102 thoughts on “SUCCESSFUL AND UNSUCCESSFUL STRATEGIES

  1. Goild

    Gary,

    Thanks again for the hard work on the SMT website.

    It is great to know that you are with the bottom pickers too.
    There is also the art of the tops for shorting.
    Have a great weekend.

  2. Vortex

    Gary,

    Outstanding breakdown of cycles and general investor reactions to price swings.

    I would imagine that most all of the mom/pop’s will wait until we see a pronounced move to the 50 day MA and then they will buy, instead of looking to scale out with a quick profit. The subsequent drop as you stated multiple times will be sold when it should be bought as weakness exacerbates the herd mentality.

    This stuff is really not that difficult to understand and you make it even easier for the average Joe to understand.

    Buy weakness and sell strength except on the very best miners and explorers that have longer-term profit parameters and lower taxation goals with zero leverage and decay. If you choose to actively trade those don’t be afraid to take a profit.

    Gary thanks for the great service and important coaching sessions.

  3. stockpick

    Good advice – buy low when nobody wants to buy and selling pressure is exhausted …watch for low trading volume indicator

    Now you are saying the intermediate cycle low will undercut the December/Jan. low so that will be a lower low since it will be lower than last year’s low. How can you say that it is an intermediate cycle low when the previous cycle low is challenged this year / cycle

    1. Gary Post author

      I said there is a possibility that the banks are going to try to create an undercut on the miners. I didn’t say anything about gold undercutting the Dec. low.

      Gold is still following my triangle scenario at this time.

        1. Pedestrian

          Bob is a serial bottom caller. Just Google on “moriarty gold bottom” to get a quick list of some of his frequent bottom calls. Eventually he will be right. And then he will have bragging rights as the best bottom caller of all time.

  4. Goild

    Yes, it would not be unusual to have the miners hit again yesterday’s low.
    They also can channel for a while around $5.2-$6.16, then have an undercut to finally rise.
    Or further fall, which I see as unlikely.
    However, the fall has been so sudden, that they can recover on a V.

    Again, and again, whichever way one must have a plan, and stick to the plan.

  5. Paul

    Gary- Buying Break Out Work… I been doing it since the early 90’s… they don’t work when you Chasing a move or are late… When Price is Extended well above the 50ma is risky, but you can Buy a Break Out or Pull Back to 50 ma and will bounce above it… But When something you are Following is Below the 200 ma and 50 ma trying Buy Break Out in a Downtrend is not a Smart Move… yeah… you might get away with a few trades… Why not follow something that is Trending Up instead of Trying to Fight the Trend… we all have different Methods… I use Primarily Weekly and Daily with 20 MA and 50 MA and the CCI along with Daily Pivots… I challenge you Gary to Talk about Pivots Points and tell the people hear buying break out don’t work… I agree with some of your video… But stop the Mis-info… there is a Correct Way and In-Correct Way to Buy a Break Out… 50 MA is good guide for Support… and if something can’t stay above it… that is Warning Sign… stay away for now… Bottom line: When Indexes are extended Above 50 n 200 ma for a long time… buying break out will fail… just as they will if you try to Buy Break Outs… with something that is stuck under the 50 n 200 ma… many times these moves will be short lived…

  6. Paul

    Let’s Talk about Pivot Points and Buying Break Outs… they work if you are have restraint and self control… I prefer limit orders… don’t get me wrong Gary… I appreciate you input… but there is a Correct and In Correct to Buy a Break Out… what you do is tough… because you try to Call Reversals, rather going with something that is already in early Up Trend… I understand the frustration you
    may in because so much is over extended… it takes Balls to do what you do… take care- p

  7. Paul

    Let’s Talk about Pivot Points and Buying Break Outs… they work if you are have restraint and self control… I prefer limit orders… don’t get me wrong Gary… I appreciate you input… but there is a Correct and In Correct to Buy a Break Out… what you do is tough… because you try to Call Reversals, rather going with something that is already in early Up Trend… I understand the frustration you
    may in because so much is over extended… it takes Balls to do what you do… take care- p

  8. victor

    Thanks Gary, always appreciate your work. So, we had extremely bullish oil sentiment and run out of sellers, now going down. Extremely bearish PM’s now turned up.
    Next? we have extremely bearish bonds and we will see guys it’s going to turn. NO rate hikes. Dollar off the cliff. Gold to fly. Oil down to 40 and lower…

  9. zkotpen

    Pedestrian,

    US Consumer Price Index:

    1913 Avg = 9.9
    2016 Avg = 240.0
    Change = 24.24X

    Price of Gold:

    1913 = $20.67
    2016 EOY = $1150.62
    Change = 55.67X

    Ergo: In 104 years, gold has become inflated vis à vis the US Dollar.

    Like 2.3 times.

    Which is NOT to say that gold should be trading at $525 today. Rather, as the CPI continues to rise over the next decade, or decade and a half (maybe into 2032 😉 ), gold will move sideways and then drop. Probably not exactly at par with the CPI, but thereabouts.

    Funny how that corresponds roughly with the $750 fibonacci retracement.

    My current best long term indicator for gold is even more overvalued:

    400 week SMA is currently 1344 and rising — my supercycle indicator of choice

    At supercycle degree, gold is in a bear market, correcting its overshoot of USD of the past century.

    Longer term than that, I can’t say for sure — I just don’t have the data. And if I had it, plotted using existing charting tools, I’d have to see what that looks like. A study I would love to do, as I’ve previously stated, but not even close to practical at present.

    1. Pedestrian

      Great work Zkot.

      You would think that maybe that bit of information would be enough to stop the gold zealots in their tracks and make them question their whole premise that gold should be worth 10,000 to 50,000 or whatever other insane number that gets put forward by the lunatic camp.

      But sorry. The worst of the promoters will never let their flock of believers in on that tidbit of revealing truth. God forbid their eyes might open to the fraud that is being perpetrated on the unwary and unprepared as their heads are filled with candy and gingersnaps.

      So you were also not able to find that chart I referred to yesterday? I might dig for it tonight when I have time. I kind of recall it was published on Seeking Alpha two years ago. But its really helpful if it opens up the minds of anyone infected by gold fever.

      1. Pedestrian

        Here’s a chart you might have seen before though.

        Its gold inflation adjusted (deflated) back to 1913 and what it tells you is not how much purchasing power the dollar has lost but rather how stupidly overpriced gold has been for decades.

        Better yet, it demonstrates a nearly perfect double top in inflation adjusted terms that would otherwise elude the observer who was relying on nominal prices. And what this is telling us is that gold has a long way to fall and secondly that we have already started down the backside of a multi-decade correction back to reality.

        Take note that the second peak (which is the 2011 top) is left translated. That is a clear warning the next peak will come in as a lower-low many years from now. In other words, we will likely NEVER see gold at previous highs again in our lifetimes.

        Those two parabolic rises that happened in 1981 and 2011 are the exceptions during more than a century of pricing. They are not the rule. Gold bugs had better start to learn this now or they will be seriously disappointed in coming years as gold fails to come through with the rich valuations they imagine are in store for them.

        This is just one of a hundred reasons I cannot get excited about gold anymore. Its a fools metal and best traded short term for profit on swings. But buy and hold? Give me a bloody break! If I want to store something of lasting value I’ll stick with vintage wines and old Scotch. Now those really do track inflation well.

        At least I have something I can enjoy with friends and its always stored close by in the cellar.
        http://www.macrotrends.net/1333/historical-gold-prices-100-year-chart

        1. Emptyness

          Ped: Gold is a fools metal
          I ask myself who is the fool – and I know the answer. It’s not me or we the gold bugs.

          1) Gold is an escape metal. We always get an enormous rally when people loose confidence in the financial system. You know the unsolvable problems of our system. The collapse is only a question of time. Then gold will rise up to the sky.
          2) Gold is cheap compared to paper money:
          https://astrologieklassisch.wordpress.com/2011/04/07/kaufkraft-des-us-dollars-seit-1792/

          Ped, you self-appointed best gold trader of the world, let’s look what’s going on.
          You don’t know it – I don’t know it – but I know gold is in no way a “fools metal”.

          1. Pedestrian

            Yes thanks. It was amazing dead accurate timing and I have been pretty pleased with myself about that. I picked up the trail because I follow currencies pretty closely. And as Armstrong often notes sagely “everything is connected”.

            I answered your post on the other thread btw.

  10. LiesandDamnLies

    Oh My God

    We have 104 year charts and 300 years charts and they are have hidden meanings and directions.

