PM End of Week Market Commentary - 10/31/2014

davefairtex
By davefairtex on Sat, Nov 1, 2014 - 3:10pm

On Friday gold dropped -25.50 to 1173.50 on extremely heavy volume, while silver was down -0.28 to 16.17 also on extremely heavy volume.  Gold was hit hard at 0300 EDT, pushing gold below its previous low at 1179.40, and again at 0820 when a huge number of longs were stopped out; gold finally bottomed on the day at 1160.50.

The drop of gold through 1179.40 support is a big deal.  This low was made in June 2013 after the big gold crash, and breaking through it is a very negative signal.  In general, a break of a long term support level generally leads to heavy selling in the days and weeks following the breakdown.  All of the longs who bought the low expecting it to hold are now looking to get out, and the shorts are greatly encouraged by breakdown and the lack of buy-side support and are enthusiastically selling every rally that happens.

Miners continued lower Friday after their huge loss on Thursday, with GDX off -5.44% on massive volume; GDXJ was down -6.46% also on massive volume.  Although losses were dramatic in the mining shares and the volume was immense, it did look like some buyers showed up to pick up some mining shares cheap, since both mining share ETFs printed doji candles on the day.  It is a very modest sign of hope amidst a sea of bad news in PM.

For the week, gold was down -57.70 [-4.69%], silver down -1.02 [-5.96%], GDX -15.93% and GDXJ -20.94%.

After a bad week, silver looks like it might have at least some support at the 16 level after Friday's 90 cent silver smash on massive volume resulted in a relatively strong rebound.  It more or less printed a hammer candle; a close above 16.50 would signal a possible rebound.

The USD

On Friday, the buck jumped higher starting in Asia trading when Japan announced an increase in the rate of money printing.  Yen dropped -2.76% (a massive drop) and the buck was up +0.71, making a new high.  One would think more money printing would help gold, but the strong move higher in the dollar likely put pressure on PM.

http://www.bloomberg.com/news/2014-10-30/yen-near-6-year-low-on-report-gpif-to-boost-foreign-securities.html

The BOJ decided to expand the monetary base by 80 trillion yen a year from a previous 60 trillion to 70 trillion yen. Only three of 32 economists surveyed by Bloomberg predicted an increase in asset purchases.

On the week, the buck was up +1.18 [+1.38%] breaking to new highs and resuming its uptrend.  The Euro made a new low by a very slim margin, but JPY was by far the biggest loser on the week, breaking down much more dramatically and closing off a big -3.68% vs the dollar.  That's a 32% loss - 130 down to 89 since mid-2012.

Miners

Miners broke support this week and sold off extremely hard.  Both GDX and GDXJ were sold very heavily on Thursday with no buyers visible.  Friday was somewhat better, as dip-buyers managed to keep prices from closing at the lows.  I'm not going to call this bullish, but its better price action than we saw on Thursday and it hints that there may be buying support at current price levels.

Another ratio, similar to the GDX:$GOLD ratio is the HUI/Gold ratio.  This is useful since it dates back to the late 1990s, while GDX only goes back to 2006.  As a result of the drop in mining share prices, the HUI/Gold ratio is at its lowest point ever.  You can look at this as positive (the low must be coming soon) or as negative (breakdowns tend to lead to more selling) depending on your viewpoint.  Trader Dan suggests that either gold is overvalued, or miners are undervalued - and the market will probably act to correct this situation.  [Hint: Dan thinks gold is likely going lower]

However you want to slice it, mining shares are dogs right now that absolutely nobody is interested in owning.  Why would you, with gold and silver breaking down making new lows, with no inflation in sight?

US Equities/SPX

Another great week for US equities, which powered through their 50 MA to make new all time closing highs; SPX closed up +53.47 [+2.72%] as positive GDP reports and FOMC minutes releases seemed to drive prices ever higher.  The equity market seems to be drawing in money from overseas, as well as money that is leaving the bond market.  In addition, strong moves in SPX seem to parallel drops in PM prices.

Rates & Commodities

Bonds fell gently this week, with TLT dropping -0.39%.  Given the strength in the equity market and the ending of money printing by the Fed, the continued relative strength in bonds suggests to me that there is a serious bid underneath bonds right now.   Foriegners looking for safety - or yield, its hard to tell.

JNK treaded water this week, down -0.20%.  What is this saying, with the booming equity market?  Unlike equities, JNK has not made new highs, and it remains just barely above its falling 50 MA.  Amidst the party in equities, JNK is hinting that all may not be so well in the risk-on camp. 

