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Author Topic: Gold: I smell a trap  (Read 78464 times)
miscreanity
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October 02, 2011, 09:25:04 PM
 #861

... and my willingness to put the details, theory, and data forward to support that position.

Yes, lots of theory with details on the theory, but the only "data" has been in the form of price chart patterns. Those have already been discussed as being malleable and unable to provide a complete perspective, especially on gold.

Price charts are only a look at price trends. They don't bare the underlying mechanics of the system, nor do they offer genuinely predictive information. This is what data looks like behind the scenes:



... cover my short position and buy.

Now you want to play the quote game?

From the original August 8th PM:

Just some words of caution; how you trade is ultimately your decision.

From August 9th through the rest of the month:

Quote
* Note that gold has formed a double top on the short term charts (1hr or shorter) after a push down from ~$1770 to ~$1730. The $1650-1680 range is the initial target followed by $1600 and $1550. Any spike down from here on out will be met with immense buying, so the drops will be very short-lived. Trade short at your own risk; I recommend buying physical metal.

I really don't care about anyone else's trading; that's their business. It's the physical holding that concerns me. Whether there's deflation or inflation, instability means that physical gold will be in demand. When there's enough shortage that no gold is readily available and prices are out of range for the majority of people who haven't gotten it, those without will suffer.

Whatever you do, don't sell your physical gold.

When the message was sent on August 8th, gold was around $1700. I had suggested not buying in size, but also not shorting. My intent was to convince you to keep your physical metal holdings, though I could've been more explicit on that. As it so happens, gold rose $200 from where you were getting ready to short. Do you feel lucky now? Are you willing to bet your wealth on luck, or a more measured approach?

All I know about your positions is that you've kept your remaining physical but otherwise gone short. I make no assumptions about your profitability, social standing, ethnicity, physical ability or asshat status.

yours is just a simple religious based view on the pm's that has been pushed for 11 years now.

This is an unbiased statement? Maybe you're right. Maybe I've started listening to Raptor Jesus again.

and you've amply proven that you're unwilling to change your views despite being faced with contrary information.

What contrary information? Price charts that mask accumulation occurring behind the scenes?

you're a Boris Spassky riddled by simple linear uncreative thinking.

How long will this childish insulting continue? Perish the thought of you being married with children. I thought this thread was about gold?

btw, the greatest form of flattery is mimicking your opponent.  "no i'm not linear, you're linear!"  thanks for that.

Imitation is the greatest form of flattery. Ridicule in the form of mimicry is not. Maybe I shouldn't have used that method to make a point but as I said, this discussion has become entertainment for me.

you're a zealot that is unwilling to consider other's views and you're still in Stage 1 of Denial.  which means gold still has a long way to fall.

Textbook ad hominem yet again. I must be the most important person in the gold industry if its price depends on my words. Very well, then: I renounce all of my prior statements - gold will fall to negative value within a month!

you're so predictable as well.  when pundits like you are proven wrong in failing to identify the change in trend (which requires looking at the short term)  the first thing they do is start backing out on the timeline of the charts.

You're so right! The first chart I posted in this thread couldn't have been for a weekly time frame. Oh wait, it was.

What's this? The second chart I posted was a 654-year. Shocking! Does this mean I should resort to dailies instead? If I point to a strong up day, can I state that it proves my case?

since even the daily arithmetic charts have gone so badly against you, you have started to throw up weekly and logarithmic charts to cover up your losses.  remind me to quantify those some time here in a post btw.  for those interested in calculating misreality's losses, just go back to his recommendations here on the thread for his buys.  they have been brutal.  even if gold were to go back to $250, you would throw up a 100 yr chart and say look we're still up from $20 in 1929!  buy, buy, buy!

Such fear mongering!

Please do quantify these "losses" that you presume I've incurred. The most novice trader understands that you don't actually incur a loss until the respective position has been closed. Go ahead - log into my accounts with the passwords you apparently have which allow you to calculate the unrealized losses that you think are present. Close a few of my 1,000% positive positions while you're at it.

