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Author Topic: Gold: I smell a trap  (Read 78592 times)
cypherdoc
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October 06, 2011, 03:28:33 AM
 #941

this is precisely why Whirlpool looks as sick as it is.  no manipulation of this price chart.
lines up pretty nice, eh?


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cypherdoc
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October 06, 2011, 03:49:01 AM
 #942

now look at this 15 yr weekly chart of the S&P 500.  stocks lead the economy.  see that hook DOWN over at the far right?  what does this tell you about where we're headed?  we've formed a huge downsloping head and shoulders formation over the last 10yrs which is extremely bearish.  again, if the economy and stocks tank, what will happen to gold which is also hooking down?  


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October 06, 2011, 03:55:57 AM
 #943

10yr weekly chart.  just to make this argument complete, guess what chart this is and compare it to the above economic charts.




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October 06, 2011, 04:11:38 AM
 #944

now this ones a little harder.  flip all the other charts over top to bottom and what do you get?


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October 06, 2011, 04:33:01 AM
 #945

Subscribing to this thread Smiley

I don't have the economic insight that the main posters on this thread have, but all those charts would seem to be indicative of one thing.. recession?  Economic growth is declining.

So does a recession and deflation go hand in hand?
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October 06, 2011, 04:38:18 AM
 #946

Subscribing to this thread Smiley

I don't have the economic insight that the main posters on this thread have, but all those charts would seem to be indicative of one thing.. recession?  Economic growth is declining.

So does a recession and deflation go hand in hand?

deflation=a decrease in the amount of money + credit marked to market.  answer:  yes.
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October 06, 2011, 04:58:38 AM
 #947

Subscribing to this thread Smiley

I don't have the economic insight that the main posters on this thread have, but all those charts would seem to be indicative of one thing.. recession?  Economic growth is declining.

So does a recession and deflation go hand in hand?

No. The relation between economic prosperity and prices is way more complicated than that. Some economist like to make easy relations based on short periods of history, but they are just wrong.

You can find in history periods of deflation and economic prosperity, deflation and crisis, inflation and economic prosperity (although you might have a lot of problems trying to find this ones, becuase they are usually bubbled times, not real economic prosperity) and inflation and crisis (called stagflation).
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October 06, 2011, 05:06:04 AM
 #948

Subscribing to this thread Smiley

I don't have the economic insight that the main posters on this thread have, but all those charts would seem to be indicative of one thing.. recession?  Economic growth is declining.

So does a recession and deflation go hand in hand?

No. The relation between economic prosperity and prices is way more complicated than that. Some economist like to make easy relations based on short periods of history, but they are just wrong.

You can find in history periods of deflation and economic prosperity, deflation and crisis, inflation and economic prosperity (although you might have a lot of problems trying to find this ones, becuase they are usually bubbled times, not real economic prosperity) and inflation and crisis (called stagflation).

in this particular time, deflation is definitely occurring via the contraction of credit which is the vast majority of the money supply.

i just showed you the graphs to prove it.

Steve Keen would even argue its the rate of change thats important.  a slowdown in the rate of change is all thats required to throw everything into reverse.
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October 06, 2011, 05:34:45 AM
 #949

Recession is not a statistic, Recession is a process.
   -- Lakshman Achuthan, ECRI

...contagion http://www.bloomberg.com/video/76372300/ (who linked this earlier?)

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October 06, 2011, 07:29:14 AM
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It is my impression that the ECB and PBC devalue because they must but the Fed because it can. Last month Cypherdoc made the point that the US banks have cleared their most toxic debt. US debt is a risk entertained by foreigners and citizens, not the financial institutions, which can not be said of Europe and certainly not China.

So while the US fundamentals sans military are poor, the money keeps rolling in and will continue as long as S. Europe walks the plank. This allows the Fed to stimulate the economy through inflation with the pretense of countering deflation.

With US interest rates approaching 0% while Greece approaches 100%, I can't help but see USD as a bubble. But I also don't see it popping before Greece. I foresee metal going parabolic only after a few sovereign defaults.

Yes, for now. That's how Bernanke got away with his first few helicopter drops - there was still some leeway. The window is now closed; most governments are backed into a corner and the reciprocating effects of competitive devaluation (it hasn't gone away, just slowed temporarily - the Swiss fired their salvo while everyone else is reloading) are coming back to drag on the US economy.

It's impossible to cause even a minor financial disturbance without international markets being affected to some extent. With the various bailouts, enough displacement occurred to further damage the underlying financial structure (esp. confidence and reliability of counterparty security). Politicians and monetary overlords have excused themselves from adhering to a "do no harm" credo.