Commodities made new lows but rebounded slightly, closing up +0.33% on the week.  WTIC dropped -0.60 to 80.70, while Brent was off -0.27 to 85.86.   Oil still is quite close to breaking above its EMA-9, and Brent actually managed to close above its EMA-9 for one day this week before retreating.  An end to the oil downtrend should be helpful for PM.  Theoretically anyway.

Physical Supply Indicators

* Premiums in Shanghai vs COMEX are up +0.25 to +0.50 vs COMEX.  Given the drop in gold this week, this very modest premium doesn't look so impressive to me.  Chinese people don't seem to be backing up the truck on the drop in prices.

* The GLD ETF lost -4.19 tons, with 741.20 tons remaining.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on October 24) of 1171.50 and silver 16.13:

  OUNZ 11.70 +0.06% to NAV [up]
  PSLV 6.56 +4.76% to NAV [up]
  PHYS 9.68 -0.56% to NAV [up]
  CEF 11.61 -8.97% to NAV [down]
  GTU 39.28 -9.35% to NAV [down]

Sprott funds managed to retain their premiums and even move up slightly, while the non-delivery ETFs were driven more deeply into discount.  The market is definitely showing a preference for delivery-based funds.

Futures Positioning

The COT report is as of October 28th, when gold was trading around 1227 and silver around 17.20.

In gold, Managed Money decreased both shorts and longs, dropping -2.4k contracts net, which is a small change.  Producers dropped -1.3k longs and increased +3.6k shorts for a net change of -4.9k contracts.  Not much happened - because the big moves this week in gold happened after this report was filed.

Same thing with silver - there was little change, with Managed Money decreasing net long exposure by -811 contracts, and Producers increasing their net long exposure by +131 contracts.

I'm guessing next week's COT report will see a lot more movement.

Moving Average Trends [20 EMA, 50 MA, 200 MA]

Gold: short term DOWN, medium term DOWN, long term FLAT.

Silver: short term DOWN, medium term DOWN, long term DOWN

No change in moving averages.

Summary

Both gold and silver plunged hard this week after the dollar jumped higher following the FOMC minutes on Wednesday and broke out to new highs on Friday on the BOJ's increase in printing.  And when gold and silver plunged, mining shares basically dropped off a cliff, suffering huge losses on massive volume.

Moving averages are mostly pointing lower. The gold/silver ratio is back up again this week, making a new high up +0.97 to 72.57.  GDX:$GOLD had a massive plunge and is at all-time lows, GDXJ:GDX also dropped, so did SIL:$SILVER.  It is all bad news..

The COT reports showed basically no change on the week, since the data was collected through Tuesday prior to the big moves lower in the metals.  There are still lots of shorts who will eventually have to cover on any substantial rally, but without western buyers showing up at the COMEX, the shorts will just keep piling on, pushing price ever lower.

Shanghai premiums are little changed and barely positive, ETF premiums are mixed, and a modest amount of gold left GLD.  Given the large drops in the gold price, I expected more enthusiasm from Chinese buyers.  I don't think that's a positive sign.

ECB stress-free "stress tests" provided no catalyst for the Euro, and the FOMC minutes drove the dollar dramatically higher on Wednesday, followed by the BOJ printing driving the Yen lower and the dollar higher again on Friday.  The dollar rally hurt PM.

Other than silver's modest rebound, and the miner doji prints on Friday, everything else looks bearish right now.   I mean - with GDXJ off -20.94%, it just seems like the worst week ever!  Miners and silver continue to lead gold lower, dollar is breaking out to new highs, SPX is sucking money from commodities and PM.

If you want to preserve your capital, its probably best to wait for other buyers to show up before plunging in yourself.  There are no medals awarded for bravery in trading.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

27 Comments

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Online)
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Posts: 3105
Feedback from veteran gold dealer

Robert Mish, the veteran gold dealer we've interviewed in the past, shared his observations with us yesterday:

Many calls already today. In our opinion, we are seeing a paper short power play in a leveraged environment. There is no lack of demand for gold. We were overwhelmed last night and this morning with orders from China and Europe.  Our best guess is that this move runs to Mon/Tue with possibility of a Sunday night surprise.
 
We are often asked where we guess gold will bottom:
  1. $1050 area
  2. where it is just before election day
  3. $960/990 
in that order.
Any of those answers will set up a new bull market that will climb a wall of worry with
many former goldbugs too afraid to participate.
Wildlife Tracker's picture
Wildlife Tracker
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silver

I posted this chart a while back and I guess this scenario is happening over the breakout scenario that I was excited about a couple months ago. Oh well!

