Silver at another decisive test of uptrend line

Silver is today testing it's powerful uptrend line that has been intact since August 23rd. It has hit it five different times, going on 6. Let's see if it hold. A failure to hold will mean a relatively strong move to the downside in the next few days

The moto of Western economies today

Gold in 1980 vs. today

Pink lines = today's bull market
Green lines = 1970's bull market

If the close resemblance continues, a major blast off could be fast approaching

An attempt at creating a photogenic homemade meal

Pan fried pork chop, toasted potatoes with chipotle sauce, sweet black eyes peas with onions, and salad.

Jim Sinclair quote

Jim Sinclair’s Commentary
You know what respect I have for Martin Armstrong as a broad market trend timer.
He is simply the best in modern times. Yes, he is a tad self-destructive but that does not detract from his genius. I have known MartinArmstrong since the late 60s and have yet to see him seriously wrong.

In Martin Armstrong’s last writing he said the following about gold. His history of accuracy demands that we all listen carefully to him, myself included.

“I have given a number for gold $5,000 that is very conservative. If we take U.S. gold reserves at 252 million ounces and we divide that amount into the national debt of 14 trillion that yields a staggering amount of $53,639 per ounce. Even taking the world official gold reserves divided into the US debt of 14 trillion we still get $15,873 per ounce.”

This makes my eight year price objective of $1,650 in January of 2011 look pitifully on the low side. Assuming Armstrong is right (as he has been for 40 years), the shorts of gold and gold shares are going to be destroyed.

Watch crude

Crude looks like it's ready to make another ATTEMPT at breaking through its key overhead resistance which stands now at the $90. Any convincing break above this will signal new highs in gas and oil prices

Roubini speaks

Roubini today spoke about the sovereign debt crisis road map going forward. To a great extent I agree with him. One point I think he fails to embrace is the propensity of troubled governments to engage in as much quantitative easing as it takes to keep this wretched system afloat for as long as possible. Regardless, you can read his piece here

Summary:
Many PIIGS states are in trouble. Super sovereign entities such as the IMF and ECB will attempt to 'socialize the losses' by bailing them out. This can have severe repercussions because the risk is then transferred to these super sovereign entities, and the can is only kicked down the road. Once the day of reckoning comes and its time to pay the piper, theses entities go bust as they become insolvent. Necessary austerity measures will prove extremely difficult to implement if the riots in France are any indication of what the consequences can look like. Spain is too big to fail and too big to bail.

My take: Europe is doomed.

A couple of thoughts for today

1) Moving forward through the perilous waters in the next 6 years, those who survive and prosper will be those who understand how markets truly work. As much as it saddens me to say this, I believe the only way to not get slaughtered by the oncoming tsunami is to know how to trade the markets. This is the pathetic situation the Federal Reserve and US policy makers has put us into. Honest, hard working people will suffer as they see their wealth contract. Those who know how to shuffle stocks will prosper.

2) To become a true sage of the markets, one must become "one with the markets". Understand what the markets are saying. Every move has a message. It is not the markets that are irrational- it is us who are incapable of interpreting the message that the market is sending. Just because one doesn't speak the language of the market does not mean the market is wrong.

Quote of a true idiot

Daniel Sadek was a renowned subprime loan pusher- who made millions on selling worthless mortgages to gullible California home buyers. This is what he had to say in defense of his business and his loans (it really shows the incompetence and stupidity of certain people, especially those who use 'Wall Street' as a measure of credibility)

"If my loans were so bad, why did Wall Street keep buying them to securitize?''

Jim Sinclair quote

"My approach is and the truth is Bert’s (Seligman) and Jesse’s (Livermore) was you don’t have to make it all. If you can knock off the middle 50% or 80% of the move, you’ve hit the jackpot. But the guys who want bragging rights buying bottoms and selling tops go broke."

Happy Birthday to me + Great Bond Bubble!

Thought the bubble days ended with the bursting of the housing bubble? Think again. The gigantic US bond bubble is here. Mark my words. This is the next mega monster to short the heck out of. All faith in the US government and trust in their ability to manage their finances and debt have been thrown into the garbage bin. Higher yields and lower bond prices are fast approaching.

Today's quote

"A bull market's job is to throw you off and your job is to hang on"

Listening to opposing viewpoints

Have the courage to expose yourself to counterarguments no matter how strong the temptation to only bombard yourself with commentary that falls in line with your own personal view. To be able to debate and counter the opposing viewpoint is the true test of one's conviction in an investment, or any belief for that matter.

Heads I win, Tails you lose!

