Thursday, May 6, 2010

MORE FEAR IN EURO DEFLATION update II

Couuple that with continued job weakness guarantees the world currency spiggot remains on. Without a true strong growing economy WITH low inflation ...gold will be you go to investment.

In a deflationary environment, people want their money to be secure and earn a small return if possible. Gold is a viable option as it is real money and government bonds are an option if that government’s finances are secure.

The difference between deflation and severe inflation rests on the market’s faith in the government. If the market has faith in the government and its finances, then the market will finance the expansion in government that occurs to counter persistent weakness in the private sector. The domestic savings picture also plays an important role. In the US in the 1930s and Japan in the 1990s, the level of domestic savings was enough so that government expansion could be financed internally. That is why there was no hyperinflation.

Unfortunately, things are much different today in the US, the UK and Japan. These governments will have to monetize deficits in order to prevent interest rates from rising too fast and too aggressively. Given the amount of debt and the interest burden, rising rates would inevitably lead to bankruptcy or default.

US Treasury bonds are still holding up, not due to secure US Government finances but due to the problems in Europe. At present, the same can be said for UK Gilts and Japanese Government Bonds. However, check the charts of these bonds and you will see massive topping formations that have dangerous implications over the next several years.

Numerous baby boomers in the US, Japan and the UK have been fortunate that government bonds have yet to enter a true nasty bear market. While the various bonds haven’t performed as well as Gold, they have proven to be a safe haven. However unlike Gold, government bonds are not a hedge for what is coming. I sincerely hope that baby boomers and others consider a move from bonds and cash into Gold while they still have time.

Moreover, just because one currency is appreciating against another doesn’t render it a store of value or a strong currency. Will a strong US Dollar vis-a-vis the Euro, Yen and Pound lead to stable or lower costs of food, healthcare and education in the US? I don’t think so.


Buy the miners on weakness gan and hope they beat this market down to 1140. I will add on weakness today.

http://seekingalpha.com/article/203275-gold-will-emerge-as-the-only-safe-haven

update I http://www.thestreet.com/_yahoo/story/10748763/1/palladium-set-to-rally.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

update II Reuters) - Gold prices vaulted 3 percent on Thursday to near an all-time high, topping $1,200 an ounce in the biggest one-day gain in more than a year as financial turmoil in Europe accelerated the flight to safety.

After trading modestly higher through most of the day, gold prices surged in mid-afternoon, passing the $1,200 mark for the first time since December 4 as stocks plunged. The Nasdaq at one point was down more than 9 percent and the S&P 500 briefly fell into negative territory for the year.

Gold and other safe-haven assets have benefitted from mounting worries about contagion from Greece's debt problems. .N But the scale and degree of the midday collapse took most traders and analysts by surprise.

"Gold is yet another currency...but it does not have the debt issue. It's not just a Greek problem, not just a European problem, but a global problem," said Axel Merk, president of California-based Merk Mutual Funds, which has $550 million fund assets.

"Gold is one way that investors can try to diversify in a world where there are no risk-free assets anymore."

Spot gold rose as high as $1,207.45 an ounce, its firmest since December 4 and its fourth rise in the last five trading sessions.

91 comments:

  1. Bah, looks like the miners aren't getting any lower for us yet. If we get to 1140 I hope gold at least catches a piece of that.

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  2. Have a little faith in the ponzi morla.....they have to slap the miners at least one more time...

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  3. Looks like they flushed the potty....raised my core....no sells today

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  4. So who'd you add, PAL, SSRI? I was hoping AUY would go lower...

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  5. Homer joe is lookin at SWC here and is accumulating........me too

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  6. miners now reversing hard.....wooooohahahahaaaaaa

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  7. Joes back in swc at 14.35.....he wanted to see how it bounced off of the 13 area low

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  8. Thanx Kli (and Joe) - already have some SWC in the mid 13's. Could have added more yesterday but I had no connectivity. We own PAL again after selling all of it a week ago and my SSRI trade is hanging on a limit order...I'm so cheap.

    Back to work, I'll keep an eye on SWC...