Stopped paying attention to silver until now. Looks like a couple more red days ahead. I'm calling bottom again somewhere in the yellow circle in this chart.

 

gbcm's picture
gbcm
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When will CM recant ?

Well the final domino has fallen - gold and silver, which CM has been relentlessly pushing with his dooms day scenario and hysterical economic analysis, has finally gone off the cliff, and will be at the bottom for the foreseeable future. Meanwhile,  Jim Puplava's analysis has been validated once again.

Interest rates will remain low for the foreseeable future, as part of 'financial repression', which Mish and Chris talked about but never acted on in word or deed, and this means that asset price inflation will continue indefinitely resulting in shares, real estate and income earning bonds being secured at new highs, until ---- it stops. Are Black Swans extinct or merely hibernating --- one can die waiting to know!

Puplava has never stopped believing in the long term non viability of the current economic structure, but he has maintained correctly, that the IOUSA was " the cleanest shirt in the laundry bag" etc and that one can't fight the "Fed(s)" who completely dominate world markets, and hence he (correctly) maintains that the US would remain the worlds dominant economy and be a Mecca for world capital seeking a safe haven and a strong currency. He long ago abandoned the "the inevitable destruction of the US$", "hyperinflation", 'hyper gold' , and the breakdown of civilization as we know it.  

He (and I) accept peak oil, gold and resources,  as well as unsustainable population growth etc etc ----- all long term trends that wont affect me in my life time. The only thing JP is dead wrong about is his 'climate change denialism' , but in the short term that's pragmatic, and in the meantime, he drives a Prius, insulates his home, uses solar, ahs back up batteries and power for his busines  etc etc.

 Jim's basic tenant is that one has to live in the present and base one's investment decisions on proper analysis of the current economic and political scene --- and this he has done superbly, because he's a realist devoid of dogma and obsessions. He rode the gold mania from the lows to the highs, and then walked away when "the facts changed" and has rode the stock market horse superbly, and even re-entered real estate, after having been one of the early predictors of the 'housing bust'.

 Jim Kunsler (who I find amusing) hates the Puplava's of the world for their perceived 'Republicanism' and their temerity to suggest that you cant fight the Fed ------ BUT you cant argue with success JimK !

 Those who have followed CM and MIsh because they are good entertainers and 'nice people', have been increasingly discomforted with the disconnect between rhetoric and performance of CM's economic analysis. But they are obviously blind to a well known psychological trap - that of seeking opinions that reinforce one's own belief - "confirmational bias" , and the PM camp is overflowing with such types.

 The CM site will obviously survive as a "survivalist center" and continue to surreptitiously  move away from being PM promoters, but in the cause of honesty, could we please have a mea culpa on gold and investments, and the stock market (where's the 40% correction that CM predicted ???? ) and an admission that JimP is a legend, and his site is the premium site for serious economic and investment analysis - those that didn't follow JP's line (but followed CM and Hussman et all) have seen their investments do badly in a bull market - while Peak Prosperity (is that now an oxymoron) will continue promoting 'self sufficiency' for the 80% who have to live 'simple lives' unconstrained by wealth & privilege. ???

Cheers, GB

 

davefairtex's picture
davefairtex
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victory laps

gbcm-

I've always found people taking metaphorical victory laps to be tedious.

 

 

Jbarney's picture
Jbarney
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One Who Tuants

Has too much time on his hands.

Arthur Robey's picture
Arthur Robey
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On with the show.

I am looking for a nice sharp collapse in the price of silver- maybe $10 an ounce. Nichole says $4. Cash only, no debt.

The show is not over till the fat lady sings.

jgritter's picture
jgritter
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Victory Laps?

It's not over 'til it's over, I don't think it's over yet.

If confirmational bias means choosing to associate with people of integrity who can turn a wrench  and drive a nail rather then choosing to associate with people who judge another not on the content of their character but by the size of their pile of poker chips, then guilt as charged.

For my part I see the current crash in the paper PM market as an opportunity to increase my very long position in physical metal.

I may be a country bumpkin, but sooner or later the fish wives are going to storm Versailles again and I don't want to be cold and hungry when it happens. 

