Monday 14 September 2009

Gold conspiracy, quantitative easing, OTC derivatives 2009-09-14

Gold conspiracy, quantitative easing, OTC derivatives 2009-09-14
Monday 14th September 2009 at 20:17 BST:


Some interesting links, money and gold conspiracies, OTC derivatives nightmares, dehedging in a hurry and China.

Blog here, interesting:
http://jessescrossroadscafe.blogspot.com/

Article on Barrick, not too sanguine about them:
http://news.goldseek.com/GoldSeek/1252609733.php

Jim Sinclair says OTC derivatives nuke is about to explode:
http://jsmineset.com/
saying,
"Can you blame China for simply saying no to Western crack cocaine finance?"

Hugo Salinas Price on bringing gold and silver back to the mint:
http://news.silverseek.com/SilverSeek/1252786770.php

and a fascinating intervew by Eric King on his website of Bill Laggner regarding money printing, quantitative easing, government fraud and another cming financial storm. He sees the 2008 credit collapse turning into a currency collapse. He just said that he has gone from net short 225% to net short 60%. PHEW! That's not a recommendation by the way! He sees 15-25% decline in housing in prime mortgages, collateral values declining, Fed is impotent.

All worth a read. Or a listen, as in the last link.

_

Sunday 13 September 2009

Last chance for gold under $1000? 2009-09-13

Last chance for gold under $1000? 2009-09-13
Sunday 13th September 2009 at 22:40 BST:

The market seems enthusiastic to push gold above $1000 but some analysts are now not so sure:

Bob Hoye on http://www.howestreet.com/ expects that gold and silver prices have had a good run but that it may come to an end with the gold:silver ratio going up again as silver and other commodities fall relative to gold in another deleveraging this autumn. He expects gold to outperform silver if we get another credit crunch and a fall in most markets. Bob is a witty and very wise market expert, very laid-back style, almost horizontal!
Discussion here: Autumn Anxiety *AUDIO*

In the goldseek radio Dr. Marc Faber & Chris Waltzek discussion, Marc Faber said that he thinks there is a bit too much enthusiasm for gold right now at $1000 to make this the big move in gold.
This is a page worth bookmarking, the Goldseek radio nuggets page with the main commentary by one individual expert: http://www.radio.goldseek.com/nuggets.php

David Morgan on http://www.financialsense.com/fsn/main.html newshour 12 September 2009 first section says he thinks that maybe this might not be the last ever chance to get gold under $1000 for similar reasons.

One of the main reasons for the scepticism is that the gold and silver COT (Commitment of Traders) are showing more or less record commercial short positions, usually the sign of an interim top. The above events may possibly influence the price to the upside, so is a commercial signal failure followed by a large upward spike in gold due to short covering (a short squeeze) possible? Hear Ted Butler on King World News and John Rubino on www.Howe Street.com.
Ted Butler September 12th: Ted Butler on the Metals Market
John Rubino on Howestreet: Gold Roundup *AUDIO*
Also on Goldseek: COT Gold, Silver and US Dollar Index Report - Septemer 11, 2009

However, Dave Skarica on Howestreet thinks that it's a A Bullish End To A Wild Week *AUDIO* and he thinks that gold has had its breakout with the gold stocks breaking out too (given the performance in the HUI Gold Bugs' Index). See his charts in an Acrobat Reader .pdf file next to the broadcast link. He can really talk! Very interesting. 'NG-AU-AG-HUI all had a strong week Click for Dave's charts.'
_

Thursday 10 September 2009

Gold - a torrent of news China, Barrick etc. 2009-09-09+

Gold - a torrent of news China, Barrick etc. 2009-09-09+
Wednesday 9th September 2009. 09/09/09 09:09:09 hrs onward:

1. China may default on some derivatives contracts, especially in oil.
China threatens to default on oil derivatives trades - BloggingStocks ,
WRAPUP 1-US commodities rattled by China derivatives stance ...
http://www.mineweb.co.za/mineweb/view/mineweb/en/page72068?oid=89018&sn=Detail

2. China has suggested in a government broadcast to its people that they buy gold and silver.
China pushes silver and gold investment to the masses

3. Hong Kong has let it be known that it wants its sovereign gold to be brought from London to a new high security vault at Hong Kong airport. The gold might be used as a backing for the Shanghai Metals Exchange.
Hong Kong recalls gold reserves from London - MarketWatch ,

4. Barrick is buing back its hedge book, apparently in a big hurry:
Barrick to sell $3 billion in stock to buy back hedges Reuters ,
Why Barrick reversed its gold-hedging strategy‎ (Globe & Mail),
Has Barrick Been Barricked By The U.S.? by Antal Fekete.