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  9. As of 1:17 PM Eastern time...

    AUY = up 2.89%
    SSRI = down 0.60%
    SWC = up 0.55%


    AUY is the winner for today. Actually if it was purchased on the dip, would have made for a nice day trade.

    ps. Sold my GS puts this morning for a $50 profit. My gut had a strange feeling. I'm all cash again.

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  10. Let's see if S&P 1140 holds (100 dma), greatest beneficiary of the decline is the 10 year US Treasury bond currently at 3.46%.

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  11. Ugh, 1140 was my mental "bottom". This is looking scary, is anyone going short here (of course, not with pms)?

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  12. Nope, that held like a fat person in line at a Ponderosa.

    This doesn't look healthy. I suspect tomorrow may be worse if the Krauts vote 'no' on the greek bailout.

    Where is the PPT? GS? TPTB? Nobody is stepping in front of this to buy anything.

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  13. 200 dma is 1095.....thats up next red

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  14. again, is anyone going short? I mean the etfs?

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  15. If it breaks 200dma then here comes santa......hehehehehhehehehheh. When the dollar starts to dump these commods like swc will pop

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  16. sista .....Joe just spotten you in that protest crowd getting battoned....he wants to know what the hell you are doing over there protesting ..hhehehe

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  17. Btw gang they are dragging "fear" in for a reason.....some big money printing coming.....can you say new "stimulus"....kaboooom

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  18. Good possibility capitulation could test the 200 dma on the S&P.

    These are still my favorites though:

    http://www.usmint.gov/mint_programs/buffalo24k/

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  19. Have Fun Gang, this exciting is making me hungry for artery lining burger and fries!

    Next stop 100 week moving average 1065 , wont finish typing before that happens. heehehh

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  20. Holy crap. There appears to be a little panic brewing.

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  21. He thought he saw me in Greece? If only, joe! Euro goes a looong way today.

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  22. look at that swc trade today holy chit.......

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  23. sista joe was very impressed by that karate chop to that cop you gave.....

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  24. This is what I get for walking away to a meeting for an hour. I guess I own SSRI now, wish I was even cheaper!!! I think I'll wait on SWC, kind of happy I didn't put in an limit order on that...

    I've asked it before, will a down draft be and orderly exit over time, or have people learned they need to be nimble? Not saying that is it, but I wonder if any folks are pulling the trigger on 401K trades and that will settle tonight and keep pushing things down further than they would have gone.

    What was with that spike down?

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  25. Kli/Red, S&P bounced right off the 100 week moving average like a super ball. Crazy. In your opinion do we see continued downside action if Germany votes against assisting Greece, or could this be a classic case of sell the rumor, buy the news, as it seems unlikely they will vote in favor of tossing a few clams to the Greeks. However, Chancellor Merkel is now encouraging them to do so, after apparently being on the fence herself.

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  26. Spike down and V reversal was meant to take out the 200 dma stops and turned at a more exotic 50 week moving average (typed wrong earlier) at 1065. Basically a large number of funds and computer traders got Pownage!

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  27. Homer, I'm with you in my curiosity on that spike down. i was watching ANR (met coal stock) real time when it happened. Watched it drop to a 13 percent loss and back 7 percent in a few minutes. oddlly enough, someone managed to pick up 150,000 shares just as it hit it super low of the day, like clockwork. Hmmmmmm....

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  28. Red, now I get it. Those algo trading programs are scary.

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  29. Yep, taking karate lessons since I don't like guns. Look at gold, my friends. Surely it will take out the previous high, maybe overnight. 1208, go, go, go!

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  30. Similar to the 87 crash but only "digital".....this is however VERY controlled in the since that this is being done to achieve an "outcome" .....bailout the eurozone "bondholders" or else.....and you better know who the "bondholders" are.

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  31. That was still weird, hundreds of points in minutes. At least there won't be a mass exit (today).

    Days range:
    10,083.12 - 10,879.76

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  32. also, aren't they wanting our auctions next week (I believe on Mon) to go well???

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  33. Action today even woke red up from his snoozing!!!

