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Graceland update March 11, 2010
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- “Hyperinflation Is A Currency Event. Not An Economic Event”
– Jim Sinclair.
- “What’s a currency event, is that where I sell all my gold at the pawn shop for a 40% markdown because I know gold is a bubble?”
– The Gold Bear Team.
- Paper currencies are government currencies. And people are people. We are ALL affected by the same emotions of greed and fear, including the gold bears. If hyperinflation or simply very high inflation were to occur, do you really think the gold bears are going to be standing there blabbing about deflation?
- I do a weekly report card. That report card encompasses the bottom line buys and sells, as well as sticking to professional action in the market. When you are buying an item into weakness, your account draws down. Stay away from morons around you who like to bully you when you are “in the moment” of a buy program. Bullies beat on people when they are down.
- A bully buys at one price. Then when price falls, they scream, “I’m losing!” The fact is that it’s NORMAL to have your account DRAW DOWN when you buy, and it’s MATHEMATICALLY IMPOSSIBLE to buy without it occurring.
- When the banksters shorted gold into 1225, their accounts drew down week after week, just as your long positions got smaller and smaller as you sold and sold and sold into that strength.
- You may want to maintain separate accounts for high drawdown actions you take, versus low drawdown actions. For example, buying levered gold ETF’s every $3 down is going to produce a lot different drawdown than a non-levered account buying every $100 down. But most investors throw everything in one account basket, and start buying and selling things based on how other things in the account are doing. Acts of wild greed and desperation are common.
- One of you sent me a phenomenal video from a new member of Nouriel Roubini’s team. Arun Motianey Arun speaks of a “WORLD of INFLATION” coming over the next 5 years, and states that even if the economy recovers, the inflation that results from that recovery should not be targeted, but instead allowed to happen. I’ll be talking to our own Mr. Macro this morning and want to get his take on Arun’s theory. Because Arun mentions some INDEXING ideas he has, his “solution” to the debt issue could be very appealing to govts (gmen) all over the world, as well as to TENS OF MILLIONS of mangled mortgage payers who have almost no cash, are facing unemployment, and are desperate for some sort of solution before time runs out for them.
- A grassroots “Listen to Arun!” movement could become a real force in America if the common person understood in plain English what he is saying in economicspeak.
- Trade Errors: If you buy the wrong item, or the wrong amount, don’t try to trade your way out of it. You could end up destroyed. That’s how Nick Leeson’s journey to a multi-year prison term began, a simple trade error. A $40,000 error became a BILLION dollar FRAUD. Don’t hold the item for “a little bit”, don’t hold it for ONE SECOND. Get rid of it and buy what you were supposed to buy. The same applies to financial advisors: If you make a trade error for a client, call them immediately. Don’t hide it and hope the item rises so you get out of it. Most clients are understanding. For ultra active clients, brokers can open NOT-HELD accounts. Meaning if there’s a trade error, it’ not the broker’s fault. This is especially important for those brokers who take email and fax orders.
- Our own Sammy the Bull (SB) reminds everyone that while many markets do indeed make significant lows in Mid March, other markets make significant HIGHS at that time. I spoke of the Transports making a new high. A high NOT confirmed by the Industrials. The daily chart shows the Transports in nosebleed overbought territory, basis the Williams and RSI indicator. Strength must be sold, and we have massive strength. Here and Now. While we’re “ages” away from getting a Dow Theory sell signal, we have immediate strength so we must book immediate profit. Here’s a look at the Dow Transports. Dow Transports I also posted the chart on the website.
- The Dow industrials are not as overbought, and it’s totally unknown as to whether they go quickly to new high and confirm the transports, or whether the transports now turn down from their overbought technical condition, and the industrials follow/lead the way down. Here’s a look at the Industrials showing the indicators up high, but with a fair bit of “wiggle room”. Dow Industrials
- The Oil Chart show here has a broadening top type of action occurring that is visible only in a close up of the April futures contract. A broadening top can be a misnomer, because it allows for either an upside or downside breakout. Oil seems to me quite similar in terms of its technical condition to the Dow Industrials. Profit-taking is the theme. (Not shorting or top calling!)
- The Chinese Dow chart(via FXI -nyse) shows a much less overbought situation. Is it just weaker than the US Dow, given the “we’re going to clamp down on lending” song coming from the Chinese Central Banksters? Or is it actually stronger because it is in a less overbought technical situation?
- We can’t know that answer, and as always, we must respond to price first and foremost. There is less profit taking to be done in the FXI than the Dow industrials, and less in the industrials than the transports, bottom line.
- A lot of talk in the past few years has taken place regarding the “decoupling” of gold from other major markets. Sad Sack, unfortunately, is a major proponent and leading member of the gold fan club.
- There are very serious ramifications to such events, and getting gold to the sky involves a lot more than some imaginary “all the stock markets will tank, the dollar will tank, but my gold options will go to the sky”. If gold really decouples from the other major markets and skyrockets while Mr. Macro’s feared DEATH SPIRAL (tanking dollar, stk mkt, bond mkt) takes place, I doubt many of you will be in a position to actually make any money from your gold, as you’ll be more busy dealing with major street violence in your backyard.
- The mid march rough time period appears to be setting up as an energy ball for gold, but in which direction?
- Gold has a head and shoulders bottom on the Gold Daily Chart
- The head itself is possibly morphing (head and shouldering is the term I use) into a larger head and shoulders. This is NOT a perfect pattern, but a fall to 1080 would build the right shoulder of what it “is”.
- Regardless, I was a buyer as we nearly touched 1100. We go into today in a state of mild confusion about the coming action of the Dow, and the effect it could have on gold. And that’s a good thing. Because a mild state of confusion means one thing. We don’t analyze price because we are confused.
- We RESPOND to it.
Special Offer for Kitco Readers: Send me an email to freereport3@bell.net and I’ll rush you my “Gold in Fives” report, showing you how to trade gold profitably in 5 dollar increments, while building your core physical position! Learn what the pros are doing to tweak their market actions in tune with the gold market’s “vibration”! Cheers st
Thank-you
Stewart Thomson
Graceland Updates
March 11, 2010
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am-9am. The newsletter is attractively priced and the format is a unique numbered point form. Giving clarity of each point and saving valuable reading time.
Risks, Disclaimers, Legal: Stewart Thomson is no longer an investment advisor. The information provided by Stewart and Graceland Updates is for general information purposes only. Before taking any action on any investment, it is imperative that you consult with multiple properly licensed, experienced and qualifed investment advisors and get numerous opinions before taking any action. Your minimum risk on any investment in the world is: 100% loss of all your money. You may be taking or preparing to take leveraged positions in investments and not know it, exposing yourself to unlimited risks. This is highly concerning if you are an investor in any derivatives products. There is an approx $700 trillion OTC Derivatives Iceberg with a tiny portion written off officially. The bottom line: Are You Prepared?
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