The banks may have offloaded a portion of their worst liabilities, but it was tossed onto the plate of the institution they were bailed out by. Gov't has its back even further against the ropes because of that. If the losses were realized, that would be one thing - instead, by been shuffled elsewhere they're festering.

i think we would have to get down to about the fractional reserve norm of 10:1 as the banks used to be.  with all the deregs like sweep accts that occurred since 2000 the primary dealers had gotten to 40:1 and i think FNM/FRE got up to 120:1.  effectively they had NO reserve ratios which is how things got so out of hand.  home buyers would need to put down the old usual 20% and the debt to income ratios would need to be restored to 1:3.

Right there - no responsibility on behalf of the banks; moral hazard.

bottom line is there is deflation occurring all around us in financial assets...

the only things that are still relatively high are goods and services which are already starting to come down.

this lowering of prices across the board is happening b/c of the global slowdown that is now painfully becoming apparent.

Yes, yes and yes; dominant for the past few months.

miscreanities whole argument is that the Fed is going to monetize all this bad debt.  well when exactly is this going to happen?  theres about $54 trillion in private debt out there so he'd better get going.  he ignores that nothing has happened since QE2 ended and Op Twist is really net neutral.

Not merely "is going to" - is being forced to because of cause & effect. The banks figured out how to effectively monetize debt and until the debt instruments are unwound, it will remain as long-term, illiquid money. For an individual, this would be like having a retirement account - you have an asset, but it's locked up. If the Fed doesn't formally monetize the debt, there's no way it can be reverted back to simple loan structures in a timely manner.

How long does it take to unwind these instruments? Legal proceedings must take place to determine who the defendants and plaintiffs are in each case. With many securitized instruments having dozens or even hundreds on both sides, determining who is associated with what and collating that across multiple sets of records becomes daunting. It's like trying to figure out the path a dollar bill takes as it's used in various exchanges to understand how to reverse that exact series of transactions.

The task is daunting, to say the least. On top of that, how many lawyers have sufficient expertise and technical knowledge to properly navigate these financial instruments? How many disputes will there be? How will market value be determined? What about counter-claims and tertiary suits and on and on?

The debt cannot be unwound fast enough to ensure that business and the economy will function when deflation takes full hold. It may take a decade to make that happen. In the meantime businesses continue to fail, banks keep bleeding and government is still in panic mode. How many goods and services will remain? The power dynamic would shift entirely away from the current hegemony.

We cannot just look at the US. Fed-initiated QE forced other nations to follow suit. That disruption has finally percolated throughout the world. Each monetary authority that inflated alongside the US added to the problem. Sure, the banks have been rescued for now and some of the non-performing debt has been transferred to gov't books, but moving it around doesn't solve the problem of excess debt.

Bank stocks have been cut roughly in half since the highs from 3/09.  this has contributed mightily to crimping their balance sheets in addition to the bad loans.  so if these guys are the ones responsible for pushing money out into the economy via loans and they're not lending how is everyone supposed to get access to enough money to drive gold and silver to the moon?

Why do they have to loan out money? In order to make up for the crunch, they'll become more aggressive in other aspects. Encouraging the average Joe to deposit funds for trading will bring an influx. Proprietary trading desks are still all the rage. Not to mention the ongoing returns they're getting from gov't bonds. Kick leverage higher to allow for more flexibility.

Forget the banks, how much more will the government have to keep paying out to prevent the banks from deciding they can get better, reasonably risk-free returns by unleashing what reserves they can? In other words: if the banks keep being crimped, what is the threshold where they'll be forced to search for cash elsewhere unless the rates paid on reserves rise? How much further does deflation have to squeeze them for that situation to arrive?

what does this tell you about consumer credit?

...

with all the deflation occurring around us do you really think this graph continues its upward trend?  i don't.

I agree. However, from the Shillings chart you posted earlier, it's rather obvious that gov't is picking up the slack where consumers are falling off. More recent information might show a different picture. I don't know of a more current data series or chart offhand - do you have one?

whereas the last graph showed a hook with a small gasp of a rebound, this chart has clearly rolled with no signs of coming back up.

...

if we were threatening  hyperinflation, everyone and their mother would be rushing to the banks and borrowing to buy a house (a tangible asset whose loan would inflate away, ie, a free house).

here are those pesky banks again.  do they look like they've been lending out debt money to the public?  or is there something seriously wrong?  we've been inflating uninterrupted for 40 yrs.  does this graph tell you we're going to keep doing the same and drive gold and silver to the moon?

ah yes, credit cards.  why the hell aren't you bums buying gold with that free Visa card with $50K automatic credit in the mail?  oh, you mean they aren't mailing those out anymore?