John G

Adam Taggart's picture
Adam Taggart
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Good Riddance

GBCM -

Well, I see that, despite your threats of self-exile, you can't seem to quit your addiction to bloviation. After much encouragement from the PP audience who had tired of your hit-and-run record of unconstructive taunts and gasbag self-aggrandizement, you made us the following promise earlier this year:

So, on Monday, I will end my subscription and hence this will mean that my posting will end , which for CM and his acolytes, will be most welcomed.

Too bad you couldn't keep your word.

We welcome opposing viewpoints here, and indeed I think some of the points buried in your prattle are worthy of discussion. But the poor manner in which you repeatedly have chosen to express yourself, in clear violation of our posting guidelines, and your bulletproof resistance to changing your approach to abide by them, has become more than tiresome and detracting to the community here.

To respond at a high level to your criticism:

  • Yes, precious metals have performed horribly over the past few years. Despite that, Chris and I believe the fundamentals for owning them are stronger than ever, as we write about often here. We very much recommend (especially at these low prices) that anyone with money to spare who does not yet own any, purchase a foundational position with haste. For those with said position already in place, we created the Gold & Silver daily update series over a year ago, which attempts to divine where the price action is headed in the near term, to help our readers determine if buying more PMs will be better today vs tomorrow. Even though he's taken a lot of flak for it, the series' editor, davefairtex, has stuck to his technical calculations and been cautioning readers since the series started that the long-term trend bottom has not yet looked to be in.
  • Chris has explained a number of times that his call for a 40% correction last year was based on an assessment that the Fed would have some shred of concern for the implications of the QE program. But, as he's admitted, they have let the current bubble expand longer than he expected, raising the risks and repercussions much higher. Was the timing of the call off-the-mark? Yes. Does Chris still forecast a massive market correction? You bet. Except, because of the continued reckless actions of the Fed and the world's other central banks (see yesterday's BOJ action) this will be materially more destructive than had it happened when Chris originally estimated.

Of course, in addition to enduring your slings and arrows, I have strained my eyes looking for some sort of data-driven argument from you, presenting an alternative forecast for the future, which others can react to and debate. Instead, we're treated to another stream of pablum and jibes with no real substance to address.

Well, no longer. I'm removing your ability to post comments. Perhaps after a long hiatus, and heartfelt display on your behalf to our moderators that you will abide by our requirements for respectful and value-adding contributions, you will be given another chance. But you'll need to earn it.

In the interim, I welcome you to instead frequent the sites of the other economic analysts that you admire so much. I think you'll be much happier there.

I'll leave your last post up, so this doesn't come across as censorship. As mentioned, opposing views are fine -- welcomed, actually. But caustic drivel merely intended to shine a brighter light on your own perceived awesomeness isn't tolerated here, as it adds nothing and irritates widely.

Adam

 

 

pinecarr's picture
pinecarr
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Premature conclusions?

Hi GB-

   Your post brought to mind a parable that has stuck with me through various life events,at http://sivers.org/horses

A farmer had only one horse. One day, his horse ran away.

His neighbors said, “I'm so sorry. This is such bad news. You must be so upset.”

The man just said, “We'll see.”

A few days later, his horse came back with twenty wild horses following. The man and his son corraled all 21 horses.

His neighbors said, “Congratulations! This is such good news. You must be so happy!”

The man just said, “We'll see.”

One of the wild horses kicked the man's only son, breaking both his legs.

His neighbors said, “I'm so sorry. This is such bad news. You must be so upset.”

The man just said, “We'll see.”

The country went to war, and every able-bodied young man was drafted to fight. The war was terrible and killed every young man, but the farmer's son was spared, since his broken legs prevented him from being drafted.

His neighbors said, “Congratulations! This is such good news. You must be so happy!”

The man just said, “We'll see.”

Time2help's picture
Time2help
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Anecdotes

Heavy traffic observed at a central LCS today - long line out the door.  Several acquaintances have indicate that they are now actively buying silver (who have not, to my knowledge, done so previously).

A dual-edged sword? So what happens when a Comex/Globex defaults? I don't imagine the follow-on from that to be all roses and peaches. 

Japan has just committed seppuko.

At least they were able to fix those nasty reactor meltdowns. Haven't heard a peep on those in what seems like years now...must be all better?

davefairtex's picture
davefairtex
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the old man lost his horse

pinecarr-

Your post is an adaptation of an old Chinese catch-phrase that literally (and roughly) translated, means "the old man lost his horse."

Sai Weng shi maa.

http://en.wiktionary.org/wiki/%E5%A1%9E%E7%BF%81%E5%A4%B1%E9%A6%AC

Its something you say (if you are of an older generation) to someone else who has suffered a misfortune and is now whining about it to remind them that we only know the real outcome once the story is complete.

