NOTE: Posted for Metal Augmentor subscribers on November 12, 2009 at 9:30 P.M. EST.
In a demonstration of just how insular some of the thinking can be in the gold camp, today Jim Sinclair made a ridiculous commentary regarding the Obama White House’s initial efforts to reduce the size of the $700 billion TARP fund. Here is what Sinclair said:
TARP to reduce the Budget Deficit is quantitative easing to infinity because they are not buying their own bonds. They are creating money to credit the budget deficits.
There has never been a more inflationary scenario in the history of currency. Trader Dan expresses his opinion on the subject at hand.
Guys,
Take a look at the following story…
I am past the point where I read in disbelief anything that this administration is capable of but this is so stupendously asinine that I could not resist sending it out.
If you sweep aside all the BS contained in the article, the crux of the matter is that these hucksters are so out of control and infatuated with their spending, that they now think it is fiscally responsible to print money into existence, saddling this plunge the nation further into debt to create the TARP program and then use the TARP money to reduce the debt and somehow can congratulate themselves for being fiscally responsible???
Once upon a time the rallying call of these drunken spenders was “raise taxes on the rich” to fund their redistributionist schemes. Now it is “raise taxes upon those who are not yet born” by destroying the currency.
With this sort of idiocy now being considered as responsible policy, gold’s target price is moving higher and higher.
Read more…
silverax Windbag Wisdom
NOTE: Posted for Metal Augmentor subscribers on October 29, 2009 at 6:35 P.M. EST.
There is no “dollar carry trade”. Yes, FOREX traders are short the U.S. dollar in massive proportions and part of the reason for this is the interest differential they receive when buying, say, the Australian dollar/U.S. dollar pair (over 3% annualized). But there is no “dollar carry trade” in terms of investors or speculators borrowing U.S. dollars and using them to acquire assets denominated in other currencies. Not because this wouldn’t be a splendid idea, but simply because there is nobody lending dollars to investors, much less speculators, at the present time.
The latest pundit to join the false “dollar carry trade” fearmongering is Nourel Roubini, the NYU professor of economics nicknamed “Dr. Doom” for his predictions about the recent economic collapse. Roubini claims that:
“There is a wall of liquidity…chasing assets,” Roubini told “Squawk Box.”
“Now we are in the mother of all carry trades,” he added.
Asset prices have been inflated by the cheap funds but the dollar cannot keep falling forever, and there could be “a market crash all over the world” when the currency’s course is reversed.
But this will not happen too soon as the real economy is still very weak and the Federal Reserve is likely to keep interest rates close to 0 percent for longer, Roubini added.
“The reality is that the dollar is the funding currency of the carry trades. Because of that the dollar weakness is going to continue for a while.”
This is utter nonsense. I challenge Roubini and anybody else who is spouting these “dollar carry trade” proclamations to identify the specific entities involved as well as their sources of borrowing. They can’t, because there aren’t any.
Read more…
silverax Windbag Wisdom
NOTE: This was posted for Metal Augmentor subscribers on October 27, 2009 at 2:10 AM EST. Normally I would reserve this type of commentary for subscribers but it involves a change in the SILVERAXIS Alert Flag, so it belongs here. Alas I’ve noted the recent traffic rankings on this website are down quite a bit — probably as a reflection of my infrequent posting schedule or perhaps my “doubting Thomas” attitude about the ongoing gold rally — so I’m not sure what it’s worth. I suppose we’ll have to wait and see with the full benefit of hindsight. By the way, I’m going to have another “contest” shortly for a free Metal Augmentor membership as a ploy to get some of you to come back and visit more often, so please do.
Last Friday gold tried mightily to attain a new closing high on the weekly chart but could not manage it, setting up the possibility, at a minimum, of a normal autumn correction (as opposed to the abnormal one we had last year). If it starts this week, such a correction would appear as a “rollover” on the charts, demanding a drop to at least $1025 gold in order to create sufficient momentum for a meaningful decline that cleans out the riff-raff and sets the market on a strong footing to continue its historic rise. We expect Tuesday of this week to be a critical day for the longs to defend support at $1040 in December COMEX gold and ideally to attempt to regain the $1050 level. If these efforts fail, we would then look for longs to start an “every man for himself” (or woman for herself) exit during the rest of this week. Should gold close around $1025 or under on Friday, the correction will likely last at least 2 more weeks with a possible low in the $980 area by the second week of November.