Again, slack in financials is being picked up by gov't. Also note that lending is still occurring, it just isn't at as rapid a rate as it was at the peak. It isn't as though everything freezes up all at once.

in all fairness i should show this one too.  however, its been well documented this consists primarily of student loans.  higher ed has gotten away with murder way longer than it should have primarily by selling the story that if you don't get a degree you won't be able to compete in this new recession type economy.  this is a sham and the link to Seton Hall shows this is rapidly coming to an end.

Absolutely. One question: what happens when large numbers of students aren't occupied with studies and are unable to find jobs? Panacea? I'd lean toward unrest. Maybe those loans will continue after all...

financial stress is rising once again.  do these spikes occur in inflationary or deflationary times like we saw in 2008?  more importantly, will the banks lend in this environment?  no.

Rising, but nowhere near what we saw in 2008. Maybe that's because the stress is on the European side this time?

are ppl going out and consuming as if their USD's are going to be worthless?  no.

Rehash of consumer slack being picked up by gov't.

is money moving thru the economy normally?  or is all of it going to magically go into gold?

Yes, there are flow disturbances. This was acknowledged.

It must be kept in mind that the gold market is tiny compared to most others. Bonds, currencies and equities all dwarf the gold cap. Thus only a very small amount of flow needs to find its way to gold in order for major price moves to occur. There is also an entire world outside the borders of the US.

why is all this money fleeing from money market funds into bank deposits?  its b/c investors are scared.  scared that another fund may break the buck or that their European bond investments will go capoof.  in other words, investors are fleeing into the USD and not much else.

Yes, although a stronger term might be necessary - terrified perhaps. A lot of capital is in the hands of non-professionals. These are people who don't understand exactly what's going on. They're the people who hear gold blasted in the news and get advice from their domestically-educated investment advisers whom have likely lost a good chunk of their own wealth as well. It's the blind leading the blind.

After taking stock of what's going on, those people will eventually dip a toe back in the water. It's a gradual process.

commercial paper funds businesses.  no business lending, no economy growth.  no economy, no inflation.

This distinction is extremely important: monetary inflation is not the same as asset price inflation or economic growth. Businesses do not manage the money supply (derivatives and securitization by banks notwithstanding). Monetary inflation can provide room for business (and economy in general) to grow, but there is not a 1:1 relationship. Asset price inflation can result from monetary inflation, but only due to underlying supply/demand fundamentals.

here is a 10 yr gold chart with a hook at the end.  now i ask you, how much different is this price graph than the economic data graphs i just showed you?  gold is just a reflection of whats going on in the economy with speculation added in i submit.

Pay attention to the increasing volume at the bottom of the chart. Either HFT has progressively gone haywire, or rising amounts of capital are flowing into the sector. I will point out again that a $300 drop from $1,000/oz to $700/oz in 2008 was a 30% correction while the same $300 drop from $1,900/oz to $1,600/oz last month was only a 15% correction.

The price does not show the supply/demand fundamentals. Those are set up in almost exactly the same bullish formation as in 2008. At that time, price was also the only piece of data that was bearish for precious metals; misdirection.

how's your income by the way?  inflating?  i think not.  and you're not alone.

you mean you're not going out and buying refrigerators, washing machines, ovens, etc?

Monetary inflation triggers asset price inflation, then wage inflation. Monetary inflation has been held in check, so now the crunch hits. Those are domestic factors. If that was the only concern, I might consider deflation a possibility. There are numerous external factors, so deflation is not an option.

this is precisely why Whirlpool looks as sick as it is.  no manipulation of this price chart.
lines up pretty nice, eh?

now look at this 15 yr weekly chart of the S&P 500.  stocks lead the economy.  see that hook DOWN over at the far right?  what does this tell you about where we're headed?  we've formed a huge downsloping head and shoulders formation over the last 10yrs which is extremely bearish.  again, if the economy and stocks tank, what will happen to gold which is also hooking down?  

Maybe a detailed explanation is due, based on more than price action. Vague and intermittent associations offer tenuous arguments.

10yr weekly chart.  just to make this argument complete, guess what chart this is and compare it to the above economic charts.

Again, pay attention to silver volume. Magnitude increases in volume suggest increased capital flows from rising demand. There is also a severe drop-off in volume on the second spike down as compared to the May 2011 decline. This suggests that there are very few longs bailing out.

The same numbers behind the scenes reflect another bullish setup, just as with gold. One more time: price is the only bearish data.

now this ones a little harder.  flip all the other charts over top to bottom and what do you get?

A simple strategy is good, but I think you've gotten a bit too simple. The inverse association is intermittent.

