Subscription Service Tout

Here are some short-term charts I sent to my subscribers Tuesday night (July 19th) for GDX, GLD and SLV:











The next morning as the markets opened, I sent out an email alert for traders to buy paper precious metal ETFs and/or precious metal stock ETFs pronto. The bottom was that morning for Gold, silver and precious metal stock indices. I think we move significantly higher over the next few weeks in the precious metals sector.

Just a glimpse of what my new service provides. It is geared towards trading, as my investment advice is too simple to justify a newsletter: buy physical Gold (and silver). And then buy more.

Consider joining us if you are so inclined to speculate in the casino with some of your capital. I focus on the precious metals sector but am happy to go short or long when trading, as I have no allegiance to any asset class in the short term.

In fact, I am already planning for our first big short position in the pending cyclical global stock bear market. For now, it's long all things precious and metal, but we are getting close to the end for the few remaining Western stock markets that haven't broken down. One of my favorite ratios, the industrial metals to Gold ratio ($GYX:$GOLD) as well the copper to Gold ratio I suspect will provide the "all clear" signal to start going short. Here's a 2.5 year weekly $GYX:$GOLD chart thru Friday's close to show you what I am looking for:





If we don't breakdown, no problem. We'll just keep making money on our long precious metal positions. Long or short. It doesn't matter to me when trading.

When it comes to investing, I never lose sleep knowing that I own shiny physical metal during a secular downtrend in the Dow to Gold ratio. This ratio will reach 2 before the secular Gold bull market is over and we may go below 1 this cycle.

As an aside, the public where I live still has no clue. I went to one of those "Out of the Box" Gold stores (i.e. sell us your Gold jewelry at a lousy price outfits), which actually had decent prices for standard bullion, and chatted up the manager. He said their business is booming. Every time the price of Gold goes up, the store is flooded. Flooded, that is, with people rushing to sell their jewelry. They are seeing roughly 90% sellers and 10% buyers so far this summer. Just a little anecdote for thought, as those same 90% will be buying their jewelry back (and hopefully my Krugerrands) near the top of this Gold bull market. Sad but true...

What Are These Global Markets Trying To Tell Us?

When ignoring the day-to-day noise and focusing on the intermediate to longer term, all the pieces in the puzzle are lining up for another significant cyclical bear market. Yes, policy makers will do everything in their power to prevent it, just like they did in 2007 and 2008. Bear Sterns, Lehman Brothers, Fannie and Freddie Mac - there were government interventions and guarantees all along the way. All to no avail, although the United States apparatchiks and bankstaz did manage to waste a lot of other people's money. Now it is Europe's turn to bail out that which shouldn't be bailed out in order to save the elite from the losses incurred on their maniacal gambling. When you know you're going to be bailed out at the first sign of trouble, why not be as reckless as possible in the quest for ever increasing profits?

This time will be no different than the last, however. There comes a time when the urge to hit the "sell" button among those risking capital becomes a herd-like instinct as fear begins to overwhelm greed. Will "QE to infinity" stop us from ever seeing a bear market again? The question would make me laugh if it weren't actually being seriously considered by so many investors.

When looking at charts of stock markets around the globe, there are some serious warning signs that a global bear market is on the horizon for the remaining Western economies that aren't in one already. Much like the summer of 2007, the writing is on the wall and yet many believe that central banks and fiscal stimulus can prevent the next bear market as long as desired. This is nonsense. Although potentially correct in theory (give everyone $1 billion in cash and all prices will rise, including common equities), this is not how things have worked in the real world even in recent history. The money goes to the banks, not the people, and when the banks hoard the money due to risk aversion, asset prices fall. Then the bankstaz swoop in and buy using other people's money or money created out of thin air and the game starts all over again.

No sense crying over the way the world works. It isn't fair, of course. But we punters can at least try to profit from these manic-depressive swings related to a secular private sector credit contraction being fought tooth and nail by clueless apparatchiks.

But enough blabbering, as the charts are what contain the truth of the markets. Though certain Western economy stock markets are holding up well (e.g., U.S., Germany, UK), they will apparently be the last to fall this cycle and other economies are giving the preview of what's to come. I am not significantly short anything (yet), but you can bet I will be when I think the time is right. Recently I looked at financial firms and their warnings. This time I thought I would look at whole countries and the warning signals they are flashing for those willing to listen.