    Can I have a 300 year chart showing the only the times when interested rates were negative please. What was the value of bitcoins 50 years ago? A chart of the price of gold in Germany in marks during the hyper inflation post first world war when it was cheaper to wallpaper your house with mark’s than to buy wall paper. What was the chance of blowing up an entire city of millions of people in the 1930’s.
    In 1983 what were the chances that the Soviet Union would fall apart “Perestroika” in under a decade.

    Times change, faster and faster, what was impossible just a short while ago becomes reality.

    Your money in the banking system is just a promise. They are trying to eliminate cash. Did you ever hear of that 10 years ago. The rich get richer and the middle class and the poor get fleeced. Company tax around the world as a percentage of any countries total receipts is declining, would your long term charts have predicted that 30 years ago.

    And yet we have 300 and 104 year charts used as a guide as to what happens next.

    Wars and earthquakes are the only two things that immediately come to mind that long term charts are useful for.

      1. Pedestrian

        No problem. Just trust the charts. The longer they are the better information they offer. We are going to see a massive deflation that cannot be countenanced or prevented. There is quite simply no solution to the problems coming and gold will not do well as it fails in a deflation environment. You must set aside the gold bug program now or you will not have a chance when trouble actually arrives because gold is not the answer you are going to need for the problems you will have.

        Look, nobody I know gets this message. It does not matter how often I write about it either as it always falls on deaf ears. I don’t mean just gold-bugs either. It is all society who are sorely unprepared for the default cycle that is already in motion and the evisceration of the pension system that is on its way.

        But the facts on this subject are clear and unequivocal. The historical record is available to anyone who seeks truth. We do know how these cycles end and its bitter as hell. Best you get prepared now if you still have time.

        1. dboz

          Ped, if you truly are of that belief, you will be the most ill prepared. Governments cannot function in a deflationary environment. They don’t work. People start hoarding money and cease consumption. That’s why prices deflate. They can’t let that happen. So that’s where helicopter money begins. Just give people money so they go spend it. However, if deflation occurs it damages the societal psychology. Helicopter money comes through tax refunds or credits or whatever they call it.

          All that money starts to hit the system at once and then you will get inflation. If inflation rises too fast, then hyperinflation can ensue. People see their purchasing power getting weaker and weaker so they try to get rid of their money. No one wants it. It’s worth less all the time.

          That’s why the move to cashless is appealing to governments. They can control what happens much easier. Negative rates to get you to spend. They can limit transactions or just freeze you out.

          Regardless, if you don’t understand the value of owning something outside of the system that can’t be conjured out of thin air or controlled you should just move to Fang stocks. Sure, they can make gold and silver illegal. Restrict it’s sale. Confiscate it. Highly doubtful though as do few own it today compared to the 1930’s. That’s why they go out of their way to suppress and discourage ownership. You recite the mantra. You believe it is worthless.

          Well, nothing is untouchable by an over bearing government, it does leave options should the banking system or monetary system deflate.

          If you can’t see the value of owning something outside the current system, you should stick to buying stocks like FANG, companies with real value and worth. Eyes rolling.

          I am going to stick with real money and worth whether you think its stupid or not.

          1. Pedestrian

            I did not use the word stupid. What I am saying however is that gold is not going to live up to the hype that surrounds it because it is not garlic against the troubles that are coming. It will however have more buying power, but its price in dollars will disappoint almost everyone here. There are better ways to spend dollars than on deflating assets if you don’t know. And gold will deflate in the environment we are entering. The charts virtually assure us of that in any case so you can take your argument up with the technicals if that gets you anywhere. As far as my own preparations go? Well I think I am going to be more ready than you just for starters.

  11. Mac

    There are many ways to make money in the markets and buying bottoms and selling tops are statistically one of the more difficult. This is especially true if your buying or selling long-term pivots expecting trend changes versus pivots for counter trend pullbacks. I know people will disagree with it but the probabilities are what they are. Your potential upside might be greater but your win ratio should be lower and the potential for loss is greater. I’m not saying that people shouldn’t do it but just be aware of the probabilities and for heavens sake use stops .

    1. Gary Post author

      You forgot to mention that risk is much lower trying to pick bottoms. Yes you may stop out more often but the losses are small and the rewards when you catch a cycle bottom are much bigger.

      This is how most retail traders think. They are allergic to taking a loss. So they wait till their emotions give them the all clear. It’s why they mostly buy high and sell low.

      On the other hand a more logical approach, one devoid of emotion would suggest you buy as close to your stop as possible. If you are wrong you don’t lose much and you try again at the next setup. Then when you get it right you are in at the bottom and can make back your small losses on a big winning trade.

      This is what we did coming out of the YCL in Dec. I had a couple of small losses trying to get the bottom, but we eventually caught it and rode the intermediate rally all the way to some really big gains. We recovered all the losses from the mistimed trade in Sept. and then some.

      1. Mac

        I’ll say it again, the probabilities are what they are. I didn’t go deeper into the concept of risk adjusted returns because people on this board need to understand the basics. Again, I’m not getting into it with you because you don’t appear open to consider new ideas. My comments are here for the one or few open minded individuals who use it as inspiration to dig deeper.

        1. stary

          Gary is right for a bottom Trade. Mac is right for a Up Trend Trade.
          Bottom Trades (those under the EMA(9) and not basing, not trending up in general). GDX is not trending up on the Daily in general.

          So on Gary’s Daily Trade GDX.
          Exactly right. For the way I play Bottom Trades!

          Simple BUY FORMULA…….After the Daily RSI(2) has bottomed out (at least two lower low previous candles).
          BUY on the 1st Green Candle.
          That’s all there is too it!

          GDX has had it’s 1st Daily Green! And a good one. (at least 2/3′ green)
          Not only that …. in this case it is a beauty… with the support of a tight tiny daily curve up with weekly RSI(2) flat and daily RSI(2) rising. WOW!
          But don’t count on a long run! And I hope it doesn’t turn into a base.

          NOW..
          Buy 1/2 position of GDX on Monday.

          THEN…. As Gary Suggests. Place Immediate STOP at Last Thursdays low of $21.14. BUY second half if the price get near the STOP.

          THEN… trail stop at the end of EACH DAY.
          BY… Placing the STOP AT THE LOWEST Low OF THE LAST TWO PREVIOUS DAILY CANDLES.
          So, in GDX case, Monday at close change the stop from 21.14 to 21.19. etc. etc. etc. Until you get stopped out.

          THAT’s IT! (Always make the STOP a few pennies lower so you don’t get pick off.)

          *NEVER EVER* remove the STOP when attempting a Bottom Trade.
          NEVER. This is the ONLY moment that you will become a True LOSER as a Trader!
          And shit it is hard to do! Just man up and take the loss!
          Cause MAC is right. You get TRAPPED! Psychologically Devastating!

          Lastly….when you get Stopped out on GDX, it is important not to move to another chart… keep sticking with the same one. And repeat the Above Steps.

          This is for Bottom Plays Only.
          Once GDX becomes a winning UP TREND TRADE you need to change to a different STOP LOSS and BUY strategy. Period.

          My Fellow Traders…..This is a WINNING STRATEGY for BOTTOM TRADES that won’t leave you in a losing Trade…. TO LONG! and won’t make you take your money off the table… TOO SOON!

          You want to do this for living. Follow the advice above!
          There alway more things you can do to increase probabilities. Don’t go there.
          In the end, keep it simple, keep it consistent!
          And most of all ignore everything else around you, stick to your simple system!

          Gary is right for a bottom Trade. Mac is right for a Up Trend Trade.
          Bottom Trades (those under the EMA(9) and not basing, not trending up in general). GDX is not trending up on the Daily in general.

          So on Gary’s Daily Trade GDX.
          Exactly right. For the way I play Bottom Trades!

          Simple BUY FORMULA…….After the Daily RSI(2) has bottomed out (at least two lower low previous candles).
          BUY on the 1st Green Candle.
          That’s all there is too it!

          GDX has had it’s 1st Daily Green! And a good one. (at least 2/3′ green)
          Not only that …. in this case it is a beauty… with the support of a tight tiny daily curve up with weekly RSI(2) flat and daily RSI(2) rising. WOW!
          But don’t count on a long run! And I hope it doesn’t turn into a base.

          NOW..
          Buy 1/2 position of GDX on Monday.

          THEN…. As Gary Suggests. Place Immediate STOP at Last Thursdays low of $21.14. BUY second half if the price get near the STOP.

          THEN… trail stop at the end of EACH DAY.
          BY… Placing the STOP AT THE LOWEST Low OF THE LAST TWO PREVIOUS DAILY CANDLES.
          So, in GDX case, Monday at close change the stop from 21.14 to 21.19. etc. etc. etc. Until you get stopped out.

          THAT’s IT! (Always make the STOP a few pennies lower so you don’t get pick off.)

