Dollar, Stocks, CRB

Just a quick post today illustrating what I expect over the next 2 years, and the intermarket relationship between the currency markets, CRB and stocks.

Pay particular attention to the inverse relationship between the dollar index and the CRB. Notice how the CRB almost immediately began moving down into it’s three year cycle low once the dollar formed it’s three year cycle bottom in May 2011.

Stocks are driven by not only the dollar but to some extent by commodity prices. When commodities start to surge too high they act as a drag on the economy and consequently the stock market begins to stagnate. When commodities are falling, like they have been for the last year, it tends to act as a mild tailwind for the stock market, which explains why stocks have continued to rise for most of this year despite the dollar moving generally upwards since February.

I think I have mentioned before that virtually every recession since World War II has been preceded by a spike in oil prices of 80%-100% over a short period of time (usually a year or less).

The surge from $50 a barrel to $100 in 2007 was the straw that broke the camels back and tipped the economy over into recession, which began in November 07. A further spike to $147 a barrel the next summer guaranteed that the recession would be the worst since the Great Depression, especially considering that the real estate market and debt bubble was imploding at the same time.

Now that the CRB has formed its three year cycle low the dollar index should be at or pretty close to a final top, which should then be followed by a move down into its next three year cycle low sometime in 2014.

If the intermarket relationships continue to hold up, and I don’t see why they wouldn’t, then we should see commodity prices moving generally north for the next couple of years until the dollar forms its 3 year cycle low in mid-to-late 2014. At some point along the way rising commodity prices are going to begin pressuring the economy, just like they did in 2007 and 2008, and also in 2011 as the CRB surged up into its final three year cycle top.

My current guess is that we will see the stock market start to stagnate in 2013 forming a very extended rounded topping pattern. By late 2013 the stock market should be clearly in a new bear market that will begin to accelerate to the downside as commodities spike into their final top as the dollar bottoms in 2014.

At that point I expect to see a severe deflationary event as the stock market and commodities collapse, similar to what happened in the fall of 2008 and early 09. This collapse and deflationary event should be accompanied by the dollar rallying out of its next three year cycle low in 2014.

Most bear markets tend to last between 1 1/2 to 2 1/2 years so we can probably expect a final bottom in early to mid 2015.

428 thoughts on “Dollar, Stocks, CRB

  1. hooloo1957

    Nice job gary thank you. You said a while back that you think the 4 yr stock cycle would be extended to maybe 6 years. Why did you think that?

  2. Gary

    I think the reason it is happening is because CB’s are intervening in the currency markets. That is causing the 4 year cycle to stretch.

  3. saif

    Oh Gary there you go chasing the dollar to its premature 15th demise based on your predictions.

    CRB’s bear market rally is almost over.
    Dollar should bottom soon and then launch a rip roaring rally.
    I would think around Tuesday or Wednesday, although Speigel’s senseless comments over the weekend regarding unlimited ECB bond buying might be the “Europe might be saved ” headline that might bottom the dollar.

  4. Gary

    I will say this; in order for your scenario to work it would require the dollars three year cycle to be extremely right translated with almost no dip into the three year cycle low in 2014.

    It would also require that the next bear market either be very short and only last one year, or extremely long and last 3-3 1/2 years.

  5. Pibe

    Sounds good but so far you have been wrong on most of your calls.

    We need QE3 for the dollar to go down and we are not even close to that. Dollar will rally. You are wrong (again).

  6. Pibe

    Deflation is occurring right now. We are currently in the middle of a dollar rally (I am so amazed that you cannot even see that).

  7. Blog Posts - RNM

    How bout this…..regardless of daily/weekly calls….regardless of short term/medium term trade ideas…regardless of the volatility that could most certainly maked anyones charts “squiggles n zig zags”…complete opposite anothers – with generally the same long term outcome.

    If the big boys have learned anything from the last crash (2008)..and if we consider the GLOBAL ECONOMY moving forward.(WITH ALL GOING ON IN EU…CHINA ETC..)…BOTTOM LINE – DOES IT MAKE MORE SENSE FOR EVERYONE INVOLVED – EVERYONE! – FOR THE DOLLAR TO RISE OR FALL?

    I think Gary has put his view out there quite straight forward.

    So….for the well being of a now “GLOBAL ECONOMY” – what say you SAIF?

  8. Blog Posts - RNM

    Dollar to the moon….and in tern its global implications.

    Seriously…lets (for my learning for sure) flush it out – lets entertain the dollar literally “to the moon”.

    Go.

  9. Gary

    Pibe,
    Other than an early entry into miners, which I’ve freely admitted to multiple times what else have I missed?

    The dollar has closed a whole 4 days above the June 1st high that I was expecting to cap the rally. Up to this point you can’t seriously consider that a miss.

    I called the bottom in the CRB almost to the day. I got the bottom in stocks in June and the last daily cycle low in stocks on July 24 almost to the day.

    I correctly predicted that the entire commodities complex was waiting for the oil cycle to bottom. Notice the grains didn’t start to rally until oil bottomed despite drought conditions that have been building all summer.

    I correctly called the bottom of golds B-wave in May.

    I said back in February that gold would have to trade sideways for most, if not all this year, and that we shouldn’t see a breakout to new highs until next spring at the earliest.

    Does one early entry into miners outweigh every other correct call?

    Does a system have to bat 1000% before you will acknowledge it’s merits.

    I have news for you, no system in the world will do that. The best in the world rarely get it right more than 60% of the time. What I’ve just described to you is a system that’s getting it right about 80% of the time and even the one miss was just an early entry that suffered a draw down. The direction was still correct.

    So if you want to get technical there are no missed calls…well other than the 2012 being the worst year since the 30’s. I now believe Central Bank interventions in the currency markets will delay that until 2015.

  10. Gary

    Pibe,

    The stock market is 4 points away from a new bull market high. The CRB just turned in a 15% rally in three weeks. Oil a 25% rally in a month and a half. Gasoline a 26% rally in a month and a half. Corn 63% in 2 1/2 months. Wheat 58% in 2 months.

    So when you say we are in a deflation I have no earthly idea what the hell your talking about.

  11. Gary

    In order to believe in these perma bear theories one would have to believe that central banks are lying about their intentions to step in front of a recession. This would be contrary to everything they have done since 2000.

    Are we seriously to believe that the money printers of the world are really going to step aside and allow everything to collapse after they have worked so hard to reflate asset markets?

    Not once have they chosen this path. They certainly didn’t do it when the credit bubble imploded. On the contrary Bernanke printed like a madman and drove the dollar below long time support at 80 for the first time in history.

    It didn’t have the effect he was looking for, and instead spiked the price of oil to a level that collapsed the already weakened economy.

    In order to expect a different response this time one would have to assume that Bernanke learned from his mistake in 2007 and 2008.

    Does anyone really think that Ben is that smart? I think he is an eternal Keynesian and completely incapable of admitting 2008/09 was his fault. So to that end I think he is going to make the same mistake again.

    1. Ken

      Bernanke is a $ucking lunatic academic that serves to protect the long-term interests of the banking cartel who’s sole exhistance is to leach off of productive society like the $ucking ticks they are. The fully fiat debt and trust based fractional reserve banking system is rotten to its inner core and will burn to the ground. Gold and silver are, have and will be money (not credit) after the criminals in are done looting what is left of this monstrosity we call the global economy. And that’s all I’ve got to say about that. Oh and if you’ve got a problem with what I’ve said and how I’ve said it… The $uck you too. πŸ™‚

  12. Pibe

    Empirical Proof of current Deflation:

    http://globaleconomicanalysis.blogspot.com/2012/06/zero-hedge-provides-empirical-proof-of.html

    http://www.economonitor.com/dolanecon/2012/07/17/cpi-unchanged-on-falling-energy-prices-deflation-risk-begins-to-edge-up/

    “So when you say we are in a deflation I have no earthly idea what the hell your talking about”

    Of course not and that’s the problem with you! Specially when you are supposed to be well informed and provide economic advice to your subscribers!

  13. Gary

    Seriously? You counter a 25% rise in oil with zero hedge/Mish conspiracy nonsense.

    These two sources have been perma bears since the beginning of time. If you take advice from either of those you have no chance of ever making any long term money in the market.

    I suggest you delete both of those from your reading list. You will end up with a lot more money.

  14. Pibe

    Edwin G. Dolan: Economist and educator with a Ph.D. from Yale University. Early in his career, he was a member of the economics faculty at Dartmouth College, the University of Chicago,etc..

    VS.

    Gary Savage: Author of “Smart” Money Tracker Blog, climber and lift weight professional.

    Who should I take out of my reading list?

    1. Ken

      You might think that Bernanke and the Federal Reserve has go IT all figured out but in do time you’ll see the market is going to $uck Bernanke and the Federal Reserve Bank raw road dog style. Bernanke keep double ‘n down and everytime the market calls his bluff. If Bernanke and the rest of the clown car brigade on the FOMC want to gamble away the world’s reserve currency then they’ll keep going down the current path.

      The market has called and re-raised your sorry @ss again Mr. Bernanke… It’s your move sir, you can call, fold or re-raise! πŸ™‚

  15. Gary

    I guess it depends on if you want to make money or not.

    Did Mr. Dolan call the bottom of the CRB cycle, the bottom of gold’s B-wave, The intermediate cycle low and daily cycle low in the stock market?

    Did he warn the perma bear’s over and over that it was too early to sell short, and that the stock market was going to at least retest the highs and probably make new highs?

    Did he try to explain the reason for both of these was that the dollar was going to drop down into an intermediate cycle low?

    If you want to trust academics whose Keynesian theories are directly responsible for the mess we are in and have missed every call since basically 2000, then sure keep reading these people and keep loosing money.

    I told you I was going to make you regret giving up your subscription. Unfortunately just like the proverbial horse, you can lead them to water but you can’t make them drink.

  16. Gold Lion

    I believe gold and the dollar can go higher together. Base metals can go lower because the demand is falling, but things we must have are going higher (food and energy).

  17. Blog Posts - RNM

    Exactly.

    No takers on the “dollar to the moon” theory.

    Granted there will be peaks n valley’s – and I for one can’t rule out an additional dollar rally (DCl)…fine.

    Globally….weaker dollar helps most…and further EUR strength (as it is….oh yes…the second most liquid/reserve on the planet – and likely not going anywhere regardless of current situation) could certainly bolster further GLOBAL INVESTOR CONFIDENCE NO?

    Against a backdrop of almost certain CB suppport – hey….Im a bear at heart and cant really beleive this thing hasnt already packed it in but….as per above….u wanna bet against that? those guys sittin across the table?

    I trade what I see….until I see otherwise.

  18. Gold Lion

    “dollar to the moon” – No, the FED won’t allow it. The US seems to be the engine of hope. So if they won’t allow DX to the moon it stands to reason we’ll have dollar devaluation..one way or another.

    Kong- Yes EWZ – went long it a couple weeks ago. I like the looks on a weekly chart for a nice run.

  19. saif

    Gary,
    You confuse the issue.
    a 26% rally in 3 months? You citing stats to prove your point.
    What about over the last 4 years?
    Since 2008 oil is down at 6-10% compunded based on what benchmark you use.
    Copper, Steel, Aluminum are significantly below their former peaks.
    Ditto for Coal, Wheat, Rough Rice and Platinum.
    So 4 years and huge balance sheet expansions, and China’s GDP expanding 40% over that time point, and most commodities are below those heights.

    It is easy to make fun of Mish, but he was long long bonds and Gold in 2008 when everything collapsed. Since then that call has done better than the stock market by a huge margin with almost no risk.

  20. Gary

    If you want to cherry pick dates then let’s start at the last three year cycle low in March 09.

    Oil +174%
    Gasoline +275%
    Wheat +80%
    Gold +77%
    copper +160%

    For some reason you refuse to grasp the concept that assets move in big cycles. The CRB formed a major three year cycle low in March 09 and again in June 2012.

    The dollar formed a major three year cycle low in April 2008 and again in May 2011.

    Gold formed an eight year cycle low in 2008. The next one is due in late 2015 or early 2016.

    The stock market used to run in a pretty dependable 4 year cycle until the turn of the century. At that time we entered a secular bear market and central banks decided to fight the secular trend by printing money.

    That intervention in the currency market stretched the last four year cycle to 6 1/2 years.

    I believe central banks will continue to manipulate currency markets and this will stretch the four year cycle into a six year cycle, at least for the duration of this secular bear market.

    Instead of trying to compare prices from peak to trough, try making an apples to apples comparison and compare prices from trough to trough or peak to peak.

    I think everyone can tell that prices at the 2012 trough are holding quite far above the 2009 trough.

    At the next peak, which I believe will occur sometime in early to mid 2014, then you can make a comparison to the peak prices in 2008.

    Otherwise one would have to assume that the commodity bull market ended in 2008. If I’m not mistaken this would make it the shortest commodity bull market in history.

  21. Gary

    By the way, part of the reason why the CRB didn’t exceed the 2008 high during this last three year cycle is because we are in the second stage of the commodity bull market. The CRB is heavily weighted towards energy.

    This stage is being driven by currency debasement instead of demand like the first stage of the commodity bull.

    During the first stage we had massive expansion in emerging markets, particularly China, India, Brazil, and Russia. We also had a global real estate bubble. This drove exceptional demand in commodities like energy and base metal.

    Now the global economy is permanently impaired. What is driving the commodity bull market at this point is currency debasement. Currency debasement is more favorable to precious metals, and it is the reason why gold has massively outperformed oil over the last three years.

    As the second phase of the commodity bull market unfolds we should continue to see how performance in metals, and possibly agriculture as opposed to energy and base metals which have somewhat impaired fundamentals due to weakening demand.

  22. saif

    Gary,
    It will be the shortest bull in the history. You will have another bull at some point, and I doubt we will come anywhere near the 2000 bottom, but 2008 highs will not be exceeded for some time (maybe 5 years).

    My point was to show how well his calls have fared.

  23. Gary

    Saif,
    You are assuming someone was dumb enough to ride the entire bear market down and back up. I certainly didn’t do that. I called the top in November 2007.

    We aren’t dealing in hypothetical, hindsight actions. We have to trade in real time. In hindsight yes holding bonds for the duration was better than holding stocks.

    In real time no one did that. We have been trading gold for most of the duration of the C-wave which began at $860. yes we exited silver 4 days too late and it cost us some of our profits but all in all we vastly outperformed bonds or the stock market either one.

    Now we are at a point where some think the bull is over. I think CB’s will continue to print and delay the process and in the meantime spark enough surge in commodity prices.

    We should know who is correct within the next 6-12 months. Essentially we will know during the next intermediate cycle. If stocks rise above the high of this intermediate cycle then the bears are wrong and I’m right.

    If stocks drop down into an intermediate low in Sept./Oct. then fail to make new highs and instead drop below the Oct. low then yes we have probably begun a new bear market.

