Wednesday, October 13, 2010

Some Mid-Week Observations...

The Dollar

To start - and I qualify this comment by saying that I am reeeeally trying to exercise grace and humility with respect to this situation - I find it amusing that the reader who continually busted my stones over my bearish dollar call has not shown up since his announcement with the dollar at 80 that he was going to get massively long DX.  Hmmm...Well, now the dollar is well below 77 and down 13% since early June.  In the realm of currency trading, that's a massive move.  I guess, despite the rhetoric, our policy makers are going to force a lower dollar on the world in an attempt to devalue the Government's way out of its catastrophic debt load and spending deficits.  Quit frankly, this will ultimately transform the masses into serfs.  It's still far from being too late to move as much of your wealth as possible into gold/silver, the ONLY form refuge from this ongoing currency debasement.


In case you missed it, the Mortgage Bankers Association released its weekly mortgage applications index today.  The purchase index was down 8.3% from last week.  It was 37.1% lower than the same week last year.  Here's the press release:  LINK

Yikes.  The MBA press release spin focused on the refi activity.  With rates at all-time historic lows, of course we would expect robust refinancing activity.  But this does nothing to stimulate the economy.  In fact, given the fee-skim involved every time a piece of paper is churned in the financial markets, ultimately refi's are likely GDP negative.  The purchase index, and it's trendline since the homebuyer tax credit expired, means more severe pain for the economy.

Obama's Government Hiring Bubble

Obama has proposed a $50 billion transportation spending program to create jobs in construction (get ready for more rediculously annoying traffic congestion caused by road work that we can't afford to pay for), manufacturing and retail.  Our Government by the day looks more and more like the one portrayed in "Atlas Shrugged."  Here's the news report:  LINK

There's not really much that can be said about this other than to note what a tragedy Obama's failed, failing and doomed-to-fail borrow and spend policies are becoming.  Soon every private employee in this country will be working pretty much solely to keep Government employees employed and set-up with rich benefits.  Probably time to start planning an eventual exit from this country.  I have one close colleague who is working on this currently.

And Finally...Va bene!

Don't ask me how long this current move in gold/silver will last OR how high it will go before the inevitable correction.  My fund partner and I are doing our best to hold onto this thing as this bronco bull bucks many off of it. The "Cafe Indicator" used by Bill "Midas" Murphy at to measure bullish/bearish sentiment in the metals hit historic lows today. This is bullish.  On the other hand, I wasn't happy to see Gartman announce that he had reloaded his gold position - well, at least the paper/fake position assumed by newsletter pimps.  With Gartman's near-flawless contrarian indicator track record with respect to the metals, this can be interpreted as bearish, although he only put on a "wussified" 1-unit, so for now the Gartman indicator is still neutral in my mind.

What I'm willing to do is put down some potential price targets that would be in the context of the moves experienced in the 2005 bull move and the 2008 bull move.  Please note that I am not making a price prediction here.  At this point I have no idea.  Having said that, in 2005 the rally culminated in May 2006 with a 66% gain; the move that culminated in March 2008 resulted in a 54% gain.  IF this current move takes on the same kind of magnitude as with the 2005/2008 moves, it would suggest a price objective somewhere between $1700 and $1900.  Please don't bust my balls if this thing goes into its corrective phase before those levels.  The best advice I can offer is to take small profits as this moves higher and use tight stops on trading positions.  This will get very volatile and buy and hold is always the most consistent strategy in a bull market.


  1. "The best advice I can offer is to take ----small profits as this moves higher and use tight stops on trading positions-----.

    This will get very volatile and buy and hold is always the most consistent strategy in a bull market."

    The first paragraph from you shows an inclination to 'paper' as far as I can discern. To my way of thinking that's "trading with the enemy"

    You redeem yourself in that 2nd paragraph...although not sure if enough to atone for the 1st.

  2. Not sure I understand what you are saying. I don't have any inclination toward paper. I don't consider quality mining stocks to be paper plays. I think you're reading too much into my commentary there...

  3. How's your pebbles Chico?

    Spare a gold coin?

  4. Dave, I'm one of those simple dollar-average-in, hold, dollar-average-out investors but I certainly understood what you were saying about trading a portion of the position during the cycle. Something I leave to the pros

    What are your thoughts on the comex shorts and paper bullion ETF's during this particular run?

    Think I'm too settled to move to another country but in a few years I wouldn't mind taking a few spare coins and buyin the lot next to me


  5. Dave I think Anonopuss is trying to get inside your mind...IE:



  6. LOL Bill.

    OBXDave: Don't get too settled. Or if you plan on hunkering down, make sure you have a few good weapons and plenty of ammo to protect you and your' is going to eventually get jiggy in this country.

    Anonymous "chico" - touche again! I like your response!

  7. And if we get a currency crisis, which is looking more likely, all bets are off and pick a number for Gold/Silver.

    Joe M.

  8. Ha ha ha ha

    Poor Karl