I suppose it may elude cypherdoc that it's possibile for other trading strategies to exist besides his. Such non-linear concepts can be difficult to grasp.

bottom line here is since we began this thread you've cost alot of ppl and yourself alot of money following your advice.  especially those ppl who bought into the push into the gold double top.  and its been even worse for those who followed your advice into the 61.8% retrace push of silver.  and its even more worse for the pm stocks vs silver.  go back and follow the timeline of our respective advice.  i was screaming for a top.  the very day the pm stocks pulled back under the breakout line i called it a failure while you and the pundits you rely on (Eric Degroot i think) were screaming for a breakout.

Once again:

When the message was sent on August 8th, gold was around $1700. I had suggested not buying in size, but also not shorting. My intent was to convince you to keep your physical metal holdings...

Trading is your own concern, regardless of recommendations. Are we in the business of saving people from themselves now, a la socialism? Physical metal is the necessity.

you're like a forester who refuses to get out of his plane at 30,000 feet and look at the leaves, branches, and trunks of the trees themselves which have rot growing all over them.  you refuse to even acknowledge that the bull could be over.  many more ppl are coming over to my view only now.  oh well, convincing you will have to be bloody.

You're right, I must be as you described. Finally getting out of the gold carry trade after its price had nearly doubled to almost $500/oz just couldn't have been a change in my perspective. It was wrong of me to admit that the bear could be over, because it's obviously resuming now that the price has retraced similarly to 2008. I'll completely ignore the fact that gold has doubled from that point. I've seen the light. Thank you for showing me the path, cypherdoc!

I understand now that gold must be due for a fall to $255/oz, despite the fact that it doesn't tarnish and has been used for thousands of years as money when other forms failed as they're failing now. The entire precious metals market is based on a lie, because the principles that give paper currency value must not apply to physical metals. Besides, it's perfectly possible for 1% of the population to wield 80% of the power and wealth in the world without the other 99% rising up against them or at the very least trying to protect themselves.

Thank you again, cypherdoc. It feels so much better to remain oblivious to the facts. Smiley

@misreality:   you sir are trapped in physical bullion as your main financial holding.  thats clear from your posts so don't try to suggest otherwise.  you have a huge vested interest in pushing the pm price so as to not only profit but also to prevent catastrophic losses.  you are locked into the most illiquid of all assets.  if the price plunges from here as i suspect, you could be bankrupted.

Presumption is dangerous, particularly when erroneous. I hold physical gold to protect against fiat default and global economic destabilization. It doesn't propel me higher - it keeps me at my current level while most others fall, leaving those with gold on the high ground. Again, it's a matter of perspective.

When have I ever suggested in this thread that I don't hold physical gold? These ad hominem attacks aren't even based in any way on anything remotely factual anymore.

Gold illiquid? Another invalid argument; perhaps you haven't tried finding a buyer for real estate and jumping through those hoops recently.

If paper prices plunge, nothing changes. If the real price falls, it can't go much below the production cost (currently averaging about $1,100/oz). If demand evaporated from the entire world, you might have a case. This is similar to positing if the prices fall on grain and I have a warehouse full of it, I'll starve. Do you understand that?

i've been open from the very beginning that i am short pm's and that i've sold most my bullion.  and i took that position before the recent plunge. if i get the sense that i'm wrong on my call, it will take but a keystroke to stem my losses.  

Will it take a mere keystroke to buy physical bullion that's unavailable after having been vacuumed up by contract holders standing for futures deliveries? We can focus on a Bitcoin aspect instead: can you acquire a 5970 card to mine Bitcoins without paying through the nose? Not so easy as a keystroke, is it?

i conclude that my arguments on this thread are much more neutral and unbiased than yours.

Of course you would... how neutral and unbiased!

Maybe I should call you a born-again permabear, or a Prechterite. Those seem to come out every time gold declines, proclaiming how "right" they are. I'll let you know when I'm no longer bullish on gold - you can quote me on that.

I hypothesize that a deflationary mindset is more likely to exist when long-term memory is deficient.

The comex reminds me very much of the lines to buy houses at the top out the housing bubble.  It went on for years.  Also the ipo craze. Everything looked so good.  How could anything go wrong?  Why can't things reverse?

You're absolutely right. In fact, my neighbor and the bum on the street both have mobile phones. It is therefore completely obvious and logical that they are both trading COMEX gold and silver futures, along with everyone else on the planet! Congress no doubt wants the whole world to live the American dream of "trading paper contract futures on the commodity exchanges".