  24. smartbullion

    Gary, I’ve noticed that the oil ETFs eg USO, OIL etc suffer from decay. Can you advise of a strategy to buy into oil when an oil intermediate cycle low is in? Would a selection of large cap oil stocks instead be a good strategy? Thanks

  25. smartbullion

    Thanks Gary. I appreciate you answering my dumb-ass questions.
    Hope your back is ok.
    My private opinion is that you should quit weightlifting to preserve your body and prevent future troubles. I hae some medical knowledge.
    Just my opinion, but there you go

  26. Blog Posts - RNM

    Saif…..hangin it out there on someone elses “call”…gimme a break.

    Make your own calls…..start your own blog/newsletter….attract thousands of subscribers….and throw your own hat in the ring.

    Mish has…Gary has.

  27. Liquid Motion

    Why do people mis-quote/mis-understand history ?

    Bernanke did not start the problems assoc with money printing……Greenspan did with his free market zero interest rate policies.

    The “credit bubble imploding” was not the event of 2007/08…it was Bear Stearns…followed by Lehman Bros. bankruptcy. That btw was not a credit bubble event …it was OTC derivatives causing the banks’ balance sheet to be severely impaired/insolvent (liabilities > assets). FORCED BANKRUPTCY.
    Money printing was the direct action of the then secretary of treasury Hank Paulson (ex GS CEO).
    He was the one who went to congress to partition for the then $700BLN bailout of the Banks. To be followed by AIG if one remembers correctly. Bernanke (being chairman of the FED) acted under the instructions of Timothy Geithner (FED President).
    Anyone who believes the FED has acted to resolve economic issues needs to have their head read.
    They (FED) introduced ZIRP and TARP to resolve issues of debt financing (amongst the BANKS).
    The side effect of all the money printing is debasement of the currency. It was never meant to be stimulatory….moreover to ensure LIQUIDITY remained in the financial system. The side effects were well known as well. The alternative was destruction.It was clearly stated to congress that had they not approved the injection of funds (money printing/nationalization of BANKS) that the financial system would have collapsed in days.

    On that basis, we can only expect more money printing when there is another credit event/threat to the financial system. The next one is likely due to the same causes of the last one….OTC DERIVATIVES.

    Given that these still operate in an unregulated market and are opaque…the chances are very high of more frequent collapses over the years ahead….in orders of magnitude of the previous one.

  28. Gary

    Smart,
    At the moment the decision is out of my hands. I haven’t been able to lift since nationals.

    I’m hoping the PRP will heal the injuries and give me another year or two.

    I’m so close to the world records I just hate to quit now.

  29. Liquid Motion

    BB is the public face of that lunatic assylum. That’s why he takes the brunt of the bashing.
    They are all part of the Ivy League of academics leaching off society. Agree 100% its the system thats rotten to the core.

    1. Ken

      Bernanke’s job is to protect the interest of those who control the world’s means of production and seek rent on the back of the masses productivity nothing less and nothing more. Bernanke cannot allow a deflationary credit collapes otherwise the 99% who’ve saved can take back what the 1% control which is why we’re going to have a stagflationary (at best) and hyperinflationary (at worst) currency and bond market dislocation. Since CONgress and the US Treasury control the Federal Reserve and have since the early 1950’s Bernanke is going to continue to monitize debt until the free market takes away the ability to paper over the malfeasances of a profligate spending government. Book it.

  30. smartbullion

    Gary,you said “I’m so close to the world records I just hate to quit now”.
    I know what you mean. You are just going to have to go for that then.

    My wise uncle once said to me: “age is age”. Lifting those weights are putting enormous stress on your body. Hidden things like aneurysms can develop, and pop.
    But, of course, I wish you well in everything you do

  31. saif

    Blog Posts – RNM,
    I have been making calls for the USD to go higher and it has.
    I am making a call that it will go higher than any of you can fathom.
    You will see the AUD under 60 cents, Euro below parity and JPY, well probably down 75% from here.
    That clear enough a call for you?

  32. catbird

    Gary @ 3:29–

    Thanks for the very helpful recap of the recent history of multi-year cycle lows.

    Why do you suppose the CB printing has stretched the stock market cycle from 4 to 6 years but hasn’t stretched the Dollar or $CRB multi-year cycles?

  33. Liquid Motion

    Simple …
    He either keeps the financial system functional and destroys the currency in the process, or we have a deflationary depression.

    Gary,
    The CRB and Stocks are going to take a beating if there is no concerted money printing exercise during September. Dollar rallies in that circumstance. Clearly your cycle theory will be tested if there is only more jaw-boning.

    Buffet, Soros and Paulson (having inside information) know something is about to happen/not happen whatever context u look at…as in CB’s not delivering what the market expects…therefore markets correct ??

    I see yields on bonds rising dramatically when we have a red light on QEIII.

  34. smt_troll

    “If you want to trust academics whose Keynesian theories are directly responsible for the mess we are in and have missed every call since basically 2000, then sure keep reading these people and keep loosing money.”

    I can’t take seriously anyone who doesn’t know how to spell “lose.”

  35. Blog Posts - RNM

    Yet another day with the usual “Morning pop or flop” to keep / bring us back to the top or bottom of this incredibly tight range.

    The U.S sesssion is serioulsy just paint drying – god…usually until Thursday!. Good luck this week all.

  36. Gary

    liquid,
    The next intermediate cycle low for stocks is due in late Sept or Oct. Gold is due in late Sept.

    There will be no QE in Sept. That disappointment will drive assets down into their ICL.

    Actually stocks have a daily cycle low coming due right around the next FOMC meeting so my expectation is for marginal new highs by the end of the month followed by a move down as the market prepares for no QE.

    So yes we already know a drop is coming and we know when to expect it.

  37. Ken

    More money is lost trying to time (short) market tops than made in bear markets. If you don’t like the market right here then stay in cash and buy into a 5% – 10% pullback because crashes like 2008/9 don’t come around every 4 years.

  38. Rocksit

    Tough crowd on this blog. Gary just gave his expectations so no need to get hostile if you disagree. Just give your position and see who gets it right. I disclosed that I got net short last week and I will stay that way unless the S&P takes out 1425 with conviction. I expect a market turn before September but am prepared to change course if price action proves me wrong. If that Bill Cara article about active ECB bond buying that was posted here is true then this rally could very well continue a few more weeks.

  39. oa92000

    “crashes like 2008/9 don’t come around every 4 years.”

    would you consider coal , steel or other miners (aumn,gpl..) already crashed ?

  40. Lyon

    Gotta love that silver pop. I am kind of leaning towards the PMs not making a run for new highs until 2013.. who knows, I’ll take it when the market gives it.

  41. Gary

    I have to say only Saif has the balls to stick around when he’s on the wrong side of the trade.

    I of course don’t have the luxury of hiding in a hole when I’m weathering a draw down. So I’m fair game for every troll during those periods.

    The next time these fleas want to pile on during a draw down they are going to be deleted.

    You can’t have it both ways. If you want to twist the knife when we’re down then you damn well better be prepared to take it when it comes back to bite you in the ass.

  42. saif

    Gary maybe you can create a proprietary sentiment indicator based on negative comments on your blog.
    My puts have not fared well but they are a small part of my portfolio and I have a lot of time left on them.
    My USD call is still doing ok. USD index is off just 2% of its highs and up about 4% since I called for it to go higher.
    Still it is a frustrating market.

  43. Blog Posts - RNM

    Im sticking it out here – regardless of my hits n misses – as I value the convo as opportunity to learn – and as well to contribute, if anyone can learn from me.

  44. Lyon

    Hey Kong, I want to learn how to be an international man of the world like you. Living off my trading profits. Except I wanna do it from my own yacht πŸ™‚

  45. Gary

    Saif,
    At one time I published a troll meter that was pretty good at spotting bottoms. Of course it was just my judgement as to when the meter pegged 100% but I could usually get it to within a day or two.

  46. Blog Posts - RNM

    he he…..tough to get a steady internet single at times from the yaught – depending on where you are at!

    Even on the ground – if I could list the number of times over the past few years where Ive been thru hurricanes/power outages/net connection issues etc… – and have done my fair share of sweating over open trades.

    It certainly keeps one on their toes!

  47. Rocksit

    In an interview today Jim Rickards confirmed his call for an ECB rate cut on September 6 and for new QE by the Fed on September 13. If its true then precious metals and miners may not see much of pullback if any from here.

  48. Euclid

    Somethign weird is brewing in these markets today. Everything says to go short. Price action implies to go short. nothing happening.

    This will be a fun week.

  49. Euclid

    Driver, unless you pay for hotspot its hard to get tethering on a phone without rooting. especially on newer androids. I would recommend you check out FoxFi. Its the best software i found for this.

  50. Jason

    I too use FoxFi. When using this fine build, please do the following;
    1) change the hostname of your hotspot.
    2) enable WPA2, disallowing snoopers from riding.

    Cheers….

  51. ...at ease

    Gary, There are times in our lives that despite all our best efforts, we come to realize that we must move on or leave behind younger years ideas and beliefs. Unfortunately, we usually we cannot move on until we leave the past behind. If you make it, great! However, if your body is telling you it’s time to ease up, all is not lost. Just remember when one door closes another one opens. You just have to have your eyes and mind open to new ideas and plans.

  52. Bill

    I think Gary should heal up and go for it. I don’t know exactly what happened Gary, but I found doing serious core strengthening helped my powerlifts. A weak core caused me to use too much of my back.

    I think Gary has a good post here. It’s easy to see how the CRB and USD are opposites.

    Gary, I don’t think the mistake of going in early on gold was going in early. I think cycles told you to do so. I think it was not having a floor closer in. My 2 yen. That all said though, did cycles mess up there, or what? I thought so, and so that’s why I stopped subscribing – I couldn’t trust the cycles. Curious your take on that now, cycle-wise? Thanks.

    BREAK THE RECORD, but 1st heal up and 2nd find out exactly what happened and why. πŸ˜‰

  53. Gary

    Bill,
    I have arthritis in my back and neck, and a degenerated disc. Mostly it’s the disc that is causing my problems.

    It wasn’t cycles that failed. The B-wave intermediate cycle lasted a normal duration (20 weeks). Most of the damage occurred over the last 7 days. If it wasn’t for those 7 days we would have entered pretty close to the bottom.

    The problem was that I paid to much attention to technicals instead of trusting the cycle to run a normal duration (several technical indicators gave buy signals during the bottoming process. I took the bait and had to ride out those 7 days.).

    B-wave bottoms are just tough. Every single one of them in this entire bull market has been volatile and very tough to trade correctly in real time.

    That’s the key of course. What do you do in real time.

    I think we all know the trolls that came on after the fact are mostly just the usual scumbags that lurk on the internet looking for some one to kick when they’re down. None of them did any better than us in real time, and most of them are on the wrong side of the market right now as evidenced by the fact that they haven’t shown up in weeks.

    Like I said none of them will be allowed to post on the blog any more, they are going to join Basil in the banned club.

    They can’t have it both ways. If you want to take digs at us when we miss a call, then you damn well better show up & fess up when it’s your turn to eat crow.

    So far the only one man enough to admit when he’s wrong and isn’t hiding in a hole somewhere is Saif.

    The rest of the fleas will have to find another dog.

  54. Bill

    Oh, man, you gotta be INSANE to do weightlifting with spinal problems. I’m with at ease on that one – and since climbing uses more pulling than pushing, would that work out better for you to focus on climbing moving forward?

    Just remember, the record was most likely set by someone on steroids.

  55. Bill

    On that gold B wave bottom, I’m still a bit confused. As I recall, the technicals showed a whole line of reversal candles, which were all fakeouts. It was the sentiment that was bullish. And I thought the cycles said to buy. But my memory isn’t so good.

    I’m still in cash, although today’s action in silver looks real good. The 60 min RSI(14) is overbought, so I’m hoping for a pullback to buy the buyout.

    Good that cycles are straight, at least for you! They are a MYSTERY for me still!

  56. Gary

    Yes climbing doesn’t hurt my back, a little hard on my neck belaying but not too bad. But I’ve never had good genetics for climbing. I managed a few 12.c’s when I was much lighter and in my 40’s.

    I’m never going to climb that hard again.

    I have world class genetics for weightlifting. If I could just fix the low back and get two more years I think I could break the snatch world record for sure and probably have a decent shot at the clean & jerk and total as well.

    My total at nationals in March would have easily won the worlds last year.

    I’m tentatively planning on the master world games in Italy next year if I can heal my back.

    I found a doc here in town that did PRP treatments on my back two weeks ago. I should know by the beginning of next week whether they are going to work or not.

  57. Liquid Motion

    Gold miners outperforming Gold by 200% since May…looks like they are leading this time around. Hold onto ur hats peeps.

    Anyone shorting AAPL ???
    Supposedly market cap is 3X total market cap of all gold/silver miners….cant be true..but it is.

  58. Gary

    Not surprising since they probably have about 100X the customer base as all the mining companies in the world.

    Rule #1 in business. If you want to make more money find a way to sell your product to more people.

  59. Piazzi

    pity those who follow anything other than the price itself — be it mish or moosh or mish-mash-moosh

    all you need to make a buck is a bit of common sense

    S&P is banging on new highs, even if it fails and those who went in against all the blah-blah of perma-creatures, the positions are in money and will closed in profit

    did mish-mash-moosh tell you when to expected good probability low in S&Ponna tell you z

    No, he just regurgitated blah-blah-blah

    Is Mish-mash-moosh gonna tell you when to exit your position?

    No, of course not

    You need to do the work yourself, but, if you spend your time looking for answers from mish-mash-moosh et al, then when do you get the time, not to say objectivity of your own unbiased approach to do the work your self?

  60. saif

    I may buy some puts on Apple.
    The concept here is not that it is not a great company but it is the Gross margins. It is impossible to sustain those kind of GM’s with Amazon, Samsung and Google on its tail.

  61. Gary

    P,
    Yes I have, but as I have noted before they have been coming early for the last two years. I think the big boys slowly exit their positions over time nowadays. The SoS numbers are becoming worthless for timing tops.

  62. Gary

    Saif,
    Again let me warn you not to jump on the short side too early. Nothing is going to go down until the dollar prints a final intermediate cycle low.

    If my cycle count is correct (and I’ll admit the recent volatility has made it a bit fuzzy) then we should still have about two more weeks before the dollar bottoms.

  63. Piazzi

    I know,

    picking tops for a market that is supported by monetary policy is like playing russian roulette

    I’d rather move stops and let market take me out

    I just mentioned that since wr are moving closer to both int and daily cycle low windows

  64. saif

    So noted Gary. Appreciate the input.
    Where you and I differ is the strength of this bottom and to some extent the timing.
    I am still thinking Wednesday (which would fall in your timing band, though early)and that would be a long term bottom.

  65. Gary

    Actually if one were to consider July 19th as the last daily cycle low then Wednesday would fall in the latter part of the timing band. The dollar would still need to move below the Aug. 7th intraday low though.

    However my instinct says Aug 7th was the last daily cycle low. If that’s the case then we shouldn’t expect a bottom until the end of the month.