          *NEVER EVER* remove the STOP when attempting a Bottom Trade.
          NEVER. This is the ONLY moment that you will become a True LOSER as a Trader!
          And shit it is hard to do! Just man up and take the loss!
          Cause MAC is right. You get TRAPPED! Psychologically Devastating!

          Lastly….when you get Stopped out on GDX, it is important not to move to another chart… keep sticking with the same one. And repeat the Above Steps.

          This is for Bottom Plays Only.
          Once GDX becomes a winning UP TREND TRADE you need to change to a different STOP LOSS and BUY strategy. Period.

          My Fellow Traders…..This is a WINNING STRATEGY for BOTTOM TRADES that won’t leave you in a losing Trade…. TO LONG! and won’t make you take your money off the table… TOO SOON!

          You want to do this for living. Follow the advice above!
          There alway more things you can do to increase probabilities. Don’t go there.
          In the end, keep it simple, keep it consistent!
          And most of all ignore everything else around you, stick to your simple system!

      2. Mac

        Let me just clarify one more thing. I don’t disagree with you on your explanation on how retail traders trade. That’s kind of my point. Your definition of breakouts are different than that of a real trader. Your stop placement is different than the placement of a real trader. That is what I’m encouraging people to explore.
        As an example, take a look at a stock like AZPN. Compare the “breakout” in June versus the “breakout” in July versus the breakout in August. Mr Druckenmiller bought the position in September. You think he might be looking at something different then you? You can dig in and defend your strategies all you want or you can maybe try to explore and see what you might be missing.

      3. dboz

        I need help on when to sell or get out? Trailing stop losses maybe? I get in at good spots and never know when to get out. I was just going to go old turkey but see advantages to selling and debuting after these repeated crashes. After two years in the miners, I would be bored stiff in regular stocks. This is for adrenaline junkies.

        So any info on when or how to know the peaks other than overbought?

        1. Pedestrian

          Support and resistance, stochastics, RSI’s, Bollingers, MACD’s, money flows……..you need to read them all anymore and sort out the conflicts in the messages. It is true that some technicals are not giving signals that are easy to read anymore. So people buy momentum and sell exhaustion. This might be mathematical but its still as much art as science unless you are a computer making fractions of a dime every trade. Incredibly, when you are pit against the programs you still need to use good intuition. It seems so contradictory. But I suspect its because the algo’s are written by humans or it would not work.

  12. arcticfox

    Couple questions. What I’ve never understood is if the OI gets so large and the commercial short reaches record highs, why don’t a couple of billionaire buddies go long and insist on physical delivery if they know the shorts don’t have the actual metal. Another thing. It’s been speculated that JPM is the big short. Isn’t it possible that JPM could open numerous accounts. Some would appear to be in the spec long category and other in commercial short. The result being that they could be net neutral while still blowing up OI to record highs with the ultimate goal of moving the spot price up or down at will. I guess I’m thinking more about silver regarding above comments.

  13. Mac

    I would also encourage people to re-examine their definitions of breakouts and confirmation. How? Follow the volume. Gary’s right about one thing when he says the markets trade much differently now then they did 15 years ago. Throw your old TA books in the garbage because every algorithmic trading platform is programmed to take money from suckers who use basic strategies like trend lines breaks, fib retracements, etc. If you’re still drawing straight lines on a chart then rest assured that the algos know where you sit.
    Take a look at some of the best trader’s portfolios like Druckenmiller and you’ll see that he remains a trend follower who still waits for breakouts and confirmation for the majority of his positions. Not too sure anyone would accuse him of being nonsensical.

      1. Mac

        Are you sure? In the past, Mr Druckenmiller has added to long term gold holdings by using GLD calls. If you look at his fourth quarter 10-F he didn’t add any long term gold positions in December. Now I do think he added gold futures at the end of December as a trading play. This would have been a macro call which bet on the pullback in the dollar and a bounce in treasuries. Like I said in my post yesterday, once you understand how those work then you can anticipate moves. But to my earlier point, take a look at 12/29 GLD and you’ll see that that breakout never came back to retest. Buying that breakout WAS the right move.

        You can find plenty of examples where Druckenmiller was buying bottoms because he’s not purely a technical trader. Another example is when he went in huge on EEM in Q1 2016 as a play on the dollar. However, I’m trying to keep it simple here because I don’t expect many people here will get to the point to anticipate moves like that. But if you continue to focus purely on technicals then you should know their limitations and understand that professional traders look at charts completely different then you do. They use your interpretation of TA against you to know you out of positions.

        1. Gary Post author

          Just post your trades on here in real time with the reason why you took the trade and the price you got and we can judge for ourselves whether your system works or not.

          1. Mac

            I don’t much care what you think about me or my system. I’m not here to brag, make friends, sell a trading system, etc. Again, I’m just hoping to convince someone to rethink how they trade and to look into things a different way.

      2. Mac

        Duquesne’s Q1 10-F comes out in about a month if you want to see if he added long-term positions in Jan-Mar. Look at the charts before that release and see if you can figure out what he did. Think about movements in the dollar, treasuries, etc. and see if you can anticipate what he’d do. Good bye and good luck.

  14. zkotpen

    Ped,

    Cool chart — thanks — that seems like the one you were looking for…

    Eventually, I’m very interested in tracking the value of gold as original money, back to the origin of money, presumably conjunct the origin of agriculture, written language, time (human ability to conceptualize time, beyond mere observance of daily, lunar, and yearly cycles), etc. Who knows what lies therein? I guess I liked that old Money and Banking class —

    1. FASTEDDY

      Hi Zkot, heres one for you: At the end of a Christmas Carol by Dickens Scrooge leans out of his window and shouts to a Cockney street urchin ” you boy is that turkey in the ye olde butchers shop still for sale, the huge one hanging in the window?” “heres half a crown go buy it and take it to bobs so the whole family can eat it for Christmas lunch” (and for the rest of the year probably) Scrooge also tells the urchin to keep the change! Well a half a victorian crown is 1/2 oz of sterling silver (92.5%) this was back when money had an intrinsic value.
      By my ‘back of a fag packet calculation’ id say in today’s money that same turkey would cost around £50 (its the largest in the shop remember) and assuming the tip was pretty generous and of the same value of the turkey (£50) that puts a full oz of silver somewhere around £200. Something to think about.

  15. zkotpen

    (accidentally pressed ENTER above)

    …ECON 430? More than I realized at the time.

    I do believe that gold became the timeless and universal currency of choice, even without instant messaging back in 4004 B.C.

    People came up with gold as preferred money; cultivating wild grasses as preferred food supply; making markings with their hands that had meaning; and notions of time… all round the same time.

    So when I read that Ben Franklin gave his preacher friend a certain amount of golden guineas to build an orphanage in Georgia (lots of orphans in the old penal colony) in the mid 18th century, or that Milarepa’s mother sold a plot of farmland in 11th century Tibet for 7 ounces of gold, we can easily render those values meaningful, regardless of year and what currency one uses, and that comparable items would have that same value today, in gold terms.

    Furthermore, I think the market perceives this intuitively.

    If an emotional outburst causes the market to get out of whack, it will correct.

    1. Pedestrian

      Indeed Zkot. Excellent points. One thing that we can count on is that as we deflate an ounce of gold will actually buy more house than it does today so in that sense as *real* money there is some hope for gold-bugs. Provided they have enough of course. But dollars are still the lingua franca of our planet and it is easier to hold those and spend than lumps of metal. As long as deflation is the outcome the preferred currency will still be the dollars we are using today.

  16. zkotpen

    Ped,

    “Take note that the second peak (which is the 2011 top) is left translated.”

    Wow! I hadn’t thought of that. Actually, looking at the 2011 top in two different degrees of trend: Cycle degree, and Supercycle degree…

    In the smaller case, the prior Cycle degree low (Cycle Wave 4) as Nov, 2008, followed by a Cycle degree high (Cycle Wave 5) in Sep, 2011, and another Cycle degree low (Cycle Wave A) in Dec, 2015. Sounds left translated to me, at Cycle degree.

    At supercycle degree — I’m thinking the move from 1999-2011 is a Supercycle move, five Cycle waves up, which is being followed by a corrective move, three Cycle waves down, the most recent of which is left translated, and the next Cycle wave is shaping up to be EXTREMELY left translated, that portends a Supercycle low in… are we back in 2030-2032 time frame? I think so.

    This is where I wish I had a 77 YEAR SMA!!! I obviously concur with your assessment of not only longer, but simply ALL degrees of trend — I recall back when you were posting your trades in real time circa late January, you mentioned using one minute charts for trading as well.