    Vix range today:
    24.43 - 40.26

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  34. The market is crashing!!!

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  35. everyone pay attention to SWC AUY PAL its the market talking ...

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  36. That was the mother of all sell-offs.

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  37. No 87 was.......hehehhe....i was there

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  38. here they come.......yeeeehahahaahah

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  39. Homer ....ya shoulda been buyin with both hands

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  40. BTW, very interesting note about FAS....

    A couple days before the rally started last year.

    FAS had a reverse split...

    Yesterday FAS had a split just before the selloff.

    IT is controlled.

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  41. CNBC is reporting that someone may have hacked the system.

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  42. Headline on CNBC:

    Trading Error at Major Firm Blamed for Market Plunge: Sources (Story Developing)

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  43. Kli - my middle name is shoulda woulda coulda!!! I'm okay with my exposure.

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  44. KLI: How can we navigate this?

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  45. The funny thing is I almost put a whole bunch of stop loss limits on my wife's 401K. Luckily I didn't and I guess I have to rethink that now, it's a whole new ball game.

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  46. SWC PAL SLW SSRI AUY or your favorite are in nice position here. Position trading is sane. Joe is nuts over SWC PAL for then next 6 months as the place to trade. I have a core back in these and the miners and will trade around them all. Silver is leveraged to gold when things start to move again.Stay away from shorts here

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  47. At least this made the news:

    http://www.marketwatch.com/story/programs-e-minis-trade-snafu-said-contributed-to-market-plunge-2010-05-06?dist=afterbell

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  48. I'm dying here!!! Yeah - someone typed a 'b' for a billion instead of an 'm' for million. ;-)

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  49. Citi is denying that it was a trading error.

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  50. All I know is that a lot of people learned the hard way to never use a market order. Ouch.

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  51. Dr. Evil: "Okay then. We hold the world ransom for.....One hundred..BILLION DOLLARS!!"

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  52. aint that da truth red.......in a thinly traded manipulated market.....these "events" will ultimately expose the ponzi

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  53. Perhaps UL (Unilever) will see a pop tomorrow. They own Pond's which manufactures Vaseline. I have a feeling after today it will be flying off the shelves ;)

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  54. I've gotta check Daneric's Eliott Wave charts tonight ::)

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  55. Look for volatility spike tomorrow to be slapped down......they will have their "game on" ready for rock n roll. buy on any hard dips for a trade at least. If you don't have any core then buy for core hold.

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  56. Well I missed the nice SSRI entry this afternoon but I'm happily paying 19.25 in the AH after todays weirdness.

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  57. Nasdaq just announced they are cancelling all trades today that exceeded 60% of price....hehehehe gold spiking AH

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  58. Well looks like it could be a computer glitch after all....

    Look at this chart on Procter & Gamble

    It had an after hour downward spike....

    http://www.marketwatch.com/investing/stock/PG

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  59. That was cool! Reminded me of the day when the House of Rep's rejected the TARP on the first vote back in 2008, the Dow dropped like 500 points in minutes. Guess Some body wants something!!! Fat Fingers, Yeah sure!!

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  60. Tom ........the good ol days ....and we may be getting a return...its an "opportunity". So keep your focus. That volatility today was a tell. They have some big problems with a NO BID market here. The algo bots are going to have more short circuits coming.

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  61. Could take about a week of trading to clean up the daily technical chart patterns on the S&P to get out from the 101.79 inside day formed today. Any hard ramping could be sold hard since we haven't bottomed out on the daily due to the intervention to reverse the bad trade.

    Somebody made a large fortune coming up with the trade reversing the mistake while a whole bunch of everybody else loss their shirts.

    On the good side, everybody is now much more aware of how long dated Alpo and physical gold could be the hottest thing next to clean rolls of toilet paper in less than 1 trading session.

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  62. Time for a beer and some SKF message board reading. I'm sure all the old school will be there tonight.

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  63. "On the good side, everybody is now much more aware of how long dated Alpo and physical gold could be the hottest thing next to clean rolls of toilet paper in less than 1 trading session."


    Tears of laughter rolling down my eyes.

