Thursday, December 29, 2011

The Bottom Is Either Here Or Near

Dave, thanks as ever for your posts and the great blog. We're dying out here and need the encouragement of someone who's lived through it before - Comment yesterday
I don't have much more to say about the current price correction in the metals/miners.  Please keep in mind that most of the damage has been inflicted since Christmas Eve, when most traders and money managers are on vacation and the volume is extremely light.  This is the ideal type of market for someone to manipulate.  But having said that, and we'll know more tomorrow, I'm pretty confident that most of the selling this week has been coming from the "large spec" COT category - the hedge funds - who have sold down a substantial portion of their long position and are piling into the short side.  I believe these traders are chasing the downward momentum of the market with aggressive short-selling in a very thin market.  They will pay dearly, like they have every time they have engaged in this strategy over the last 10 years.  Conversely, the "commercial" COT category has substantially reduced their short interest, especially in silver where the net short interest position of the big banks is as low as its been since 2001.  In other words, the sellers are largely washed out of their longs and the short-side manipulators have largely covered their short position and have been taking on a bigger long position.   The large specs will soon be squeezed into covering. This is uber-bullish.  Those of us who have been involved in this sector since the inception of the bull over 10 years ago have seen this pattern repeated several times.  Wash. Rinse. Repeat...then on to a new high in gold and silver.

As for the mining stocks, I received an email from a colleague this morning who, like all of us, likes to track the $BPGDM index on  Based on today's downdraft at the open, this index hit single digits, which reflects extreme bearish sentiment and an extremely oversold condition in the mining stocks.  You can see the 3-yr chart HERE  He timed a big move back into the mining stocks in October 2008 using this index and he's moving a lot of money back in now.

Beyond that, I thought I would post some quick comments from some highly respected analysts who study the market as much or more than me:

Ted Butler:  "It’s no fun for silver investors to have to live through the current slam down in prices. Knowing that the sell-off is intentional makes the pain more acute. The sell-off this week, in particular, has taken on the characteristics of an historic bottom. Since the predominance of the evidence indicates that silver is oversold on an absolute basis and relative to just about everything else, the most logical investment approach is to treat it as a bottom. A deliberately created bottom, but a bottom nevertheless. That means holding or buying, not selling."

John Hathaway:  “I think it’s games being played and you can always play games in thin markets. The bigger picture is, first of all, we are in a bottoming process for the stocks and the metal. Sentiment is rock bottom. I think we are seeing a number of different things that are indicative of a bottom."

John Embry:  "It’s interesting, I’ve just been writing something internally here for our people. It really focuses the mind when you have to put this down for posterity. I was just going over it and when you do that exercise, the fundamentals are so compelling for gold and silver going forward. It amazes me the degree of human stupidity here, that people are parting company with the one thing that is going to save them in the future.”

Egon Von Grayerz:  "I’m not really surprised because last time I talked to you I did say gold could go down to $1,550 support and maybe even $1,420.  In my view that would be quite normal in a very thin market and I said that would probably happen by the year end...I wouldn’t be surprised to see several thousand dollars (for gold), let’s say between $3,000 and $5,000 next year. I see that as the next move and fundamentally everything supports that.”

I can't say it any better than that.  I will say once again that the selling I'm seeing out there is coming from the amateurs who are afraid of their own shadow when it comes to the markets and it makes absolutely no sense to me - or any of the above market pros - to be moving from physical to cash.  I can guarantee you that the professionals are buying (I'm one of them).


  1. Of course the CNB-asS Slime Money Five on FastMoney were counting their fiat casino chips and gleefully proclaiming how rich they were in Zimbabwe dollars for having shorted gold. Geniuses!

  2. Silver is a slam dunk to hit $1000 per ounce in the next five years. A mortal lock.

    Since I think the manipulation is far from over, and the economic crash is still three years away, it would not surprise me a bit if it hits $12 per ounce before it hits $1000.

  3. That's a great chart on the miners bearish number, wow thats nuts!

  4. Thanks Dave for posting this because we were feeling like we were taken to the woodshed not the couch. As a gold bug I'll just have to keep adding to my stash.

  5. Presidential Candidate Ron Paul Slams SOPA

    A few days before the election circus in the US will start with the Iowa’s caucus, presidential candidate Ron Paul made a comment on the pending SOPA bill

    “They want to take over the Internet,” he said.

    “Can you imagine how much we’re going to be curtailed in the spreading of out information if we lose the Internet?”

    Paul says that while SOPA is claimed to stop piracy, it’s mostly going to invade the privacy of citizens and restrict their freedom.

  6. "...and need the encouragement of someone who's lived through it before"

    No one has ever ventured into the unknown landscape that we are about find ourselves in. Never, ever. There's no map, no book, no inertial guidance system designed to take you by the hand and safely and securely make sure you end up in one piece at the other end. (I still can't believe people aren't getting this) DENIAL is no longer an excuse and kicking that proverbial "can" (we've heard that cliche enough times by now; printing more moola) is only going to delay the inevitable pain that's waiting so patiently for itself to be felt, a few moments, days, months from now.

    For those who think that that light up ahead, (you see it up there? looks like a very bright star?) is the END of the tunnel? Sorry my friends, no, no, no, no, no, that is not the end of the tunnel, that is the beginning of a very lit up landscape filled with headache, angst, self doubt and Beklemmung. It's lit up cuz it's filled with Fire, and it's a catastrophic, high intensity, "Bleacher" fire. (A Bleacher fire is commonly understood in the wildland firefighting world as a fire that is so fricking hot, so unbelievably out of control, so uncontainable, that the firefighters have to sit and watch it from the bleachers, sometimes for a few days, because they don't want to go up in smoke),

    Do you remember that scene in the Stanley Kubrick movie Spartacus, with Kirk Douglas, where the gladiators are being trained, and there are these devices; a vertical round pole with a 6 foot blade coming out horizontal about a foot up the pole and another one, on the opposite side, about 5 feet up, also horizontal? The pole is spinning around so the blades are doing the same thing, like a propeller facing up. The gladiator trainee is jumping one moment and ducking the next. Well, imagine those devices going twice as fast and situated everywhere you normally find yourself. Get the picture? See what's coming. It's an illustration, but one that most assuredly will be on that landscape at the end of the tunnel coexisting with the bleacher fire.