    Also almost no stock sentiment levels are indicative of a top yet. Most specifically we need the intermediate score and ROBO put call ratio to reach overbought levels. They aren’t there yet.

    Until they are (overbought) it’s unlikely we are going to get an intermediate top hence I think the Aug. 7th cycle count is probably the correct one.

  66. saif

    You have the $vix putting 6 consecutive closes below 15.Last time this happened was in 2007.
    Throughout 2009, 2010, 2011 and 2012 we never had that.
    On rallies more powerful than this, against better economic conditions, we never had so low a fear index.

  67. Liquid Motion

    Is that an anomaly?
    The index, the repetition, the history …all of them are rear view mirror analysis. Its not predicting the future. Careful not to let your judgement be clouded by historical patterns.

  68. Bill

    I’m wondering, if gold’s B wave is done, and if C is impulsive, why we’re not blasting out of here yet?

    Maybe silver leads gold this time then, w/yesterday’s breakout?

  69. Bill

    Uh, makes me think that there may be more to this B wave.

    Like a few analysts have said, I wouldn’t be surprised to see one more big down in gold.

  70. Bill

    Last comment …

    Though this correction has been 1 yr, and that pretty normal, the depth is really shallow IMHO.

    If no QE3 is announced at Jackson Hole (as Gary predicts I believe), then I could see gold drop $100 or more.

    W/out QE3, I can’t see it going up, fundamentally.

  71. Gary

    Bill,
    C-wave’s don’t “blast”. They experience a multi month consolidation phase before they can break out to new highs. Look at the chart I posted back in Feb (It’s included in the last article )and you can see what the beginning of a C-wave looks like.

  72. Gary

    Saif,
    If you look at the last bull market the VIX stayed below 15 for the majority of 5 years.

    Trying to rationalize a top just because the VIX is at 14 probably isn’t a strategy with a positive expectancy.

    Like I said give it two more weeks and let the dollar get into the timing band for a cycle low. Once it is wait for a swing to mark a likely bottom.

    Let me warn again that this top isn’t going to be easy to sell short. I suspect we will chop around most of Sept with multiple retests of the highs before finally moving down in Oct. Even then expect several counter trend rallies that will rip shorts out of their positions.

    If I had to guess I would bet that most of the losses will occur in the last 7-10 days and by then both bulls and bears alike will have gotten whipsawed to death and be so shell shocked that neither one will make any money.

  73. Liquid Motion

    The distinction is that Gary is forward looking. Your analysis/data points are historical and offer no clue as to future movements other than by way of statistical probability. Not weird in my book.

  74. Gary

    Instead of continually getting kicked in the teeth trying to pick the bottom and top why not at the very least wait for a swing?

  75. saif

    Kicked in the teeth?
    My account is up 2% for the year. That is hardly teeth being kicked.
    I have used mainly puts for a very small value. It has not worked out but in there lies a built in stop loss.
    Here, I feel Bold.

  76. Blog Posts - RNM

    Saif u kill me.

    Its obvious that you’ve got no plan…and that’s kind of too bad considering your general market knowledge etc…

    Why not put a plan in place to match?

    To suggest a “headline” has been provided – and to actually act on it (even worse in my view – contrarian!) And get short the dollar is 100% completely ridiculous no? (please…maybe it was sarcasm?)

    Its impulsive, naive….amature..and most certainly spurred on some emotional level.

    I suspect you have likely lost considerable cash over the years and have possibley developed a “grudge” and are now trading (if you are really trading) on pure emotion.

    This will certainly clean out the rest of your accounts in a very short time.

    I mean….not even a simple Moving Average Cross on a smaller time frame chart has turned…..literally…at this moment…every single indicator under the sun (including price) is pointing straight north!

    Tell us you’re kidding…please.

  77. Gary

    And there is the big move in miners that I told subscribers we should see this week. I think it probably has further to go and will eventually take out the June 6th high and complete the 1-2-3 reversal before the next intermediate correction.

  78. Gary

    Be wary about getting too excited.

    This should only have 10-15 days left. Once the dollar bottoms (it’s very late in the intermediate cycle) we’ve got another very difficult period ahead of us.

  79. Lyon

    Saif – 2% for the year? You have to realize you’re on the wrong side of some trades, right? Damn – I was up 25% in the 1st Q.

  80. Gary

    If you were up 25% in the first quarter with the market only up 13% you were probably using too much leverage.

    I would think twice about that. Sooner or later you are going to miss a call and that kind of leverage will turn a 25% gain into a 50% loss real quick.

  81. Blog Posts - RNM

    Its been a great month for sure…all be it – a pile of work….and likely alot more screen time than most of u.

    I am commonly up to trade the London sessions – and just as often am back out of trades or moving stops around pre market time U.S.

    I plug at it at times when we are trending etc…and equally – have considerable periods of inactivity. Its a lifestyle choice for sure.

    In any case….I likely booked profits here this morning a touch too soon – (now 100% cash again – short of eternal long hold USD/JPY) but will look for possible re entires this evening.

    I still dont see the participation/enthusiasm outta NZD and AUD that I would like too see with rallies like this…so unfortunately am stil jumpy / with my guard up.

    I can always handle missing a lil upside, or part of a move… with the firm knowledge that there are about a million other trades setting over n over n over n over again.

    Have fun guys.

  82. Lyon

    I don’t use leverage – well, only when I trade futures. But, no, I made 25% by trading IBD 50 stocks algorithmically. I stayed with it a little to long and gave back over half, but as of today I’m up 23.88% on the year.

  83. Rocksit

    Saif
    Don’t go 100% anything. Ever. Play the ranges with your net exposure. In addition to increasing my short exposure I also reduced my long book into this morning spike to get me to my 15% net short target. S&P 1432 will have me covering shorts to get me back to market neutral. I still expect a pullback but gotta respect the price action. I have seen people lose the most when they thought the chances were the smallest.

  84. saif

    Rocksit,
    It is an Index. An individual stock, no I would never do that.
    Most people are 100% long all the time, what is wrong with being 100% short after a run like this?

  85. Rocksit

    Saif
    Everyone has their own system but I’m never 100% long either. I can’t time directional moves with certainty so I don’t even try. Just advice though so if your system works then just ignore my comments

  86. Blog Posts - RNM

    I will say…..this is the absolute largest “bearish wedge” pattern of all time…and todays “candle” has all the makings of a turn around for sure….not to mention the lazy AUD, NZD – and divergences everywhere.

    One certainly cant be blamed for considerations “short” here – I apologize SAIF… if I was a lil brash.

    Me….Ive just learned too many times (as stated here by others) I will just wait out the “toppy part” as it can (at times) go on forever – tieing up capital and grinding up accounts.

    As Gary suggests….it could go on for months..and sideways n me……dont get along.

  87. Lyon

    Bet whoever sold me BBY at 16.40 pre-market is kicking them self in the rear. BBY had a revenue of -2.80% year over year and you would of though they declared bankruptcy.

  88. saif

    Lyon,
    If you are long BBY,
    I recommend buying the Dec 20 Calls in addition to your existing longs and sell twice as many 23 Dec calls.
    Your risk is zero.
    The cost of this trade should be only about the commissions.
    Between 18-20 you make what you would have anyway.
    Between 20 and 23 you make additional money equal to 1X your long position.
    Between 23 and 26 Your gain on the first set of calls neutralizes your loss on your sold calls but you do make money on your pure long position.
    Beyond 26 you stop making money on your long position as well.
    Risk free way to double your bet on a takeover. Just my thoughts…

  89. Lyon

    No kidding. Yeah I think several on this board overstayed that trade. I think I got smacked a couple times trying to time a trend reversal. There wasn’t much bounce in that dead cat. lol

  90. saif

    “saif what happened to your 90 USD… is it still coming. “
    Oh yes it is.
    It is so funny that all of you who criticize the dollar, get excited and buy the Euro, whenever the ECB agrees to, and get this, PRINT MORE.

  91. Gary

    I most certainly would not buy the euro. It’s way too late in the dollar cycle to be buying euros or selling short the dollar.

  92. saif

    Gary, I was not referring to you in particular, But I am sure u will appreciate the irony.
    The largest up moves in the Euro have coincided with promises of ECB largesse.

  93. Gary

    For the most part I pretty much ignore the news and just pay attention to the cycles. The dollar should now be on week 25 which makes it very very late in the intermediate cycle.

    Certainly too late to sell the dollar short or by the Euro long.

  94. Blog Posts - RNM

    Ok….Ill chime on here only in that -Gary! – huh?…not sure Im following you.

    If its not a at decent time for an individual to get short the dollar or long the EUR – so what then?….you had just posted you envision another 10 – 15 days of dollar weakness no?

    Ok…so you arent into trading currency…fair…but….we just went through 9 straight days flat as a pancake….xle has done absolutely zip…..GLD has barely moved…and now you more or less discount the next 10-15 days as “too late” in the cycle to do “anything”??

    Im trying to figure out how it is that you have planned…or plan…on making any money any time soon then? as you’ve also suggested you dont “get short”.

    I dont get it.

    Flat as pancake last 2 weeks = no money….too late to “get long” or “short”..= no money ……….you dont trade “bearish/short “…which we all pressume to be the next move = no money!

    As I am an extremely aggressive and active trader….this just seems so “passive” to me!

    Help me understand!

  95. Rocksit

    Not sold on the reversal and don’t think that the bulls are ready to give up the ball just yet. Any gap down open will likely have me adding to select longs for one more push higher. Still think we are playing in thin air up here but tops are processes. In any case its time for me to move on now so I wish you all good luck

  96. Liquid Motion

    Just my 2 cents worth…
    USD move after bottoming will take some heat out of commodities (incl PM’s)..but that will be fleeting.
    The gold rush has well and truly begun…hope ur all aboard the train.
    Cost push pressures will support the gold price going forward. I’ve said it before …cost of mining is increasing…at rate of ~15% pa. This is very supportive of the gold price increasing to match the cost increase.
    Additional to that we have China who are agressively taking more than is readily available on market.
    Combined with CB buying and potential tsunami of buying as a result of BASEL III we have a fantastic catalyst for very strong moves in a short period of time. Basel III is not expected until Jan 13…so Gary could be right on the money there in terms of timing for the move into 1900-2000 levels.
    Break through 1640 then 1675 opens up 1700, 1750 and then 1900.
    I’m excited…!!!!!!

  97. Gary

    I never could figure out what makes retail traders attempt to fight trends.

    Professionals are either trend followers or regression to the mean traders. That’s why they generally make money.

    Retail traders almost invariably do the exact opposite. They continuously try to pick tops and bottoms and jump on trends only once they’ve gotten stretched far above the mean.

  98. Gary

    They almost certainly will at the next daily cycle low. This kind of rocket launch is indicative of an ending move for an intermediate cycle. Depending on where the dollar is in it’s daily cycle we could get a top in assets and bottom in the dollar sometime in the next 10 days.

  99. Cabriolia

    “I never could figure out what makes retail traders attempt to fight trends.Professionals are either trend followers or regression to the mean traders. That’s why they generally make money.Retail traders almost invariably do the exact opposite. They continuously try to pick tops and bottoms and jump on trends only once they’ve gotten stretched far above the mean.”

    hahahahaha,Didn’t you do exactly that with the miners? Only you averaged down along the way. Talk about a retail trader mistake. Which raises the question do you consider yourself a professional or retail trader?

  100. Lyon

    Trades that don’t work out is just part of trading. Even billionare partner to Warren Buffet, Charley Munger lost half of his clients money on his first years. He felt so bad he gave them back their money and closed his management firm – he was a pro πŸ™‚

  101. Cabriolia

    Who said anything about trades that dont work. G-mans words were retail fights the trend and tries to pick a bottoms because it got stretched from the mean. His words nto mine. I just pointed out that is what his miner trade was.

  102. Cabriolia

    Lion
    If your wondering why I needed to do that it’s cause the G-man had to look down his nose and take a dig at the spaceball guys comment. You also had to give a snide coment too when we have no idea why that guy put out a warning in the first place. Helmut get out here and defend yourself and let us know why we should be careful in sivler.

  103. Gary

    Maybe you should read what I wrote again. I said professionals are either trend traders or regression to the mean traders. Cycles are basically a way to trade regression to the mean and that’s exactly what I was doing.

    Nice try, but all you did was demonstrate your inability to comprehend what I wrote.

  104. Lyon

    Cab,
    Didn’t mean to be snied. It was more a comment about how the market often doesn’t do what we expect. Hell, I didn’t expect a sharp move up with silver.

  105. Pibe

    Cabriolia,

    Silver seems to be overbought now (according to several technical indicators)along with most of the miners so it might be due for a pullback. That does not mean that silver is not a good investment long term – I am talking about years here-(It might be better to buy physical to not get into the temptation of selling and buying at the wrong time).

    I hope that helps

  106. Gary

    First off I made it clear the other day that trolls whose only purpose was to come on and twist the knife during drawdowns but then disappeared once the market started going against them were not going to be allowed to post on the blog any longer.

    I don’t have the lecture he of hiding in a hole when the trade is going against me. I have to set here and weather not only a draw down but the endless taunts of the fleas.

    If those fleas think that they can run off and hide when the market starts going against them then they are going to lose the privilege of posting on the SMT blog.

    So far the only one with the balls to stick around while is trades have been going against him is Saif.

    Notice how no one is piling on him for being on the wrong side of the trade.

    Saif can post his opinions any time he wants.

  107. Liquid Motion

    Wait for the WSJ (fed)mouthpiece to let us know what the Fed is going to do and when. Should see something by the EOW. Otherwise we are still in the dark about QE.
    1675-1700 target on AU and low to mid 30’s on AG…ST.

    Gary…is the consolidation over or just a st blip bcos of usd cycle.

  108. Gary

    This should be the ending phase of this intermediate cycle. Gold is starting to accelerate and this should quickly push sentiment levels into extreme territory (the same for the dollar).

    At that point gold should begin moving down into it’s next intermediate cycle low (due in late Sept.).

    The next intermediate cycle is where we should see some real gains. Probably a test of the $1900 level sometime in November or early December.

  109. darkhelmet

    Apparently a whole lot of drama here on my account!

    Cabriolia, please don’t “defend” me again. Not necessary and certainly not wanted.

    Lyon, way to give the idea at least 2 hours to work. I advised being careful in Silver when SLV was at 28.80 and it closed at 28.92. Besides, based on your comments I’d prefer it if you were on the other side of the trade.

    Gary, reading the thread, I’m not sure if your comment was directed at me or not but I never advised anyone to go short silver. I simply commented based on silver being outside its upper BB and some unusual option activity in SLV. Regardless, I really could care less about anyone’s opinion of my trading methodology.

    In the future, I’ll just take my comments elsewhere.

  110. Unknown

    Darkhelmet,

    Can you please expand on the unusual options activity that you saw with SLV?

    Thanks.

    Silver up over 30 now. Looks like everything is in BUY BUY BUY panic mode.

  111. saif

    Last attempt that was hilarious and so true. Can you make that into a flowchart? πŸ™‚

    I am sure Gary’s system works for him, I have only had a problem with his occasional God Complex.

