Saturday, September 3, 2011

Next up…the precious metal and energy commodity blow up...

Nobody can believe that an ever decreasing availability of a resource can do anything but drive prices to stratosphere. Even sophisticated investors like Jim Rogers are falling into this trap. The fact is that there is a lot in common here, not with the behavioral dynamics of supply and demand, but much more with music.

This process is a dance and no symphonic dance can crescendo into the infinity of ever perpetuating grandeur - there will always have to be a cadence of some kind - a resolution, if you will. The fact is that when you cross over the threshold at the top of the exponential curve, the trip stops and the dance begins. That dance is the dance that finds all the appropriate reasons, moves and momentum to both drop demand and prices, all while supply continues to perpetuate its illusion of unavailability. We are in the Coda (a musical term and structure) of this dance now. Gold, Silver and various Oil products are nearing the point at which they will not simply drop in price - but collapse. This is totally contrary to every fundamental that you could possibly use to underpin a decision to own them…but as I have said fundamentals are relatively useless for making "people" decisions - which is essentially what investing is…people are NOT rational remember.

The condition in these markets is not different, in many respects, to the total misunderstanding that Marc Faber, Bill Gross, the Gold and Silver promoters at Zerohedge and Jim Rogers have had regarding the behavior of US Debt. While I respect them, especially Marc and Jim…I have to say that money dynamics and the nature of credit psychology tends to totally distort expected behavior of people en-masse. At this time, precious metals and energy are build of the framework of a credit driven dynamics. It does not matter that Eric Sprott, a total charlatan in my opinion, thinks that he is paying for his gold in cash and taking its delivery physically…the foundations for the prices he is paying and the psychology of the people deciding those prices are build on the flimsy framework of a very sloppy matte of credit. As I have said many times…technically credit is money…however there is a big difference as to how people spend credit and how people spend money…these markets are prime examples.

You can rest assured that I will have equally rewarding shorts in these markets as my systems call them in the near future. We are up big (well into the double digits on average) so far this month…and I expect these markets to offer a dramatic opportunity in the very near-term.

Again, this is not a time to rest on laurels, hopes or impressions - it is a time to be very careful.

Thursday, September 1, 2011

well, well, well...

Its interesting to see how things go…the dollar is not going to make the lower low, nor is the EURO going to make its potential high. My weekly dollar long system triggered though I am sadly not short the EURO which will likely outperform on a relative basis - meaning the short of the EURO will likely be better performing than the long on the dollar for a similar amount of capital. As I indicated I would likely be, I am short - and at this point very profitable - up over 12% for the last several weeks. Therefore, I am short the major equity markets and expect significant new lows…in fact, I am not going to be surprised with a significant market dislocation and a breach of the 2009 lows on this move.

Regarding bonds…I expect the relentless trip towards insolvency of everything other than a few sovereign treasuries…therefore, the march toward negative yield will continue for the US Treasury bond. The move will be much more extreme than people are possibly imagining. Can you really imagine loaning the US money for the benefit of getting 97.75% of you principal back? Most can’t…however yields are likely to ultimately drop below negative 2% in my opinion.

Fundamentals are useless. Most of the talking heads on TV are pumpers and hungry for airtime to promote their 2% management fees (this is why my fund charges exactly ZERO percent management fee) and assorted alternate agendas…their pumping rings hollow…and people who may try to rationalize a credit and liquidity driven market will likely be left rationalizing the remaining size of their account in addition to their thesis that fundamentals matter.

My perspective is do not risk anything you do not need to if you are long…and that includes gold and silver…which were highly profitable shorts for me again recently. I will likely short them again imminently…there will be no place to hide.

Monday, August 29, 2011

Pennance of the Penant...

I know I have not been posting much...that will change soon.

The problem is that EVERYONE is watching the pennant that looks like it needs another low down to the 1,020 to 1,040 area in the SP500...I have not wavered from my expectation for the dollar to hit 70 and the Euro to make 1.47 to 1.5ish...The current pattern, I am afraid to say, is the worst of all scenarios...It is most likely NOT a wave 4 - it is most likely true that we completed wave 1 down and this bounce is wave 2...targeting 1,240. My clients have been alerted to this already for the last week or so...the problem with the current pattern is that it sets up a wave 3 that makes this dramatic wave down (wave 1) look potentially mild. It is certainly hard to imagine that it is possible to get harder selling than what we got on this recent wave down...however, that is sadly what looks to be in the cards. It would have been preferable to get a wave down to a new low than to have the whole move from 1,370 to 1,070 be a wave 1...but that is what it looks like to me. My systems will likely short this bounce with abandon...and I encourage everyone to think about just how dangerous this next move down has the potential to the looks of things we will be taking out the 2009 lows more quickly than anyone expected.
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