Sunday, May 31, 2009

assorted observations sunday afternoon...


some points to consider for all those following the gold-buggery right now happening in the blogsphere..


1. there has been talk about a default on the COMEX contract for over a year now, with each new wave of rumor centering around 1 central figure who has amassed what is called an "unusually large" position. Each time the month rolled over and passed with little or no fanfare.

for those expecting something to happen in June remember, dont count on black swan events, simply have a plan in case at all times if they appear. Every gold bug is harping on something big happening in june, and by big they tend to mean bullish. the contrarian in me is starting to get worried. remember my maxim: if someone is allegedly building a massive long position because they know something, then someone else with enough gold is selling it to them because they know something.

these kinds of stories are what make great headlines and suck people in. while anything can happen, and im prepared to a sudden gap up or parabolic move in part, im also prepared for the opposite as we have seen the later come to fruition more often than the former.

2. for the many Sinclair fans on the board, who i count myself as one of them, recall Jim's calls last summer/fall about a major massive gap up in gold, a settling of oil at $100 a barrel and gold shares not collapsing... the man is right in a macro sense, but trying to time gold has proven difficult at the best of times.

3. june is a tricky month because of the nature of the COMEX volume and activity coupled with the Armstrong turn date mid-month, E-wavers building "C wave up" postulates, and the flatlining nature of so many overbought TA signals in the broad market.

4. with respect to the gold miners, i posted on friday that i sold a bit, in preparation to reload should things slide from here. its hard to time so i wouldnt be surprised to see $1000 before we see $900, but if we do fall from here, i suspect it will be nasty and fast to scare the pants off of people. too many are either bullish or expecting a nice orderly pull back to reload. when does it ever work like that?

5. GATA does some great work but they have zero credibility when it comes to inside information. there is no objective evidence that any of their sources have brought to the table something we either didnt already know, or was proven true after the fact. Jim Willie and the rest of the "black swan alert" gang have only been right in that gold has risen over the past few years. if you followed their advice and bought jr's and miners you'd probably still be underwater. theres no money in telling people to simply buy gold bars and sit on them. even though thats proven the best strategy the past few years from a passive investment perspective.

6. gold bugs still fall into the religious category, not investor type because far too much of their ideas on gold stem from biblical black swan events in which the second coming of their lord will appear in the next COMEX contract to send the gold price skyward to heaven.

the beauty of their system is that they have said the same thing for years, and neglect to discuss how often they were wrong, simply rehashing the same old arguments until one day they may just get it right, and they can do a victory lap while saying they told us so. too bad far too many gold bugs having been massively underwater holding miners the past few years will celebrate simply breaking even.

when gold and gold shares collapsed in 2008, few truly saw it and articulated it clearly enough, simply because its difficult to do. you cant blame anyone for getting it wrong. but you can blame those who got it wrong, but obfuscated the past by declaring why it went down and why it wont happen again on any further downdrafts. does anyone really think if the market crashes gold mining shares wont go down again? unless gold skyrockets up they will fall. even a gradual gold price rise will not hold the miners from falling w/ a big correction. dont let people claim it was "margin calls" from hedge funds.

hedge funds have been used to blame for anything and everything under the sun. gold bugs love blaming them for short positions, then crediting them for being savy when they suspect they are long... its religion, not analysis.

7. long and strong. half all in. thats my game. if we moonshoot to $1200, awesome, ill be happy. my standing offer remains: if the HGU hits $30 this year, ill go 2 rounds of Brazilian ju-jitsu with anyone willing to come up to toronto. its an open invitation/open weight class offer. and my ju-jitsu sucks, so im counting on the euphoria of gold miners that high keeping me from noticing the pain of getting choked out!!

8. USD came down fast, china like most nations dont want a currency crisis anywhere. they are not stupid war-mongers either, no one likes what north korea just did. China if anything will emerge as a more diplomatic force with everything that is happening as a collapse of the US would threaten the ruling regime in bejing, remember they have 1.6 billion people, the focus of chinese domestic politics has historically been of greater concern because of the sheer size of its populace. failure to contain domestic problems has led to regime change over the past 3000 years in china, not foreign invasions.

be careful about view china's actions through the "foreign policy" lens of western geo-strategic traditions. still valid in their own right, but not entirely applicable to china. remember, looks matter in totalitarian regimes, hence why dissent is so aggressively quelled in such regimes and the press/internet is restricted more than in the west. currency swaps with brazil and argentina may mark a turn from a US-dollar centric FOREX but are tears in the bucket, and dont negate china's ongoing purchases of US debt instruments. It just sounds good for domestic patriotism to imply they are turning away from american reliance when in fact they still are the biggest holder of US debt. Its all about looks.

9. same with Iran. they have no reason or desire to actually bomb anyone. Its a media game and a bunch of hot heads on either side trying to provoke someone. if they want nuclear weapon they could purchase one, or make one. this notion that we must intervene to stop them is ineffectual. no state has ever been able to do that. sanctions dont and wont work. all they do is bring the populace on the extremist side. regimes will as we have seen allow their people to starve before giving in. sanctions in iran or elsewhere are pointless and only give them more attention.

iran has enough fire power to do damage, they know using a nuclear weapon against anyone would mean their nation would be wiped from the map immediately. the rest is simply conjecture. think about how viable this is as a policy approach? its not, and most people know its hot air, unless of course you are only listening to right wing american media.

10. the taliban are not taking over pakistan, or their arsenal. it never was close to happening, and its even less likely now. most Pakistani's have no interest in the taliban running the show. its more media attention so they can run headlines to say "could taliban take control of the nukes in pakistan? should we send more troops???". its all a great pre-text to increase the stakes in the af-pak war. under the auspices of a nuclear-taliban obama can deploy more men and material there.

please if you dont believe me follow some articles here,

http://www.tomdispatch.com/

one of the most cogent geo-political blogs on the net.

11. its soccer time, need to blow off more steam!!!!

good luck gang.

14 comments:

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