We give the above scenario fairly high odds (between 25-50%) and while arguably we are doing no more than grabbing at straws, we do spend quite a bit of time staring at price patterns and picking out the best (and worst) technical analysis to help coalesce our views. From time to time we are even rewarded with being correct, which seems to be anywhere from 25-50% of the time. Coincidence? We think not! Compare this to the .000 batting average of the typical gold pundit who has emphatically declared the “Big One” on about a thousand occasions in the past few years, only to strike out every single time.
On the other hand, if gold is able to shake off the weakness and close the week on a strong note near or above $1050, there is a very good possibility that next week could bring new highs in the $1080-$1100 area, which is the level we thought might be an intermediate top for this historic move above the March 2008 high. There is of course nothing to definitively say that gold cannot go much higher than $1100 in the weeks ahead, and there is also nothing that can. It’s just that we’re working with probabilities (or rather possibilities) here, not absolutes.
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silverax Windbag Wisdom
NOTE: Posted for Metal Augmentor subscribers on October 20, 2009 at 7:22 AM EDT.
Earlier this year it was revealed by a Chinese bureaucrat that China has supposedly* acquired several hundred tons of gold for its official reserves during the past few years, representing the biggest purchase of gold by a central bank since the French under de Gaulle tried to clean out Fort Knox. Alas, it appears that many so-called experts have totally misunderstood this new “Gold War” to the point that they actually believe China has instituted a formal policy of preventing the gold price from ever crashing again. This alleged policy of supporting the gold price has been nicknamed by pundits as the “Beijing Put”.
*We say “supposedly” because there is really no way to validate these quoted figures and therefore the degree to which you trust them is directly proportional to the degree to which you trust information coming out of China.
Here at Metal Augmentor, we have a different view on the matter. There is a Beijing Put alright, but we believe it involves a policy of patiently waiting for opportunities to acquire large quantities of gold at prices that won’t literally break the (central) bank. That means the Chinese are not going to be in the market buying gold when speculators are building leveraged gold positions, such as now. Indeed the Chinese might even be shorting against these speculators. Conversely, the Chinese are going to be in the gold market when speculators are unwinding leveraged gold positions. The beauty of this approach for the Chinese is that they are able to pick up physical gold on the cheap during retreats by the hot money, even when there are no fundamental changes in physical supply or demand. Moreover, by being short against leveraged speculators, the Chinese are able to neuter a major source of competition on the long side that might otherwise drive both the paper and physical gold price higher. This is precisely what some pundits have claimed to be the situation in the silver market for quite some time. While we rarely agree with the pundits, such allegations make sense to us not only in the case of silver but gold as well.
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silverax Windbag Wisdom
It was only a matter of time before gold broke to new record highs given its stickiness around the $1000 level, and its move today was made in convincing fashion. If the momentum can be maintained in the days and weeks ahead, gold is theoretically capable of moving significantly higher. This is because there is no fundamental valuation measure that says “$1100 gold is fair value” or “$1500 gold is fair value” despite various pundits arguing otherwise. Gold will move higher simply because there are more buyers than sellers and vice versa. We see the same dynamic in the stock market currently: people are buying and therefore stocks are moving higher. No rhyme or reason to it other than that.
Fundamentally speaking, today’s rally in gold, silver, commodities and stocks — and a fall in the dollar — was based in part on a series of shams.
One was the rumor that unnamed Arab oil exporters have met with Russia, Brazil and China to discuss dumping the U.S. dollar as the currency in which oil is traded worldwide. The report was made by Robert Fisk, a noted anti-American journalist, and has not been corroborated by any credible source.
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silverax Windbag Wisdom
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