Watch the charts. Turn off the financial news because it is only unnecessary noise. Financial media's attempts to rationalize price action is akin to a new born trying to explain the meaning of life. How else can you explain some sort of rationalization they try to make of every micro move in price action everyday? If the dollar strengthens, it is because of a strengthening economy because "investors have confidence in the US". If the dollar weakens the next day, it is also a sign of strength in the US economy because people are choosing "to embrace risk assets". It is absolute rubbish and it is dumbfounding that this game of "heads I win, tails you lose" can go on like this.

Jim Sinclair said it best when he coined the acronym "MOPE" - Management of Perspective Economics.

Martin Armstrong on smart money

Have gotten hooked onto the writings on "#1 political prisoner" Martin Armstrong. I have always wondered why people point to a rising gold price as a "warning signal". The reason for this, as laid out by Armstrong, is that smart money always forms the primary trend through its very acute sense of forecasting what is to come. It piles into 'quality' assets that will ultimately be the most appropriate investment for what is to come. So the argument goes that gold is rising because it is foretelling a major crisis ahead of us.

Then what, one might ask, can we discern from gold rising right before it peaks? If the economy were the start rebuilding right after gold peaks, are we to assume that the last parabolic phase in gold failed to foretell this in spite of a rising gold price? No! The reason for the last phase of gold's rise is the dumb money. They are the last to arrive and the first to get slaughtered. Their piling in will help drive the price to the moon, but it is too late, for the smart money, that got in and started the trend when gold begun its rise from $250, was the original and early forecaster of what was to come.

Interesting times

To say we live in interesting times is an understatement. With US politicians and mainstream economists refusing to give up their blind optimism about the 'hope and change' that is coming in the economy, the economy continues its decent into the abyss. The below video about the '99ers'- those millions of Americans whose unemployment checks will soon dry up after the fast approaching 99th week - is truly eye opening. The people in the video are a representation of the great "American Dream" that Alan Greenspan, the Fed in general, and past US administrations have given the American people. It is a result of flawed economic theory and a lack of responsibility on the part of policy makers, whose sole purpose is to get reelected and live for the moment by keeping the party going for as long as it can (ie. kicking the debt can down the road).

Link to 60 minutes video- The 99ers

Unemployment is currently closer to 20%, far higher than the government's 10% figure that they would rather have you believe. The same goes for the rate of inflation. In spite of helicopter Ben Bernanke's repeatedly using the "low inflation" as an excuse to stimulate and print trillions in more money, the cost of everything from food to health insurance to transportation costs continues to rise- all this in the midst of a collapsing economy, ever rising unemployment, and stagnant wages.

This is clearly a depression. And gold- the only hedge against government insanity and mismanagement- continues to be shunned by the general public and financial managers. The wall street-government complex has so far been successful in brainwashing the people into believing a bottom in the economy is just around the corner. But the smart money currently moving into gold tells a different story.

What the Dow/Gold ratio means for the stock market and gold

Dow/Gold ratio will ultimately reach 1:1. Dow is currently around 10,000. Gold is around $1200.
This would mean either:
1) if gold goes no where from here, an ultimate collapse in the Dow by 90%
OR
2) if the Dow goes nowhere from here, an ultimate rise in the price of gold by 900%.

Clearly, gold would be the preferable asset class in whichever scenario unfolds in the future.

Obama's debt commission warns of fiscal 'cancer'

From http://www.washingtonpost.com/wp-dyn/content/article/2010/07/11/AR2010071101956.html

Obama's debt commission warns of fiscal 'cancer'
By Dan Balz
Washington Post Staff Writer
Monday, July 12, 2010; A02
BOSTON -- The co-chairmen of President Obama's debt and deficit commission offered an ominous assessment of the nation's fiscal future here Sunday, calling current budgetary trends a cancer "that will destroy the country from within" unless checked by tough action in Washington.

The two leaders -- former Republican senator Alan Simpson of Wyoming and Erskine Bowles, White House chief of staff under President Bill Clinton -- sought to build support for the work of the commission, whose recommendations due later this year are likely to spark a fierce debate in Congress.

"There are many who hope we fail," Simpson said at the closing session of the National Governors Association annual meeting. He called the 18-member commission "good people with deep, deep differences" who know the odds of success "are rather harrowing."

(Graphic: President Obama's proposed 2011 budget explained)
Bowles said that unlike the current economic crisis, which was largely unforeseen before it hit in fall 2008, the coming fiscal calamity is staring the country in the face. "This one is as clear as a bell," he said. "This debt is like a cancer."

The commission leaders said that, at present, federal revenue is fully consumed by three programs: Social Security, Medicare and Medicaid. "The rest of the federal government, including fighting two wars, homeland security, education, art, culture, you name it, veterans -- the whole rest of the discretionary budget is being financed by China and other countries," Simpson said.

