at the whole truth, not just “prices”

  444. Avann

    Jeff, thanks for the smile. Seriously, I do take my 80 year old mom shopping every Saturday morning … LOL … She loves the dollar store:) I think it reminds her of the times when her money did go much further.

  445. Tim and Jeanene

    I get it, you don’t have an answer to refute it. Totally understand.

    Humor as an option instead is good though. Makes life better. I give you a thumbs up for conceding though and using humor to lighten the situation.

    Have a good rest of your weekend.

  447. Redwine

    T & J

    It’s so wonderful how much further an hours work goes these days. It’s lovely to see so many out of work, so many homes abandoned, record numbers on food stamps, etc.. It’s hard to imagine it being any better than now. The fifties and sixties were miserable. Not.

  448. marinho

    Gary,
    i am very interested about your comment on the PRP procedure for my knee arthritis and also for an old friend reumathoid arthritis in her hands, do you think this would work also for reumathoid arthritis?

  452. Natanarchist

    @ T & J

    In 1914, Ford workers made 5.00 an hour for 8hr day. model t cost about 600-800..roughly a months salary. Can you show me any factory workers that can buy a new car today on a months salary?

    before we argue about the price of gas, lets find out if the unskilled worker can even afford a new car. A digital watch’s cost over 500.00 dollars when they first came out. Today they practically give them away. Am I better off today? yeah if I want a digital watch. But probably not if I want a new car.

    The point..there isn’t one. There are lies, damn lies and statistics.

  453. trond56

    Well, I talked about the real interest rate, and it was negative in 1979-80, even if the nominal interest was very high, the real rate dropped steeply at the end of 1979 and caused the ensuing gold price explosion.

    Here an article that show a chart of the close correlation between real rate and the gold price.

    http://seekingalpha.com/article/240460-the-u-s-real-rates-gold-price-relationship

    The TIPS that I mentioned are not ordinary Treasury bills, but are so called “Treasury Inflation-Protected Securities”.

    So as long as their yields are above 0, the real return is above the CPI. (But of course we know that the inflation is higher than the official cpi).

    So one could keep a close look at the (official)real rate by watching the tips yields since it has shown to be an indicator of the development of the gold price.

    It is logical that when the real interest rate is positive, ones fortune grows automatically with time, and no great need to protect it, but when it is negative ones fortune erodes and that’s why people panick into gold in order to protect it.

  454. DG

    Easy Tim…Don’t get snide (even if others do). I have to say, I’ve been reading a lot of these posts and have not seen anything that really refutes what you are saying other than anecdotes and carefully chose examples. That’s not to say I agree with your conclusions, just that if it is sophistry it is well-constructed sophistry. These things cannot be proven conclusively, and my evidence for that is that there have been tons of economic (and other) theories that were clearly and unfailingly proved…until they turned out to be wrong. Time will tell, but nothing else will. And even then, if things cave as you say they won’t, the Neo-Chartalists can always say, “well, that’s because this exogenous effect occurred, otherwise it would have been as we said.” You cannot prove something to someone who is determined not to have it proved.

    You might check out the discussion below, by the way, that says there is no logical flaw in MMT, but does offer some criticisms:
    http://www.ucm.es/info/ec/ecocri/eus/Febrero.pdf

  455. Gary

    I’ve been at a weightlifting tournament all day and it looks like I’ve missed out on the usual debate.

    Tim,
    No I don’t think we will have hyperinflation in the next couple of months or even in the next 5 years. But if we continue down the path we’re on it is the inevitable outcome.

    We created a debt bubble. That has unavoidable consequences. We are going to suffer through a depression there’s no way around that. Now we just have to decide if it’s going to be a deflationary one or inflationary one.

  456. Bede

    Tim and Jeanene,

    Are you interested in investing in PMs? You seem to think that the PM investment thesis is all wrong. Is there a reason to be invested in PMs that you would agree with?

    Tell me you’re not here just to spread the gospel of MMT.

    You’re certainly entitled to be here, but I’m just wondering why?

    Of course, you don’t have to explain yourself, I’m just curious.