For this thread supposedly being about global economics, there sure was a lot of gold-related sentiment in these recent posts. Smiley

I have to say, it was refreshing to see all of the STL Fed data sets displayed - thank you. So we've agreed again that deflation is the dominant force at the moment. This series started off very nicely. When it came to the price charts, there was no real explanation for why the price action in gold and silver are occurring aside from deriving meaning from the price actions themselves. Circular reasoning is a fallacy.

Let's take a look at some technical price analysis versus fundamentals.

What about lumber? It looks like it's in a range, but that's heavy. Deflation is in vogue.



Perhaps more paper will be needed for the myriad new legislation and IRS forms coming down the pipe? In all seriousness, there are so many uses for lumber (construction, repair, fuel, paper, etc.) that there really isn't any argument against it.

Still not convinced? Try AT&T on for size. Recession? Depression? Where? Business as usual, go back to your daily lives.



Would it stand to reason that the company is consistent because it's part of critical infrastructure?

No? Alright, I think Genesco's price chart looks great. So much for deflation, right? I mean, price is everything.



Or maybe this is due to the fact that brand recognition still counts, or at least because people still wear shoes.

I haven't seen a reply from you on the issues of:

  • Open Interest
  • Volume
  • Commitment of Traders reports
  • COMEX/NYMEX deliveries
  • COMEX warehouse inventories
  • SPDR ETF (GLD/SLV) trust holdings movements

I suggest we just see how things play out this month. After that, we can reassess what's going on and adjust our theories.

I'll leave with the news that over 1 million silver eagles have been sold by the US Mint as of October 3rd, following a near-30% drop from September 21st through the 26th. Silver coins sales were immediately halted for "repricing" purposes. Even with a similar decline of nearly 30% in price, gold coins are still being sold.

Silver sales are about 200,000 away from hitting a new record, and there is still one more quarter left in the year. It isn't as lofty, but gold is high also. I would think it safe to assume the fundamental of supply and demand is the cause. Where is the bubble? Participation is still low, and these buyers won't be letting go unless substantial profit is involved. If they view precious metals as insurance, they probably won't let go for any fiat price.

Got physical?

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October 06, 2011, 08:01:39 AM
 #951

in this particular time, deflation is definitely occurring via the contraction of credit which is the vast majority of the money supply.

i just showed you the graphs to prove it.

Yes, the facts are clear and we agree.

The issue is what are the effects of such contraction of credit and if it is good or bad that it happens. To some degree its "good" or at least necessary that happens because its the effect of removing bad business out of existance. If you dont allow that process to happen you will only prolong the depression.

Quote
Steve Keen would even argue its the rate of change thats important.  a slowdown in the rate of change is all thats required to throw everything into reverse.

Steve Keen has a very interesting theory of credit and everybody should read it. In fact, I learned about it reading him. Its the same theory of credit that chartalist have adopted.

But he fails big time on the rest. The proof is that he was predicting big deflation and it has not happened. When asked why his predictions failed he answered that we have seen an unsual government reaction that has avoided the deflationary collapse. The problem is that he knows its just an excuse, that the reaction of governments is not unusual and that a lot of economists had told him thats exactly what governments would do, because its what they do everytime a bubble pops. I dont understand why he takes so much care to understand one side of the monetary system (the relation between the banks and the central bank) but likes to ignore the other part (the relation between the government and the central bank). I really dont understand why he does that.

Also, the use of aggregates and in general the heritage from keynesian economics hurts him as well.
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October 06, 2011, 12:01:14 PM
 #952

in this particular time, deflation is definitely occurring via the contraction of credit which is the vast majority of the money supply.

i just showed you the graphs to prove it.

Yes, the facts are clear and we agree.

The issue is what are the effects of such contraction of credit and if it is good or bad that it happens. To some degree its "good" or at least necessary that happens because its the effect of removing bad business out of existance. If you dont allow that process to happen you will only prolong the depression.

we agree

Quote
Quote
Steve Keen would even argue its the rate of change thats important.  a slowdown in the rate of change is all thats required to throw everything into reverse.

Steve Keen has a very interesting theory of credit and everybody should read it. In fact, I learned about it reading him. Its the same theory of credit that chartalist have adopted.

But he fails big time on the rest. The proof is that he was predicting big deflation and it has not happened. When asked why his predictions failed he answered that we have seen an unsual government reaction that has avoided the deflationary collapse. The problem is that he knows its just an excuse, that the reaction of governments is not unusual and that a lot of economists had told him thats exactly what governments would do, because its what they do everytime a bubble pops. I dont understand why he takes so much care to understand one side of the monetary system (the relation between the banks and the central bank) but likes to ignore the other part (the relation between the government and the central bank). I really dont understand why he does that.