    By the way, said ~77 year SMA would have each individual candlestick coming in at roughly 38.2% of a year — a nice, unexpected fibonacci that just sort of popped up. And that’s probably because I’m using weeks, which are conceptual. How about each candlestick being worth ~96 trading days? Give me that kinda data, with interactive charting as it exists in 2017, and that would add a lot more confidence to my long term outlook in the price of gold at the close of the global trading day, March 10, 2017, vis à vis… perhaps all the way back to 4004 B.C.

    At the very least, I would have that much more confidence in proclaiming the current Supercycle as left translated 😉

    That’s why I keep encouraging you to learn at least a basic primer in the Wave Principle (so-called “Elliott Wave” — RN Elliott himself called it the Wave Principle, and I concur with a more descriptive & scientific, rather than personal, basis for nomenclature).

    The Wave Principle is premised on two things:

    1. That there is a finite number of general patterns in which markets move; and

    2. That these patterns are fractal in nature (self-repeating at all degrees), from the infinitesimally small, to the infinitely large.

    1. Pedestrian

      Zkot, to me that lower peak in 2011 is the dead giveaway that the future of gold is going to be quite different than what the gold community preaches. I recall the top well (both tops actually) and at the time there was a near consensus that because gold and silver had not exceeded their 1980’s inflation-adjusted highs that it MUST mean that the gold bull market had not yet ended in 2011.

      But silver had CLEARLY made a parabolic blow-off peak which is rare and not likely to be repeated again anytime soon.

      Absolutely nobody (and I mean nobody other than myself) was acknowledging the real implication which was that we had a deflationary future in store where gold was concerned and this was as good as it would get. But I was shouted down, verbally abused in ways I cannot even repeat and drowned out for even mentioning the idea.

      The bugs became absolutely apoplectic at any mention that another higher-high was not in store. Not only that but I was kicked off two different gold blogs just for talking the objective truth about that chart and pointing out what was plainly obvious to any fair-minded chart technician. It was totally unbelievable on the face of it. As though I was saying the world was flat!!!!

      There was however some satisfaction in seeing those gold bugs from the past destroy their accounts through ignorance as gold’s bear market continued for five long years. They earned their punishment well. In the end I am still here and the great majority of those idiot bugs are broke and back to washing dishes and flipping burgers.

      Right where they belong.

      1. tulip

        pedestrian- you are showing your true character – whoops!

        There was however some satisfaction in seeing those gold bugs from the past destroy their accounts through ignorance as gold’s bear market continued for five long years. They earned their punishment well. In the end I am still here and the great majority of those idiot bugs are broke and back to washing dishes and flipping burgers.

        Right where they belong.

        1. Pedestrian

          Tulip, if you were not around to see how abusive they were you won’t know what I am talking about. It was over the top excessive and yes I mean every word of what I wrote. They were so sure of themselves but in the end proven to be total idiots.

  17. Gary Post author

    Basically it just boils down to whether or not you think governments can print trillions and trillions of currency units and nothing bad will ever happen.

    I would call that a fairy tale land and I don’t think it exists. I think it’s going to have the same result as every other time in history when governments tried to take the easy path. There are always consequences.

    1. Pedestrian

      Maybe Gary. But we are going to see a hell of a deflation first and you can bank on that unless the laws of economics have all been suspended. There is no existing force that can prevent the eventual mean reversion of asset values at a time when dollars are still strengthening and we turn recessionary. Unless the government makes the deliberate decision to default on its trillions in Treasury paper and all the State and Municipals follow suit then it means the debt must be paid and that is unquestionably a deflationary event when growth goes negative because it can only be accomplished by raising taxes or cutting programs. Truth it the debt is wholly unrepayable at current levels. Maybe 200 year T-Bills can solve the problem! And don’t forget its only the Fed via the Treasury that can devalue dollars. But cities cannot do that. Nor can States. That only leaves default as an alternative to payment but we know that many are already technically bankrupt and pension plans are already insolvent in large numbers. Basically there is a limit to how much money that can be conjured out of thin air before the game does not work any more. Creditors might be complacent but in the end they are not complete idiots. They have simply not recognized the risk yet. But they will. Don’t you wonder why so many countries are dumping Treasuries lately? Like rats jumping off a sinking ship they all want to be first to the exits even years in advance. So who is going to absorb that burden in the future? Well Gary its me and you and the rest of the people on this site because the piper will be paid in a lower standard of living, higher taxation and slim to no discretionary spending to keep the rest of the economy afloat. Goodbye retail for starters and say hello to a house worth just a fraction of its peak highs. That’s how it shows up and that’s why it deflates the economy. At the heart of this disaster is rising unemployment, falling production and productivity, fewer sales and a strangulation of income that everybody needs. You and so many others seem to think its all going to be wiped away by inflation but you are wrong because almost none of you gets that credit collapses in that environment and so does demand as it evaporates with discretionary income. I can warn you until I am blue in the face but few will hear it. they never do. that;s why credit cycles always come as a surprise and shock because too few recognize the symptoms as they are being manifest. We are facing a shitstorm that will be memorable and it could break up many countries in the process.

      1. Gary Post author

        If the money supply was still fixed I would agree with you. But as all countries are now Fiat there is no amount of debt that can’t be printed away. The end game was always going to come in the currency markets and it’s going to come as a massive inflationary period. History is going to repeat the same as every other time countries turn to counterfeiting to solve their debt problem.

        1. Pedestrian

          If you were right then maybe you can explain how thirty year bonds can sell with such a small yield or why every major institutional, bank and pension fund gobbles them up. So don’t be intimidated by the size of the Fed’s balance sheet. Four trillion is small change compared to the size of the total economy. It’s small enough that buyers still believe they will be made whole and not see their investment wiped away to zero. They surely would not buy otherwise and lets keep in mind those are the professionals with all the tools at their disposal to make the buying decisions. To believe otherwise we must also conclude the Government and Fed will conspire to pull a fast one on the very institutions that support the economy and the system. So I don’t buy it for a minute. Rather, the consumer and man on the street will carry the burden just as it has always been and they will be bankrupted out of their cherished assets for lack of income in the traditional manner.

          1. Gary Post author

            Lol. Then explain to me how these sophisticated institutions could have possibly loaned money to homeowners that had no reasonable ability to ever pay back the loan. The simple fact is that humans are herd animals and we are governed by emotions not logic. The smartest people in the world almost brought down the Global Financial system when long-term Capital Management went under.

          2. Pedestrian

            Well you make an excellent point there so I won’t disagree.

            But that doesn’t mean a serious deflation will not come. I frankly expect it Gary. Not least of which is the size and depth of the Asian/Chinese credit bubble although I have no idea how long that will take to manifest itself.

            But a problem that big will not go unnoticed and none of us will be spared the impact once it arrives for it represents a deflationary impulse on the rest of the globe as pricing power is lost and deep discounting begins urgently if only to keep the doors of failing firms open.

            Steps are already being taken by the Trump administration in advance of the event to apply tariffs and taxes and simultaneously trade agreements are being torn up to end the possibility of litigation brought about by reneging on past deals. So its closed borders from here till Sunday night or until the excess of the past has been burned off and China has eliminated its supply issues.

            The truth though is that virtually nobody will believe a deflation is possible let alone probable until it actually arrives. Even then it will persist for years while most live in denial.

            These things are so far apart cyclically that nobody alive recalls what happened leading up to the crash that always comes. Nobody who is not sipping out of a straw in an old folks home at least.

            And just as an aside to a prior post you left I neglected to comment that the size of the Fed balance sheet is meaningless since most of the ginned up money still sits as idle excess reserves! It can in no way, shape or form be inflationary since nobody has access to it and banks do not lend it out to expand the volume and intensity of credit.

            If you have not noticed the big credit avenues have already been pushed to the edge of to their maximum utility. For example, home ownership is still down as there are not enough eligible borrowers anymore and certainly too few in the right demographic segments. And student loans which filled the space in the credit gap left by unwilling home buyers has also been maxed out and proven to be a massive disaster of defaults.

            Similarly, credit card usage is not a growth area anymore as most people have hit the limits of how much more they can absorb while car loans are a bubble just waiting for the pin to pop. We are almost all credit saturated already and that is a classic sign of the end of the credit cycle.

            Only low rates have kept this game going as it enticed business to borrow to its hearts content in order to buy back stock and prop up equities. Gary, this is not going to go on forever. If another means of injecting credit into the system is not found (and soon) then the money supply will just keep shrinking and dollars will grow in purchasing power (deflationary.

            As it stands there is currently a global dollar shortage that could be leading to a crisis. I suppose the Fed could bail out European and Asian banks to inject a fresh supply of dollars into foreign nations but don’t you just wonder where it ends after that when we know it is ultimately consumers who drive the economy, not banks and private business.