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  64. Red I hear its a 60% cutoff......hmmmm how bout the 59% trade.......hehehehe arbitrary ripoff.....typical ....you knew it would look like this when we talked in 08......

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  65. All good traders should wear adult-sized diapers, saves on the toilet paper and unnecessary time away from watching the ticker. For once I do half believe CNBC saying that was an errant trade. If every target gets an overshoot like that fine by me, just be on the right side of it. Agreed on Immred's post above, mistake or not the technical damage changes everything, it will be interesting to see how they remodel, may take a couple days to see where it goes. I would rather have this than narrow range chop shop.

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  66. Yes Analyze. This move tells anyone just how "rigged" this is. Any "normal" market would not fall with that type of mistake. So it confirms that this is one treacherous market to be in.

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  67. Kli, one thing that they did mention correctly on CNBC, is that (in as many words), the attempt to con the retail investor back into the market took a serious setback. Remaining traders...it is down to just the algos and whales now.

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  68. Glad I don't believe in stop orders.. Some limit orders would have done me a world of good today tho, damn SSRI went to 18.40 when I wasn't looking.

    Anyway, if that was a legitimate trade does that mean Richie Rich, Scrooge McDuck, and Bruce Wayne are now short the Dow?

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  69. Dow futures down 68. Maybe this thing is for real?

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  70. They will make it as real as they need to in order to remodel it to a viable structure for the ponzi. I would rather wait to see what transpires from this for a couple days than game it in general, and wait for some semblance of order to return. Erroneous or not, my target was overshot, so any current model based on the past is not viable. We had a great downside move, no need to become over-zealous yet. I will wait until identifiable trends develop from this.

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  71. The selling, no bids, trading glitches were for real. Due to the mistake and subsequent chart damage on which which virtually all trading computers function, the selling has to be exhausted though managed to let the daily stochs and rsi bottom out. It's going to be a very busy weekend for Dr. Evil and the Big Leaders of the World to patch together a new CONfidence plan or scapegoat that will try and once again accelerate the velocity of capital.

    Everybody got to see the Wizard of Oz behind the curtain was too busy jerking off when today's accident occurred.

    Two weeks minimum to minimize the technical damage and reset the technical targets. Looks more and more like a dome top and 200 week moving average top for the rest of the year after the cleaners.

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  72. Excellent comments guys...also agree on the damage to the ultimate goal of the gov in getting the retail CONfidence back ....this is severe damage and the 61.8 fib may be the market high...I thought they might take it over but nature has fibonacci for a reason. Analyze your strategy should be listened to by all here. My core is replentished and other than small quick trades....i will sit on cash.

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  73. Kli...you know where I was today...already short, but never figured on what happened...wish I had been holding TIE...had it a few months ago...sold...DARN! In TYP, TZA, SMN, FAZ...short GS still, got my C's, short PCU, F(Jan11), AA(got it today),LVS(took profits today),short the ags and DB...If silver can break 17.85, then I'm back in SLV...still adding to my physical gold and silver anyway...With China dropping, I think one of the best trades coming will be to short copper...may pick up some EDZ shares in the morning as well...GL ALL...next few months going to get very hairy...second half of this year I pity those that stay long...IMO...TXB

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  74. I'm telling ya all what this was...tier zero...the algos have become self aware and just started flexing their muscles.

    Sorry, had to do it. Great discussion by the way.

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  75. TB Don't stay too long in the short bus. Its close to megasqueeze. Homer you get detention for that joke ;-)

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  76. KLI. I'm going to challenge you.

    What evidence do you have of a megasqueeze?

    Europe could be a black swan in my opinion.

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  77. Denninger agrees. ;-)

    http://market-ticker.denninger.net/archives/2282-Mr.-President-Unplug-the-Fing-Computers.html

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  78. Kli has no evidence just some hunches that Alpo Riots won't go over too well on literally the doorsteps of the aristocracy.

    Homer, the damage will put a few more high end homes into foreclosure and short sale plus some slightly used luxury goods on Ebay.