Also, the use of aggregates and in general the heritage from keynesian economics hurts him as well.


come on hugolp.  how can you say he fails?  the story has just gotten started.  first of all he was right about the deflationary shot over the bow we got in 2008.  the story is not nearly over b/c of the only partial retrace we've gotten since as evidenced by the S&P 500 which has resumed its rollover.  when it undercuts the 3/09 low you'll be singing a different story about Keen's deflationary predications.  also look at the hook downs in all the economic charts i just put up.  deflation is going to be here for at least half a decade or more.
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October 06, 2011, 12:18:21 PM
 #953

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Steve Keen would even argue its the rate of change thats important.  a slowdown in the rate of change is all thats required to throw everything into reverse.

Steve Keen has a very interesting theory of credit and everybody should read it. In fact, I learned about it reading him. Its the same theory of credit that chartalist have adopted.

But he fails big time on the rest. The proof is that he was predicting big deflation and it has not happened. When asked why his predictions failed he answered that we have seen an unsual government reaction that has avoided the deflationary collapse. The problem is that he knows its just an excuse, that the reaction of governments is not unusual and that a lot of economists had told him thats exactly what governments would do, because its what they do everytime a bubble pops. I dont understand why he takes so much care to understand one side of the monetary system (the relation between the banks and the central bank) but likes to ignore the other part (the relation between the government and the central bank). I really dont understand why he does that.

Also, the use of aggregates and in general the heritage from keynesian economics hurts him as well.


come on hugolp.  how can you say he fails?  the story has just gotten started.  first of all he was right about the deflationary shot over the bow we got in 2008.  the story is not nearly over b/c of the only partial retrace we've gotten since as evidenced by the S&P 500 which has resumed its rollover.  when it undercuts the 3/09 low you'll be singing a different story about Keen's deflationary predications.  also look at the hook downs in all the economic charts i just put up.  deflation is going to be here for at least half a decade or more.

Its not me, even he admited his prediction failed. He was predicting a deflationary collapse that did not happen. Yes there was movement in the stock market and commodities that they recovered "quickly" and the CPI hardly touched the negative. If the government had not done anything it would have happened as he predicted. But a lot of people told him how governments would react and he ignored it. I dont really know why he only looks at the credit part while ignoring the rest.

His theory of credit is great to know because it describes the present system correctly, but thats it.
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October 06, 2011, 12:44:35 PM
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Not merely "is going to" - is being forced to because of cause & effect. The banks figured out how to effectively monetize debt and until the debt instruments are unwound, it will remain as long-term, illiquid money. For an individual, this would be like having a retirement account - you have an asset, but it's locked up. If the Fed doesn't formally monetize the debt, there's no way it can be reverted back to simple loan structures in a timely manner.

where is the evidence that they're being forced to monetize on a large scale that anyway resembles the magnitude of the outstanding bad debt worldwide?  Ben has only pumped a mere $2T.  add up the $54T in private debt plus the quadrillion or so of derivatives overhang?  they haven't, they aren't, and they won't.
Quote

Bank stocks have been cut roughly in half since the highs from 3/09.  this has contributed mightily to crimping their balance sheets in addition to the bad loans.  so if these guys are the ones responsible for pushing money out into the economy via loans and they're not lending how is everyone supposed to get access to enough money to drive gold and silver to the moon?

Why do they have to loan out money? In order to make up for the crunch, they'll become more aggressive in other aspects. Encouraging the average Joe to deposit funds for trading will bring an influx. Proprietary trading desks are still all the rage. Not to mention the ongoing returns they're getting from gov't bonds. Kick leverage higher to allow for more flexibility.

speculation on your part.  right; the avg Joe is about to explode his debt overhang by going out to borrow to open a trading acct?  are you dreaming?  proprietary desks are NOT all the rage. they have been cut back severely and their trading profits as evidenced in the primary dealers quarterly reports have been hurt badly.  why do you think they're having to finally cut bonuses and fire employees just now?  right; just kick leverage higher.  they can't.

Quote

Forget the banks, how much more will the government have to keep paying out to prevent the banks from deciding they can get better, reasonably risk-free returns by unleashing what reserves they can? In other words: if the banks keep being crimped, what is the threshold where they'll be forced to search for cash elsewhere unless the rates paid on reserves rise? How much further does deflation have to squeeze them for that situation to arrive?

i told you this thread is moving away from speculation as to what you think the Fed/gov't is going to do.  what are they doing.
Quote

what does this tell you about consumer credit?

...

with all the deflation occurring around us do you really think this graph continues its upward trend?  i don't.