  112. Gary

    I think we all know how this started. Several trolls, including Tiho, Basil, Shawn, etc. showed up with the sole intention of being rude and disruptive.

    I made a simple statement that the SMT portfolio had out performed the vast majority of hedge funds over the last couple of years. There was nothing false in that statement. We have outperformed most hedge funds. So investors could either put their money in a hedge fund or follow the model portfolio. Following the model portfolio would have produced much better results for most people.

    We have considerably outperformed the market during the last two years and the precious metals sector.

    I’ve never had a problem with differing opinions. I even offered one time to let bygones be bygones and start fresh with Tiho. He of course ignored the offer because his intent was never to have a rational debate but to just cause disruption.

    If your sole intent is to just cause disruption then I don’t want you on here. If you’re willing to discuss in a reasonable and polite manner then I’m more than happy to entertain opposing views.

  113. Gary

    I offered many times to just make a burrito bet. But instead I get called a moron or an idiot because I don’t see things the same way as someone else.

    Maybe it’s just me but I don’t particularly like being called names.

    It would be much more civil if we just made the bet. That’s what Saif and I did.

    What’s so hard about that? We just have differing opinions and we’ll settle it by one of us buying dinner.

  114. saif

    Gary, I am going to go out on a limb on another call here.
    Till now I believed that Gold “Could”rise along with a rising dollar, but Now I no longer am in that camp. The Deflationary pressures are extremely strong and Gold will be sold to meet redemption/margin call pressures.
    I think we may still get some run here but Gold should top out before end of 2012 and I think $1250 is on the cards.

  115. Lyon

    I still have a gut feeling that the DX will have to be allowed to fall (a trend reversal to the downside), that the FED will be forced into letting it fall to try to save the economy. But, of course I don’t have a crystal ball.

  116. catbird

    Saif @ 7:02

    Now there’s a bold call, but you hedge when you say $1250 gold is “in the cards.” A lot of things are in the cards. I can say nuclear war with Russia and China is “in the cards” in the next few months, but I wouldn’t be saying much.

    Why not simply say something like “Here’s my prediction: gold will drop below $1300 by Dec. 31st of this year.”

  117. Gary

    I forgot what’s the subscription bet again? We’ve go too many for me to keep track of in my old age.

    Sometimes I forget my middle name…

  118. Blog Posts - RNM

    “A Serious Disturbance in the Force!”

    Well…..I am sooooo pleased to see that you “precious metals fellows” finally got a move! – I can most certainly empathize – with respect to the amount of patience/waiting that has been required… I truly hope its been worth it. Congrats.

    Otherwise…and in case you havent noticed…..THE YEN IS ON A TEAR! – AND WE HAVE NOW SEEN TWO DAYS OF MAR

  119. Gary

    This should be an ending move for the metals sometime in the next several days. My original expectation was for a tag of the $1700 level followed by an intermediate decline.

    The next intermediate cycle is where the really big money is going to be made.

  120. Blog Posts - RNM

    MARKET DOWN AND DOLLAR DOWN.

    In general…this is not normal…and in my view certainly commands respect.

    Commods vs Yen get trampled by 150 pips…so…..if this is a “dip” then its gonna be a serious money maker….but…a wise man once told me…..”what the dollar does….the Yen does more”…ie…risk off….flight to both yen and dollar….risk on…..both are sold.

    THIS IS NOT HAPPENING HERE SO……BEWARE….WE ARE MOST CERTAINLY ON THE CUSP OF A MOVE.

  121. saif

    Gary,
    “Sometimes I forget my middle name”
    That is “Nverong” I think.
    Subscription bet….
    CRB bottom broken within 2 years, you give me a year’s sub free
    CRB bottom not broken in 2 years I buy a month from you.

  122. saif

    “THIS IS NOT HAPPENING HERE SO……BEWARE….WE ARE MOST CERTAINLY ON THE CUSP OF A MOVE.”

    “All of this has happened before and will happen again….” Battlestar Galactica

  123. saif

    Catbird,
    More likely next year,
    However I am nowhere near convinced about this one as I am about the Epic Australian Bust down the line which will put AUD below 60 cents by Dec 2014

  124. Gary

    If I’ve been condescending it wasn’t my intention. I’ll try to do better in the future.

    What say we all just start over.

    Hi my name is Gary!

  125. Gary

    It’s definitely way too late in the daily and intermediate cycle to be buying. If one is already in, then I would suggest placing a trailing stop on positions.

    We are using a PSAR to get us out of the remainder of our mining positions.

  126. EddieG

    Last Attempt,
    I think fault lies with both parties but Shawn and Tiho take it to much more offensive levels. Although I did like Tiho’s posts. I think gold goes down based on Paulson redemption selling .

  127. Blog Posts - RNM

    Battle Star Galactica..he.he….love it man.

    Yo….SAIF.. I appreciate your conviction on AUD and am super interested to hear more.

    Are you in some way connected (family or biz?) or do you follow AUD economy/situation on some other level perhaps?

    As Ive learned over the years…there really isnt anything better than either having a man on the ground or actually being in a particular country yourself…. to truly get a bead on whats happening.

    As it stands…AUD generally fits into my plan as a “risk barometer” of sorts…I dont really get to far into the dailies.

    Your conviction is contagious…

    Any further insight….a bonus.

  128. Blog Posts - RNM

    And on a more personal note.

    “Last Attempt” – wow…if that doesnt (literally) say it all.

    “Last Attempt”…man..lets say it again “last attempt”….Im racking my brain for a more pathetic / sad handle than that….and am drawing a complete blank. Do tell (oh no…please dont) how you ever came up with such a “colorful” name for yourself? (or…should we considering asking your “ever so disapointed” boyfriend? – Tiho?

    It would appear that you… and only you… have suggested that yes indeed you are a moron.

    Further confirmation of your moronicy (yes it is a word!) – Tiho’s cut and paste job (likely from his dad’s paid subscription) of a bunch of completely useless garb – more often aimed at attracting low ball / clown investors with the I.Q’s of…. well……morons!

    And not a single original or even remotely interesting idea of his own….please make it so!….make this your “last attempt”!

  129. saif

    Blog Posts – RNM

    There are many reasons for AUD downfall.
    The primary one is PPP (purchasing power parity). NOw people say it does not matter, they are right …it does not matter until it does.
    It matters when all other factors are equal.

    Right now the interest rate differential between AUD and USD is making PPP irrelevant.
    That will change…
    Why?
    THE AUD housing bubble is a magnitude larger than US was at its peak.
    All major cities where 80% of the population lives have Price to income multiples in excess of 7.
    I think US had less than 5% of the population living in such cities at the peak.
    Think about that…16 times the population is exposed.
    China’s demand for base metals has resulted in most of the employment gains.
    I see China’s real GDP averaging less than 4% per year. While 4% may look good to western countries, it sends BASE metals demand negative.
    There is a complex curve out there but generally base metal demand in China requires 7-8% GDP growth to stay constant.

    Right now the world is so yield hungry and looks at the AUD govt balance sheet and concludes here is the safest place to earn money. That BID has pushed AUD prices far in excess of where they should be.
    Once RBA goes to 0% and the Govt bails out their Big 5 banks, things will look a lot different.

    The combination of these factors will drive AUD below 60 cents.

  130. catbird

    Saif,

    Gold goes below $1300 next year?

    OK. Here’s my bold prediction: Gold stays above $1500 for the remainder of its secular bull.

  131. Liquid Motion

    Saif …that’s absurd.
    U dont understand the dynamics of gold if U believe $1250 is expected by end of the year.
    50% of miners would stop mining at that level. That creates a supply issue…vs growing demand …China CB and Indian retail arent interested in selling. Besides that Gold will achieve “cash” status when Basel III comes into force….with zero risk. Highly liquid market will draw banks and all Fund types to hold as “the” go to asset. Growing distaste for fiat will only expand when next round of currency debasement in EUR and US takes place.
    UR on the wrong side of the trade if you have that sort of thinking…U dont want to short Gold here or for the next few years. Follow the trend my friend …or run the risk that your personal beliefs will wipe you out.

  132. Liquid Motion

    Also…UR far too bearish on the AUD.
    Your logic revolves around two key themes…China and Property.

    China is still in its infancy in terms of its growth. Not even 1/3 of the way through and what we are seeing now is a blip on the radar. Compare Japan and Korea’s development (30 yrs +) to understand where China is headed.

    Property is relative. Look at underlying economic conditions…employment near “full employment”…Interest rates still supportive of a growing economy…ownership of houses is in mid 30%..vs mortgaged around 30%. Where is the pressure going to come to sell/liquidate. Moreover what % of the market will that affect? Australians have a love affair with housing…and the Banks are very well regulated.
    House ownership in Aust. is like forced savings…its built into their psyche.
    Sure mortgage holders may suffer when interest rates turn but it will literally take a bust of epic proportions on a global scale to push property down by 30-40%. It doesnt have to follow what happened in other western countries in terms of a liquidation and price adjustment. They are still five years into a property cycle adjustment with some areas showing stability and some even growing. 4 Australian capital cities are rated in top 20 world wide as most livable cities on the planet. On that metric alone …UR case for a property bust falls flat on its face.
    AUD:USD to trade in a band of 90-110 for the better part of the decade. Oh and I’ve dealt with currencies for the better part of 2 decades so I do have a handle on that little baby.
    Government doesnt have the debt:GDP levels of other western countries ….the public does though.

  133. saif

    LM,
    U are wrong on so many levels it is not even funny.
    a) I am not shorting gold, although the way I am playing it I will make money if it goes down.

    b)The average cost of mining Gold of the GDX miners is close to $800oz all in including Depreciation. I challenge you to prove otherwise rather than throwing ludicrous statements about.

    c) Even if the price temporarily went below that, Miners do not stop mining. You believe that Gold miners have different set of brains and balls than NG drillers?
    How come everyone is getting NG out of the ground when their all in break even costs are around $6.00 and NG is at $3.00?

  134. saif

    Regarding Australia,
    Again I will take you up on any bet you like.
    To answer to your points, Livable cities have nothing to do with this.
    Price to income and price to rent is all that matters. Sure there is a premium for better cities.
    But when 80% of the population is
    living in cities that suggest insanity not not premiums.

  135. Liquid Motion

    I pay attention to leaders of the industry….ones who actually mine the stuff and what they say. Others who are well versed in Gold and its cost drivers, also know market factors at play.
    How do you throw around a number like $800…u are living in fantasy land with that.
    YES they do stop mining if it becomes uneconomical. Especially if they want to attract investors, because too many question marks are hanging over mining houses. Non-delivery of profits and cash flow and dividend yield. You would think at $800 cost base would imply significant profits/EBITDA growth….WHERE IS IT ??. Doesnt exist bcos the $800 level is nonsense. Just like ur statement.

  136. Liquid Motion

    Again look at the demographic and % of ownership and proximity to Asia….esp CHINA.
    I concur that in real terms, house prices are not growing and have a propensity to move sideways /stagnate for several years…but that is far from a crash. If you consider no growth for a decade that is akin to a crash of 40%….YES !!!!

  137. Gary

    FWIW many miners hedge some production forward. So even if price were to fall below $1200 they would own futures contracts to sell at much higher prices.

    This is what is happening for the most part when the conspiracy people freak out about large short positions and blame some mysterious and evil cartel. It’s mostly just miners locking in high prices.

  138. Gary

    Anyone want to bet that when gold dips down into its intermediate cycle low in the next few weeks the conspiracy crew goes nuts again??

  139. saif

    LM, clearly talking to industry professionals never involved you being able to understand accounting or finance, so here it is.
    1)
    http://barrick.com/News/PressReleases/PressReleaseDetails/2012/Barrick-Announces-Second-Quarter-2012-Results1130321/default.aspx

    Cash costs $613/oz net cash costs $534/oz.

    2)
    http://newmont.q4web.com/Press-Releases/News-Release/2012/Newmont-Announces-Second-Quarter-Net-Income-from-Continuing-Operations-of-056-per-Share1130337/default.aspx
    Gold cash costs $681/oz

    3) http://www.goldcorp.com/Theme/GoldCorp/files/Financials%20Q1%202012_v001_z7rr8t.pdf

    $251/oz cash costs on a by product basis, $648/oz on a direct basis.
    In case your enlightened brain cannot follow, NET CASH costs is the only consideration to continue to mine or shutter it. Ask any CFA what they would choose. In any case even their $648 is well below your ridiculous assertions.

    4)
    http://www.yamana.com/Theme/NewYamana/files/2012%20Documents/Q2%202012%20MD&A%20BOD%20V3_3%20%28SEDAR%20FINAL%29.pdf

    By product costs of $244 and direct costs of $536/oz.

    I have shown you 4 major producers all well below your retarded $1250 levels of break even. Show me one that is in excess of $1250.
    BTW I know the approx breakeven of each miner in GDX my head but this was all I had energy for cutting and pasting links.

  140. Gary

    Not off the top of my head, but then I don’t spend much time with stuff like that because it never helped me make any money.

    It doesn’t matter how good or bad a companies financials are if the market decides it likes you or hates you then the stock is at the mercy of emotions.

    I think probably one of the greatest examples of this ever was the tech bubble.

  141. Blog Posts - RNM

    Cycle wise….it is lookin more n more like Ive got this one…ie…..day like…24 now….It will be interesting to see how things do play out here “end of the month”.

    Currency wise…..continued weakness in AUD and NZD..ie..risk off…and now….I am 12 candles away from “trend change” on USD/CAD.

    Ive had difficulty with the latest count..but lookin at “month end” games to follow…so we will see.

    2 days outta the markets – sometimes no trade is the best trade of all.

  142. Piazzi

    Gary sayd:

    “I think we all know how this started. Several trolls, including Tiho, Basil, Shawn, etc. showed up with the sole intention of being rude and disruptive.”

    I remember one of them said he was here to prove that Gary was a contrary indicator — how’s that for Get-Life-Dude moment?

  143. Veronica

    Gold has slammed into the top of it’s weekly bollinger band, and a huge oppurtunity for old turkey holders will come when it revisits the bottom band. I think Gary’s IT low will probably do it.

  144. Lyon

    Gary,
    I read a lot of quarterly reports from mining companies and I don’t know of one that is selling their gold into the futures market. Barrick got hurt so bad by doing that that they’re all staying clear. I’ve seen you say that before. Who is selling futures?

  145. Lyon

    One more thing for what it is worth. I did extensive back testing with PSAR and it isn’t a very good exit strategy. Usually leaves much to late. It is better to exit on a signal that triggers on an uptrend… a multi day high, RSI or BB breakout are good examples. I’m sure you already know this though.

  146. Liquid Motion

    Au Contraire Saif…..I have a very good appreciation of numbers & ACCOUNTING. U have no idea how far off base you are with that comment.

    First off..ty for posting the links. Useful data …..if you care to READ it.

    I wasnt referring to cash costs…I was talking TOTAL costs. Cash cost are BS when it comes to mining. Any analyst or anyone in the industry knows that.