5. The gold and silver COT (Commitment of Traders) are showing more or less record commercial short positions, usually the sign of an interim top. The above events may possibly influence the price to the upside, so is a commercial signal failure followed by a large upward spike in gold due to short covering (a short squeeze) possible? Hear Ted Butler on King World News and John Rubino on www.Howe Street.com.
Ted Butler September 12th: Ted Butler on the Metals Market
John Rubino on Howestreet: Gold Roundup *AUDIO*
Also on Goldseek: COT Gold, Silver and US Dollar Index Report - Septemer 11, 2009.

6. Jim Dines has suggested on King World News that Rare Earth elements are going to be in a super-bull market.
James Dines

7. Rick Rule on King World News acknowledges that a bull market in 'alternative' energy is very likely but he sees geothermal and hydro as being the two that are viable in the free market without government subsidies.
Rick Rule

8. NOW A BULLISH VIEW: Dave Skarica on Howestreet thinks that it's a A Bullish End To A Wild Week *AUDIO* and he thinks that gold has had its breakout with the gold stocks breaking out too. See his charts in an Acrobat Reader .pdf file next to the broadcast link. He can really talk! Very interesting. 'NG-AU-AG-HUI all had a strong week Click for Dave's charts.'

As an aside to this but highly important for the future, will China allow their Yuan currency to appreciate against the US dollar? In other words a dollar devaluation with respect to Asian currencies. Marc Faber thinks so on goldseek.com this weekend.
Dr. Marc Faber & Chris Waltzek on their useful 'nuggets' page to bookmark:
http://www.radio.goldseek.com/nuggets.php

Also, see Mish Mike Shedlock's article
http://www.howestreet.com/articles/index.php?article_id=10646
and the often fascinating LEAP article with a highly European perspective:
http://www.leap2020.eu/When-China-prepares-its-Great-Escape-from-the-dollar-trap-for-the-end-of-summer-2009_a3582.html

Happy reading! I am going to try to post relevant links most weeks in a post like this, especially if we get a big move in gold.

By the way, Bob Hoye on http://www.howestreet.com/ expects that gold and silver prices have had a good run but that it may come to an end with the gold:silver ratio going up again as silver and other commodities fall relative to gold in another deleveraging this autumn. Dr. Marc Faber & Chris Waltzek discussion has Marc Faber saying that he thinks there is a bit too much enthusiasm for gold right now at $1000 to make this the big move in gold. Dave Morgan on http://www.financialsense.com/fsn/main.html newshour 12 September 2009 first section says he thinks that maybe this might not be the last ever chance to get gold under $1000 for similar reasons.

That's it for this weekend!
_

Monday 7 September 2009

SP500 and Dow Jones Megaphone charts 2009-09-07

S&P500 and Dow Jones Megaphone charts

Monday 7th September 2009 at 18:04


Here are two charts of the S&P500 and Dow Jones with megaphone (top?) formations, as described in my previous post:
Inflation Deflation debate on financialsense.com 2009-09-06

I think that they may indicate increasing episodes of alternating deflation and inflation that may continue to alternate leading to some kind of collapse at the end, because megaphone patterns tend to be bearish and resolve with a breakdown below the lower trendline.

I am going to look for more evidence to see if it is likely that we get alternating inflationary and deflationary episodes during the current crisis and to see if there is any precedent for this.

Dow Jones megaphone:




S&P 500 megaphone? :




Inflation 1980s-2000:
Long term bull market in stocks, bonds and property with few interruptions. Topped 1999-2000.

Deflation 2000-2003:
Small debt defaltion and falling asset prices, stock market crash.

Inflation 2003-2008:
Massive inflation in debt instruments and derivatives, very low interest rates at 1% , huge property bubble, commodities rising, price inflation, rising stock markets, some to new highs.

Deflation 2008-2009:
Larger debt deflation, banks bankrupt, financial panic, stock market crash.

Inflation 2009-now:
Massive injections of liquidity into bankrupt financial systems, ultra-low interest rates of zero-0.25% in USA (similar to Japan in late 1990s to present day). So what happens next?

Deflation? 2010?:
Massive bank failures, debt repudiation, market crashes, negative CPI.
or does the present 2009 trend morph into Hyperinflation?


Here are three of my previous blog posts before last year's panic:


Inflation/Deflation debate is BUNK! 2008-05-29.