  458. Gary

    You know I’ve heard all this before. In 06 and 07 everyone said we were in a secular bull market and that housing wasn’t in a bubble.

    I said that the rally was a counter trend cyclical bull that would separate the first phase of the bear from the second. I also said that housing was in a bubble and that it would implode like all bubbles do.

    I said the Fed’s flawed monetary policy would spike inflation which would destroy the economy and lead to a much worse recession than the one in 02.

    Well the rally was a counter trend rally and it did separate the first and second leg of the secular bear market. Housing did collapse and the Fed did print until they spiked the price of oil high enough to destroy the economy. The recession was much worse than the 02 recession. In fact it was the worst recession since the Great Depression.

    I said the Fed would print unimaginable amounts of money in a vain attempt to halt the bear and that it would fail completely in it’s goal of creating jobs.

    I also said it would ultimately spike inflation again which would send the economy back into recession.

    The Fed has printed trillions. It has completely failed to spur job creation. It is spiking inflation all over the world and no matter how much money they print they haven’t been able to keep interest rates down.

    Many months ago I said the dollar would fall into a major three year cycle low this spring or fall at the latest and when it did it would cause a mini currency crisis. At the time the dollar bulls said I was crazy. Well the dollar is falling into that major three year cycle low and it is on the verge of creating a currency crisis. If it drops below the 08 low all hell is going to break loose as inflation soars all over the world.

    I said a year ago that the bond bull was over and that it bottomed on the Fed’s announcement in 09 that they would print to hold rates artificially low. I said at the time one could safely trade against the Fed as the market was bigger than the Fed and they would not be able to hold rates down.

    Well the bond bull has clearly expired and taking the opposite side of the Fed was a sure trade and the market was bigger than the Fed just like I said.

    Now you are trying to tell us that reality has changed and the mere fact that someone has concocted a theory guaranteeing that deficits don’t matter proves that we can do what has never been done in history.

    I’m sorry but they do matter. They’ve mattered every time in history. Just because we are the United States of America doesn’t guarantee that the laws of nature are going to all of a sudden stop working.

    Your flawed theory is going to ultimately be tossed on the trash heap with all the other flawed theories throughout history.

    Everything I’ve said is just plain commonsense. It’s why I’ve been right on every major macro call for several years now. Well with a little cycle theory thrown in regarding the dollar.

    And I guarantee commonsense is going to prevail this time too 🙂

  459. Gary

    Matt,
    i don;t know of any off the top of my head. You can search Google or I do have a fairly detailed explanation of how I use cycle theory in the terminology document.

  460. Gary

    Rebecca,
    Physical is a great way to ride the bull if you are one of those people prone to hit the sell button every time gold experiences a pullback.

  461. Gary

    Marinho,
    I’m not a doctor so I couldn’t say if it works on that type of arthritis. I know it works really good on osteoarthritis.

    Just find a doctor in your area that does the treatment and ask them.

  462. Gary

    Robert,
    The odds of silver moving down to $25 are growing smaller by the day. The intermediate cycle is already stretched and we now have weekly swings in the entire sector. Plus a powerful launch off what may turn out to be the intermediate bottom.

  463. Slumdog

    Sophie: “I know that if I follow the plan, I will be OK, but the last few months have been difficult, so now, I see money, I take it…It is the wrong approach for big money, but I need to be able to stay in the game andI feel better like that..”

    Sophie, independently of Gary, I’m observing the set up of the largest move in Gold/Silver in many, many years.

    The measure of the move is about 110 points off of the high or low, which will be huge.

    And here’s the kicker which I can’t answer yet as it will appear in the weekly or daily price movement closer to the end of this month, the move can be up or down.

    There’s risk of a fake out in either direction. I can’t myself understand this fake out as I’ve not studied it, backtested enough.

    If we don’t see the low, 1312 area, taken out, and gold goes above 1422, we can all go to the bank with 110 points, and probably nearer 300 points. And the timing will be over a period of just a few months, March-May.