            This is where the idea of helicopter money originates. Ultimately consumption can be promoted by simply handing out free cash and perhaps that’s where we are headed as the private pension system implodes. Sadly, old folks are not the biggest spenders.

            We need a demographic solution but as you know the Merkel program to reinvigorate Europe by importing refugees from Muslim nations has failed miserably as it turned into a culture class nightmare. And that’s why we will deflate. The one outstanding feature of our modern developed nations is a serious shortage of children and an unwillingness or inability on the part of young people to start families.

            We can in no way surmount that problem without inviting in people from less developed countries. And simultaneously the public is becoming increasingly hostile to that idea without knowing why it is a primary economic mistake.

            So instead of more open borders we have more walls going up and fewer opportunities to build a growth economy. This is a Rubik’s cube of inconsistencies and insoluble problems for which we will all be paying in the future. And there is thus no way out for the millions upon millions of retirees who sole source of wealth remains the family home.

            And that dear readers will be declining relentlessly for decades as there is just not enough young buyers to sop up the supply. Not current prices anyway. It represents a disaster of sorts and is part of the reason I am not enamored of precious metals. They are still a commodity and all commodities will stay flat or decline for years to come.

            You are simply better off holding dollars as long as the system keeps working and collecting rent income on your money if any is available. Gold is not a panacea nor is it a fix for this kind of crisis.

            It may be money but don’t count on it growing in value as the system deflates. Gold never succeeds in a deflation by its own accord. Only an act of governments can make it more valuable as the wind hisses out of the gas bag.

  18. chrisG

    Lol, lots of blind readers will just blindly buy on lows like days ago. They will buy perceived low, when it’s not really low enough. Gary is right in some ways. But people will interpret it wrongly. And I love it. I love it when most lose money.

    Trust me, many also blindly listen to the theme, sell when others are euphoric, buy when all are desperate. There are times when the selling is so severe, ask Gary when his calls for gold bottom in 2013 never materialize.

    And also, his comments on breakout trades not working is not totally true also. There are ways to trade it too.

    And also, trust me. There’s a decent chance for gold to break 2015 low. If so, I will laugh at Gary. And it may even drop go below 1k! If that happens, I will super laugh at him. Why? Cos he was cock sure it wouldn’t happen! Yes, gold may bottom $1080, or $1150 for all that matters. I just know, when it bottoms, and make some moves, I will capture it. Right now, I am more interested in Nikkei, and Europe. If they fail to work, and I can’t make money, then I will examine if gold is worth a visit. But in May, I will surely start visiting it.

    My 3 cents worth of wisdom to all…. Fish where there are fishes!!!!

    1. Gary Post author

      Does this mean I can go ahead and start laughing at you since we’ve already made 159% in the metals over the last year and 3 months.

      Most people don’t do that in 10 years. 🙂

      1. chrisG

        Why should u laugh at me? I made 20 x my risk capital last year.

        And I am not saying u are no good. You are what I considered a successful trader. You have a workable system. But many, don’t. And many don’t read carefully or have comprehension problem. They will listen blindly. In the end, u make they lose.

        Also, even if comprehend correctly, they may still not make it. Bcos trading psychological is the key, and discipline. Step one, build lots of knowledge. After that, knowledge is of little use. Cos with knowledge, comes skills. If have knowledge, no skills, its useless. Next , with skills still need psychology. To make it, eventually, I rate it 90% psychology, 10% skills.

        1. Gary Post author

          I doubt anyone is going to believe you made 20,000 percent last year.

          Like I said post your trades in real time along with the price you got and we’ll judge for ourselves whether your system makes money.

  19. zkotpen

    ARends,

    “I try and consider all know techniques that add value and I guess EW specialist would be on the ball to a good degree…”

    I prefer “Wave Principle”, as Elliott himself called it — “EW” specialists spend way too much time counting waves. When it’s historical data, I go right for the jugular: Where is the middle 3 of an impulse?

    For a correction, I tend to concur with Gary’s advice. He used to say something like, “look at a chart from across the room — where is the obvious high and low?”

    I do that in my own way: Where is the obvious mathematical high and low?

    The “EW” specialist, by contrast, places a high priority on counting out his or her 1, 2, 3, 4, 5, or 1-2, 1-2, 1-2; 3-4, 3-4, 3-4; 5, etc., for an impulse; or getting bogged down in trying to count out some or other complex corrective pattern, and often unsure of whether a triangle is more likely to break out or down (Is wave 4 “A – triangle B – C” or is it just one big triangle by itself?)

    So turning to your question, I’ll give it back to you rephrased:

    During the Supercycle move in gold from 1999 to 2011, $252-$1925, where is the “middle 3”?

    Answer that correctly, and that will give you a MUCH better idea of Cycle wave 4, Cycle wave 5 (2011 — should be obvious), how to label the 2015 low, what you mentioned in your comment, “The move up in 2016”, Cycle wave currently in progress… and so on.

    Finally, even though I consider the most of the “EW” guidelines to be archaic and in need of rewrite — which is my long term plan — they do have value. For instance, Prechter is always talking about wave 4 tending to retrace back to the previous wave 4 of one lesser degree, usually to the extreme half of it. So go find Cycle wave 4 in the Supercycle move from 1999-2011, and that gives you a nice target range, with likelihood of gold getting down to the lower half of that range.

  20. Goild

    Good morning,

    One benefit of focusing in trading gold/miners is that one gets so familiar with their moves that often one can predict what will happen. Though acting correctly, taking advantage of the opportunity, is a different matter.

    The question is, why going elsewhere to make money, to a place not so familiar? The grass is not greener elsewhere.

    As per how to best trade, there is not a single recipe that works, all recipes can work. It does depend on the trader skill and primarily on the physiological buildup of the trader.

  21. Goild

    Dboz,

    All things considered, we may say that the entry point is the easy point.
    It is the exit point which is the most difficult.

    Sometimes I wonder which is a better way to make money.
    Plunging with a lot of shares, or aim at multiple trades to make the same amount of money as a plunger would do.
    Risk of ruin grows disproportionally with the bet size.
    A factor not often acknowledged is how much the trader psychology is affected with large bets.

    Livermore in part worked it out. Do not start will your full account stance. Test first if you are right.

    I guess key to the trading dilemma is to have a plan, accept it, and execute it.
    Risk of ruin, ruin, means the game is over. Means not being here, means having your mind elsewhere.
    Can one walk away from this site? From trading?

    What is more important, making a lot of money quickly, or over a longer period.

    I was reading the other day that more money does not equal happiness. It is the quality and quantity of the relationships we have with other people what equals/impacts happiness.

    I am glad you got some relief yesterday!

  22. Robert

    Pedestrian, been reading your interesting posts and got a few questions. What do you see coming in the next few years thats got you so worried, a war/economic collapse? You said your “prepared”, what sort of preparations have you made and what do you advise?

    I have to disagree with you on gold being worthless. During all times of chaos and uncertainty gold has always been superior to paper money. Go back to your history books and look on the economic collapses in Rome, Weimar, Argentina. Hell, look on Venezuela right now. If u have many ounces of gold in Venezuela you preserved your purchasing power as the currency went down the toilet and your way ahead of majority of the population.

    1. Pedestrian

      In just a few words, Robert, what has me worried most is the pension collapse and insolvency of municipalities brought about the eventual mean-reversion of asset values. These are still rising of course and we are not yet at the top but every boom of this sort eventually turns to bust.

      There are no exceptions so I hope you won’t argue against the basic premise.

      Whether stocks or bonds or real estate or farmland or bitcoin, everything is already priced as though the boom will run forever. Price charts are forming ominous parabolas and rate normalization will eventually trigger a collapse. And unfortunately because everything is in the nosebleed section already that tells me the impending correction will be very nasty and long lasting.

      Decades perhaps. Don’t laugh, it happened to the US before so its not a novel idea I am presenting here. The Long Depression prior to the Great Depression lasted some two decades in total from 1873 to 1897. Rough times. End of the credit cycle. Bursting of the bond bubble. Deflation of all assets amidst unrepayable debt, business failures, bankruptcies and rampant unemployment. Nothing has changed at all and now we face the same problem once more.

      Except this time we have automation that threatens to wipe out millions of the remaining jobs. Not good.

      The Long Depression
      http://socialwelfare.library.vcu.edu/eras/civil-war-reconstruction/the-long-depression/

  23. stockpick

    The best indicator is volume and price action….it never lies!

    During corrections or at the bottoms, volume dries up and then look for spurt in volume and the price action….you will get the sense on where the market is headed at least in the intermediate terms. Usually there is always a successful re-test to make sure the price is trending in the right direction.