    I took one of ur splendid examples…Newmont….
    Net Y down 47% (pr yr qtr)
    Avg realised gold $/oz up 6% (pyq)
    Sales down 6% (pyq).
    All of the above doesnt look too healthy to me. With a net Y of $279M on 2.2BLN sales, what are total costs on 1.18mln ozs Gold produced(copper being a by-product of the process anyway). HMMMMMMMMMMMMM….seems like the numbers can tell lies….esp. if you only half look at the real ones. With net Y dropping almost a half even with $/oz going up…where is the profit going ?????….mining/overheads. Exploration costs are usually capitalised until minable reserves are capable of being defined. So their effect on p & l is minimal.
    All in all on that example alone
    supports the view that I had that Gold being at $1250/oz…miners would stop mining…they would be out of business and literally not be making profits.

    Gary…very few miners hedge their gold selling. Those few that do usually have a requirement to secure pricing to support funding/finance arrangements.
    Most established players are running unhedged. Newmont/Lassonde have cleared their hedges since 2002/03. Most followed suit bcos of what he did….he is very astute & has tremendous credentials. So far he has been correct..if I’m not mistaken.

  147. saif

    LM,
    Take the Newmont numbers and show me how you come up with $1250 an ounce.
    Remember the capital costs have long been paid for.
    Since you claim to know accounting, you should know that the only RELEVANT COST at this point is raw AFTER BY PRODUCT COST.

    The mine cost is a SUNK cost.
    It is irrelevant for shuttering decisions.
    Same for Depreciation.

    If you say that the cost of bringing on new marginal supply is around $1250 an ounce I would probably agree with you.

    You are hallucinating if you think Gold actual RELEVANT costs are anywhere close to that.
    And Newmont is the worst of the bunch. Look at the rest.

    Their declining profits are due to lower production numbers as well as higher costs for copper.
    Look at Barrick’s copper cost jumps. Since they use BY product credits, it does change their costs.

    Between 2000 and 2002 for 3 years most miners ran at a loss.
    Sure a couple of really expensive mines were shuttered, but world Gold production barely declined, proving that u have no clue what you are talking about.
    BTW the 85% decline in NG prices led to a 7% increase in production

  148. smt_troll

    “This should be an ending move for the metals sometime in the next several days. My original expectation was for a tag of the $1700 level followed by an intermediate decline.”

    Never let it be said that I ONLY come on here to bash you (just most of the time πŸ™‚ ).

    My best performing gold system (which usually makes fewer than five switches a year) went from long to short at the close (which tends to agree with what you said). There are a lot of leveraged players in gold that are not “strong hands.”

    “China is still in its infancy in terms of its growth. Not even 1/3 of the way through and what we are seeing now is a blip on the radar.”

    You are joking, right? If you knew anything at all about demographics (which is THE most important determinant of long term economic changes), you would be aware that the size of the Chinese work force is peaking (either this year or next) due to population policies enacted in the past. Their workforce will then decline (and age) rapidly leading to much lower economic growth in the future.

    Saif, keep up the good posts (containing actual facts). You are absolutely right on about what is going to happen in Australia. No doubt some of the “Australia is different” crowd couldn’t even find it on a map.

  149. Lyon

    One more point about PSAR. When I back tested I got results that were only about 35% profitable. I actually found that reversing the buy and sell signal created a much more robust trading system…strange but true.

  150. Veronica

    SF, it is long and will sell for a profit. This will be the first win after 4 straight losses.I don’t want to post it’s trades until the profit curve goes to new highs.

  151. Gary

    Yes in a trading range the PSAR is worthless. One can always speed up the parameters if you want to get a quicker exit but that of course increases the number of whipsaws.

    FWIW I almost never use the PSAR. At the moment we are using it to take us out of the last remaining bit of our mining shares. We’ve already taken profits on most of our positions.

  152. saif

    smt_troll,
    Glad you brought up Demographics.
    I had already found so many negatives on China that I stopped researching, but demographics compounds the effects of all of these and actually is probably the single most important factor. Although in China’s case their overbuilding might have a more dramatic impact shorter term.

  153. Liquid Motion

    Saif,

    Lets get one thing clear…$1250 is your number ….RIGHT!
    You made the statement..”I think we may still get some run here but Gold should top out before end of 2012 and I think $1250 is on the cards”.
    IMO ur wrong on that count (being respectful)…like you will be on AUD at .60 and the housing bust there as well.

    Trouble is Saif…you dont have to believe me…nor anyone else who actually runs a mining company. Cost of mining IS increasing. Miners face the real prospect of lower grades in increasingly difficult mining paradigms. You will have more mine closures. World production is already declining. Gold price has to increase to offset the increasing cost of production.

    Your arguments are not valid in my book…and u obviously cannot separate the BS from the truth.
    Numbers are just numbers….you have to be able to read btw the lines. Besides I’m sure ur familiar with Accounting standards and how the US Govt/Banks fully comply with them….? Too many are lied to and are lead to believe in fiction….dressed up as FACTS.

    Here….for your piece of mind and for all to once and for all clarify …str8 from the horses mouth and delivered to ur front door.
    http://www.scribd.com/doc/101950820/Nick-Holland-31072012

    u may want to focus on pg 12 + 14.

    That is reality and this guy calls it as it is. U might want to re-adjust your thinking of where the gold price is actually headed and WHY. Even $1400 is not remotely feasible.

    SMT_troll ….quit the US centric view and wake up to reality. China has min 2 more decades of growth. Why dont you take ur nonsense argument and highlight that to the 500MLN chinese people who want to improve their living standard.

    What makes U an expert on Aust.?
    OR R U just extrapolating numbers and statistics like Saif (“the whole world has suffered a housing bubble correction…so therefore Aust. is next.. thesis”). The sun came up this morning…odds on it will happen again tomorrow.

    Facts are…exactly that. The smart money knows how to decipher the BS (fiction) and work out reality. U might want to co-read the above article with Saif…and perhaps stop wasting ur time blowing smoke.

    Saif …I believe U have a high propensity to lose money…based on what you have divulged recently (2%)…your abundant knowledge is not translating into acceptable returns. WHY ?

    Gary ….anyone ….????

  154. saif

    Liquid Motion,

    “Saif …I believe U have a high propensity to lose money…based on what you have divulged recently (2%)…your abundant knowledge is not translating into acceptable returns. WHY ?”

    Last time I checked being up 2% was not losing money. Actually I am up close to 70 fold in the past decade.
    Unfortunately I did not start with enough, or else I would have retired.
    I did it by ignoring technicals,by ignoring “wave counts” and betting on what i believed in using leaps like instruments.
    Obviously. I do not risk everything anymore as I have more to lose than I did before.

    I did not make any generalities about AUD. The Australian Housing bust is going to be so bad that in 1 year your decade long range of 90-110 will be broken to the downside.
    Since u cannot comprehend such stuff, I will address u next when that happens.

    A couple of points about your link.

    You equate spending with profitability of existing mines?
    How retarded are u?
    I did say the cost of finding NEW MARGINAL SUPPLY was close to $1250/oz.
    That is not anything to do with current supply.
    Just as Nexen’s oil presentation will show you.
    Their operating cost per barrel is close to $30/barrel, but they are spending around $60/barrel for new supply.
    Regardless, in 2000-2002, and even in late 2008, world Gold production did not/barely changed proving that gold miners do not stop producing when the price goes below their breakevens.
    Done with u.

  155. KenS

    You guys spend alot of time here debating fundamentals yet from what I can tell you all trade using TA or cycles. Do you get any advantage spending your time reading and debating these issues?

  156. smt_troll

    “SMT_troll ….quit the US centric view and wake up to reality…. What makes U an expert on Aust.?”

    I happen to live in that corner of the world, and frequently travel to Australia. I can see what is going on there FIRST HAND, and it is obvious that everything Saif has described is going to happen. How many times have you been to Australia in the last year again?

    As for China, I never said that it was going to have zero growth, but the headwinds of a shrinking workforce and a rapidly aging population is going to slow the growth rate dramatically within a few years (to three percent or less). In the longer run (say the middle of the century), I expect that India will have a larger economy than China (they will have twice as many people as China by then).

  157. Lyon

    KenS,
    Tim Knight on Slope of hope had a chart showing the same touch of the top down trend line. From that point of reference, I guess you could say gold hasn’t broke out to run for a new high just yet. IMO it is a matter of time…maybe 2013.

  158. KenS

    Lyon,
    Thanks but I was more interested in views on the downside possibility. I know most will just say no way possible but can anyone justify a move down to these levels?

  159. KenS

    Lyon,
    Right now that is everyones view. I have not seen anyone except Saif that believes that gold can fall below 1524. Seems like too many people on the same side of the boat.

  160. Lyon

    You could be right Ken. I am not long here. Waiting for a pull back. But, if it falls below 1600 I will know my thesis is wrong.

  161. Driver

    Euclid or Jason,

    Foxfi: When I try to Activate WiFi Hotspot, it gives me the message that “WiFi mode has failed on your phone.” And, I can’t figure out how to get the Bluetooth mode on my old laptop (WinXP.)

    Do you have any recommendation for other Android apps that are good for this? Thanks.

  162. Blog Posts - RNM

    A fantastic little “stick save” here this afternoon eh! Its truly unreal – how bent the markets are on suggestions of further QE.

    Bernanke is getting the job done – without having to do anything now!

  163. Gary

    This is more about the dollar moving down into it’s intermediate cycle low. Sentiment stretched to decade highs at the top. It needs to move a proportional amount to the downside before we get a bottom. As of last week sentiment was still in neutral territory.

  164. Gary

    S,
    That’s never been the case in my experience. Human emotions don’t really work that way. We go from extreme to extreme. That’s why bull markets and bear markets always go much further than anyone expects.

    It’s why regression to the mean forces never stop at the mean. They pendulum back and forth on either side of average, and typically the further the pendulum gets pulled in one direction the harder it swings back in the other.

    The pendulum got extremely stretched on the upside. Like I said sentiment reached 10 year highs. It’s very unlikely that human nature is going to let it stop at neutral on the downside.

    Plus we’ve got the minutes from the last Fed meeting driving this move. They are clearly going to ease again at some point. Now the market is just trying to price in when that’s going to be.

    Like I’ve been saying the next QE when it comes will be open ended and it will drive this leg of the commodity bull as it continues to move higher out of the three year cycle low.

  165. saif

    Well Gary u already know how I feel about how ineffective QE will be at driving the USD down.
    What is more important is that now BEnny has to do QE just to keep exchange rates constant.
    For example if RBA cuts rates by 1% Benny will have to achieve 30-40 basis points reductions in the long bond yield just to keep AUD/USD constant.
    At these low levels of yields that would require probably 2 trillion of bond buying.
    Not going to happen.

  166. saif

    “Human emotions don’t really work that way. “
    You are completely wrong on that.
    Yes re balancing does occur but in secular bull markets the threshold for re balancing is much higher.
    Look at NASDAQ during the 90’s sure you had corrections, but sentiment never got too negative on the NASDAQ.

  167. Gary

    Saif,
    I would disagree. Unfortunately I only have data for the intermediate score back to 2000 for the Nasdaq. But it corrected 10% in less than a month in Feb. 99

    It did it again in July 99. Did 11% in 3 days at the start of January 00 and again in 6 days at the end of January 2000. Both those occurrences drove the intermediate score to 31% which is a sign of extreme bearish sentiment so it’s reasonable to assume the same thing happened in 99.

    I can say with out a doubt all of those swung sentiment into extreme levels, especially since the market had been rising consistently for years.

    That was during the final parabolic phase of a secular bull market. So I don’t see why sentiment wouldn’t at least reach modestly bearish levels after hitting 10 year highs in the dollar index.

  168. saif

    There are prolonged periods in bull markets where sentiment can stay elevated, just as there are prolonged periods in Bear markets where sentiment can stay bad.

    Take bearishness as measured by AAII and VIX during the 2008 bear market.
    It did rebalance but we extreme sentiment for a long time.
    VIX stayed at more than 2 X the 2007 period for over a year.
    Extreme COT readings persisted on Oil and Silver for more than 6 months before reversing.

    Surprisingly right at the bottom, the Small Speculator longs on E-minis were at an all time record while the commercials had an all time record short position (You can check this at CFTC.gov).
    In any case,
    I do think USD bottomed yesterday.
    The weakness in AUD/USD and AUD/JPY is warning of much nastier things to come.

  169. Gary

    I’m not disputing that. But even during the bear market the intermediate cycles still occurred right on cue. And the rally out of each one lifted sentiment back to at least modestly extreme bullish levels before the next leg down began.

    The dollar is now in the timing band for an intermediate bottom. Up to this point sentiment has only dropped to neutral levels.

    I kind of doubt the intermediate decline will be finished until sentiment at least reaches modestly extreme bearish levels. Which could happen next week if the dollar continues to drop into the Jackson hole meeting.

  170. saif

    Another point Gary you may find of interest.

    AUD futures long positions and CAD futures long positions both hit record highs and are significantly above those hit during march peak.
    But both those currencies are LOWER right now compared to March.

    Higher bullishness lower price…you know what that means.
    If you look at the individual positioning it becomes clear that only against the EURO are people positive on the USD.
    Every other currency is at record USD bearishness.
    Still if the Euro moves higher the USD index will have a hard time moving higher.

  171. Gary

    Swings are meaningless unless they occur in the timing band for a cycle bottom. The volatile nature of the dollar index over the last month has made it exceptionally difficult to determine where the last daily cycle low occurred.

    If it occurred on August 7 then the dollar is probably forming a bear flag with another leg down next week.

    If it occurred on July 19 then the swing today has a good chance of marking the cycle bottom.

    I’m leaning more towards the first scenario for the reason mentioned above. Sentiment still hasn’t achieved true oversold levels.

  172. saif

    Gary,
    I am not really sure how cycle timing works but you might have a more accurate result if you broke down USD into its components.
    See whether EURO is due for a top or not.

  173. Lyon

    I was just listening to a financial radio show and two people called in. The first asked about shorting platinum, the second asked about shorting silver. Made me laugh that people can be so bearish when the fundamentals and technicals are so bullish. Lots of bears is bullish indicator to me.

  174. saif

    That is true Lyon,
    But look at what people do not what they say.
    the CFTC report and VIX are good starting points.
    Neither show any fear or bearishness.

  175. Lyon

    Saif,
    I wouldn’t expect anything except falling prices for steel or copper for a while. World growth is slowing, China is over built and has lots of over stocked base metals. But the PMs are different in that people want to own them because of currency devaluations – China now doing QE, EU about to, US can’t seem to stop either…all IMO.

  176. saif

    Lyon,
    I respect your opinion on this but I do find it a bit confusing to understand the rationale.

    Govt’s are “printing” money. If they are, then why aren’t prices of commodoties or CPI going up…..answer because we have excess capacity…fair enough. But then why should Gold and Silver go up?…uhhh because Govt is depreciating the currency.