If you say it to someone younger, they will laugh at you and call you "grandfather."  But they will know what you mean regardless.

jarrad's picture
jarrad
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naughty or nice

gbcm is doing timeout on the naughty steps and needs to learn how to play nicely. but there is definitely a lesson here for the rest of us. what he really describes, without realising it, is that trend followers have had terrific success with an up trend in SPX and a downtrend in commodities. the trend followers continue to extrapolate the trend and will continue to make money until the trend ends. New trends will emerge and the people that gbcm gives credit to will simply change their opinion to fit any emerging trend. They always find a story to fit the trend and they probably believe that they add value but after many years I now realise that they only add entertainment value. They are actually a little bit dishonest because they conveniently forget how they were wrong at the end of each trend. For example, they told a story of natural gas and how Canada was going to use it all in the oil sands and not export any to the USA and the price was going to $15 but instead it went to $3. Also, when oil was $150 it was predicted to hit $200. Simple extrapolation. That is on the record as fact if you play the old podcasts.

davefairtex's picture
davefairtex
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trend following

jarrad-

From a trader's perspective, it is a really good idea to be a trend follower.  It is also a good idea to abandon a position once the trend is seen to change.

That's not the same thing as projecting something infinitely skyward, or pretending you know the answer where some price will end up.  I have a problem with anyone that does this, because they can't possibly know for certain what will happen.  Also, possessing "certain knowledge" makes it almost impossible to abandon a position when the trend actually changes - due primarily to the large ego-investment that comes along with "certain knowledge."

One thought: we might be able to use Mr GBCM as a decent contrary indicator.  The fact that he feels so certain about the permanency of the outcome that he comes here to perform his victory lap might be an indication just how total the capitulation in PM and mining shares is, and that this could possibly mark the bottom within a week or two of the actual low.  Wouldn't that be fun?

As always, I am looking for the reversal of this current downtrend.  We aren't there right now, everything is pointing lower (and the break of gold through 1179 is really a terrible sign), but at some point it will reverse and I intend to spot it when it happens.

Luke Moffat's picture
Luke Moffat
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Models

I think setbacks like this require that we revaluate our logic. For me it all becomes a question of models. I’ll admit then when I started my journey down this rabbit hole I had read the book, “When Money Dies” by Adam Fergusson, which I recommend to anyone who hasn’t read it. I then applied this logic to the Federal Reserve and the Bank of England as they used Quantitative Easing as a means to prop up the financial system. I thought that such reckless policy would trigger hyper-inflation within a few short years. Armed with this insight into the debasing of currency as a means to appease the government’s need for cash I entered the world of precious metals in a quest to protect what little currency I had from the reckless abandon of central bank money printing. Yet my model was wrong, the Weimar Republic was not the world’s superpower. Debasing the Papiermark had little effect on global prices and consigned the German people to their unique brand of hell.

Seeing the price of gold depreciate following excessive issuance of digital US Federal Reserve Notes forced me to abandon this model because it simply wasn’t working. Instead I now draw parallels to one of the world’s historical power centres – Rome. Under Emperor Augustus the Roman Denarius went from containing 6.8 grams of silver to 3.8 grams of silver. But did the Empire fall in 14AD? No. Was Augustus even concerned about currency debasement? No. Its purchasing power was maintained by the full might of the Roman Legions. What concerned Augustus were the energy requirements of the Roman Empire – slaves. The issue of manumission concerned him so much that he told the Roman Assemblies to pass laws (Lex Aelia Sentia) to prohibit slave masters from freeing slaves under the age of thirty. By possessing educated Greek slaves (accountants, teachers, physicians) and unskilled slaves (put to work on farms, in mines and in mills) he was able to keep the Roman economy going, the Legions armed and the people fed. This is the model of empire. It works so well that other empires adopt it.

Now we all know how this story ends. Once Rome could no longer expand she ran out of the ability to acquire slaves for her economy and materials for her military. But while people bowed before her might she could do whatever she damn well pleased. As long as the United States Government is willing to murder children to protect the purchasing power of the Federal Reserve’s Dollars then investors around the world will see it as a safe haven. I’m sorry, but that is how the game works. Standing against the might of New Rome’s Legions is not a viable investment strategy. I believe, like many do here, that precious metals will have their day but right now we are being punished for our foresight. Again, like many here, I believe the American Empire ends when the 3 E’s prevent her from expanding. It’s just that we aren’t there yet.