Seriously, cypherdoc - thank you for so much great material.
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miscreanity
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October 02, 2011, 09:26:33 PM
 #862

The point essentially is, when the paper gold and silver is shown as bogus, don't you think this will have severe upward pressure on the real deal?

No, because nobody wants precious metals, remember? Except for the rest of the world, that is. Silly world - it should listen to Americans, sell all gold and silver because they're worthless!
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October 02, 2011, 09:31:25 PM
 #863


yet you keep coming back and posting here more than your own blog!   i'm sure you're drawn by the fact that my thread is getting alot of views.  not trying to brag but i'm willing to bet most people here are drawn more to my willingness to put myself out there and take a contrarian view to the conventional wisdom in calling an end to the gold/silver bull.  especially since things now seem to have gone terribly wrong.  and my willingness to put the details, theory, and data forward to support that position.  and i do this not on just a longterm view but realtime as well. after all, how the hell are you supposed to get out ahead of these turns if you don't trade short term?

not that these viewers are in my camp mind you; i bet most here desperately want me to be wrong since they are pm bulls like yourself.  thats ok too.  as i said from the beginning, you were my motivation to start this thread; your mysterious unsolicited pm from an anonymous internet poster whispering for me to cover my short position and buy.  not used to ppl ignoring your advice and even intimidating you, eh? Smiley   i still smell a trap.



Well, I for one keep reading this thread because I think you both are making very interesting points, and it's fascinating how much you guys agree on (as you've both noted). When it comes down to it, I still contend that you two really only have a single disagreement; how much power and willingness the Fed has to monetize the debt, one way or another. And fundamentally, that's a subjective point. Again, it's fascinating how that single disagreement leads to polar-opposite investing strategies, despite the agreement on so many fundamentals that most people are not even aware of.

Anyway, I think the discussion has been highly valuable to everyone viewing and participating, and I hope it continues throughout the inevitable economic turmoil, whatever form it takes.

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October 02, 2011, 09:53:59 PM
 #864

... and my willingness to put the details, theory, and data forward to support that position.

Yes, lots of theory with details on the theory, but the only "data" has been in the form of price chart patterns. Those have already been discussed as being malleable and unable to provide a complete perspective, especially on gold.

Price charts are only a look at price trends. They don't bare the underlying mechanics of the system, nor do they offer genuinely predictive information. This is what data looks like behind the scenes:




you want data?  here's some data:

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October 02, 2011, 10:02:31 PM
 #865

Let's say the federal reserve closed doors tomorrow and would only keep the servers running for the reserves...

Let's then say the banking system goes into chaos and the inverse debt pyramid falls over...

Spending goes down due to the credit collapse. People holing paper USD notes will be better off, but the COMEX would no doubt collapse also, destroying the fake gold and silver.

Let's say the USD deflation is more than the gols and silver deflation...

Gold and silver will still go up in terms of goods and services people want to buy.

In any scenario, gols and silver is a goof long term safe haven for your wealth and it will always make better and more stable money than toilet paper.

Want low risk? Want protection from inflation? Get into real money.

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October 03, 2011, 12:02:28 AM
 #866


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October 03, 2011, 12:30:22 AM
 #867

http://www.calculatedriskblog.com/2011/10/update-on-gasoline-prices.html

no inflation here.

i guess all these articles i've been putting up aren't data according to misreality.
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October 03, 2011, 01:20:39 AM
 #868

http://www.calculatedriskblog.com/2011/10/update-on-gasoline-prices.html

no inflation here.

i guess all these articles i've been putting up aren't data according to misreality.

I wouldn't read too much into gas prices.  They've been damn strange since 2008.  In my opinion, gas prices have been about 50 cents too high for the last year or so.

I keep my eyes on TWIP.  We've been above the average range on crude stockpiles for a whole year now.  Gasoline stocks have been mostly quite high, not counting the exaggerated spring dip.  Also, notice how flat the 2009-2010 retail prices were.

It is hard to say if the current decline in gas prices are the usual annual fall drop, a correction long overdue from 2008, or another sign of the strengthening dollar.

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October 03, 2011, 03:58:25 AM
 #869

http://www.calculatedriskblog.com/2011/10/update-on-gasoline-prices.html

no inflation here.

i guess all these articles i've been putting up aren't data according to misreality.