    If we get to 1700, and you’re still in, place real, solid stops below your position as a stretch to 6X is possible but not as probable as 3X. Gee, imagine 2000, which would be 5X. That for me is The Great Doubling, and like a magnet, once at 1870, the market will move towards that Big Round Number in The Sky (the last one being 1000).

    So, in spite of the obvious direction being down in this huge monthly setup, it’s time to get ready to flip the coin, win or lose, a lot.

    I’m playing it by being long, and scared during the balance of this month.

    And at the end of this month, I’ll be much more aggressive as this will, not may, but will, be what Gary’s talking about, now. It will make all who hold the PM’s fully invested, and those who are leveraged, very rich.

    I’ve seen this setup on this large scale only once before, at the top of the market in 2007-8. I called it then, and I’m calling it now, this time early.

    If this setup doesn’t materialize because gold begins to run before month end, it may still do so next month. But right now, it’s an amazing setup for what Gary calls the C wave.

    My view of this is much different than his. So, I’m more agnostic as to the direction of gold at this moment. However, based on a parabolic 10 year chart, it’s quite okay to see gold rise quickly over the next few months. Then it will retrace dramatically, also, as the parabola still has a few years to play out fully.

    Hope this helps.

  464. Tim and Jeanene

    Natanarchist-

    The Model T Ford cost $850 in 1908; however by 1925 the price had fallen to $290. How do we compare these values? If you wanted to compare the two years you would see that by using the CPI, or the GDP deflator, $850 in 1908 is equivalent to between $1,485 and $1,670 in 1925. Using the wage indicator we see that the labor cost (of the 1908 car in 1925 wages) was $2,094 and by using the GDP per capita indicator it was $1,957. Thus in 1925 the $290 was less than 20% of its cost in 1908 using the price indexes and only 11 to 14% using the wage indicators and 15% using the GDP per capita.

    If we wanted to consider the costs of the Model T using today’s prices we would find that the $850 cost in 1908 is $20,400 in today’s prices using the CPI, $15,200 using the GDP deflator, about $44,000 using the consumer bundle, $89,000 using the unskilled wage, $136,000 using the manufacturing compensation, and $116,000 when comparing using the GDP per capita. At this point the ford was a luxury for most everyone.

    The $290 in 1925, on the other hand, would be only $3,500 in today’s prices using the CPI, $3,000 using the GDP deflator, $7,500 using the consumer bundle, $12,300 using the unskilled wage, $15,000 using the manufacturing compensation, and $17,000 when comparing using the GDP per capita. By now, the ford was an automobile affordable by all.

    SO the conclusion is that in 1908 – the ability to own a Model T was for the wealthy and was a luxury. But in costs today, it would be very affordable.

    Next.

  465. Tim and Jeanene

    Gary at 6:18

    I am happy that your track record has been so great and that you can trumpet it out here to show that you have been the man. I never said you were or weren’t.

    But that still doesn’t get to the heart of the issue.

    Why is it so hard though to answer my simple question?

    Is a gallon of gas today more or less of a burden to the average worker?

    When you can answer that, all face saving aside, we can move on to deficits if you really want to know. Something tells me you don’t though.

  466. Gary

    That one is easy. It’s much more of a burden today. Especially today as a large segment of the population is either unemployed or underemployed.

  467. Rebecca

    Thanks, Gary. I guess my question is too general, so allow me to rephase. I have been buying and holding precious metals (both physical and etf) and miners since 2003. I don’t trade because I don’t have confidence in timing the market with technical analysis alone and I don’t have the time to watch the market on the daily bases. Yes, I held my positions through the 2007-2008 correction because I know precious metals are in a bull market. Your strategy in investing in immediate trends works perfectly for me. That is something I have been trying to figure out how to do. I have subscribed to numerous technical analysis services. None offers the clear guidance, conviction and mostly importantly good timing calls you do. I have followed you for while and just now have the confidence to follow your calls to trade. I am currently 80% invested. Nerve racking I admit. But with you trading on the same side, I feel good. Anyway long story short I am planning to invest the remaining 20% in physical silver. Would welcome your suggestions and comments on this. Thank you!