Right now our model is proving costly. So I think we ought to advise patience. In the words of Henry Ford, “Failure is simply the opportunity to begin again, this time more intelligently.”

And another that I quite like, “Welcome to the Hunger Games, may the odds be forever in your favour.”

All the best,

Luke

Time2help's picture
Time2help
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pinecarr's picture
pinecarr
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The old man lost his horse

Hey Dave-

   Interesting, I didn't know the background to the story.  I like the idea that it is a Chinese catch-phrase.   For me, I have found the lesson useful in coping with difficult situations where the perceived misfortune is obvious, but where there's also good fortune to be found (or made) if one chooses to.

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Michael_Rudmin
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Indeed, you ought to reevaluate.

Gold and silver are all very well, but if the masses are chasing paper, then the paper value of gold and silver will fall.

And of course, that lasts until the system breaks down. What then?

If there are 50,000 superwealthy people who will do anything to keep their wealth, and they just lost it all in the ultimate crash, and there are 10,000 who held onto their gold, and rode all kinds of losses, and now are seeing the price of gold skyrocket,

Those 10000 have each gotten 5 deadly, powerful, ruthless enemies. “Want" is your enemy. And those people will have want. And guns. And an army. And if you defeat them, there is ISIS behind them.

There are some games that have no winner. We may be in one of them. At that point, all you can hope for is to reenact Sambo and the tigers as well as you can, and hope that one day you will have butter and honey for pancakes at home.

GBCM-- and our illustrious article author DaveFairtex-- take note. A gracious host allows victory laps, and bears them graciously. But victory laps just make you a bigger target.

The best portfolio you can build is not gold. It isn't community, even. It is good will.

cmartenson's picture
cmartenson
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Cross post to this thread...
Bankers Slave wrote:

this piece is wrong.

It should state, "Will the Silver nightmare soon be over?"

It would be interesting to see if Ted was putting his money where his mouth is, and buying silver like there was no tomorrow.

Ted has a business to run and a table to put food on, lets hope he is correct in his analysis, for his sake and the sake of his own.

I don't know when the silver beatings will stop...presumably not until morale improves.  But yesterday I bought 1,000 ounces (silver eagles) and I have not bought any silver in years.  Whether I am right or wrong, at least in terms of paper dollars, remains to be seen over the near term, but I could not be more convinced about silver over the long term.

I bought that silver yesterday for my grandchildren as yet unborn and completely imaginary as none of my kids are married and/or of age yet.

I really don't let my decisions get pulled around much by the price of things...as I believe we are in a time of extreme distortions where we know the price of everything but the value of nothing.

Some will say the 'markets are always right' but that's patently false.  Were 'the markets' right last year when they were selling water in CA at a fraction of its current cost, with a 300% oversubscription rate, and with an obvious drought underway?

Some would say 'of course, markets are always right' but I disagree.  You see, we have a system of money that systematically takes wealth from the many to give to the few.  That's how it was designed and why it received no opposition when being implemented.  

Once you adopt the view that 'markets are always right' what you've really done is adopted the view that our system of money has integrity.  Once you measure everything in dollars you might as well have your picture placed in the dictionary next to "Stockholm Syndrome."

Money is a system of belief and like all belief systems it will color your view of the world.  It will find data that confirms its validity and reject the rest.  And like any illusion it always seems so very real and tangible right up until the moment until it breaks.  Until the current bubble (in whatever) breaks paper assets are tangible and real.  You can trade them for things of real value, with real utility.  But as soon as the illusion pops, all of that ceases to be true.

It's no different than buying into the very obvious illusion that you have your whole life in front of you.  With that frame of mind we willingly waste our moments, perhaps working at a job we hate or tolerating sub-standard experiences with uninteresting people.  But once a terminal diagnosis gets made, we rapidly shift and no longer tolerate wasting time as we suddenly understand how precious each moment is.  The truth eventually is revealed; all we ever have is this moment.  No more and no less.  That was always the truth, the hidden value in life that an alternative belief system carefully hid from view.

I work in the pretend world of money because I have to, because I am left no alternative.  Without money I will lose "my" house which I am really only renting from the local tax authorities who rather tediously insist that paper dollars are the only acceptable form of wealth.  So I play there in the world of money, and manage my money as carefully as I can, but I never confuse money with wealth or value.

Wealth is tangible and real.  Value is in the eye of the beholder.  I am perfectly capable of massively enjoying a $5 bottle of wine and have hated some that cost $100.  I make that choice.  Some let the price tell them what experience they are having.