"We can't grow our way out of this," Bowles said. "We could have decades of double-digit growth and not grow our way out of this enormous debt problem. We can't tax our way out. . . . The reality is we've got to do exactly what you all do every day as governors. We've got to cut spending or increase revenues or do some combination of that."

Bowles pointed to steps taken recently by the new coalition government in Britain, which also faces an acute budgetary problem, as a guide to what the commission might use in its recommendations. That would mean about three-quarters of the deficit reduction would be accomplished through spending cuts, and the remainder with additional revenue.

Most Republicans in Congress are opposed to any tax increases, which has made the work of the commission far more difficult. Bowles and Simpson appealed for support to the governors, who have been forced by their states' constitutions to balance their budgets with deep spending cuts and, in many cases, tax increases.

Bowles and Simpson said the commission would have had a stronger hand politically had it been created by Congress, rather than through an executive order. Simpson was pointed in his criticism of seven Republicans who once co-sponsored such a measure but who helped block it in the Senate.

"As far as I can discern, it was to stick it to the president," Simpson said. "That's where we are in Washington." He later added that all seven "have now come to us to say, 'We're ready to help.' "

The presentation by Simpson and Bowles, which included repeated statements of determination to produce a bipartisan set of recommendations, drew praise from the governors.

"I don't know that I've every heard a gloomier picture painted that created more hope for me," said Arkansas Gov. Mike Beebe (D).

Washington Gov. Chris Gregoire (D) said that many governors fear that the commission's recommendations will result in more demands on the states.

Bowles, who noted that the 1997 balanced-budget agreement between the Clinton White House and the Republican-controlled Congress included many provisions that put more burdens on the states, said that wasn't likely.

"I don't think you're going to see a lot of devolution coming from us because the states are all broke," he said.
Simpson also warned that the November elections could add another wild card to the work of the commission. "I have no idea what's going to happen on Election Day but it's going to be disruptive . . .," he said. "It's going to be a big wake-up call around the whole United States. I have no idea where it's going, but thank heaven we have a month then to work through the wreckage."

Jon Stewart on US government promises to end dependency on foreign oil

See video here

Big move up in gold mining stocks appears in the making

All technical indicators flashing buy signs. Let's see what happens

Silver priced in 2010 dollars- well below all time high

US dollar purchasing power since end of gold standard

Nassim Taleb on unstable systems, debt, and the financial crisis

Nassim Tabel breaks down the intricacies of unstable systems- their causes and how we can prevent them. In a nutshell, follow the laws of nature, Darwinism, and free markets.

Click to see video

Gold makes new record high

Quantitative easing into oblivion = Gold price to infinity

Drunken sailor takes offense to government spending

Financial earnings vs. Non financial

7 Rules - Identifying Investment Opportunities... Howard Marks offers insightful rules:

1. No group or sector in the investment world enjoys as its birthright the promise of consistent high returns.
2. What matters most is not what you invest in, but when and at what price.
3. The discipline which is most important in investing is not accounting or economics, but psychology.
4. The bottom line is that it is best to act as a contrarian.
5. Book the bet that no one else will.
6. As Warren Buffet said, “the less care with which others conduct their affairs, the more care with which you should conduct yours.” When others are afraid, you needn’t be; when others are unafraid, you’d better be.
7. Gresham’s Law says “bad money drives out good.” When paper money appeared, gold disappeared. It works in investing too: bad investors drive out good.

11 Facts Govt Doesn't Want You to Think About...

FACT #1: The official national debt now stands at $12.68 trillion — an amount equal to about 88.5% of all the goods and services our economy produces in an entire year.
FACT #2: Contingent obligations for Social Security, Medicare, Medicaid, veterans, and pensions now stand at an additional $108 trillion over and above the “official” national debt. (?)
FACT #3: State, county and local governments are nearly $3 trillion in debt. Many can’t pay and will ultimately demand that Washington assume responsibility for that debt as well.
FACT #4: Total federal, state and local government indebtedness now stands at a mind-blowing $123.6 trillion.
FACT #5: Last year, Washington added $1.4 trillion to the debt. In this fiscal year, the Obama administration will add another $1.6 trillion!
FACT #6: In addition to funding the current trillion-dollar-plus deficits, the U.S. Treasury must borrow MORE each year to replace bills, notes and bonds that are maturing.
FACT #7: This record-shattering borrowing by the Treasury has resulted in a Mt. Everest of Treasury obligations being dumped onto the market, which naturally depresses bond prices and drives interest rates higher.
FACT #8: In a desperate attempt to keep interest rates low, the Bernanke Federal Reserve has created $1.25 trillion out of thin air to buy mortgage-backed securities … another $300 billion to buy U.S. Treasuries … and yet another $170.6 billion to buy other government bonds — a total of nearly $1.7 trillion in all.
FACT #9: From September 10, 2008 to March 10 of this year, Bernanke increased the nation’s monetary base from $850 billion to $2.1 trillion — a 250% increase in just 18 months.
FACT #10: Despite this massive money-printing, the yield on the benchmark 10-year Treasury note has STILL risen by more than one-fifth — from 3.2% to 3.86% — since December.
FACT #11: Because of this massive money-printing, the U.S. dollar has lost nearly 10% of its value in the past 12 months alone.