    Tell me Lyon, If you do not feel any effects Currency printing should PM’s really go up?

    Like if a man talks in the Jungle and there is no woman around…is he still wrong?

  177. Lyon

    Well even the fear of future inflation is enough to cause a whole lot of people to start stacking silver and gold in their safes or a hole in the ground. People also have a distrust of the financial system, and especially the governments.

  178. Lyon

    I have just recently heard rumors of physical silver shortages. I know a couple months ago the premium on silver was 1$ an ounce, now it is closser to 3$.

  179. saif

    Lyon,
    Good point about future inflation, but then why would real estate not go up.
    Remember Real estate is a huge leveraged bet on inflation.
    I know the advantages of PM over Real Estate. But still you should have some leak through….
    Did you know that the number of ounces of Gold required to buy a house hit an all time low in the US?

  180. Gary

    Since the three year cycle low:

    CRB +15%
    Oil +23%
    corn +47%
    Wheat +48%
    Gold 9.4%
    Copper +7.6%
    Nat gas 42%
    silver +17%
    Platimnum +11.9%
    Palladium +16.7%
    Lumber +12.5%
    Gasoline +19%
    Oats +49%
    Soybeans +31%
    Cattle +7.8%
    Heating oil +31%
    Sugar has been the worst performer and even it is up 4.5%

    And this is just in the first 2 1/2 months of a brand new 3 year cycle.

    I really have no idea what you are talking about when you say there is no increase in commodity prices.

  181. Lyon

    That’s easy, because we had a massive bubble in RE that isn’t worked through yet. There is still an over supply on the market. The Fed has created bubbles in RE, right now we have one in bonds, my bet is the next one will be PMs.

  182. Gary

    And no you aren’t allowed to measure from the top of a three year cycle to the bottom to get the results you want. That isn’t an apples to apples comparison.

    The only measurement that is at all relevant is from the bottom of a three year cycle to the top.

    During the last one the CRB went from 200 to 370 (+85%).

    This cycle started with the CRB at 270. Just a similar rise of 85% would take it to 500 which would exceed the 08 high. Although I think this three year cycle is going to be much more aggressive than the last one because this one should include a currency crisis at the dollar’s next three year cycle low in 2014.

  183. saif

    Gary remember these exact words because within 6 months you will use them.

    The CRB Just had a left translated cycle. For a cycle to peak out this early is really ominous. I should have listened to Saif.

    Ok maybe u will not say the last part πŸ™‚

  184. Lyon

    Lol saif! No Gary will preface it with “as I have said before…”
    Gary you have to admit you flip flopped on QE3..I know, I probably did too.

  185. Gary

    It’s always possible for a cycle to top in a left translated manner. I don’t think it will, but if it does I will gladly pay up.

    I was just pointing out that we clearly have some serious commodity price inflation since the three year cycle low.

  186. Gary

    Lyon,
    My stance for months has been no QE3 until Oct.

    Why? Because the market has to have time to drop down into its next intermediate cycle low. The perfect driver for that would be for the Fed to balk again at the Sept. Fed meeting.

    If you want to know what we are doing you aren’t going to figure it out by a few sporadic free posts to the blog. You need to get a subscription πŸ™‚

  187. Lyon

    I know Gary, I do need to subscribe πŸ™‚ I am over extended right now. Divorce has a way of taking half your money πŸ™‚

  188. Lyon

    Good article ao92000! It fits with my perception that demand is slowing. That is why the CBs want to QE us more. They’re trying to spark some life into the world economy. They’ll take any inflation they can get.

  189. Liquid Motion

    Saif,
    Dont be so sure that the RBA is going to lower rates.
    In fact U need to be a contrarian here. Highly probable they will increase rates next year. Ahead of the curve my man…its what you aint. Still looking in the rear view mirror.

  190. saif

    The fed is driving speculation but not real demand Gary. Hence non-futures market items, which cannot be speculated on are not increasing.

  191. Liquid Motion

    Interesting Gary…silver to go to 100-150 at the peak.

    U r being conservative arent U. U dont want to scare people when u truly believe its going higher than that. MUCH higher.

    Lyon..YES shortages. Massive. China isnt helping either.

    my post 22.8.12 “Combined with CB buying and potential tsunami of buying as a result of BASEL III we have a fantastic catalyst for very strong moves in a short period of time”

    Eric Sprott 24.8.12 “I sense big things happening in gold, in a tsunami-like sense, where all of the sudden you get this whole new group of people moving in there”.

    Wake up people….life is short…opportunities to become very wealthy will not present to you many times in a lifetime. Here is perhaps the only one that will do that…GUARANTEED. Have some patience, buy physical and miners and sit back and let the CB’s do the rest. There is nothing more certain except for death and MORE taxes. When the stampede comes you will be caught out and forced to enter at much higher levels. When it does move it will move quicker than most expect and are able to react to with expediency.

    For those that dont understand…
    The writing is on the wall. The system cannot fail….liquidity is the only solution they know. Its side effect is inflation (currency driven). World wide inflation is already present and will gather momentum into 2013-14. Dont be surprised if the US formally declares a recession next year. Long overdue (hidden and disguised for too long).

  192. Gary

    Saif,
    You are focused on the wrong thing. You are assuming a slow down means a drop in demand, which it probably does, but you are ignoring that supply in the form of paper currency can be increased exponentially and at will.

    If the currency part of the equation is expanded then it doesn’t matter what the demand side is for commodities. Demand will be artificially induced simply because currency supply explodes.

  193. saif

    Gary, as I have tried to explain before, QE is not money printing.

    The Fed buys treasuries hence lowering yields, but the excess is sitting as excess reserves. Unless used to purchase anything there cannot be inflation.

    In fact I think all of you guys have got it absolutely wrong. QE has almost no effect on yields either.
    In fact a Fed paper suggested the same thing.

    If QE was going to cause inflation the banks would have used the reserves to scoop up all the available hard assets most notably houses.

    Look at all your high inflation and hyperinflation episodes in history. Show me one in which wages were stagnant.
    Commodities are a small part of the puzzle.
    Labor is key.
    With COmmodity prices quite high AND their end product in a crazily deflationary industry, how does INTEL have the highest gross margins in their history?
    Because labor is still cheap and with increasing number of Indians and Chinese ready to displace western workers for 1/4th the wages, with 25% unemployment in many countries, you will not get you inflation.

  194. Gary

    What do you think purchasing treasuries is? It is loaning money to the United States of America, so the government can spend money.

    Haven’t you noticed that the US debt has exploded over the last several years? That money is getting pumped into the economy as fast as Uncle Sam can spend it, and he has been spending at an incredible rate.

    Some of the liquidity ends up as reserves, but obviously banks want to get something better than a negative yield on their money, so some portion ends up in asset markets.

    If I remember right about 40-50% of the population gets some kind of check from the government, either as an employee or entitlement recipient. Some of that money finds it’s way into markets, especially commodity markets as everyone has to buy energy and food.

  195. Gary

    We are just beginning this inflationary phase. Remember the three year cycle just bottomed 2 1/2 months ago. So give it time.

  196. catbird

    Saif,

    I responded because you left the door open to the possibility of gold dropping below $1300 next year. When traders talk about gold (or oil or the SPX) the assumption is that USD is the measuring stick.

    I am flatly stating that gold will not go near $1300 USD for the rest of the secular bull, and on the contrary will hold above $1500.

    AUD:GOLD predictions won’t work, because then we’d be using different measuring sticks.

    So, do you agree that gold will hold above $1500 USD? That’s a simple yes/no question, and it doesn’t depend on exchange rates.

  197. saif

    Ok Catbird,
    I will bite. No I do not think $1500 will hold.
    I have doubts that $1250 will hold.

    Again, it is not my high conviction play.
    I have very high conviction that we will see S and P 500 at 500, the AUD under 60 cents, RBA rates at 0%. So I rather bet on what I have the highest conviction on.

    That said, I do have one relatively risk free play on falling gold prices. I intend to deploy that when I believe it is close to topping.

  198. Liquid Motion

    You must have a lot of patience…and r willing to give up significant upside moves …to put in place your strategy. Waiting game…..time will work against you…and ur monumental 2% returns.

    Catbird…fwiw…I side with U.
    In fact would go so far as to suggest that Gold will not break 1500 ever again. Gold will come back into the monetary system …and they wont let it out.
    It will be re-valued (much higher) and there…in a nutshell…it will remain.

    Rickards did some amazing work on this scenario in his recent book. I believe he has got that one correct.

  199. Blog Posts - RNM

    Ive done my weekend reading / chart analysis etc…and as chancy/dicey as it might be – (I need to stay active as my plan requires) – I “may” take one last stab long risk here next week.

    Many charts are still looking “constructively bullish” regardless of some of the divergences as well as general weakness in AUD (but a “buy the dip” here against both USD and YEN could most certainly take care of plans for PERU come Feb.)

    As well…..thanks for the convo / debate on AUD in general guys…SHEESH! – you guys really dig in!

    Im going to assess action Monday…anything better than “flat” and Ill take a 2-3% poke.

  200. catbird

    Liquid Motion,

    Yes, I read Currency Wars last year. Great book and essential reading for anyone in these markets.

    Rickards says a gold-backed currency is entirely workable, it’s just a matter of picking a reasonable price vis a vis a nation’s money supply and its holdings of physical.

    For the US money supply, Rickards arrived at about $7,000/oz.

  201. saif

    And it has begun!

    http://www.sunshinecoastdaily.com.au/story/2012/08/25/sellers-get-realistic-with-big-cuts/

    A Sunshine Beach property that was on the market in 2008 for $2.6 million has been reduced to $1.595 million while a Cooroy property for sale for $3.15 million in 2009 has been discounted $1.155 million.

    A list of the top 25 discounted properties from the SQM Research shows prices discounted between 24% and 40%.

    There are 3 pillars of Australian mining profits.
    Coal, Iron Ore and Copper. Sure the rest contribute but these are the most important ones.
    Coal and Iron Ore have already fallen more than 50% from the peak.
    Copper because of its futures component is taking longer but it will join in time.
    World Steel prices are now moving quickly to 2008 lows, making it likely that both Met Coal and Iron ore will fall a lot more.
    The implosion in Australia, will be something to behold! Gary has accused me of focusing on demand of commodities currencies rather supply of currencies, well he and other are focusing on USD troubles rather than troubles facing other currencies.

  202. smt_troll

    saif said…

    “Personally I prefer Platinum.”

    I happen to think that platinum (and palladium) are fantastic long term shorts. They are the only commodities I know of whose main use (catalytic converters) is going to disappear over the next several years.

    Gary said…

    “That money is getting pumped into the economy as fast as Uncle Sam can spend it, and he has been spending at an incredible rate.”

    The thing that you are not taking account of is credit contraction. If the Fed expands the money supply by $200B and credit contracts by $400B, that is NET deflationary.

    I am not saying that the Fed won’t eventually go crazy with printing and cause inflation (they probably will eventually), but I still think that is several years off. After large credit bubbles in the past, interest rates have tended to stay low for years (far longer than people imagined).

    Liquid Motion said…

    “In fact would go so far as to suggest that Gold will not break 1500 ever again.”

    I am sure that in March 2008 when gold topped $1000 for the first time that few people thought it would go back into the 600s again, but it did – just seven months later.

  203. Gary

    The thing is that credit is not contracting. The government has taken over and credit is expanding at an astronomical rate.

  204. saif

    SMT troll.
    The total value of all above ground platinum is approximately 1/1000th that of Gold. Only 5-7 million ounces of above ground platinum stores exist compared to 5 Billion for Gold.

    South Africa which produces close to 80% of all platinum has a breakeven cost of $1250 for the cheapest mines.
    If platinum gets too cheap compared to Gold and even 5% of Gold jewelery buyers switch to Gold the price should rise.

    You are focusing too narrowing on one use and not seeing how supply demand metrics would function over the entire curve.

  205. Lyon

    I just googled “projected use of platinum used in catalytic converters worldwide” and came up with four extremely bullish articles about future demand and falling production for platinum. So much so that I think I’ll look into trading futures. The articles say the market will get tighter after 2017 and have major shortages by 2020. Why would anyone want to short that?

  206. 2SWTrading

    Hi to everyone, I don’t know if any of you is interested in short term Gold and Silver swings (I know Gary is not), but sometimes forecasting the extension of a small swing (daily swings for example that may last 2-5 days) can be very helpful to calibrate/allocate gradually a long-term holding position (be it a LONG or SHORT position).

    For example, if someone was currently bearish on Gold and Silver for the long term, realizing that they are short-term quite overbought may help to enter a SHORT position at very favorable prices.

    Here for example:

    http://www.retracementlevels.blogspot.com

    you can see that Silver and Gold Daily time periods (tickers: XAUUSD, SI, SLV, GLD) are massively overbought, showing higher consecutive daily closes ranging from +5 to +8 days up in a row.

    They are definitely set for a correction (at least one day down, maybe more).

    From a tactic point of view the upcoming correction could be used to buy more LONG positions at a better price(if you have a LONG holding plan), or otherwise one could simply reduce its LONG holdings before the SHORT correction and then replenish LONG positions after the correction is in.
    In the long term these type of techniques, if based on sophisticated quantitative research (or other valid method) can be very helpful to reduce long term beta and thus resulting in less market correlation and higher profits regardless underlying market volatility.

  207. Gary

    Shorting a bull market almost always ends up costing one money over the long term, especially if the market is trending back in the secular direction.

    Ask the grain shorts how well they have done trying to pick an overbought top lately.

    Rule #1 never, never, never short a bull market.

  208. Gary

    If you think a correction is imminent then go to cash and then buy into the dip, but never sell short based on overbought oscillators.

  209. 2SWTrading

    Well, I definitely agree with Rule #1 (not shorting a Bull Market) but for some securities selling SHORT can compensates the LONG holdings, so it is a way to ‘go to cash’ as well.

    + 1 LONG – 1 SHORT = go to cash

    At the same time, there has been some significant correction in both Gold and Silver in the last few months, so I think there are definitely cases where going SHORT is profitable, even in a Bull Market, although I agree that if one uses traditional indicators (MACD, RSI, etc.) or financial macro indicators, or other very unreliable tools, it’s going to be very hard to predict where the swing can go.

    Quantitative research is different, in my view, it does offer some degree of predicting power.

  210. 2SWTrading

    Btw, Gary, I forgot to ask: how do you know that a Bull Market is a Bull Market ? πŸ˜‰

    Just kidding, but you have to admit there is no way to know for sure – the charts and the indicators are only showing one thing: THE PAST.

    A trend, a Bull Market, can end any time, quickly and without warning – for sure the charts will be great to confirm what has already happened, but in many years of trading career I have never seen one chart showing the future, for one simple reason: they are based on past datapoints, so they can’t show the future.

    In conclusion, it is sound and correct to say “never short a Bull Market” the only problem is that it’s impossible to know for sure if Gold and Silver are (still) in a Bull Market.

    One can make an educated guess, but I am afraid the final confirmation will come only after the facts.