Finally, as regards the miners, I have not been a fan of miners in years, and have not advocated owning them since 2009 when I sold out of my last positions.  There are a complicated set of reasons but what got me turned off was watching PMs go up and free cash flows from the miners go down as dilution went up.  That told me that the industry was not being managed in a way that made sense to me as an investor.

I see the same dynamic today with the shale operators, but that's another story for another day.

At any rate, our work here at PP is not to give perfect investment tips, we'll leave that to others, but to coach people towards building real wealth into their lives and adding value whenever they can.  Money is a completely manipulated substance and to believe in the current leadership and trajectories is to believe the four most dangerous words in investing:  This time is different. 

It never is.

So thank you paper silver shorts for the heavily subsidized price I received this weekend, and I look forward to many more opportunities in the future as well.  But I am sorry for the miners out there who are now in a steeply negative free cash flow situation because the paper shorts have pushed the price below the cost of production.  Some miners will be completely wiped out.  

On that last point I agree with Ted 100%.  It's just not right that a very tiny cabal of speculators with access to free money printed out of thin air can dictate 'reality' to a much larger group of mine operators, their employees, and legitimate investors.  For my belief system, and I have one just  the same as anybody, that's confirmation of the view that our money system lacks integrity.

 
Thetallestmanonearth's picture
Thetallestmanonearth
Status: Gold Member (Offline)
Joined: Feb 28 2013
Posts: 324
Silver in my market

Over the weekend I had to make a trip to the apple-store to get my work computer fixed. While waiting in the longest most disorganized line I've ever been in (my own little technotopia version of hell - nothing against technology and people who enjoy it more than I do, but not my thing), I looked up the silver price on one of the i-thingy devices. Seeing the nose dive, I stopped in at one of the bigger PM dealers in the area that happens to be across the street from the mall.  I was only planning a small purchase, but I learned that they had no silver eagles and just a couple of maple leafs in stock.  The sales rep told me they can't keep it in right now and that people are paying cash and buying as much as they can while still staying under the reporting limit. Sounds to me like high demand despite falling prices.

My PM holdings are so small that no matter how high they go I'll never get rich off of them and that is not my intention.  I want a plan B in case the guy at the gas station dolling out the rationed gas ever tells me they no longer accept USD.  The gas of course will be for my chain-saw so that I can get more firewood stacked which I will then trade for silver (stacks for stacks?).  At that point, I won't really care how many USD will buy one ounce of silver, but will be more interested in how many ounces of silver a cord of firewood is worth. So today, the goal is to get silver as inexpensively as I can so that I have a plan B and can save other dollars to buy things like breeder rabbits (which coincidental I also bought this weekend).  All the antics and price action between now and then are just entertainment.  If I were hoping to profit off silver in the near or mid-term my analysis would be more tortured.

 

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2840
Seppuko

Japanese Stocks Tumble 500 Points; Nikkei Futures Back Below 17,000; Bond Yields Crashing

Sayōnara Kuroda-san. 

I'm not sure even Godzilla could save Japan at this point.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1191
Some body

will blame Japans crisis on raiders like Kyle Bass.

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1449
davefairtex
davefairtex wrote:

jarrad-

From a trader's perspective, it is a really good idea to be a trend follower.  It is also a good idea to abandon a position once the trend is seen to change.

That's not the same thing as projecting something infinitely skyward, or pretending you know the answer where some price will end up.  I have a problem with anyone that does this, because they can't possibly know for certain what will happen.  Also, possessing "certain knowledge" makes it almost impossible to abandon a position when the trend actually changes - due primarily to the large ego-investment that comes along with "certain knowledge."

One thought: we might be able to use Mr GBCM as a decent contrary indicator.  The fact that he feels so certain about the permanency of the outcome that he comes here to perform his victory lap might be an indication just how total the capitulation in PM and mining shares is, and that this could possibly mark the bottom within a week or two of the actual low.  Wouldn't that be fun?

As always, I am looking for the reversal of this current downtrend.  We aren't there right now, everything is pointing lower (and the break of gold through 1179 is really a terrible sign), but at some point it will reverse and I intend to spot it when it happens.

Nobody mentions it but there will be re-pricing of labor too.   So maybe oil can be profitable $50...after a  large war.

jgritter's picture
jgritter
Status: Gold Member (Offline)
Joined: Dec 13 2011
Posts: 273
Clarification Please

I don't see the connection between a war and  the  price of  labor.  Dropping  labor costs/wages would seem  to suggest dropping gasoline/ oil sales.  Does $50 oil imply a glut on the market or a world too broke to pay a higher price?  Does $50 in paper buy a loaf of bread, or does a $50 gold piece buy you a house?  Is the war a conventional war in the Middle  East, a civil/fratricidal war in the United  Staten, or a global nuclear war?  