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  79. For those with an Iphone, Ipod touch, or Ipad. The free app of the day during those boring trading moments.

    http://appshopper.com/games/sheeple

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  80. Yup....no evidence. Just a scalded ass from 2008 in similar "collapses". hehehe. They aren't going down without a LOT of short squeezes. It may be tomorrow or not. NOT really my worry. But if I am on a short bus.....then staying too long could result in a scalded ass. Red and I both have scars to prove it.. These guys have NOT lost control...but you are supposed to think so. Now...as far as the drop today doing tremendous damage to the CONfidence of the retail... WELL guess what. RETAIL wasn't buying any of this ANYWAY. This is plan II.

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  81. When the "Real" short bus leaves for the big one, it won't be to the land of Bears and Honey, because you won't be able to cash you chips out of the system after it fails. Today was the accidental sampler of what happens when complex systems fail.

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  82. Got ya Kli...stops in place...:) Hey guys, I know this sounds nuts...but was today a test? And no retail never bought in...anyway thinking we bounce...so be nimble...remember GS loves ya money...He He...TXB

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  83. No one is talking about it....but I also have a conspiratorial aspect to it...perhaps it wasn't "planned" or "primary" but I don't believe this was an "accident". It may have been a message to O and some of the investigatory bodies after GS. "Back off or you will wish you had." I think the principal reason for this was to instill volatility and to make money.

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  84. Kli, what company do you recommend for physical gold purchases? After today's action, it is easy to see how fragile this manipulated system really is, kind of reminds me of Sept. 17th, 2008, but the PPT made their grand entrance that time.

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  85. Makes sense to me Kli. As I mentioned earlier, someone picked up 141,000 shares of ANR during the few seconds in which it reached the low of the day. That volume dwarfed the rest of the day. It would be interesting to know how many stocks out there had relatively high volume buys right at that point and sold an hour later. I mean timing it that perfectly as a retail investor is next to impossible. Truly catching a falling knife as they say. The only reason someone would make a large buy in the midst of that market freefall was if they knew it wasn't going to go any further, IMHO.

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  86. Wilks go with a local trusted dealer in a cash deal. I am not sure about Kitco. Stick with Maples, American Eagles and Buffaloes.

    As for the large buy, if you bought a large sum of NYSE or SP futures the leveraged contracts would make the equivalent buy for each of the index components. You just have to have a cash account with the ability to activate the transactions across all platforms simultaneously. If the 1065 level failed to hold the next support attempt would have been 1030 (60 week moving average) all which didn't matter since most stops were taken out at the 100 and 200 dma and selling started to decelerate after the liquidations. The PPT futures buy program got a real world test today and passed with flying colours!

    The fall until 2:40 and the programmed recovery at 1067 were all controlled. In between then I am less certain how much planned and how much got out of control. Any programmed intervention can only work at certain supports. OB and Staff were in contact with the other Dr. Evil minion class today so it does seem something got a little out of control in my opinion. You don't let the public know you are not in complete control and their whole savings and lifestyle could potentially disappear due to an trading intern fat fingering an entry that could wipe out your whole life savings and bring the global economy down.

    http://finance.yahoo.com/news/Obama-briefed-on-Greece-and-apf-4098393791.html?x=0&sec=topStories&pos=2&asset=&ccode=

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  87. Immred, thanks for the explanation. It actually made sense to me. It is great to have someone with your expertise and insight to give some kind of rhyme and reason to this madness. I will try to find a local gold dealer here in Raleigh, NC. It is definitely time to start stocking up on some. Thanks again.

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  88. Local dealers are fine wilks.....I use kitco...but for no particular reason....No local dealers here.Just don't pay more than 5% premium on an ounce of gold. Also cultivating a local dealer provides you a buyer when you move out of it.

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  89. I use tulving. Low mark ups and very reliable.
    http://www.tulving.com

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  90. Different public commentary of yesterdays fun. We will still have a few turbulent no man's land in trading until another fake baseline is established on the technical charts , and they try to bail the fit cabal survivors and shoot the remaining wounded retail.

    http://emsnews.wordpress.com/2010/05/07/the-inevitable-black-swan-stock-market-failure/

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