I agree. However, from the Shillings chart you posted earlier, it's rather obvious that gov't is picking up the slack where consumers are falling off. More recent information might show a different picture. I don't know of a more current data series or chart offhand - do you have one?

take look at this from the FRBNY's summary report.  look at bottom right chart.  see just how little fiscal support is coming into the economy.  in fact its gone negative:


Quote
whereas the last graph showed a hook with a small gasp of a rebound, this chart has clearly rolled with no signs of coming back up.

...

if we were threatening  hyperinflation, everyone and their mother would be rushing to the banks and borrowing to buy a house (a tangible asset whose loan would inflate away, ie, a free house).

here are those pesky banks again.  do they look like they've been lending out debt money to the public?  or is there something seriously wrong?  we've been inflating uninterrupted for 40 yrs.  does this graph tell you we're going to keep doing the same and drive gold and silver to the moon?

ah yes, credit cards.  why the hell aren't you bums buying gold with that free Visa card with $50K automatic credit in the mail?  oh, you mean they aren't mailing those out anymore?

Again, slack in financials is being picked up by gov't. Also note that lending is still occurring, it just isn't at as rapid a rate as it was at the peak. It isn't as though everything freezes up all at once.

ditto above graph
Quote

financial stress is rising once again.  do these spikes occur in inflationary or deflationary times like we saw in 2008?  more importantly, will the banks lend in this environment?  no.

Rising, but nowhere near what we saw in 2008. Maybe that's because the stress is on the European side this time?

don't you have any imagination as to where that upward spike may be headed?

Quote

are ppl going out and consuming as if their USD's are going to be worthless?  no.

Rehash of consumer slack being picked up by gov't.

rehash gov't consumption graph above.
Quote

is money moving thru the economy normally?  or is all of it going to magically go into gold?

Yes, there are flow disturbances. This was acknowledged.

It must be kept in mind that the gold market is tiny compared to most others. Bonds, currencies and equities all dwarf the gold cap. Thus only a very small amount of flow needs to find its way to gold in order for major price moves to occur. There is also an entire world outside the borders of the US.

2007:  "the lines of ppl around every new home model tract waiting to put down a deposit to secure a home scheduled for delivery 6 mo from now is a sure sign that home prices will continue up.  God only made so much land you know."

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here is a 10 yr gold chart with a hook at the end.  now i ask you, how much different is this price graph than the economic data graphs i just showed you?  gold is just a reflection of whats going on in the economy with speculation added in i submit.

Pay attention to the increasing volume at the bottom of the chart. Either HFT has progressively gone haywire, or rising amounts of capital are flowing into the sector. I will point out again that a $300 drop from $1,000/oz to $700/oz in 2008 was a 30% correction while the same $300 drop from $1,900/oz to $1,600/oz last month was only a 15% correction.

glad you brought this up.  a more sophisticated analysis of the volume show an increasing volume on the days of selloffs.  this means there are more interested sellers.
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The price does not show the supply/demand fundamentals. Those are set up in almost exactly the same bullish formation as in 2008. At that time, price was also the only piece of data that was bearish for precious metals; misdirection.

you've got to stop dissing the "price".  after all, how do you measure your wins vs losses?  certainly not by volume.  this is a classic excuse when fighting the tape.  its for amateurs.  i believe the price action is setting up for the next leg DOWN.  silver 2nd leg down recently is telling you what gold is going to do very soon.

you also need to read Nicole Foss's post completely where she explains bubble dynamics which you completely ignore:

http://theautomaticearth.blogspot.com/

"Changes in supply and demand do not typically occur rapidly, but changes in perception certainly do, and it is perception that drives markets. If the fundamentals of supply and demand were responsible for setting prices, we would not see price collapses over a matter of months, yet this is exactly what we saw in 2008. "

and exactly what we're seeing in 2011.

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how's your income by the way?  inflating?  i think not.  and you're not alone.

you mean you're not going out and buying refrigerators, washing machines, ovens, etc?

Monetary inflation triggers asset price inflation, then wage inflation. Monetary inflation has been held in check, so now the crunch hits. Those are domestic factors. If that was the only concern, I might consider deflation a possibility. There are numerous external factors, so deflation is not an option.

you're right; its not an option, its a fact.

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this is precisely why Whirlpool looks as sick as it is.  no manipulation of this price chart.
lines up pretty nice, eh?

now look at this 15 yr weekly chart of the S&P 500.  stocks lead the economy.  see that hook DOWN over at the far right?  what does this tell you about where we're headed?  we've formed a huge downsloping head and shoulders formation over the last 10yrs which is extremely bearish.  again, if the economy and stocks tank, what will happen to gold which is also hooking down?  