I'm not being facetious, I'm genuinely concerned.  As it stands, the U.S. government and others around the world are able to keep a lid on a glutted labor market by paying millions to remain unemployed.  When that lid comes off I see a rough patch of road as we try to retrain an urban population with limited skills and a sketchy work ethic into a gung ho rural work force of field hands who will work from sun up to sun down with a hoe.

I guess that my concern is that so may things, like 1000/oz. silver, seem to bring with them the implication of some kind of social shit storm singularity that it is very difficult to see past, looking to history for precedent only makes it more frightening.

I have to confess to some butterflies in my stomach,

John  G  

Wildlife Tracker's picture
Wildlife Tracker
Status: Gold Member (Offline)
Joined: Jan 14 2012
Posts: 403
Probably no rush to buy

We might have to deal with mid-14-15 dollar silver until the end of winter....Painful....

Next year will be a rocket ship though! I think my prediction is $40-45 by October 2016 if I remember from that cycle chart. I've been meaning to make an updated one, but I have not gotten around to it yet.

phecksel's picture
phecksel
Status: Silver Member (Offline)
Joined: May 24 2010
Posts: 204
Had an interesting chat with

Had an interesting chat with the not so young lady cutting my hair tonight.  She's freaking out because her son, daughter in law, and grand child + one in the oven sold their cars, bought a truck and rather small trailer, quit their jobs, cashing in their 401k and moving to AK.  Apparently Alex Jones "sky is falling" hit home with them.  What is really interesting is what these two corporate types in a college town are going to do in AK.

But, she had some interesting points.

  1. how many remember the nuclear desk drills
  2. late 80's market crash
  3. y2k
  4. banking financial collapse 2008
  5. and here we are today

IDK,I'm trying to stay balanced, but when a friend offered me a fantastic deal to buy some of his silver holdings at 15 a month ago, I was ecstatic.  Today, it's not looking like the same opportunity.

It's tough staying positive on metals decisions in a collapsing price.

Sossos's picture
Sossos
Status: Member (Offline)
Joined: Nov 7 2014
Posts: 1
Markets

Some interesting comments made in this forum.

Personally I think it all depends on when you have gotten into a particular market. John Hussman would suggest that right now would not be a good time to invest into the stock market in general. Valuation are out of wack and while it may crash, it may not. Can't say when or if, just that historically, the valuations are just too high. The metals would be in the same boat. Are you catching a falling knife, when will it bottom out.........

I'm not going to claim to know and don't really believe anybody else knows either. I do know that an old trader once told me that not being in a particular market or trade is a position too. Sometimes a wise choice if you are not reasonably sure where it's headed.

Back in early 2000's the housing market made many people think they were smarter than they really were. Circumstances made many look very smart or very lucky. A few were criticized for warning of a possible crunch. It all depended on when you got in and out as to how you faired.

The question no one can answer is this. What happens when the FED ( or central bank around the world) does raise rates? The cost of the existing loans will go up and the debt is huge. Every country you look at globally is massively indebted. Countries like Italy and France are borrowing money cheaper than the USA. In Germany you have to pay for the privilege in anything under 2 years. This looks a lot like the housing bubble only at a larger level, by multiples.

I can't say what the future is, but I do know that principles of natural law are being offended in major ways and that nature eventually wins. Can't say when, just that the facts are right there in front of everybody to see and we all will see it differently. So when to get in or out?

The one law of nature none of us can outrun is very simple.

Stupid is supposed to be painful.

fourells's picture
fourells
Status: Member (Offline)
Joined: Sep 29 2013
Posts: 1
I am buying worms

Since the metals market is so volatile I have bought worms.  If tshttf my worms will keep working for me, and make lots of potting soil so I can eat.  I buy every week both metals as I can find them.  I don't buy in the markets as this makes them rich and I am always a speculator.  As I buy it don't matter.  It is cheap, I can do trades and buys with what I get.  These are my ideal way to beat them at their own game.  I have a solar cooker that was built for basically nothing, and more people should be doing what they can as cheaply as possible and it will turn out good.  I won't elaborate on the metals I buy.  I will start collecting lead now that I see it is worth something.

Blessings

Lee

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