Tuesday, August 2, 2011

SLIPPERY SLOPE


Engineering a global deleveraging economic cycle can create moral hazards that can have unintended consequences. This oft used expression is true and continues to drive the precious metals trade. The fundamentals that are behind the trade are very much intact and very much a thorn in the side of the Central Banks. They know that the more the competitive global fiat devaluation continues the more gold and silver prices will be pushed higher. Silver is more volatile which keeps a lot of traders away from this trade. However even with multiple attempts by the bankers to throttle the silver trade it still clings to the $40 level. Even with margin attacks on speculators the price remains strong. Time is not on the side of the bankers and nothing can stop the price rise of either metal unless they pull the plug on the monetization. The threats to do so have only provided buying opportunities.

Political pressure worldwide on the bankers to monetize the debt bubble will continue or the dreaded deflationary collapse will occur with warp speed. We know about the Eurozone troubles but what will drive the silver and gold trade in the the latter months of this year will be China. Watch the effects of the Chinese to jump start their flagging economy. Dr. Copper will be moving ahead along with Aluminum and nickel as they rev up their construction industry and employment monster. They put the brakes on their overheated inflationary expansion but they cannot politically withstand further GDP hits. So we are nearing another round of Chinese stimulus.

The U.S. economy is obviously hitting the skids now and its structural deficits are NOT going to be addressed. Monetization is the only thing the Fed knows and they will stay on that road as more voices are ALREADY calling for QE3. In fact they expect it so much that one commentator was calling the past QE2...QE3 before he noticed his mistake. Once the current administration committed to the banker's plan in late 2008 when the country was falling off the cliff....they had essentially made a pact with the devil for the destiny of the U.S. and the world. Now its just a waiting game until the economic cycle overrides the global monetary attempts to reverse deflation. If you recognize that deflation is essential as the solution AND you recognize that they are going to continue the futile efforts at devaluing the currencies and monetizing the debt issuance then you can MAKE the trade.

Gold still looks bullish short term and long term. Intermediate term neutral 1550 should get retested. Silver.....tougher call short term but I'll stay bullish on it. The miners hmmmmmmmmmm. I think you are going to get a bullish move over the next 2mos so play the trade.

The Euro/USD trade did turn as I had hoped it would and reclaimed the channel ...lets see how EUO does. gl

Bank run anyone?

http://www.zerohedge.com/news/eric-sprott-real-banking-crisis-global-depositor-bank-runs-and-why-gold-going-much-higher-resul

28 comments:

  1. move today on miners is short term very bullish with a nice bounce of the recent pullback.....HEALTHY

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  2. ATPG is dipping to buy spot.13.90 is nice area.

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  3. RIC 8.84 is a nice resistance to rip through......comin up

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  4. trade it or ride it there but I think they rip it apart this time.....

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  5. EXK wants 11 within the next five days and then 12.....also short term...12 will provide some nice res

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  6. HL is headed to 8.72......should getta trade

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  7. bank run in europe look at spreads in italy....and thats why gold running

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  8. KLI: What is going to be the end result? Will we see riots in the streets? Will we see a 20 year depression? Will I be able to afford bread?

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  9. That QE3 announcement is probably already being scripted haha! Imagine that short squeeze!

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  10. Morning Kli,
    Figured I say hi since your the only one posting today, bought some abat yesterday and have a small position in ric other than that kind of on the fence with what to do....... A bit off the reservation but I picked up a hand full of IBM 175 puts last week for a Buck and sold yesterday for two and change. That helps keep the itch to do something at bay at least for a day or two :) I'm becoming addicted hehehehe

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  11. jay,

    The answer to your question is in the lyrics of this song, when nature says piper is due, it's due. All the over consumption, greed, sense of entitlement, lack of caring by society, debt, corruption,,etc and the nature says, ok, heheeeeee!

    http://www.youtube.com/watch?v=AhKnEo9ZyEs&feature=related

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  12. Jay,

    In May 2008, clif droke wrote the following and that's the answer to your question:

    http://news.goldseek.com/ClifDroke/1212159600.php

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  13. LLEN a great trade today at $4, nice!

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  14. ATPG has gone through the daily and monthly bands all that is left is monthly, which would require some serious puking.

    Central Banks continue to accumulate the yellow dog publicly and privately.

    http://finance.yahoo.com/news/Gold-Prices-Spike-as-South-tsmf-2665445406.html?x=0&sec=topStories&pos=2&asset=&ccode=

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  15. The tape for ATPG turned at 12.85 for intra-day trading, nice trade so far.

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  16. SHTF NOW....Bernank will need to act or last one out turn off the lights

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  17. kli,

    Bernanke does not need to act till S&P hit 1025/1050, till then any temporary upside is by the big BOYZ to dump their remaining holdings. If Bernanke acts around 1050 for S&P then you will get 200 up for S&P which is 2000 for DOW and after that down side resumes again. QE3's impact on stock market will be much more temporary from interval than QE1/QE2 due to supply and demand reality this time which means the actual economic conditions will overpower any QE from now on. This is when it's getting close to nature's law.

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  18. ABSOLUTELY Joe!! Exactly where I am with this too.....don't know if he will take it to that level but he needs some real panic to bring in the big guns and the big squeeze.....I'll use my usual parameters to decide when enuff is enuff.....eg. Bob Pisani crying at the close that day.

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  19. By the way Bernanke knows very well that QEs from now on won't be able to save the economy and the market from depression, he will do QE3 just to buy some more time and he knows the time he buys from now on is much shorter than previous QEs. Nature's law will get it's deflationary collapse and Bernanke knows it NOW. It's the point of no return and unlike most who think he is not aware of nature's law, he is but will not admit it publicly.

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  20. Any where between 1050 and 1175 for S&P will buy market some time to upside and Bernanke knows those levels.

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  21. For the very short term including this week, keep your eye on 1250s for S&P, if it goes below that then the chance of S&P testing 1175 will increase. Friday the so-called unemployment numbers are due, heheeeeee!

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  22. friday will be a key turn date....if I am right they will use it as a fulcrum....which way they move will depend on thurday's action.

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  23. Must say I thought the market would at least temporarily fake some good cheer over the "debt deal" (as in "here's the deal, we keep borrowing every dollar we can get our hands on til at least 2013")

    Luckily my money wasn't where my mouth was as I try not to wager on these media circuses. Core is up, dollar is up, ABAT looks stable..

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  24. I learned my lesson with both bailout votes. Bet wrong both times, and it really was just betting/guessing.

    Glad to see you back Joe.

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  25. Media and pundits all over friday's number.....consensus is complete and utter end of the world number...

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  26. Jefferson county could be coming up soon, largest US municipal bankruptcy, just a preview of the US government...I think their deadline got extended for a little bit.

    http://maxkeiser.com/2011/07/17/jpms-financial-rape-of-jefferson-country-revisited/

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