    From that perspective, going SHORT when the quantitative probability is favorable can actually be a very smart choice and reduce beta and increase profits in the long term.

    In any case these tactics are good only for traders, not long term investors, hence my preliminary question: ” I don’t know if any of you is interested in short term Gold and Silver swings (I know Gary is not)” – I assumed most investors on this blog are of the ‘long term’ type, correct me if I am wrong.

  211. 2SWTrading

    Just published a Weekly market review on Slope of Hope where I express my view for next week, based on quantitative readings:

    http://slopeofhope.com/2012/08/spxesspy-weekly-analysis-valid-for-august-27-31-2012.html

    In short: the market has corrected a bit last week, it may correct more. However is not sure it will. Let’s say we can prepare ourselves to buy where the odds are good, if if the correction continues.

    I would not say this is a bullish moment because the market has been going up for a while, so it is better to be cautious at this juncture… a bit more upside is possible but I do not see a big uptrend starting from here.

  212. Jeff

    Govt borrowing is not credit creation. Treasury sells debt, bought with existing money in economy. Fed uses cash from maturing treasuries in its portfolio. Fed has not done QE since 2010. Inflation is expansion of money supply and credit. Only banks create credit through fractional reserve banking and right now, they are not. Excess reserves piling up at Fed for 1/4 point, while banks borrow at 0. Economy is credit based. Cash component of asset value is 1% while credit is 99%. So even modest QE 1 and 2 contributed very little, as economy is over 50 trillion Credit by private sector is contracting faster than money creation, which was last done in 2010. Twist didn’t expand money. Half of govt deficit bought with existing cash in world. Other half is roll off from existing govt debt held by Fed. Without expansion in credit, no inflation possible. We are in deflation. Fed can create money, but cannot force it to be lent by banks. Borrowers have no collateral and so banks hoard excess cash. QE would need to be 10 trillion to have any effect. Thet will never occur.

  213. Gary

    I guess if you believe that then you better start shorting commodities.

    The government is expanding credit at an astounding rate. They are borrowing to stimulate and to service the already unsustainable debt.

    If I recall correctly the national debt is now over 16 trillion and that doesn’t even count unfunded liabilities. And it’s growing by over a billion per day.

    It’s been made painfully clear that deflation can be halted at will. How do I know? The Fed did it in 2009 with QE1.

  214. Jeff

    World is slowing down. As it does, demand for inputs (commodities) falls. Prices of commodities fall. Commodity currency counties like Australia and Canada slow down and their currencies fall. QE 1 and 2 had fundamentals on their side. Company comps were to 2008 and so stocks rose due to improving economies due to fiscal stimuli, especially in China. So stocks went up due to fundamentals. Not inflation. Now fundamentals are bad. Growth is gone. And govts have much higher debt levels so cannot do fiscal stimuli. Monetary easing will do nothing. Effects of any further QE will be fleeting. We are going to repeat 2008 and gold will follow all assets down. Gold is an asset. Not money. Cash will be king. Just like in 2008. All will crash. There is no way for govt to get growth back. Growth requires debt and govts have no capacity to increase debt – especially for growth policies. Europe is demanding austerity in return for govt financing. This will lead to contraction and that will hurt corporate profits. Unemployment will continue to rise. Only fiscal spending will lead to growth and nongovt will do it. And they can’t because they all have too much debt that requires liquidation. So we are slowing down worldwide. Electricity usage in China is way down. GDP there is probably 3% at best. Gold went down in 2008. People sell what they can, not what they want to. All assets will crash in this deflation tidal wave approaching. QE, in the absence of fundamentals, is useless. It all. Omes back to corporate profits. Guidance is down at most companies.

  215. Jeff

    Fed is not using credit. It sells bonds into market. Fed has not printed since 2010. Where is credit creation? Just because we have deficits does not mean we Fed creates credit. Money in system buys the debt. And fed uses proceeds from redemption of its bonds to reinvest. There is no new credit funding deficits. It comes from existing stock of money.

  216. Gary

    I’m betting you are 180 degrees wrong and that the CRB is going to continue to rally for roughly two more years as governments print faster and faster to delay the inevitable. The end will come for the same reason it came in 2008.

    Printing will spike commodity prices to the point that it collapses the global economy.

    We are making the same mistakes we made from 2006 to 08 and we are going to get the same result.

  217. Jeff

    Deflatin cannot be halted. There has been no inflation. Price increases is not inflation. They can be a symptom of credit and money expansion, which is inflation, but prices can go up for many reasons. Not just expansion of money and credit

  218. Gary

    The Fed doesn’t sell bonds, they buy bonds.

    If they were selling bonds their balance sheet would have contracted radically over the last three years. Instead it has expanded at an astronomical rate.

  219. Jeff

    I disagree. We will get falling commodity prices as world slows down. People won’t invest in commodities just because of printing. There must be demand, which will slow with contraction in economies of world

  220. Jeff

    I never said fed sells bonds. But bonds in its portfolio mature and fed uses proceeds to reinvest in treasuries. Feds balance sheet has been stable since 2010.

  221. Gary

    I hate to point this out, but so far the CRB has formed it’s three year cycle low just like I predicted. Almost every commodity has rallied between 10-50% in the last two months.

    All in all you might want to re-examine your expectations because the deflation theory isn’t holding up to what is happening in reality.

    I guess one could close their eyes and pretend it isn’t happening, but that usually isn’t a very profitable strategy.

  222. saif

    “I hate to point this out, but so far the CRB has formed it’s three year cycle low just like I predicted. Almost every commodity has rallied between 10-50% in the last two months. “

    That is a bear market rally. For all the money printing that has been done CRB is now just 4% over a level achieved in Jan 2010!
    SO when you put scary inflation numbers out there remember that context matters.
    Go back and look at how many times others and you have called for vast inflation over the last 30 months and see how WRONG you all have been. I dare say that if not for the worst drought in a century, the CRB would still be below that high of Jan 2010.
    So all the FED money printing, has produced a 3 yr annualized inflation of almost 0%! Truly terrifying.

    Here Gary read this piece of insight.
    http://www.smartmoneytracker.blogspot.ca/2011/08/is-fed-about-to-make-mistake-of-decade.html

    “Next we need to take a look at the dollar chart. It’s not a pretty picture. With the market in free fall the dollar should be rallying violently. If May marked the three year cycle low like I originally thought then the dollar should be rising rapidly by now.The fact that it’s not is a very ominous sign.If the market decides that QE3 is in the cards that would be the trigger for our bear market rally. Unfortunately it would also be the trigger for another spike in commodity prices at the very time that the consumer is least able to withstand them.”

    Hmmmm sounds like someone was calling for a USD destruction and commodity prices soaring exactly a year ago!

  223. Blog Posts - RNM

    From what I understand “yes indeed” the FED does “sell bonds” to 1 st tier banks (at “x percent” discount) and then in turn “buys bonds” in the open market at an additional marked up price no?…..is this not the PONZI OF DEATH?

    The banks dont lend… and in all ….nothing happens… short of the banks (using capital derived from FED PONZI) to pump their own stocks /fleece investors with usual calls to “buy” when they sell….and to “sell” when they buy no?

    Seriously….somebody crack me over the head if Ive got this completley wrong?…is this not a given?

    And yes exactly…..further QE may have some type of short term “shot in the arm” …but in all….will do absolutely zero to improve current situations..if not magnify no?

  224. Gary

    Saif,
    The market followed my expectation almost perfectly after that article. The only thing I didn’t plan on was for CB’s to print enough to abort what was clearly the beginning of a new bear market.

    This is why I think the 4 year cycle in stocks is now evolving into a 6 year cycle.

    Just compare the dollar’s rally out of the 2011 bottom to what happened in 08. You can see that huge forces are being applied to abort the kind of move we saw in 08. This has been an exceptionally weak rally out of a three year cycle low.

    Pay attention to what is happening. Every time deflation starts to get a toe hold central banks throw more paper at the problem and reflation starts all over again.

    This time the market wasn’t even allowed to drop below the 200 DMA before reflation began.

    In 2010 many perma bears were convinced the bull was dead. They are now broke.

    In 2011 the perma bears were absolutely sure the bear had returned… and they were right. But Ben’s printing press was more powerful than deflation again, and markets and economies recovered. Again destroying the perma bears.

    After proving twice now that Central banks can halt deflation at will (actually three times if one takes into account QE1) why would anyone continue to making a losing bet over and over expecting a different outcome?

    What’s going to finally bring this down isn’t deflation, it’s inflation. The same thing that brought down the global economy in 2008.

  225. Gary

    More QE will not improve the economy because the act of printing money doesn’t create and new industry that will generate jobs.

    More Qe will only intensify and accelerate the economic decline as struggling consumers cost of living will rise along with commodity prices.

    But this kind of environment produces a very extended topping pattern as it tends to inflate asset prices while at the same time causing economic deterioration.

    This is why I think the markets will form a very extended top in 2013 as more and more liquidity will have less and less effect on the stock market but a greater and greater effect on commodities.

  226. saif

    Gary,
    This is the problem people have with you.
    You never admit you did anything wrong ever.
    If you see the articles before that, your expectations were quiet different than what happened.

    Regardless,
    I have just been made an offer on a trial basis in addition to my regular work. I have decided to accept it, and I cannot post my opinions anymore as a result.

    I will not be posting at all for the next few months, but our bets still stand, and I hope you understand it is not “because my trades are going against me”.
    I wish all the people here the very best, I have had some interesting discussions and learned a few things.

  227. Gary

    I guess I should point out that I’ve admitted numerous times that my call on 2102 being one of the worst economic years in history was flat out wrong. That is almost certainly going to be pushed out to 2015.

    I’ve clearly stated that I was early on my entry into miners. After several false starts I recognized that the B-wave bottom was just too complex for me to call and I just adopted a buy and hold position to wait it out. I had the direction right but was clearly early and had to weather a hard draw down.

    We took a small position in TVIX to play the last intermediate decline and as luck would have it that was the exact time they decided to expand the float. Clearly a wrong call.

    Over stayed my welcome in silver by one day and got caught in the crash. Learned my lesson again. don’t try to pick tops in a parabola. I actually already knew better, but I thought we were going to be able to get out Monday morning. As fate would have it that was 4 hours too late.

    So I’m not really sure what you mean when you say I never admit a mistake.

  228. Blog Posts - RNM

    I think its fair to say…. that we all have considerable scope… within our own (chosen) areas of discipline and interest.

    For me…its the margin of “overlap” and the general awareness of my own “lack of knowledge” (in areas where others “seem” to see so clearly…) that compels me to participate.

    To be “right” or “wrong” (in my eyes at least) is really beside the point – short of gains made from the general exchange of ideas.

    Is the idea not to “make more money”?

    Lets make more money!

  229. smartbullion

    Gary, Jim Rogers is calling for 2013 & 2014 to be “difficult years” for the economy. Marc Faber is 100% certain of a recession next year.
    If we get money printing in Sep/Oct, its likely there will be more next year in a recession/fiscal cliff scenario. Oil is now nearly $100. I think maybe XLE and silver are good holds for the next year

  230. Blog Posts - RNM

    How any of you choose to do this for 2 – 15% annual gains is completley beyond me as Ive doubled my account year over year….and am set to do the same in 2012 – through what I understand to be ” the most difficult markets of our time”.

    Personally….how anyone could be bothered….. for anything less is a reach at best….let alone argue about it.

  231. Gary

    Blog,
    History has shown over and over that the best in the world rarely produce better than 20% annually over any long term period.

    A bull market can improve those returns but eventually a bull market ends.

    We made over 100% last year with the silver run but this year markets have become trendless. In a range bound market one has to trade often to make gains.

    Maybe your system works well in a trading range but then will perform poorly once a strong trend begins.

    I would caution against expecting outsized gains every year, especially if you are making them by using leverage, as leverage will eventually destroy your account.

    Eventually the law of averages applies to everyone unfortunately.

  232. Blog Posts - RNM

    Excellent advice Gary…and duly noted….Ive no interest in blowing a horn…if not only to motivate others/possibley spur “deeper thoughts”.

    Ive weathered some (literally) BLISTERING drawdowns where others (ANY OTHER) would have most certainly thrown in the cards.

    These mistakes will not be repeated…and I have 1000% respect for mother market.

    Scratch that…….10,000%!

  233. Liquid Motion

    G-man…cu been working overtime…with the deflationists …great conviction.

    Like I said …the writing is on the wall..if they care to read it.

    Deflation is debt/credit destruction…and ultimately the crippling of the financial system. Its not about economics anymore (since 2008). Its about the continuance of the system.

    The FED has a mandated CPI marker ~2%. Actual CPI (when measured correctly.. food+energy) stands closer to 5%. I would argue that if the FED targets 4%-6% then CPI would actually equate to >10%.
    How does the FED achieve a targetted 4-6% CPI….???? Inflating the money supply has been their key tool. Some may argue that they dont see the “effects” of previous efforts. They are just not looking hard enough.

    You may see “deflation” in asset prices ( mitigate debt burden and removal of speculation).

    Ultimately they need to have velocity and money multipliers working…

    Gold is MONEY…and soon to be recognised for banking (capital) as liquid as cash with ZERO risk. Hmmmmm …some people still remain very uninformed. Once in the monetary system it will stay there.

  234. Jeff

    Gary, I meant Treasury sells bonds into market. Not Fed. That was a typo. You did not respond to any of my other comments. Oil is high because of demand from China, not due to QE. Other commodities have their own reason. If there was inflation, all assets, including real estate would be up. Again, there has been no QE since 2010 and the market is up on very low volume. Money has flowed out of stock funds over the past yr. stocks love promise of QE, but they have gone up with fundamentals acting as wind in their back. Now with fundamentals tyrning over and growth slowing, stocks will face headwinds and will go down, regardless of promises of QE. Again, inflation is expansion of credit and money. Where is the expansion of credit. Only in student loans. Even auto is rolling over due to prior channel stuffing ending. Look at reports from China auto dealers choking on too much inventory. Wind is in face, not at back. In this environment, QE will no effect.

  235. Blog Posts - RNM

    Amen for “gold as money”.

    LM…You actually believe all those silly numbers you,ve quoted?…let along base investment decisions/trade on it?…common seriously….2%, 4%….blah blah…its all garb no?

    Im dieing for somebody to show me how the difference between a freakin “2” and a “5”…or whatever really….is gonna change how I make money based on my own view / vision of the market.

    The rarley discussed… and deeply misunderstood ” psychology of trading ” is certainly the factor that has us all on our own path – regardless of the numbers/media/blah blah…..regardless of cycles….elliot….candles….gann….theory…etc….

    A man with nothing to lose…and a man with everything to lose will trade completely different.

  236. Lyon

    Saif,

    Good luck with your new gig. I for one will miss your balancing opinion on this blog. You make a LOT of very good points.