I wouldn't read too much into gas prices.  They've been damn strange since 2008.  In my opinion, gas prices have been about 50 cents too high for the last year or so.

I keep my eyes on TWIP.  We've been above the average range on crude stockpiles for a whole year now.  Gasoline stocks have been mostly quite high, not counting the exaggerated spring dip.  Also, notice how flat the 2009-2010 retail prices were.

It is hard to say if the current decline in gas prices are the usual annual fall drop, a correction long overdue from 2008, or another sign of the strengthening dollar.

i disagree.  gas prices especially over $4 have been significantly correlated with inflation expectations of the American public.  we saw this in summer 2007 when everyone was predicting $200 oil.  below $4 won't worry anyone in the US about discarding their hard earned USD's for gold/silver.  they ain't coming to the party.
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October 03, 2011, 08:59:04 AM
 #870

Sorry for the late answer, dont have too much time lately:

This is utter bullshit, salaries and prices are already going up while unemployment is high and it will accelerate. If anyone is interested I can go into more detail why.

i am an employer.  i have never had such wage control power since i've been in business since 1993.  i don't offer health care or a pension plan yet i have dozens of apps for any openings i advertise.  i'm also seeing older ppl enter the workforce that will accept lower pay than younger ppl b/c of the squeeze Ben's put on them.

Yes, some areas are suffering but not all. Its the problem at looking at unemployment as a big agregate, you miss what its really happening. F.e. a construction worker is not competition for a google engineer. So when it comes to negotiate the salary for the google engineer the fact that there are a bunch of construction workers unemployed doesnt make any difference.

The way it happened is that the people closer to the money supply saw their wages up sooner. Those people are the ones working on the financial industry, whose wages are recovering and going up in the middle of a depression. Then we are seeing the high skilled workers demanding higher wages, for example engineers of Google and Microsoft: Goolge war for talent rises wages 10% (2010), Microsoft raises wages to attrack talent (2011). But the central bank money is getting to specialized workers (not necesarely high skilled workers): Truck companies see a 30% wage increase

According to keynesians that should not be happening, but it is. The problem is that the idea that because unemployment is high wages can not go up is utter bullshit. Not all workers are interchangeable, not all unemployed workers are competition for working workers. As I said, that a bunch of construction workers are unemployed is not competition for a Google engineer. Its the problem of looking at aggregates and not at reality.

For a better explanation I recomend this short article of proffesor Steve Horwitz: http://www.pbs.org/nbr/blog/2010/08/idle_resources_-_they_dont_sto.html

The sad part is that some areas, mainly of low skilled labour, are not going to see their wages rised because anyone is competition for them, while the rest are going to see their wages rised and prices are going to follow. So the less skilled workers, usually the poorest, are the ones who are going to suffer inflation most. As always, inflation works to increase the wealth inequality.

Quote
this whole discussion presupposes that they'll have a choice in this whole deflationary event.  they don't.

Fair enough. Let me show you why they do:

Quote

3. "The Fed is out of bullets" Everytime I hear this I ask a question and never get an answer: Whats stopping the Fed from monetizing more government debt? (apart from the fear of producing hyperinflation).

and i keep answering it:

Politics, the sheer size of the bad debts, the rioting that you'll see if they try (Middle East) and self preservation.  if they destroy the USD what would be their function?  what about the billions of USD wealth these bankers have?

Yes, but the choice is not between deflation or hyperinflation. Some people argue that we are going to see a lost decade of near 0 inflation/deflation ala Japan lost decade, some others (like me) argue that we are going to have stagflation (high inflation and high unemployment) ala the 70's.

What the governments/banking system are trying to achieve is high inflation but controlled. Granted this is not guranteed, there could be a panic and they could loose control and go into hyperinflation. While its always a risk my opinion is that they will pull it off and we will get high inflation for many years, while the unemployment wont fully recover.