Maybe a detailed explanation is due, based on more than price action. Vague and intermittent associations offer tenuous arguments.

there you go again.  lots of ppl think that ALL information is embedded in price.  why should i believe your opinion?  why do you think i call you misreality?
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10yr weekly chart.  just to make this argument complete, guess what chart this is and compare it to the above economic charts.

Again, pay attention to silver volume. Magnitude increases in volume suggest increased capital flows from rising demand. There is also a severe drop-off in volume on the second spike down as compared to the May 2011 decline. This suggests that there are very few longs bailing out.

The same numbers behind the scenes reflect another bullish setup, just as with gold. One more time: price is the only bearish data.

yes; pay attention to volume on selloffs vs up days.  again, the setup is down.

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now this ones a little harder.  flip all the other charts over top to bottom and what do you get?

A simple strategy is good, but I think you've gotten a bit too simple. The inverse association is intermittent.

Occam's Razor

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For this thread supposedly being about global economics, there sure was a lot of gold-related sentiment in these recent posts. Smiley

I have to say, it was refreshing to see all of the STL Fed data sets displayed - thank you. So we've agreed again that deflation is the dominant force at the moment. This series started off very nicely. When it came to the price charts, there was no real explanation for why the price action in gold and silver are occurring aside from deriving meaning from the price actions themselves. Circular reasoning is a fallacy.

you can't ignore price.  thats called denial.
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Let's take a look at some technical price analysis versus fundamentals.

What about lumber? It looks like it's in a range, but that's heavy. Deflation is in vogue.
...
Perhaps more paper will be needed for the myriad new legislation and IRS forms coming down the pipe? In all seriousness, there are so many uses for lumber (construction, repair, fuel, paper, etc.) that there really isn't any argument against it.

Still not convinced? Try AT&T on for size. Recession? Depression? Where? Business as usual, go back to your daily lives.
...
Would it stand to reason that the company is consistent because it's part of critical infrastructure?

No? Alright, I think Genesco's price chart looks great. So much for deflation, right? I mean, price is everything.
...

and yet you throw up a series of price charts to prove a point?

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Or maybe this is due to the fact that brand recognition still counts, or at least because people still wear shoes.

I haven't seen a reply from you on the issues of:

  • Open Interest
  • Volume
  • Commitment of Traders reports
  • COMEX/NYMEX deliveries
  • COMEX warehouse inventories
  • SPDR ETF (GLD/SLV) trust holdings movements


i have commented on the first two which i think are bearish and i keep track of warehouse inventories which is supportive of dwindling supply.  i don't keep track of the other categories largely b/c i think they're irrelevant b/c they are so opaque. but i know that on the face of it they're suportive of tight supply.  i'm not arguing that they are not supportive of your argument but i see enough other data to think we've topped and close to beginning the next leg down in the metals.  we could get a small bounce here but its looking pretty weak, esp silver, and i suspect we get another plunge very soon.
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October 06, 2011, 01:07:18 PM
 #955

i'll reiterate.  if you follow the minute by minute ticks of the USD vs almost everything else (i follow oil, the Dow, gold, silver, and a few currencies) you'll see an exact inverse correlation.

this means that these markets are not based on fundamentals but purely on speculation of further liquidity injections (criminality) from the world's central banks.  in other words, these f*ckers allowing you to be raped.  as a result of this i actually think that price means everything.  in other words the techinicals trump the fundamentals in this particular situation.  you almost cannnot reason what the markets will do.  you have to follow what they are doing.  otherwise, you will get raped.  and what they are doing is going down.  
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October 06, 2011, 01:27:35 PM
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whereas the last graph showed a hook with a small gasp of a rebound, this chart has clearly rolled with no signs of coming back up.  ask yourself, what is your biggest personal asset?  if you're a home owner this one is easy.  therefore, if no one is taking out RE loans to buy more houses this means that house prices are going to continue down.  if we were threatening  hyperinflation, everyone and their mother would be rushing to the banks and borrowing to buy a house (a tangible asset whose loan would inflate away, ie, a free house).



This one is pretty silly.  Half the country just got burned badly by the real estate market, and the other half knows someone who did.  Even if "Hyperinflation will start tomorrow" was written in flaming letters across the sky, people wouldn't be jumping back into houses.

In my view, the people that are sure that hyperinflation won't happen here are just as crazy as the people that are sure that it will.

The US economy and the US dollar are seriously fucked up right now.  The current condition cannot continue much longer.  There will be a change, a big change, and it has a pretty good chance of getting nasty.

But, as bad as things are, it is still the best game in town.  The importance of this global view cannot be overstated.  There will be no apocalypse while the US remains the safe haven.