First up, one of the world's largest economies, Japan. Here's a 2.5 year weekly chart of the Nikkei Index ($NIKK):





Next up, the powerhouse growth story that is supposed to rescue us all: China. Here's the Shanghai Index ($SSEC) using the same 2.5 year weekly chart format:





Apparently, the growth in China is not enough to have their stock markets rise significantly, despite money printing over there that is on the verge of making Helicopter Ben blush. Warning: does not compute. Super fast growth plus massive money printing = stock market bubble (doesn't it?).

Next up, Brazil, the resource powerhouse that can't stop the "hot" money flows from coming in:





Moving on to a few peripheral European countries, let me preface these charts with a little comment. People like to say that Greece or Portugal or Ireland are small economies and don't make that big of a difference. The people who say this are the same ones that said "subprime is contained," "Bear Stearns is just one company," and "soft patch, green shoots, Goldilocks, muddle through, everything is fine, everything is fine, EVERYTHING IS FINE!" In other words, people you probably don't want to trust too much. It was an Austrian bank default that set off a panicky chain reaction in the 1930s, not a British one (Britain was the economic superpower of that time).

Anyhoo, here's the Portuguese stock market ($PTDOW):





And here's Italy ($INE):





Next up, Spain ($ESDOW):





Ireland ($IEDOW) is on the verge:





And the last of the so-called PIIGS, poor Greece ($GRDOW):





Getting to a slightly larger European fish, the French stock market ($CAC) ain't exactly smelling like a rose at current levels:





At least we can count on Australia ($AORD) to power higher on the back of insatiable Chinese demand for everything "raw," right?





If all those currency reserves in China plus 20-30% (or more) per year monetary growth in China can't buy enough raw materials to push up Australia's stock market, what happens when the point of recognition related to Australia's bursting housing bubble hits?

And what of the Baltic Dry Index ($BDI)?:





Well, at least the bond market is signalling hyperinflation, so we don't have to worry about prices falling any time soon. Here, just look at the 1 year United States Treasury yield ($UST1Y) chart:





Just some food for thought among those trying to figure out where we go from here over the next year or so. I know which way I am leaning and it ain't towards the paperbug crowd's side. Matter of fact paperbugs, how about that Dow to Gold ratio?





Bottom line: Don't be a bag holder here. Use rallies to lighten up on long positions in common equities. If we have a nasty common equity bear market, Gold stocks may or may not be a safe haven, but physical Gold held outside the banking system will do just fine (and probably a whole lot better than fine). Navigating the current equity minefield is not for the faint of heart, to be sure.

NOTE: Specific trading recommendations are reserved for subscribers.

Fiatus Decrepitus

Let others worry about trampoline jumping fiat currencies in the financial arena constructed by paperbugs. Gold bulls know all paper is sinking relative to Gold (and silver). It's not rocket science, it's the common sense that seems to be in short supply in a world held hostage by printing press-running central banksta fascists/corporatists.

Here are the charts showing the strength of Gold. It ain't a U.S. Dollar thing, it ain't a Euro thing, it ain't a British Pound thing, and it ain't a Canadian Dollar thing or even an Australian Dollar thing, it's all the above (charts courtesy of goldprice.org):

















We are oversold in the short term and due for a brief correction in the precious metals patch, but come now paperbugs, you really aren't ready to cry uncle yet? Get with the secular cycle before the Dow to Gold ratio makes new secular lows. You want deflation? Price the Dow in Gold. You want inflation? Price the Dow in U.S. Dollars. Such a simple concept and yet this is what separates the herd from the strong hands holding shiny metal outside the banking system.

Specific short-term trading recommendations reserved for subscribers, but buy physical Gold if you want to align yourself with the long term financial trend.

It Can't Be This Easy to Outperform the Herd

How can it be? How can an item within spitting distance of its all time nominal highs generate such negative sentiment? I am speaking of Gold. In other words, the world's global reserve currency, which will crush the U.S. Dollar in the clash of the titans for financial dominance.

I saw this Gold sentiment chart in a piece by Mr. Roy-Byrne over at thedailygold.com and actually laughed out loud:





Now, I wasn't laughing at the people in this survey - I was laughing at my good fortune. I am guessing this low occurred around July 1st, when there was a brief dip in the Gold price of a FEW PERCENT (oh my gosh, how horrible!). I admit I made my purchase of Gold on June 27th (buy the dips in a bull market, right?) and told my subscribers the low for Gold was in at that time, so I missed the short-term bottom by about 1%. As hard as it is to believe, the Gold sentiment (by this single sentiment measure and none are perfect of course) just went to its lowest level in MORE THAN 2 YEARS at a time when Gold was less than 7% from all-time new nominal highs!

The markets never fail to both confuse and amuse. We are setting up for a great rally that I suspect will last into the end of the year for both Gold and Gold stocks. I plan to keep my subscribers on board for the ride, including navigating some of the short-term swings. Why don't you join us?