Bernanke has lost control over interest rates and raising them significantly (ala 20% Volcker beggining of 80's) would be a disaster with the governments and banks going broke. Thats why after the crash of 2008 Bernanke got permission from Congress to start paying interest on excess reserves. This had never happened in the history of the USA (or any other central bank that I know). What does Bernanke achieve paying interest on excess reserves? It controls the flow at which banks grant credit to the private sector. If Bernanke thinks too much credit is being emited and inflation is getting out of control he just have to raise the interest of the excess reserves and banks will decide to leave more funds at the Fed instead of loaning them out, because its risk-less. There are other tools Bernanke can use but thats the main tool that he will use to control the flow of credit into the economy to produce high inflation and avoid hyperinflation. The risk of hyperinflation is always present, but Im pretty convinced he will succeed and the western economies (the ECB will follow the Fed) will go through years of stagflation.

Conclussion: If deflation gains traction Bernanke can monetize government debt (like it has done until now and has avoid any kind of price deflation). If inflation starts getting out of control it has tools to control it (not avoid it).
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October 03, 2011, 10:38:57 AM
 #871

Sorry for the late answer, dont have too much time lately:

This is utter bullshit, salaries and prices are already going up while unemployment is high and it will accelerate. If anyone is interested I can go into more detail why.

i am an employer.  i have never had such wage control power since i've been in business since 1993.  i don't offer health care or a pension plan yet i have dozens of apps for any openings i advertise.  i'm also seeing older ppl enter the workforce that will accept lower pay than younger ppl b/c of the squeeze Ben's put on them.

Yes, some areas are suffering but not all. Its the problem at looking at unemployment as a big agregate, you miss what its really happening. F.e. a construction worker is not competition for a google engineer. So when it comes to negotiate the salary for the google engineer the fact that there are a bunch of construction workers unemployed doesnt make any difference.

The way it happened is that the people closer to the money supply saw their wages up sooner. Those people are the ones working on the financial industry, whose wages are recovering and going up in the middle of a depression. Then we are seeing the high skilled workers demanding higher wages, for example engineers of Google and Microsoft: Goolge war for talent rises wages 10% (2010), Microsoft raises wages to attrack talent (2011). But the central bank money is getting to specialized workers (not necesarely high skilled workers): Truck companies see a 30% wage increase

According to keynesians that should not be happening, but it is. The problem is that the idea that because unemployment is high wages can not go up is utter bullshit. Not all workers are interchangeable, not all unemployed workers are competition for working workers. As I said, that a bunch of construction workers are unemployed is not competition for a Google engineer. Its the problem of looking at aggregates and not at reality.

For a better explanation I recomend this short article of proffesor Steve Horwitz: http://www.pbs.org/nbr/blog/2010/08/idle_resources_-_they_dont_sto.html

The sad part is that some areas, mainly of low skilled labour, are not going to see their wages rised because anyone is competition for them, while the rest are going to see their wages rised and prices are going to follow. So the less skilled workers, usually the poorest, are the ones who are going to suffer inflation most. As always, inflation works to increase the wealth inequality.

Quote
this whole discussion presupposes that they'll have a choice in this whole deflationary event.  they don't.

Fair enough. Let me show you why they do:

Quote

3. "The Fed is out of bullets" Everytime I hear this I ask a question and never get an answer: Whats stopping the Fed from monetizing more government debt? (apart from the fear of producing hyperinflation).

and i keep answering it:

Politics, the sheer size of the bad debts, the rioting that you'll see if they try (Middle East) and self preservation.  if they destroy the USD what would be their function?  what about the billions of USD wealth these bankers have?

Yes, but the choice is not between deflation or hyperinflation. Some people argue that we are going to see a lost decade of near 0 inflation/deflation ala Japan lost decade, some others (like me) argue that we are going to have stagflation (high inflation and high unemployment) ala the 70's.

What the governments/banking system are trying to achieve is high inflation but controlled. Granted this is not guranteed, there could be a panic and they could loose control and go into hyperinflation. While its always a risk my opinion is that they will pull it off and we will get high inflation for many years, while the unemployment wont fully recover.

Bernanke has lost control over interest rates and raising them significantly (ala 20% Volcker beggining of 80's) would be a disaster with the governments and banks going broke. Thats why after the crash of 2008 Bernanke got permission from Congress to start paying interest on excess reserves. This had never happened in the history of the USA (or any other central bank that I know). What does Bernanke achieve paying interest on excess reserves? It controls the flow at which banks grant credit to the private sector. If Bernanke thinks too much credit is being emited and inflation is getting out of control he just have to raise the interest of the excess reserves and banks will decide to leave more funds at the Fed instead of loaning them out, because its risk-less. There are other tools Bernanke can use but thats the main tool that he will use to control the flow of credit into the economy to produce high inflation and avoid hyperinflation. The risk of hyperinflation is always present, but Im pretty convinced he will succeed and the western economies (the ECB will follow the Fed) will go through years of stagflation.