Megaphone top in Dow:Gold ratio? 2008-06-03

Chart hints at Financial Disintegration: 2007-12-23)

Inflation Deflation debate on financialsense.com 2009-09-06

Monday 6th September 2009 5:03 pm:
Inflation Deflation debate on financialsense.com

Bon Prechter the archetypal deflationist was interviewed by Jim Puplava on http://www.financialsense.com/ this Saturday. Very interesting. He admitted that he hadn't expected that there would be one last 'final' reinflation after the recession of 2001 (he had expected the deflaiton to start in 2000-2001), but he was convinced that the events of 2007-2009 were exactly what he had predicted in his book 'Conquer the Crash' many years earlier. The book has been updated for a new edition and is going to print, by the way.

Jim Puplava is going to interview two inflationists followed by one more deflationist in the following couple of weeks. If they are as good as Prechter's interview then they will be very informative and intellectually stimulating.

Myself, I wonder if we are going to see something different from the big hyperinflaation or big deflation that the inflationists and deflationists are touting.

I think it is possible that we might see alternating periods of inflation and debt deflation, because we have actually seen this already:

1980s-2000: Long term bull market in stocks, bonds and property with few interruptions.
2000-2003: Small debt defaltion and falling asset prices, stock market crash.
2003-2008: Massive inflation in debt instruments and derivatives, very low interest rates at 1% , huge property bubble, commodities rising, price inflation, rising stock markets, some to new highs.
2008-2009: Larger debt deflation, banks bankrupt, financial panic, stock market crash.
2009-now: Massive injections of liquidity into bankrupt financial systems, ultra-low interest rates of zero-0.25% in USA (similar to Japan in late 1990s to present day). So what happens next?

These periods coincide almost exactly with stock market rises and crashes.

1) Liquidity injections not sufficient to offset debt collapse and asset deflation: result, another banking crisis and deflation, possibly hyper-deflation and comlete deleveraging of economy.
2) Liquidity injections sufficient to prevent debt collapse, possible spillover into many asset markets and consumer prices: resulting high inflation or even hyperinflation.

No-one seems able to give a really convincing argument to back either of the above cases, possibly because nobody knows the answer!

I have a feeling that we might be in a new stock bull market that could take us to yet a new nominal high in the Dow Jones, as per 2003-2007, or to a high in the 14000 area. However, Prechter's argument is that there has been a socio-economic change in 2008 that makes this impossible and people are not going to take on more debt.

The large increase in the savings rate agrees with Prechter, as did the rally in the US dollar in 2008 that corresponded to the unwinding of the 'synthetic dollar short position' that the deflationists were postulating before this event. The deflationists were correct: dollars were raised in a hurry to pay off debts and to refill destroyed bank reserves, resulting in a very sharp US dollar rally in late 2008. In that case, we see either a low trending market or another crash coming soon because deflationary forces could be dominant. Many inflationists (even very clever ones such as Jim Sinclair) scoffed at the synthetic dollar short position argument, but it did happen!

My feeling is that, since there is no convincing argument to determine whether the Federal Reserve, the ECB and the Bank of England can re-ignte inflation to balance the deflation which is the natural process that would happen in their absence, then we might be in for alternating periods of inflation and deflation, which might increase in amplitude as the debt collapse continues.

I note that the stock market, well the Dow Jones (and the S&P500) anyway, made a high in 1999-2000, a low in 2003, a higher high in 2007 and two slightly lower lows in 2008-09, we have another possible megaphone formation in progress, much like the megaphone in the Dow to gold ratio that has been forming since the 1920s. In other words, the market values of assets are increasing in uncertainty as this crisis unfolds, possibly leading to a catastrophic collapse at the end of this period.

Bob Prechter is expecting a major deflation in the 2010 timeframe, larger than the one in late 2008, once the present 2009 inflationary episode is over. In his view, the Fed's purchases of non-performing assets in 2008-09 will not generate inflation because they were more or less targeted as loans to specific institutions to replace the non-performing assets with existing Treasury bonds, rather than freshly 'printed' money, as I understand it. And when more assets fail, such as in the commercial real estate, prime mortgages and leveraged buyouts, many more defaults will come and deflation will continue, sending markets to new lows.

Here are two of my previous blog posts before last year's panic:
Inflation/Deflation debate is BUNK! 2008-05-29.
Thursday 29th May 2008: Inflation/Deflation debate is bunk.
and
Megaphone top in Dow:Gold ratio? 2008-06-03
Tuesday 3rd June 2008: Megaphone Top in Dow:Gold ratio?


Charts for new post:


Dow Jones megaphone:







S&P 500 megaphone? :