    Gay has changed his call on several occasions, but he is a good trader but when he makes calls beyond 6months, I have my BS meter on. he trades with what he sees and as any good trader keeps a close eye on price/volume.

    I do not agree with Gary’s returns because he trades using 3x leveraged and options which is not a typical investor does…those vehicles are used by traders. He should be clear on who he is addressing.

  24. FASTEDDY

    Hi all, I’ve finally got around to actually joining so i can post. I realise most of you guys are on the other side of the pond but as a Brit i’m trading in GBP. Iv noticed none of you guys seem to have picked up on the inverse correlation of gold and the GBP (£) . Since the brexit vote last year its been my goto check/forecast of where the price is going. Anyone else picked up on it /follow it? …..Article 50 possibly being invoked this week?

    1. Pedestrian

      Don’t expect it to last. Geert Wilders Freedom Party which leads in the Netherlands is set to win the elections next Thursday night and that will have exactly one outcome you must know about now. It will cause the euro to sell off and dollar to rise because Geert Wilders is a far-right anti-immigration type who will immediately be headbutting with Germany over border controls. And if the euro falls then gold is going down with it sorry to say. So even if there is a reprieve and one or two day bounce on news Yellen will hold fire on a rate hike it could all be reversed 24 hours later on news the Freedom Party has taken the day.

      1. Emptyness

        Don’t scare the people. Wilders Freedom Party will get about 15 – 20 % of the votes. Maybe they will be the biggest party – but nobody wants to enter a coalition with them. The election has no importance.

        1. Pedestrian

          We have a little expression that covers that;

          Buy the rumour, sell the news.

          So by the time people realize there is not a threat the damage will already be done and gold will have taken another leg down. Or maybe two. But don’t underestimate the power of money to move markets when a major currency is involved and fear is in the air.

  25. stary

    Gary is right for a bottom Trade. Mac is right for a Up Trend Trade.
    Bottom Trades (those under the EMA(9) and not basing, not trending up in general). GDX is not trending up on the Daily in general.

    So on Gary’s Daily Trade GDX.
    Exactly right. For the way I play Bottom Trades!

    Simple BUY FORMULA…….After the Daily RSI(2) has bottomed out (at least two lower low previous candles).
    BUY on the 1st Green Candle.
    That’s all there is too it!

    GDX has had it’s 1st Daily Green! And a good one. (at least 2/3′ green)
    Not only that …. in this case it is a beauty… with the support of a tight tiny daily curve up with weekly RSI(2) flat and daily RSI(2) rising. WOW!
    But don’t count on a long run! And I hope it doesn’t turn into a base.

    NOW..
    Buy 1/2 position of GDX on Monday.

    THEN…. As Gary Suggests. Place Immediate STOP at Last Thursdays low of $21.14. BUY second half if the price get near the STOP.

    THEN… trail stop at the end of EACH DAY.
    BY… Placing the STOP AT THE LOWEST Low OF THE LAST TWO PREVIOUS DAILY CANDLES.
    So, in GDX case, Monday at close change the stop from 21.14 to 21.19. etc. etc. etc. Until you get stopped out.

    THAT’s IT! (Always make the STOP a few pennies lower so you don’t get pick off.)

    *NEVER EVER* remove the STOP when attempting a Bottom Trade.
    NEVER. This is the ONLY moment that you will become a True LOSER as a Trader!
    And shit it is hard to do! Just man up and take the loss!
    Cause MAC is right. You get TRAPPED! Psychologically Devastating!

    Lastly….when you get Stopped out on GDX, it is important not to move to another chart… keep sticking with the same one. And repeat the Above Steps.

    This is for Bottom Plays Only.
    Once GDX becomes a winning UP TREND TRADE you need to change to a different STOP LOSS and BUY strategy. Period.

    My Fellow Traders…..This is a WINNING STRATEGY for BOTTOM TRADES that won’t leave you in a losing Trade…. TO LONG! and won’t make you take your money off the table… TOO SOON!

    You want to do this for living. Follow the advice above!
    There alway more things you can do to increase probabilities. Don’t go there.
    In the end, keep it simple, keep it consistent!
    And most of all ignore everything else around you, stick to your simple system!

  26. MagnuM

    Thanks for taking the time to offer your interesting opinions once again Pedestrian! Not everybody ignores your predictions! =)

    My question is, how does one invest in a deflationary bust? Cash, bonds, and going short are the only things I can think of! Also buying defensive sectors like utilities that pay a good dividend is another thing that comes to mind.

    1. Pedestrian

      Dividends are an excellent idea.

      For that matter, any secure investment that generates income is probably a good bet. Gold does not offer that opportunity. The key feature of a deflationary depression is a shortage of work though and so above all you need to take steps to insure your income is dependable.

      Advances in automation, robotics and self driving vehicles alone now threaten millions of salaried jobs in a way that was unthinkable a decade ago. So its not just the low-skill factory floor worker who will become redundant in the next few years. All variety of job from bank tellers to truckers and even restaurant workers are threatened. So are accountants, teachers, brokers and sales agents. Not many jobs are immune anymore.

      The advent of rapid job killing innovations is remarkably similar to the changes thrust onto Americans during the Long Depression when railroads, telegraphs and mechanical industrial equipment was rapidly on the rise. It was also at that time electrification was being introduced. So the collision of technological innovation in a cocktail of burdensome debt and falling growth as traditional work went into decline resulted in a very difficult economic period.

      It was a panic. But at 23 years in length is consumed a large percentage of the typical persons life.

      At the heart of it all was a lack of good paying jobs and sustainable employment. Millions ended up at soup kitchens and while that is probably not going to be seen again since income safety nets mean you can be unemployed and unseen, it does not give us real hope that the social impacts will be any less destructive or political discord any less muted.

      So what I am saying is you need to focus on revenue streams (and the more the better) as some will be dead ends in a difficult economic period. What you don’t want to happen is that one day you are unable to service your basic debt obligations since that generally has only one bad outcome when taken to the last degree.

      And you do not want to become dependent on the state which is where the majority will be heading as that only results in losses of freedom and a substandard life. Neither do you want to be investing in more real estate if you don’t already own some. When the chips are down you cannot buy a tomato or a pack of smokes with that house unless you hock it into debt.

      What depressions always teach, and what lessons seem to never be learned by the generations that follow, is that its all about cash and incomes when the day is done and your ability to maintain your life in a way you are already accustomed. A house ain’t worth piss when nobody can afford to buy it anymore and you cannot keep it heated and in good repair.

      Right now household wealth is again at a peak but as always it is paper-wealth meaning values are highly speculative and subjective and based only on what the market believes is fair value. Throw in a hard recession and double digit unemployment and those prices adjust rapidly back to reality.

      We had a taste of that in 2006 and I think we could see it again given so many people are now living almost hand to mouth and paycheck to paycheck. Savings rates are insufficient so there is very little cushion for error for the majority these days.

      None of this prescribes well. We don’t know when the wheels will come off the cart of course. That could take two more years or it could take ten. But what we should be prepared for is the worries over a shortfall in income streams or a lack of essential income as the inevitable future of job shortages arrives.

      So your investment decisions need to keep that idea at the forefront at all times.

      You need to invest for income, not store away pretty lumps of metal.

  27. Chad

    Long time lurker, thoroughly enjoying all of the information in the comments. Civility at its best here. I am not a trader, yes I do have a few positions being held over a year. I am just a macro watcher.
    What made me sign up and wish to post today was a comment about deflation. I am assuming (bad of me to assume, hence reason for the post) that deflation is that CPI will decline. Goods and services will “cost” less with current currency units in circulation, and when economy slides, additional currency units will be provided and still goods and services will decline. Yes?
    I will argue against this stance. Today, most of the currency units are trapped in the upper loop. The lower loop has had many of its currency units sucked from them by the banking and corporate institutions. I would argue that the amount of circulating currency in the lower 70 percent of the world has declined steadily since 2008. This would be the reason why currency circulation is at a decades low.
    The Federal Reserve of the US is going to raise interest rates this quarter (next week). This will be the first time they have raised rates two quarters in a row in over 10 years. Many are surmising a .25 raise, but there is some speculation that a shock of .50 basis point raise may transpire. Again WHY? There is nothing being shown in ANY economic information that the economy is accelerating to the point to necessitate this increase. Every indicator is showing deflation due to slowing economic activity and raising rates is just going to amplify this situation.
    What is the saying “when all are on one side of the trade, that is the best time to move to the other side”. The Fed is showing their hand that “something this way cometh”?
    My thought is they (Fed) are raising rates to decrease the amount of currency units (leverage) in the upper loop before an “event” happens that causes the flood of currency possibly into the lower loop. Bond market starting to decline but still above the long term trend, possibly taking a breather to reload for another leg up, but maybe not. Raising rates may stem the tide of bond price decline, but at near 0% long term return in bonds, how much farther can the interest rate on bonds decline and still be considered a prudent investment? Other than banking institutions using soveriegn bonds as collateral, i dont see the 0% continuing. This is the area that the largest amount of invested currency units are deployed. Once funds start to move out of bonds, other assets (non perishable) will become bid.
    IF the SM hits a bump, interest rates on the rise, those that use leverage to trade are going to get margin called, including banks and hedge funds. This will increase the rate of decent in the SM. Again leads to currency being invested elsewhere.
    Britain filing Article 50. Turmoil in the Euro. This may be why Super Mario is going to increase currency creation.
    Deflation in currency paper products, yes, but i don’t see deflation in the real economy in any scenerio other than steady as she goes, which does not look possible for the foreseeable future.