  470. Tim and Jeanene

    DG –

    There is actually plenty wrong with MMT. I keep getting accused that I am somehow selling something. I am just presenting the facts about the system. And those facts show the collapse, if it’s in the future will not happen from a currency crisis or a t-bond collapse.

    The biggest issue I have with MMT reality we live in, is that it is all based on the dollar in which we are forced to use. Inflationistas get all hot and bothered that the government is devaluing their money, missing the point. It is not their money, it is the governments issued currency that they are forced to use. That is the problem. It is not their money. It is the government’s money which is mandated by the government and brought into existence by the government.

    Not sure why we stop at getting up in arms that they devalue their money. We should not HAVE to use THEIR money.

    That is the issue.

  471. Tim and Jeanene

    Gary –

    It’s not easy, that is why you use anecdotal evidence instead of looking at the facts I provided.

    I can see this conversation can’t go forward to deficits, as you want to accuse me of theories, yet I provide you will data, and you revert to observations you see rather than factual data, theories.

    DG provided a great pdf – I would encourage those who are not so closed minded to continue their study. I have done as much as I can here to bring the truth, but when the captain of the ship won’t admit he is wrong even though his argument is heading for the rocks, well, I’ve done all I can.

    Thanks all for the debates! It sure helped solidify in my mind that inflationistas can only argue using conjecture and anecdotal evidence.

  475. Tim and Jeanene

    Ravi –

    I will continue the debate on my blog at seeking alpha if you really want to get into it.

    Today the poorest spend 20% of their income on food. 75 years ago it was over 50%.

    While it is painful no doubt, they are still better off being poor today than being poor 75 years ago.

    See you over at SA if you want to continue…..

  476. Slumdog

    Galloping Inflation.

    I’d like to iterate, cotton yarn has risen 60% in the past 12 months, and independently, polyester has risen 60% in the past 12 months.

    These are major components of clothing, and nearly all fabrics for every use.

    It is the 60% number that stuns me. My reality is not the reality I hear from anyone here. The game has changed.

    As I studied Weimar as best I could with the information accessibility of 1984, I will never forget the parabolic curve which places us now at middle 1922, having moved up from early 1922. This would leave only one year left, at most, before the climactic end of Weimar.

    So, this is an additional point on the PM “C” intermediate wave that Gary invests by.

    I’m saddened in advance, personally, for the many elderly who worked diligently their lives and who are holding Treasuries, bonds and savings accounts. They will be knocked off their curent economic station and will drop to the bottom.

    Like Gary and Jim Rickards, I see no option but to watch runaway inflation manifest.

  477. wingman

    Tim,

    I appreciate your contribution here and the thoughtfulness you bring to this topic. But I can say that I myself am somewhat leery of statistics. Someone earlier posted the well-known saying, “there are lies, damn lies, and statistics.” I personally think there is a lot of truth to that, and Wall Street and Government data which seems to show a disconnect with real life only reinforces that belief.

    Thus from my observation, which according to your previous posts observations don’t seem to be of much value to you, is that life is harder now on folks than it was in recent years. I happen to live in a very affluent area and am a pastor of a decent sized church where I see and feel the needs of a large group of people. And what I can tell you is our church right now gets MUCH more requests for help to meet financial needs from people in the community than it ever has in the past 10 years. (Interestingly, the requests we get most often are for food, gas, and rent, so we keep gas cards and grocery store cards on hand). Our members are also financially struggling more so than at any time over that same period.

    All that seems to validate for me that there is a disconnect between Main Street and Wall Street and government statistics. The government tries to hide inflation and dull the economic impact its monetary policy is having. Of course that’s just one man’s perspective…but one man who is involved in the lives of many, many people.

    Now am I a doom and gloomer? No I’m not. On the contrary, I have tremendous confidence. But that confidence isn’t born out of an implicit trust in this system we live in, but it’s born out of my trust in God. That might be offensive to some, but that’s the truth.

    And so while I sincerely appreciate your input, I remain unconvinced by the statistics you provided. Perhaps if wages and employment were keeping up with money printing things would be different and they would be easier to accept, but as it stands that’s not the case.