  237. saif

    Thanks Smartbullion.
    Good luck Gary in your life and business till we chat again.
    Don’t injure yourself trying to break records πŸ™‚

  238. saif

    Thanks Lyon,
    Contrasting opinions are always good.
    I learned that through the most unique experience.
    I bought 2010, Crude 100 strike calls in 2005 when crude was trading at around 45, for $1.60 a contract.
    I was up 26 fold and I felt I was the king of the world.
    A very good friend saved me and made me take my profits.
    I saw crude going to $200, $250 and above.
    He saw the recession, the bust coming.
    It is because of him I have what I do today. I am up 70 fold from my start point because of him, otherwise I would have had zero.
    Because in that moment of All knowing all righteousness I listened to someone else’s opinion processed it and applied it.
    Good luck to you Lyon.

  239. Gary

    Jeff,
    Global demand for oil has been depressed since 2008. China is experiencing a sharp slow down so price clearly isn’t driven by demand.

    Real estate was the largest bubble in history. That bubble has popped. We aren’t going to see demand return in the real estate market no matter how much the money supply increases. Liquidity will flow into other asset classes, ones that aren’t nearly as impaired as real estate.

    The fed has clearly promised that they are going to intervene with further rounds of quantitative easing if they feel the economy is slowing. When they do it will have the same effect that it did the last two times.

  240. Lyon

    I have an intuition that trend following is about to be making a comeback. It just seems like the rhythm of the markets are changing, cycles are extending.

  241. Liquid Motion

    RNM….
    Its an interesting dynamic…the currency debasement…cost push inflation …sentiment and trends.
    If one were to read the tea leaves early enough …say 2001…then they would have invested accordingly….NO…!!!!

    Cause and effect…no I dont invest on CPI confirmation …more so on the “expectation” driven by TPTB. After all arent we all following the sentiment of the market to place bets…that is still a psychology issue. Who wins that battle…the ones with the deepest pockets…or the ones with the most time ?

  242. Lyon

    LM, you said ” After all arent we all following the sentiment of the market to place bets.”

    I would argue that it is better to fade the sentiment of the market. Buy when they’re selling, sell when they’re buying.

  243. Gary

    Operation twist includes selling short term bonds and buying long term in the attempt to artificially depress long-term rates.

    From what I understand though they are about to run out of short-term bonds to sell. So if they want to keep pressure on long-term interest rates they are going to have to begin another round of QE.

  244. Jeff

    Sorry, meant jawboned the market up for 2 yrs in the post above. And yes, fed sells and buys bonds as part of the FOMC actions through the FRBNY.

  245. Lyon

    LM,
    I might be trying to be to fancy right now, but last week I sold several miners I was up about 30% on, and today I started building positions on miners that haven’t had much of a move yet. The only position I didn’t sell was AGQ which I am long at 38.

  246. ikti

    Gary, what will you do if CRB make new low in, lets say, next 6 months? You will just rephase CRB cycle and be right again. Am I correct?
    I side with deflation for time being. Fed did not expand his balance sheet since June 2011. link
    Commodity prices has fallen since then, dollar strenghted. Fed has no reason to engage in QE3 with spx making new high, so we should expect more of the same.

  247. Liquid Motion

    “if easing worked, it would have been done. It doesn’t work”.

    In what context U referring to ? Easing was never meant to be stimulatory…it was/has been done at times of financial stress. It provided liquidity to financial institutions and larger corporates and govts. whilst achieving lower inter bank lending rates. It prevented a systemic collapse in US and then in EUR.
    If I recall correctly..the FED provided more liquidity via swaps(Dec 11-Jan 12) when they did a backdoor bailout of the EUR financial instos. Money lent to ECB is on lent to struggling banks who in turn buy bonds of Greece , Italy Spain etc. Avoids the ECB bailing out the insolvent sovereigns.
    Swap lines, which the FED uses, are for all intents and purposes LOANS/LOC. Money created out of thin air…..ala QE.
    The FED continues to provide Covert assistance to a number of governments, CB’s and financials.

    It hasnt stopped printing money and the US taxpayers are paying for these loans.

    I would add that these swap lines are adding to the balance sheet of the FED and NOT replacing other assets (ie. not selling treasuries to create swaps).

    The FED is the lender of last resort. Be assured that any future money printing in EUR will be funded by the FED. They dont need to announce a QE III…they have already/and continue to participate in that event, under the radar. MSM and public at large (incl some people here) are oblivious to the mechanics of the FED.

    All this is in effect INFLATIONARY. Markets across the globe are being flooded with money…courtesy of the FED. The FED is funding southern peripheral Europe. Be careful what you read and what you believe. Moreover think outside the box.

  248. ikti

    Europe is likely in recession already. Asia is slowing. They will cut interest rates and do their own QE. This will strenghten dollar and at the same time reduce commodity demand. US will probably be last to feel global slowdown, so we will have to wait for QE3.

  249. Gary

    ikti ,
    The CRB cycle doesn’t need to be re-phased. We clearly have a three year cycle low. The only question at this point is whether or not this three year cycle will be right or left translated.

    I believe it will be extremely right translated with a dollar crisis in mid-2014 that will drive a massive surge in commodity prices with the CRB moving above the 2008 high.

  250. Liquid Motion

    To elaborate…”never meant to be stimulatory”..

    Artificial economic activity is the result of activities between bankrupt states and banks. We see large scale mal-investment of resources as they are removed from productive activities.
    eg..Loans are made to sovereigns as opposed to individuals…perceived risk from economic stagnation.
    QE is an exercise in monetary policy to provide time to allow for reforms to be enacted. Artificial favorable market conditions provide the framework to alleviate market stresses and pressures.

  251. Liquid Motion

    Further to my entry on 23.8.12

    here it is from the horses mouth..

    Mark Cutifani, CEO of AngloGold Ashanti: “If you want to go on a total cost basis, we’re running at about $1,200. The industry average is probably around $1,250 an ounce.”

    Steve Letwin, CEO of Iamgold: “It’s going to be difficult for anybody to produce gold at less than $1,200 an ounce.”

    Full support of my comment about the cost of gold mining (being around $1250/oz)and for the price of Gold to continue to rise in support of increasing costs of mining. Most gold miners will be bankrupt within 3 years if they cannot contain their mining costs.

    Oh Saif…where r u now …whatever pseudonymn ur hiding under.

  252. smt_troll

    Gary said…

    “The thing is that credit is not contracting.”

    That is not clear to me. NON-GOVERNMENT credit certainly is contracting (especially in the financial sector). Jeff has since made most of the points against your claim (basically that private sector debt is much larger than government debt).

    saif said…

    “South Africa which produces close to 80% of all platinum has a breakeven cost of $1250 for the cheapest mines.
    If platinum gets too cheap compared to Gold and even 5% of Gold jewelery buyers switch to Gold the price should rise.”

    Why would people (necessarily) switch to platinum for jewelry – there are plenty of other elements “cheaper than gold?” My claim is that the ratio of XAU/XPT will continue to increase over time.

    “You are focusing too narrowing on one use and not seeing how supply demand metrics would function over the entire curve.”

    That “one narrow use” accounts for half of all platinum consumption.

    Lyon said…

    “Why is it that platinum will no longer be used in catalytic converters in several years?”

    It will be, but the days of the internal combustion engine are numbered. I would say that (even with the growth in the developing world) there will be fewer internal combustion engine cars produced in ten years than there will be today. Automobiles running on natural gas or electricity do not need catalytic converters.

    Gary said…

    “I guess I should point out that I’ve admitted numerous times that my call on 2102 being one of the worst economic years in history was flat out wrong.”

    2102? I am going to guess you are not going to live long enough to find out about that. πŸ™‚

    Gary said…

    “Real estate was the largest bubble in history. That bubble has popped.”

    Only in the United States. There is still Australia and China to go.

  253. Lyon

    Don’t know if this DX reversal will stick, but I didn’t expect it so quick. I thought it would at least test the down trend line near 82.If it breaks below 81 it could get very interesting. I might wish I’d been more aggressive in buying miners yesterday.

  254. Lyon

    smt_troll,
    Everything I read says not to expect the end of the internal combustion engine any time soon. One article said CAGR of ICE will be 13% annual due to India and China, although efficiency will rise from between 15-20% towards 30%. If electric vehicles sales grew faster I would think the demands on copper would be very high. Electric engines are pretty amazing though, to think they pull locomotives impresses me.

  255. Liquid Motion

    Lyon,

    Thought U said u were playing the contrarian….hmmmmmm?

    Who’s buying miners these days..anyway….tooooooo late in the cycle according to Gary. If you intending to go long that is.
    Top in S & P and bottom in USD..not there yet !!!

  256. Lyon

    I dono LM, but buying miners yesterday felt pretty much like I was going against the crowd. They were all red, all day, at least the ones I bought. I don’t know what Gary is saying, but I would think if the DX falls below 81 it would nullify the risk off trade. No?

  257. Lyon

    If the S&P breaks above 1425 Doug Kass will have egg on his face. He went on national TV and said the markets have topped with a failed triple top and have seen their highs for the year. Quite a gutsy call I’d say. We may soon see otherwise. Gartman sold all his stocks too.

  258. Blog Posts - RNM

    Kong gets long……as of last night.

    “It aint pretty” – but…..Ive staggered back out on the field…after several days on the sidelines.

    Only select pairs (certainly not across the board) and relatively small positions.

    Generally market action sucks as Im sure you guys know/see…but “you can’t win if ya dont buy a ticket”.

    Ive “little to no expectations” here… but will allow the entries/stops to run regardless.

    Looks to me that 1405 in /ES holds…its up from there.

  259. Gary

    Right translated cycles rise for more than half of the cycle so they have less time to fall. Left translated cycles are the opposite.

    Generally speaking right translated cycles tend to indicate a rising market, higher highs and higher lows.

    Left translated cycles tend to indicate a falling market lower, lows and lower highs.

  260. Slumdog

    ” Gary said…

    ikti ,
    The CRB cycle doesn’t need to be re-phased. We clearly have a three year cycle low. The only question at this point is whether or not this three year cycle will be right or left translated.

    I believe it will be extremely right translated with a dollar crisis in mid-2014 that will drive a massive surge in commodity prices with the CRB moving above the 2008 high.”

    Gary, you expect a parabolic curve, with the rate of increase increasing dramatically in 2014.
    Is this correct?

    Gold and Silver will ride along with. Right?

  261. Gary

    Correct. Gold’s next C-wave top should occur in conjunction with the dollar’s next three year cycle low. The same as it did in 2011.

  262. Slumdog

    Would a longer term strategy be just to wait for the increasing rise of the parabola, killing in essence a year, on the sideline, without the headache of expectations, save the core positions in silver and gold and maybe even a CRB position in an option or two?

  263. Gary

    We have a strategy like that already in play. Other than that I will continue to try and spot intermediate cycle lows.

  264. Slumdog

    BTW, your conservative, less stressed ability to see what you do is back in the saddle. For a while, during the shocking window after May 2011, there’s been a lot of sloshing about, which is normal after steep parabolic moves, and it’s been rough because the waters were not calm. Now at this time window, the reaction has ground many out of the market, with major losses, which is what that sloshing does, as it extends and extends. In your view, after the parabola, there’s no movement back up for a long time. In this case, 3 years is a short time frame. I witnessed the Hunt Bros and the aftermath; so many of my friends were seriously psychologically defeated. I did what that character, Ben Bernanke who used to post here, does. I stick to the physical and hang on, hell or high water.

    What is of interest to me is the beginning again of the parabolic rise. This is a nice bounce that shows at least there’s a bit of life in silver and gold.

    Your advice here is sage. I’ve returned but have little time to be as active as before. Thx for continuing to slog forward. I remain a subscriber in hopes that the action will commence, but I’m watching for later 2013 when it will be a higher probability of a rise.

  265. Piazzi

    smt_troll said…

    NON-GOVERNMENT credit certainly is contracting (especially in the financial sector). “

    what is the source your data for that claim?

    If you go to FED’s FRED data, you will see that both total bank credit and total business loan have been in uptrend since late 2009 early 2010

    please provide the source of data for your claim so that we can check if

    1. financial sector credit is in fact contracting
    2. if if does, over what time frame and by what magnitude

  266. Gary

    Consumer credit is contracting slightly, but it is more than being compensated for by the massive expansion of credit in the government.

    Taken as a whole total credit is expanding.

  267. Lyon

    Interesting that Paul Tutor Jones does pick tops, and bottoms. I actually agree with him here.

    “I believe the very best money is made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all your money by playing the trend in the middle. Well for twelve years I have been missing the meat in the middle but I have made a lot of money at tops and bottoms.”

    Read more: http://www.businessinsider.com/the-tk-best-things-paul-tudor-jones-has-ever-said-2011-8?op=1#ixzz24wHJsZV0

  268. Blog Posts - RNM

    That’s rough new about your lil pooch Gary – I feel for ya.

    Oddly – Ive gained a cat! (showed up at my screendoor last night, and doesnt appear to have any interest in leaving!) – round n round it goes.

    Well…..as forseen..markets are flat as a pancake here this week – as all sit in wait.

    Im of the camp that things are more on hold waiting for ECB on the 6th vs Ben “not” implementing (but certainly suggesting possible) QE..

    I am a touch surprised though – that markets wouldnt be front running this – as QE under current conditions is absolutley out of the question (and death to Obama without question) and selling “into” the disapoint on Friday.

    Risk currencies certainly are…although still within the confines of a “solid dip”.

    Ho Hum…..twiddle our thumbs.

  269. Lyon

    Grandish says China is putting the peoples equivilent of social security into gold. It is to bad America didn’t do that instead of creating a pay as you go ponzi scheme.

  270. Liquid Motion

    Right Lyon.
    Amerika lined its puppet masters pockets with the SS contributions. There will be hell to pay…!!!!
    Retirees (baby boomers) will take that matter to congress. Pensions and “entitlement” are dead.

    China on the other hand sees “Wealth” and “Prosperity” for all its citizens. A currency backed by Gold with encouragement to own the PM ensures the country and its citizens will go a long way to making it a stable economy, free of excesses and ability to distort, while improving their living standards across the board.

    That is in direct opposition to what Amerika is doing.

  271. Gary

    Much better than Tuesday but it’s going to take a long time to heal this wound.

    I don’t know how a little five pound dog got such a hold on me but he did.

  272. smartbullion

    Gary,
    You gave him a good life. There was nothing more you could have done.
    I love dogs myself. They automatically put a smile on my face (unlike most humans, I’m afraid :o) )

    Thank you for the work you do here

  273. smt_troll

    Piazzi said…

    “what is the source your data for that claim?”

    I looked at your blog entry, and the
    chart you posted omits the most significant component of private debt – financial sector debt, which has been contracting rapidly. I can’t locate a current chart at the moment (I come across them every couple of months or so, and don’t really pay that much attention to them), but here is one that includes some of the recent period when bank credit has been expanding – and financial sector debt has been contracting rapidly:

    http://creditwritedowns.wpengine.netdna-cdn.com/wp-content/uploads/2011/09/Total-Credit-Percent-of-GDP.png

    Lower leverage in the financial sector (part by choice, and part mandated by new regulations) will keep this chart on a downward slope for quite a while.

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