  28. Don

    Forget about the long term ‘guessing’ about what the dollar may or may not do. Let’s stick to something more immediate in nature. If and when the US decides to tune up North Korea with an all out attack, a possibility that is quickly becoming a probability, what effect would that have on the markets? I believe long gold/silver and short the stock market would work out nicely.

    1. Pedestrian

      Funny Don. I don’t think anyone is guessing about the US dollar since the chart is unequivocal and the dynamics pushing our currency higher are not in dispute. Nor is the facts about a global dollar shortage nor the M! money supply. And in case you forgot (or perhaps never knew) money velocity is still in decline and that alone is a red flag of deflation.

      I know you guys are just too desperate for gold and silver to be good investments but I never really understood your reasoning. Are you honestly hoping for a war to test your hypothesis that gold goes up when the nukes start flying?

      Its comments like yours that keep proving to me gold bugs are the stupidest people alive.

      1. Gary Post author

        Velocity of money has been steeply declining since 98. During that time we had a tech bubble, a real estate bubble, and a commodity bubble. And now we are at the very beginning stages of another stock market bubble.

        I have no idea why anyone even pays any attention to MV. It’s a completely worthless measurement.

        1. Emptyness

          I don’t think so, because inflation is based on
          (a) money supply (already very high)
          and
          (b) money velocity (so far very low)
          The fed rate hikes may lead to an increase in money velocity and therefore increasingly higher inflation. So it’s not worthless.

      2. Don

        Pedestrian, are you living in some kind of bubble where you are able to filter out what ever is going on in the world and then literally make up your own narrative about how you think the world works? Good grief man, get a grip on reality! Are you really unaware that the US is seriously considering a preemptive strike on the North Korean nuclear facilities? The possibility of the US attacking North Korea is increasing every time North Korea launches a new long range missile. BTW, who said anything about “hoping for war”? That was a stupid thing to say and another example of how you just make things up in order to dominate a discussion. Frankly, I think, as others do, that you are just clueless.

  29. Steffmeister

    Someone who has an eye on the big fractal in gold? I’ve told Gary about it for years, but he is not paying attention or he lacks knowledge in that area.

    Pedestrian is clueless about the future for gold, listen to him at your own risk. He is correct about deflation, but so is Mike Maloney, Daneric and others. First deflation with currency-financial crisis, then major inflation. We will soon repeat the rise from 250-1900 in a much shorter time period. Being conservative, that predicts a top in Gold 2020-2023 at $7600 in today’s dollar value.

    So yeah, great opportunity for us invested in precious metals. However we are still in a BEAR 🙂 will we get a top or a bottom at summer solstice this year? We got a bottom at winter solstice. Old ancient knowledge still works today despite the fact that we live in a HFT environment. As a species we are not that modern are we?

  30. Steffmeister

    OFF TOPIC:

    Very difficult times in Sweden. We ethnic Swedes are being replaced at great speed. Travelling around in major cities in Sweden it almost feels like we are living in a third world already. Rinkeby is a hot topic these days:
    https://www.youtube.com/watch?v=0SmKcdg5pQM&t=2s

    Who is behind all this, it’s almost like a concentration camp without gas and it’s getting worse, day by day, year by year. I guess the elite is pushing their agenda and Sweden is one of the most eager knee dog to fulfill their plans. The globalists Carl Bildt and Göran Persson was skillful in that area.

    “The Third World War must be fomented by taking advantage of the differences caused by the “agentur” of the “Illuminati” between the political Zionists and the leaders of Islamic World. The war must be conducted in such a way that Islam (the Muslim Arabic World) and political Zionism (the State of Israel) mutually destroy each other. Meanwhile the other nations, once more divided on this issue will be constrained to fight to the point of complete physical, moral, spiritual and economical exhaustion…We shall unleash the Nihilists and the atheists, and we shall provoke a formidable social cataclysm which in all its horror will show clearly to the nations the effect of absolute atheism, origin of savagery and of the most bloody turmoil. Then everywhere, the citizens, obliged to defend themselves against the world minority of revolutionaries, will exterminate those destroyers of civilization, and the multitude, disillusioned with Christianity, whose deistic spirits will from that moment be without compass or direction, anxious for an ideal, but without knowing where to render its adoration, will receive the true light through the universal manifestation of the pure doctrine of Lucifer, brought finally out in the public view. This manifestation will result from the general reactionary movement which will follow the destruction of Christianity and atheism, both conquered and exterminated at the same time.”

    1. Pedestrian

      Concentration camp? Seriously? Only 3% of your population is from the Middle East, your domestic birth rate is dropping fast and the median age is among the highest in the world at 41 years. Unless you welcome a lot of new immigrants soon the whole nation will be an old folks home a decade from now and there won’t be many working to pay into the pension system.

      You are staring down the barrel of an economic drought brought on by little more than the fact there are too few children to replace the aged. The only alternatives are sharp cutbacks in pension benefits or raising the retirement age because Sweden has one of the highest life expectancy rates in the world where people live on average into their middle 80’s. You are top ten actually.

      On top of that you are suffering the typical housing market bubble and asset inflation that accompanies misallocations of capital into already overpriced assets. But there is nobody coming up behind to buy those inflated homes and the outlook is dismal as the next recession will see likely an aging population attempting to dishoard excessively priced homes into a falling market (EG, get prepared for a crash). You will therefore see a corresponding home price deflation that will go on for many years as the excess is wrung out of the system.

      It is the perfect recipe for an economic heart attack as debt ratios rise and employment levels decline along with government revenues. This is easy to predict actually since we can forecast retirements based on population alone and spending patterns are thus not difficult to calculate.

      Sweden is an excellent example of what I have been talking about in earlier posts as it faces a very slow growth future under current conditions and rising debt with a terrible demographic pattern. Any disturbances to the balance of trade could turn negative quickly so Europe’s health is obviously a big worry.

      So I don’t know its a globalist agenda to destroy your culture by inviting in young workers but something has to be done quickly because its already too late to raise the birthrate as the average Swedish female is already midlife at 42 years.

      You might want to hug an immigrant instead of kicking them out.

      1. Steffmeister

        Obviously you know very little about the situation in Sweden. 3% not a chance that number is more than 10years old and I do not trust the authority numbers. Looking into my hometown I feel like a total stranger nowadays.

        Demographic wise I’ve been told that we got the highest birthrate in Europe.

        Almost 1 million is living outside the society, that is 10% of the population, a recipe for disaster!
        We need intelligent highly educated workers not the kind that is showing up in the central of the city throwing shit around and shooting each other.

  31. zkotpen

    FASTEDDY:

    Thanks for that Xmas Carol reference — loved it!

    Funny thing, when I saw your moniker here for the 1st time, it reminded me of a decades old question in my mind: Who shot Fast Eddy? Could never figure that one out, from Reservoir Dogs…? One of the unresolved mysteries of cinema & Tarantino.

    I could never finish a Dickens novel — though I’ve tried ACC, DC, GE, & the famous “It was the best of times, it was the worst of times…” I did manage to watch the BBC miniseries of “David Copperfield”. Happy I will go to my cremation without ever completing any Dickens novel… though I absolutely love both the 1938 & 1951 film versions of A Christmas Carol. Just can’t stand CD’s writing!… I don’t like his style: Schmoozing around, slumming, sucking up, just to gather a bunch of fodder & then writing about it in patronizing fashion.

    Charles Dickens is dead as a doornail to me! 🙂

    Likewise, I just can’t seem to wrap my head around the silver charts — though I haven’t given them a serious look in a very long time. Seems too prone to fits & spurts for my taste… that’s just my own personal take, and one should only trade a market one feels comfortable about.

  32. zkotpen

    …BE ALL THAT AS IT MAY: The INTRINSIC VALUE OF MONEY is AS A MEDIUM OF EXCHANGE and ONLY as a medium of exchange. NOT the value of the materials of production, not the cost to produce this or that coin.