So, while the doomsayers are right that the US appears to be doing everything it possibly can to usher in a serious bout of hyperinflation, it won't happen today, or tomorrow.  It might not ever happen at all.

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October 06, 2011, 01:39:21 PM
 #957

whereas the last graph showed a hook with a small gasp of a rebound, this chart has clearly rolled with no signs of coming back up.  ask yourself, what is your biggest personal asset?  if you're a home owner this one is easy.  therefore, if no one is taking out RE loans to buy more houses this means that house prices are going to continue down.  if we were threatening  hyperinflation, everyone and their mother would be rushing to the banks and borrowing to buy a house (a tangible asset whose loan would inflate away, ie, a free house).



This one is pretty silly.  Half the country just got burned badly by the real estate market, and the other half knows someone who did.  Even if "Hyperinflation will start tomorrow" was written in flaming letters across the sky, people wouldn't be jumping back into houses.

In my view, the people that are sure that hyperinflation won't happen here are just as crazy as the people that are sure that it will.

The US economy and the US dollar are seriously fucked up right now.  The current condition cannot continue much longer.  There will be a change, a big change, and it has a pretty good chance of getting nasty.

But, as bad as things are, it is still the best game in town.  The importance of this global view cannot be overstated.  There will be no apocalypse while the US remains the safe haven.

So, while the doomsayers are right that the US appears to be doing everything it possibly can to usher in a serious bout of hyperinflation, it won't happen today, or tomorrow.  It might not ever happen at all.

i sure hope you're not saying my pt was silly. i think we're saying the same thing.  think about it, if you feel HI is right around the corner, the best thing to do is to go out and take out the largest most leveraged loan you could get, typically a mortgage (most favored tax haven and favorable terms), and buy as many houses as possible.  the banks got seriously hurt in the 1970's by giving out too many easy RE loans which got inflated away.  this is one of my critical pts; they aren't going to repeat this mistake by leveraging up and spraying USD's all over the economy.  and if you don't get HI, how is gold going to go to the moon?
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October 06, 2011, 02:02:03 PM
 #958

i sure hope you're not saying my pt was silly. i think we're saying the same thing.  think about it, if you feel HI is right around the corner, the best thing to do is to go out and take out the largest most leveraged loan you could get, typically a mortgage (most favored tax haven), and buy as many houses as possible.  the banks got seriously hurt in the 1970's by giving out too many easy RE loans which got inflated away.  this is one of my critical pts; they aren't going to repeat this mistake by leveraging up and spraying USD's all over the economy.  and if you don't get HI, how is gold going to go to the moon?

Yup, that would be the most rational thing to do if you were sure that inflation was coming.  Not even hyperinflation.  Just regular old steady inflation of more than about 4 or 5% would be enough to make that a profitable play.

My point was that even if Jesus himself showed up in person to tell everyone that hyperinflation would be starting in a month, housing would not be the place that most people would go to, because they are still smarting from the hard spanking they just got.

Because of that, the chart of real estate loans can't really be considered evidence that people don't expect inflation.  I have a habit of picking on bad arguments, particularly ones that are made in support of a view that I favor.

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October 06, 2011, 02:08:22 PM
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i sure hope you're not saying my pt was silly. i think we're saying the same thing.  think about it, if you feel HI is right around the corner, the best thing to do is to go out and take out the largest most leveraged loan you could get, typically a mortgage (most favored tax haven), and buy as many houses as possible.  the banks got seriously hurt in the 1970's by giving out too many easy RE loans which got inflated away.  this is one of my critical pts; they aren't going to repeat this mistake by leveraging up and spraying USD's all over the economy.  and if you don't get HI, how is gold going to go to the moon?

Yup, that would be the most rational thing to do if you were sure that inflation was coming.  Not even hyperinflation.  Just regular old steady inflation of more than about 4 or 5% would be enough to make that a profitable play.

My point was that even if Jesus himself showed up in person to tell everyone that hyperinflation would be starting in a month, housing would not be the place that most people would go to, because they are still smarting from the hard spanking they just got.

Because of that, the chart of real estate loans can't really be considered evidence that people don't expect inflation.  I have a habit of picking on bad arguments, particularly ones that are made in support of a view that I favor.

but this is a major pt in favor of deflation.  there was no greater amt of leverage poured into an asset class of the system by the plebes than residential RE.  those 69% of Americans (peak housing participation rate) that bought anywhere btwn 1999 or so and 2007 are screwed into the biggest debt instrument of their lives.  they won't be coming to the gold or HI party.
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October 06, 2011, 02:50:33 PM
 #960

What about European HI and American deflation?

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