Infamous Quotes from 1930 Great Depression

* "I am convinced that through these measures, we have reestablished confidence."
— Herbert Hoover, U.S. President, December 1929.
* "While the crash only took place six months ago, I am convinced we have now passed through the worst — and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
— Herbert Hoover, U.S. President, May 1930.
* "This is the time to buy stocks. This is the time to recall the words of the late J. P. Morgan ... that any man who is bearish on America will go broke. Within a few days there is likely to be a bear panic rather than a bull panic. Many of the low prices as a result of this hysterical selling are not likely to be reached again in many years."
— R. W. McNeel, market analyst, as quoted in the New York Herald Tribune, October 30, 1929
* "The Wall Street crash doesn't mean that there will be any general or serious business depression ... For six years American business has been diverting a substantial part of its attention, its energies and its resources on the speculative game ... Now that irrelevant, alien and hazardous adventure is over. Business has come home again, back to its job, providentially unscathed, sound in wind and limb, financially stronger than ever before."
— BusinessWeek, November 2, 1929
* "The end of the decline of the Stock Market will probably not be long, only a few more days at most."
— Irving Fisher, Professor of Economics at Yale University, November 14, 1929

Head and Shoulders Top on Short Term and Long Term Treasury Chart

Technical picture of gold 03/17/2010

A picture speaks a thousand words

Gold at key level

The next couple of days will be decisive for gold. A breakout move above the triangle wedge pattern might signal a definitive bottom. A failure to breakout will likely mean further downside.

Shanghai market likely peaked

Key support line has been violated. It is said that China lead the global rally up. If China is still the "leading indicator", it most likely will lead the global markets down. S&P, emerging markets, and commodity markets all look a bit toppy here.

Market update

Markets have been trading down in the last week. All indications point to a top in the market rally and a coming correction. This correction should be complemented by a dollar and bond rally. Commodities and emerging markets will come under heavy pressure, while developed markets and blue chips will outperform (although they will still track the market lower).

2010 is going to be a "corrective" year but not like 2008. The trillions of dollars sloshing around the globe courtesey of helicopter Ben should provide support to asset markets. However, markets are currently severely overbought. Future earnings should likely disappoint. This rally was partly driven be inventory restocking, which is now over. We went from an oversold position in March 2009 to currently what is an overbought position.

David Rosenberg quotations

"No doubt that we are seeing modestly positive growth in the economy and that the pace of job declines is moderating. We won’t quibble with the rose-coloured glass crowd on that. But the extent of any improvement has to be viewed in the perspective of the vast amount of fiscal and monetary resources that have been deployed to-date to try and bring the economy out of its malaise. If indeed the economy is fully out of recession then that first quarter of positive growth normally is 7.0% at an annual rate, not the pathetic 2.2% rate posted for the third quarter. And, considering that the Fed began to ease monetary policy back in the summer of 2007, what is normal typically 2½ years after the first rate cut is that real GDP is humming along at a 5.0% annual rate and employment isn’t declining at a slower rate but is booming. The fact that that the private domestic demand is still so stagnant following the greatest experiment with fiscal and monetary ease in recorded history, we have to admit, leaves us more than just a tad worried over the macro outlook and beyond."

"We started the decade with a national payroll level of 130.8 million. We finished the decade practically unchanged at 130.9 million. Meanwhile, the total pool of available labour rose from 146 million to 159 million. In other words, we have the same number of jobs today as we did a decade ago, and yet we also have 13 million more people competing for them. It was more than just a lost decade for the equity market. It was a lost decade for the labour market."

World currencies measured in gold

Gold retains its purchasing power. This is why it is considered "real money", unlike fiat currencies. Therefore when the gold price moves "up", it isn't really increasing in value. It is simply compensating for the drop in value of the respective fiat currency- be it the US dollar, Euro, or Yen. The following charts illustrate how well gold has performed against many of the world's major fiat currencies over the last decade. All these major currencies have lost much of their purchasing power- even the so called 'strong currencies' such as the Australian dollar and Canadian dollar.

http://jsmineset.com/wp-content/uploads/2009/12/Gold-in-assorted-currencies-2009-year-end.pdf