    Nevertheless, I do appreciate the dialogue.

    All the best!

  478. Keys

    I can’t figure it out yet…but it is either Justin or Anon1…or both. I am guessing Justin…only he had the time to blog for hours on end.

  479. TheBookGuy

    Gary,

    Lets play make believe and pretend that the markets move as you believe they will this spring/summer. Gold has a major move, the dollar hits a three year low and stocks start to move lower.

    At some point in that movement will you be selling your PM stocks and shorting the general stock market? Are you always looking for the next opportunity in market movement? I’m trying to lay out my future game plan is why I ask. I want to ensure that I won’t need to be looking for an additional newsletter to follow the next moves. Obviously at some point this PM bull is going to be over and the big opportunities will lay elsewhere.

  480. Natanarchist

    @T & J

    well you gave it the old college try, you get credit for that.

    Your response to my post about the model t means nothing. I didn’t use 1908 as a year. I didn’t refer to 1925 and I didn’t make reference to dollar costs between any years. I used hours worked to buy the car at that time 1914 (the year was picked for two reasons..can you figure it out) and asked if a factory worker today could but a car for the same number of hours worked. You selectively picked two years I didn’t mention, made this wonderful academic nonsense comparing two years I didn’t refer to and then patted yourself on the back. Can I live in that delusional world as well. Or where do you get the drugs that you take..I will try some.

    maybe if you paid more attention to reading comprehension in elementary school you wouldn’t make these mistakes.

    So let me leave with you a quote from author Robertson Davies..” all you academics…back, back, back to your ivory towers and leave the real world for the rest of us”

  481. Gary

    Book,
    I’ve said all along that I will exit all PM positions when I think the C-wave has come to an end.

    I will probably look for some sector that is extremely extended to sell short during the move down into the yearly cycle low this summer (not PM though. I never short a bull market.)

  482. jeff

    natan

    just a stab at your point. Is it that henrey ford started his revolutionary manufacuring and also raised salarys without gov intervention and created real production?

  483. jeff

    gary
    has everything, maybe since ww2, been geared towards 2 incomes? therefore been a leap and a gamechanger on the american people somewhere along the way?

  485. Natanarchist

    @ T & J..

    It just dawned on me after reading some more of your posts…you remind me of the Soviet Academicians I debated in Leningrad in the mid 80’s…they made their system work with numbers that were not refutable..yup the numbers all added up and mathematically they were correct. However, Humans are not a math problem. And the ruble was a 100% FIAT currency. It was also a reserve for other Soviet Bloc countries. Funny thing though..their system collapsed, totally and completely. And just like you, and the proponents of MMT..all socialists by the way,- this irrational fear of freedom is what they struggled with.

    Then I started thinking that this MMT is nothing more than an updated version of Irving Fischer and his work the Purchasing power of Money. Keynes basically ripped this off when he proposed his “General Theory” key words being…pay attention…General and Theory…meaning not exact and not fact.

    By the way, Mises refuted Fischer in 1912. You might want to re read Mises.

    Interesting, both Fisher and Keynes were socialists…weird eh?

    And please stop with your up is down, left is right, night is day nonsense about those who reject MMT as the doom and gloomers…it is the Socialists who are the doom and gloomers. Like you, they fear a world or society without government..because on no ..”who will protect me” even though we have REAL world examples happening right before our eyes proving this fear is nonsense.

    I was right the first time you posted on this blog. MMT is nothing but State Socialist economics and will not survive for any length of time in the real world. And I don’t fear this…I welcome it. In fact I can’t wait.

  486. Redwine

    J & T

    Concerning your drivel about being productive or investing in productivity and not stuffing money into the mattress. Besides being reminiscent of Soviet or North Korean propaganda it’s utter nonsense.

    The main reason the world is awash in over 400 trillion USD of derivatives is people chasing returns to stay ahead of debasement. The reason for our predicament is malinvestments.

    The debasement hasn’t led to more and higher productivity only more and higher speculative frenzy and more idiotic consumption of natural resources and investment products. It’s resulted in the growth of a huge financial industry that just shuffles paper around and gets bailed out instead of imploding while doling out billion dollar bonuses.