What Are These Financial Firms Trying To Tell Us?

When bankers are suffering, they shut off the money spigot transmission effect (via the so-called "federal" "reserve") to the rest of us out here in the real world. Don't believe me? Try looking for a home loan right now in the U.S. with zero money down. Though this was standard loan policy 5 years ago, good luck trying to find it now.

The take-home message for traders and investors is that you need to pay attention when financial firms are not doing well. The lag time between a top in the financial sector and the general stock market indices is variable. Here's a look over the past 7 years, the following chart showing the financial sector, using the Dow Jones US Financials Index ($DJUSFN, the green area plot) as a proxy, versus the S&P 500 Index ($SPX, black linear plot):





I would like to show a few specific, really stinky looking short-term charts in the financial sector, which should worry longer-term equity bulls significantly. First up, Morgan Stanley (ticker: MS) over the past 6 months:





And here's Bank of America (ticker: BAC) over the same time frame:





Remember that AIG insurance firm? In case you forgot, despite their utter insolvency and previous implosion, they are still an ongoing corporation trading in the free markets:





Next up, Goldman Sachs (ticker: GS):





Finally, one of the biggest financial fish left swimming, JP Morgan (ticker: JPM):





I own no financial firm stocks and haven't for years. I do own physical Gold, which helps me to sleep well at night. My bearish tendencies are in hibernation right now, but they are keenly aware of a pending spring awakening. I am patient, knowing that the Dow to Gold ratio will decline to 2 (and we may well go below 1 this cycle). This means that as a Gold investor, I will gain in relative wealth (regardless of any shorting activity) compared to the paperbugs that dominate the financial landscape in the United States.

Trannies At New All-Time Highs

One ten year monthly chart through today's close, one message: The Dow Jones Transportation Average ($TRAN) is at new all-time nominal highs:





This ain't U.S. Dollar deflation, folks. I don't watch tout TV (e.g., CNBC) and haven't since the internet days, but I'm guessing someone was throwing confetti today and celebrating. Price the transports in Gold and the picture, of course, looks very different:





Stick with Gold over common stocks until the Dow to Gold ratio gets to 2 (and we may well go below 1 this cycle).

Preview of a Slow Motion Train Wreck

Everyone is focused on Europe and their debt problems. The peripheral countries (i.e. PIIGS) of Europe are now being asked to sell off national assets to keep the bankers fat and happy. What a system, huh? Meanwhile, several larger states in the United States (e.g., Illinois, California) are quietly slipping into bankruptcy and beyond. Will they be bailed out? The odds are strongly in favor of federal help for states in dire financial straights. After all, an election year is coming and who ever heard of a government not willing to give away other people's money/future purchasing power to get a few more votes for the incumbents?

I doubt we'll see any bailouts until we get a few fireworks in the U.S. municipal bond markets, however. I have been watching this lipstick-covered pig-of-a-market for some time. Though shorting this market is difficult, municipal bonds are still a bellwether to be watched. I think the top in the muni bond market is just about in - we may have a percent or two more to go, but now is the time to be exiting this sector with haste if one is long (unique individual opportunities aside).

Here is a 6 year weekly log-scale chart of the Nuveen Municipal ETF Price Return Index ($NMUNP) thru today's close:





As is typical in debt markets, the weaker debt tends to deteriorate first. I belive the first cracks in muni debt market are starting to show in the high yield sector. Here is a 2 year weekly chart of the HYD ETF ("Market Vectors High Yield Municipal Index"):





I don't play in the muni debt markets. Government debt is not attractive to me for many reasons - I'm a Gold bull in the midst of a private sector secular credit contraction/economic depression, after all. I think major dough will be thrown at the muni debt markets and state governments because an election is coming up in 2012 and because the U.S. will continue to print money until the federal debt markets revolt. With a 10 year bond yield of around 3%, I'd say we're quite a long way from the bond vigilantes imposing discipline upon the federal apparatchiks of the United States.

In fact, when the so-called federal reserve (not federal and has no reserves) throws money at the muni market upon the request of the U.S. Treasury, this may be just the catalyst Gold needs to start moving above $1550 on its way to $2000/oz and beyond. Forget the headlines. They tell you exactly what the market has already priced in and this is not worth knowing. The charts are the only chance the little guy has of getting insider information. If you don't know how to read charts and are trying to trade these markets based on what you read on Bloomberg or see on CNBC, consider subscribing to my low-cost trading service. Click here for a description of the service and to see samples of recent subscriber materials.