Conclussion: If deflation gains traction Bernanke can monetize government debt (like it has done until now and has avoid any kind of price deflation). If inflation starts getting out of control it has tools to control it (not avoid it).

i fully understand this line of reasoning and its a logical theory of what might happen.  but at the same time you're seeing increasing social unrest spreading worldwide.  these occupywallstreet events are starting in other cities and could eventually lead to riots.  this steady rise in stagflation could lead to Middle East type unrest in the US.  you can only keep a lid on a boiling pot for so long before a reversal needs to happen to relieve the pressure.

what about all the charts of commodities, stocks, junk bonds rolling over worldwide?  what are they saying about inflation?

edit:  i am what you would consider a highly skilled professional worker with more years of education under my belt than any of you here, i guarantee.  but yet my "wages" are controlled by the gov't for the most part and i have seen a deflation in my wages since i started my business many years ago.  what you say about Google type workers is probably true.  but i think this phenomenon is confined to a more narrow group than you think.  probably just tech and financial people.
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October 03, 2011, 10:50:59 AM
 #872

melbustus made a good point.  we all see the same problems yet we all are positioning ourselves differently based on our interpretation of how this plays out in the future.

using gold as a longterm indicator, miscreanity sees a parabolic blowoff spike finishing the gold bull, hugolp sees a steady rise, and i see a rollover happening.  i guess this comes down to how you perceive markets work.
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October 03, 2011, 05:42:06 PM
 #873

the Dow, SPX, RUT, DJT all below Aug 9th lows.  if this holds, bad news.
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October 03, 2011, 05:56:17 PM
 #874

looks to me like the pm's begin wave 3 down.
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October 03, 2011, 07:39:23 PM
 #875

It seems to me that while Asia or Europe might dream that their own currencies reach reserve status, they are so mortally dependent upon the relative strength of USD, that all major economies will conspire to prop USD up at nearly any cost. The US has plenty of wiggle room to continue monetizing its own debt in relation to the vast majority of other fiat currencies.

For the past ten years, gold has risen under the radar, primarily because there were other assets that consistently out performed. However, if gold continued and accelerated its trajectory throughout the last three years it would both signify and cause the destruction of USD and the major economies.

It follows therefor that the major economies would have every incentive to collude in the suppression of the price of gold if necessary. At less than $10 trillion (13 zeros, 15% gross global product), I think this game can be played for a very long time. After all, gold does not have its own military. This is not to say gold can not go higher, but I wouldn't count on its price reflecting fiat monetary inflation.

Cypherdoc's point, that deleveraging of the past three years overwhelms base USD supply, is undeniable. Even if southern Europe implodes orders of magnitude greater than Lehman, to where will Europeans flee, where are they already running? Perhaps this is precisely why gold just tanked. I have personally suggested that my friends and family in Europe buy up metal since July. They won't, but USD and American assets, sure.

Greenlandic tupilak. Hand carved, traditional cursed bone figures. Sorry, polar bear, walrus and human remains not available for export.
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October 03, 2011, 08:03:16 PM
 #876

ALL major indices except NDX under the 8/9/11 lows.  This is a major technical break.  Wave 3 down has begun.

Gold/silver stocks whacked again.  i expect the metals themselves to follow.

$DXY and UST's up big.
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October 03, 2011, 08:05:26 PM
 #877

turns out the break of the retailers and momos i brought attention to a few days back was a major sign of an impending market break.  good luck guys.
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October 03, 2011, 08:46:16 PM
 #878

hey Matthew.  you still like this picture right?

you know what comes next don't you?

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October 03, 2011, 09:41:46 PM
 #879

I wanted a picture of your USD notes but you didn't show any.

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October 03, 2011, 09:48:26 PM
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I wanted a picture of your USD notes but you didn't show any.

LOL!  you and misreality deserve each other.
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