    I’ve heard it all over the world… mostly Latin America, where I understand the language as well as I understand English: Chileans baffled by the fact that it costs more than 1 CLP to produce 1 CLP, and legends of people walking around Chiloé villages carrying lumber and such here and there trying to barter a couple of wood posts for a basket of food here, for a shirt there.

    There is HUGE value in having a medium that you can hand over to somebody in exchange for something you want, while somebody else gives you some of that medium when you give them something they want, and there’s no need to worry about the fact that you don’t want what the latter offers, and the former doesn’t want what you offer.

    That, and ONLY THAT is the INTRINSIC VALUE OF MONEY.

    Once again, ECON 430: Money and Banking. That is a full semester course, with plenty of prerequisites, including some in mathematics and statistics, if memory serves. It’s an upper level university course, and it is such for a reason.

  33. zkotpen

    Steffmeister:

    “As a species we are not that modern are we?”

    Yes and no.

    On the “no” side: The universe is mostly, even overwhelmingly UNKNOWABLE, as it has ALWAYS been. Of the small portion of what is knowable, that is mostly, overwhelmingly UNKNOWN. That leaves an infinitesimally small portion of the universe as “known” — and much or most of that is highly open to circumspection. Always been that way, always will be.

    On the “yes” side: As a species, we exist outside of the food chain.

    We’re modern, but we’re not modern 😉

  34. zkotpen

    Just to drive home the above point, I like to leave the light on outside when the sun goes down — sort of like bribing the geckos to be my pets, as the light attracts bugs that they can eat. For a gecko, a nice moth or other insect is their form of money — it’s an object of great value to them.

    Sometimes, like today & yesterday, there are these rather annoying swarms of thin-bodied insects with relatively long, sleek, translucent wings, and a lot of them end up dead on the floor. I go to bed thinking I’m going to have to clean their corpses up tomorrow morning. But when I wake up and go out the next day, there’s hardly a trace of all those bug corpses lying around — a broken wing here and there, as well as a few of these bug corpses trapped in the webs of my other pets, the spiders. Otherwise, all gone! Carried off by ants in the night.

    Humans tend to take it for granted that we exist outside of the food chain.

    Being outside of the food chain is such a huge luxury — it allows us to have all of this discussion and chatter on the internet, while not worrying whether some big beast is gonna swoop down, pounce, maul, etc. & drag us off as the main course of their dinner!

    1. zkotpen

      Awesome exceptions that PROVE THE RULE!!

      Or as my best friend a Uni, a PhD candidate in Cognitive Psych put it so eloquently nearly 30 years ago:

      “Isn’t it funny how we eat millions of fish every year and think nothing of it, but we make such a big deal of it when a handful of fish eat a few of us every year!”

      That was the same friend who turned me on to Tarantino (see my other post to FASTEDDY, above 🙂 )

  35. zkotpen

    Pedestrian,

    Thanks again for that chart yesterday. As I stated above, I gave it a look when you posted it. Then I slept on it & gave it a fresh look in the morning.

    With that broader perspective, I do recall seeing another version of the same — I even think I posted a comment to that effect on the SMT premium site… back 2014 or so: I noted the MUCH steeper slope of the move up in gold to the 1980 peak than the slope to the 2011 peak, on a log scale.

    Now, I’ve got two thoughts. First, that gold chart sure looks like simply another CURRENCY chart. And that, as I’ve stated more than once, is my interest in a deeper study of the price/value of gold over time. But to be clear, when looking at the gold market, my mindset is ForEx, as it should be.

    I’ve always been suspicious of the term “commodity”. Will make a post on that below — in brief, the Romance Languages refer to “raw materials” as such — I find that appropriate, for those items: soybeans, wheat, sugar, silver, copper, etc.

    Though gold comes from the Earth, exists in largely pure form and overwhelmingly as a stable isotope, it is the timeless, universal currency. I believe that’s the proper mindset to have as one approaches the gold market — it’s just another ForEx unit, that trades round the world, round the clock — sometimes it goes up, sometimes it goes down. No need to get emotionally attached — as I know you agree!

    Second, even more do I wish I had literally centuries worth of data — all the way back to the invention of currency, if possible, to give more meaningful analysis of the trends of highest degree. That would be super interesting!!

  36. Gary Post author

    In the last 80 years we’ve experienced two deflations. The first in the early 30’s when the money supply was tied to gold. Roosevelt stopped the deflation when he broke the gold connection in effct doubling the money supply overnight.

    The second was a brief period in 2008. Bernanke stopped it in its tracks with QE1.

    Based on history I don’t know why anyone would think we have any serious threat of deflation. Central banks can halt deflation easily by expanding the the money supply. If need be they can simply mail checks to the population to get it into circulation.

    There has never been any real risk of a serious sustained deflation. There is going to be risk of a serious inflation though at some point. And just because the dollar is rising against other currencies doesn’t mean the purchasing power of the dollar is going up.

    Gold is a perfect example. It has already started to decouple from the dollar. When the dollar made a higher high recently gold was nowhere near making a lower low. The stock market is another example. Despite the dollar rising dramatically over the last three years stocks have continued in their bull market. If a rising dollar was deflationary then stocks would have fallen like they did in 2008.

    1. Pedestrian

      Inflation and deflation are a little like Yin and Yang. One cannot exist without the other. So its not as if there is only day followed by more daylight. As long the world turns there will always be both conditions present. Many years of QE have failed to ignite real economic growth and instead only given us excessively inflated asset values. We must assume therefore that the termination of those QE programs and advent of a tightening cycle (opposite of what we have been getting) will eventually bring about a matching deflation until there is balance again. So deflation has not been slain by the Federal Reserve nor is that their intention. They will more likely embrace it because it is the essential other-half in the economic dance.

  37. Don

    Gary, that was very well put. Some think that a a falling price of anything, be it a commodity or a price of a pair of shoes, is evidence of being in a deflationary environment and that’s just not true. I agree that the central banks can prevent true deflation anytime they want by creating as much money as it takes. Stopping inflation is not quite so easy.

  38. Don

    Pedestrian, are you living in some kind of bubble where you are able to filter out what ever is going on in the world and then literally make up your own narrative about how you think the world works? Good grief man, get a grip on reality! Are you really unaware that the US is seriously considering a preemptive strike on the North Korean nuclear facilities? The possibility of the US attacking North Korea is increasing every time North Korea launches a new long range missile. Even the threat of such an attack will undoubtedly have an effect on the markets. BTW, who said anything about “hoping for war”? That was a stupid thing to say and another example of how you just make things up in order to dominate a discussion. Frankly, I think, as others do, that you are just clueless.

    1. Pedestrian

      This is the comment you wrote:

      “Forget about the long term ‘guessing’ about what the dollar may or may not do. Let’s stick to something more immediate in nature. If and when the US decides to tune up North Korea with an all out attack, a possibility that is quickly becoming a probability, what effect would that have on the markets? I believe long gold/silver and short the stock market would work out nicely”. — Don

      ——————–
      You wrote “tune up” North Korea as in teach them a lesson. If we are watching a boxing match and you said the same thing I would know immediately you were rooting for the one who was about to deliver the knockout punch and you were also looking forward to it.

      Then you commented on the probabilities of “an all out attack” (which you now confirm is probably going to be a nuclear event) and then immediately begin to speculate on your investment angle if that should happen by advising “long gold/silver”.

      And since this is a gold blog you necessarily added a remark on how that would improve the odds of a good outcome for precious metals by saying it “would work out nicely”. In other words you are building an investment thesis with war as an ingredient and positively imagining how that would boost your sagging fortunes in the gold market.

      Because all bugs think that war is good for gold. Its one of the most entrenched beliefs in that small minded community of morons who need bad news to make a dime instead of being part of the regular world who invests for growth. But of course you guys actually need a nuclear holocaust to make a buck in precious metals bear market.

      So what do you figure Don….it adds maybe 10 or 20% to your portfolio when a few million Koreans die?

      You just dropped to about a zero in my books.

  39. Don

    Ped: Any smart investor must be ready for any situation that becomes less speculative in nature and more probable and which may have a dramatic effect on the markets. Profit is what investing is all about and those who wish to engage in the world of trading stock and commodities have no business pretending they are living on the moral high road. It’s a cut throat business where ‘morals’ are a handicap and which are best left for pretense at dinner parties. That said, I don’t think you are much of a trader anyway, just a big mouth with a massive (and unjustifiable) ego. You don’t care one whit for anything Gary, or anyone else, has to say. It is quite evident that you are nothing more than an armchair investor who rarely, if ever, actually puts money where his mouth is. At best, you are a small time trader. I will not waste anymore time reading or responding to your garbage ‘predictions’.

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