  487. JD

    “So let me leave with you a quote from author Robertson Davies..”

    Boy, I miss him. Quite a mind. Morons/barbarians rule now. sigh.

  488. Gary

    I find it…interesting that otherwise intelligent people can become distracted or sidetracked by a complex theory. All one needs is a little commonsense.

    “deficits don’t matter as long as a country can print it’s own currency”

    Any reasonably intelligent high school student could use just a little commonsense and figure out that’s pure nonsense.

    Just the act of counterfeiting money doesn’t service debt. There will be a price to pay if a country goes down this path.

    A nation that falls for the myth that deficits don’t matter will run larger and larger deficits under the false assumption that they can be serviced with the printing press.

    However counterfeiting money has consequences. It causes inflation. The larger the deficits become the faster the government has to run the printing press to service it and the higher the inflationary pressures become.

    As we should all know inflation is a hidden tax on everyone. It’s a tax the government can levy without any representation.

    The higher deficits become the more heavily the population is taxed by inflation. At some point unless the government comes to it’s senses the inflation tax will spiral out of control and drain the population of all their savings (hyperinflation).

    So when I hear statements like deficits don’t matter I have to wonder is commonsense dead in this country. They most certainly do matter. They matter very much and they have always mattered throughout history.

  489. Natanarchist

    jeff and redwine..you guys pretty much nailed it. One year after the FED and the start of the assembly line manufacturing as well as raising wages far above the norm..that even pissed off Fords investors… But Ford proved he was right.

    good for you two for spotting what should have been obvious…except Wikipedia doesn’t provide those answers which is why Tim missed it and went in another direction.

  490. Movax2

    T/J

    Thank you for the exercise. I often shake my head at people that can’t consider the alternative viewpoint: They get stuck in an ideology and defend it no matter what.

    I believe humans are prone and can fall easily for that kind of thinking, so I try to remind myself to look at and consider other sides and different points of view. I sometimes look for “gold’s going to sub $500” kind of articles and see if they have any validity. Sometimes they scare me, but they always turn out to reinforce my views because they are often illogical.

    You’ve helped me reinforce my views as well.

    Gold bugs views follow a logic and Austrian Economics might as well be called Common Sense Economics.

    And remember, it doesn’t matter what you believe, it matters what the majority believe, and what history has shown to be true. If they believe debt matters, then it does, even if not believing could save the world.

    http://www.youtube.com/watch?v=i32LUZdljIs

  491. Natanarchist

    @ JD..Robertson Davies was a very interesting man..I miss listening to him as well, but at least we have his writings. That quote was from a PEN conference back in the 80’s he spoke at and he was just brilliant.

  492. Tim and Jeanene

    Nat –

    The cost of the Model T in 1914 was about $360, which is on the lower end of my example of $850 to start and $260 to end. I was showing that it was unaffordable whan it first came out, and a luxury later. The price in 1914 compared to today’s dollars is very affordable today.

    Nice try.

    feel free to come over to my blog and I can continue to help educate you on the reality of the system in which we live. I think you know what it is, and I agree with you, we just disagree on the conclusion….

  494. Beanie

    Jeremy Grantham was actually bearish for almost a year since the market bottomed in 2009. Only a year later (april 2010) he said that the fed’s money printing could take the market higher, only to crash again (presumably by October 2010).

    John Paulson, coming out of nowhere, has dominated all hedge funds for the last 4 years. He is bullish on the economy and the market.

  496. Beanie

    Deficits do matter, everybody can admit that, even a junior high school student. But it’s always when it will cause us big problems. Anybody that shorted our markets because of perceived deficit problems 50-100 years ago would have been broke a thousand times over.

  497. David

    Beanie,

    You are being willfully obtuse.

    John Paulson’s 2010 performance the result of massive investments in gold and gold companies.

  498. Beanie

    David,

    Paulson was bullish on the market in 2010. He could have basically bought anything and it would have gone higher, and he would be right.

    The fund assets were denominated in gold is what i remember reading. That gave it a further booze.

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