    Folks, this is new territory for everyone. Not just the finance world of; "investing" extra bucks to make a few more bucks. This new territory crosses all the lines; Economics, Society, Environment, and will end up in the center of your living room and there won't be any bleacher for you to sit in, any doctor there to comfort you, any pill to make things all better.
    You'll be on your own. Yes, you'll have your stacks for the long term. But in this interim period best to learn how to take care of oneself without those amenities we, as a spoiled culture, thought would never cease to keep us comfy.

    "We're dying out here..."

    Not yet folks, but that reality is coming, very very soon.
    Got non-gmo, organic food and body armor?

    PS Thanks Dave for a venue to share our mutual cognitions.

  7. PS Did you all catch this humdinger?

    "Pass the Kool Aid. Seriously, I loves me the kool aid."

    It's so timely and right on.

  8. the COT really tells the story on this one along with the trenchant comments of the ever prescient Mr. Grayerz. As an equally astute observer Stewart Thompson impressed me with his observation that the unusually long commercials have gathered together gold, silver and euro feathered friends in their hands leaving the spec hedgies to gather their dollars and T-bills in the bushes. but what the hell, even Jim Sinclair seemed a bit twitter pated about this latest lockdown. It really doesn't help when idiots like Max Keiser predict a Comex bust and a several hundred dollar parabola in Au in December (yes, he did!). along with so many others who have benefitted from the steady and balanced
    analysis at this site, I'm wishing Dave and TGT the best in the coming cataclysms. Cheers!

  9. oui oui..

    French CEO About Ratings Agencies: ‘We Have To Shoot All These Guys’

    How? “Higher VAT, higher taxes on drinks, on garbage collection, all that will go up. And then there is inflation. This year, we haven't seen too much of it, but it’s still about 3%.” Yet salary increases haven’t kept up with it, so it hit household purchasing power.

    “Inflation in 2012 is arriving ominously,” he said. “Suppliers, who couldn't pass on their price increases because we opposed them, are coming back to us” and demand higher prices because their costs have gone up, in some cases by 20%.

    And what would he tell the next government after the election in May? “Stop listening to this financial world, these ratings agencies.” The government has to keep control of its strategy, he said. “According to the ratings agencies, it would be necessary to put France on a diet. But if there is no growth, we'll never be able to pay back our debt.”

    “We have to shoot all these guys that come to give us lessons,” he said. “I believe that’s the real combat of our society. We, the actors in the real economy, must regroup so that we won’t be eaten up by these guys.”

    "It wasn't the Italians that threw out Berlusconi, it was the ratings agencies. That's not normal. And it's not normal either that Monti was ‘non-elected’ by the ratings agencies. We have to master our own destiny once again. That’s the job of all of us.”

  10. short for time second video endorsement....

    Jesse Ventura Endorses Ron Paul as the Only Anti-war Candidate

  11. jamie, lloyd, ben...gfy's

    The Depth Of Despair In The Gold Community

    Gold is coming up on a tight group of four very major support areas that will hold the price from which the next advance is to take place. We have reached a point in terms of the depth of despair in the gold community that was never reached in the 1968 to 1980 reactions.

  12. Summary of 2011 year to date performance on major financial stocks prior to today's trading day on December 29, 2011:

    BofA: -60.38%
    Citi: -44.76%
    Goldman Sachs: -46.41%
    JPMorgan: -23.03%
    Morgan Stanley: -45.24%
    RBS: -50%
    Barclays: -34.32%
    Lloyds: -63.02%
    UBS: -29.33%
    Deutsche Bank: -28.55%
    Crédit Agricole: -56.04%
    BNP Paribas: -37.67%
    Société Générale: -59.57%

    Dave Than you for a great year full of great commentary, I wish you a happy and prosperous 2012, rest assured it will NOT to be a boring one.

    Again thank you for all you do we are humble and grateful.

    Be well


  13. "or anything else that might be deemed an indicator of inherent value. "..kind of like why facebook gets a valuation of $100 billion and the gold sector goes begging for $...its the oligarch version of something for nothing!

    Chris Powell: Financial Repression

    "Is the message here that governments have determined that the only way to stay in power is:

    "To fund their excess through the banking system, at the expense of the private sector;

    "And to go along with the gold price suppression scheme so that the only alternative to that system is not attractive either?

    "If the Chinese, Indians, Japanese, and others buy into this power-preservation scheme, then it appears -- as you have long said -- there really is no true market left, and we're all screwed, no? This is not particularly what I want to believe, but if that's where we are, then I guess I need to deal with it."

    Your secretary/treasurer replied: "Yes, that's how I construe the comments about 'financial repression' made by Rickards, Kirby, Tett, and others. It's a matter of government's making it impossible for investors to make money except in undertakings specifically approved and designed by the government itself, undertakings that get narrower and narrower as government intervention in markets grows more pervasive.
    "Economic circumstances and markets will keep trying to find ways to assert themselves, and the different interests of some countries may cause them to act against the 'financial repression' other countries try to impose, what Rickards describes in his new book, Currency Wars so there's no assurance about how things will end up, just assurance of less democracy and more totalitarianism. That's what GATA has been fighting all along."