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Gold: Turnip Trucks & PowerShakes

Stewart Thomson
Feb 2, 2010

1. By the time some of you read this today, I’ll be in a plane to New York. Should be interesting, assuming the plane lands. I don’t like to assume much of anything is a sure thing, because it is not. Some writers are staring intently into the charts, trying hard to divine the next move in the gold juniors. I’m meeting with one of the world’s largest gold juniors investors, kingkong. The GDXJ juniors ETF staged a spectacular comeback yesterday. The index soared almost 10%. Is that move for real? The charts are very helpful in figuring out what’s going on. The fact is however, that liquidity flows provide the other 99% of the information needed.

2. The banksters have the best information on what money is flowing where and when. It is what it is. Big money is flowing into the juniors. Last week, little money jumped out at the 22nd and 23rd floors of the GDXJ building. While it is never good news to lose a fellow gold soldier, it can’t be denied that big money moving into an entity is a process that is often accompanied by small money moving out. Is big money smarter? No. I don’t subscribe to the theory that big money is smarter than small money. Big money is just better at making money than small money is. Think simple. Think like Granny. Granny is not smart. She is wise. Price goes down, Granny buys. The GDXJ price went down. So Granny and big money bought. Yesterday price soared. So Granny and big money sold a bit.

3. Yesterday’s action in the gold market was caused by the banksters manhandling the price chasers. I saw last week a number of what I termed “London days”. New York sets the price in the gold market, and London trades the volume. A London Day is a volume capitulation day on price weakness. I would say that by Saturday the negativity in the gold community had reached a crescendo. Is it a final crescendo? Who knows, who cares, but it certainly was one. Many “anticipatory shorts” were put on last week, shorts handed to the price chasers by the banksters as the latter booked massive profits as gold tanked.

4. The dollar bugs and gold bears were mauled yesterday by the banksters as they drove price higher. The mauling continues this morning as gold is now 1110 basis April gold, up $35 from the lows and ringing your cash registers. At least, so I’m assuming.

5. What I saw last week, and even into the weekend, in terms of hysterical thought and action in the gold market, gave me this picture. A picture speaks a thousand words, that is an important fact. Picture the gold price as a winding country road. Now picture a Gold Turnip Truck careening along the road, filled with gold analysts, writers, investors, fund managers. At the 1075 corner, huge numbers of gold turnip workers failed to hold on, and tumbled out of the truck and onto the highway, left forever at 1075.

6. Now this next part takes a bit of wisdom, but not much: Even if price falls far below 1075, the fact is those that jumped off the gold truck at 1075 cannot reverse their turnip worker status.

7. I’ve spoken a fair bit about the importance of maintaining high cash levels in your accounts. For two reasons. The first is emotional/mental. When price goes below your lowest buy point, you become a cork in the gold price sea. While the banksters operate aircraft carriers in that sea, you just float around. Helpless. It’s not much of a fight if the banksters decide to target you for price destruction. Price should NEVER go below your lowest buy point without you on the continued buy.

8. The 2nd reason relates to what gold is. Gold is the ultimate currency. Because most of your accounts are in US dollars, that cash is itself an asset, but also a bet that the US dollar will rise. Let’s say you maintain cash levels of 50%. If gold doubles against the US dollar, the dollar itself may have risen only 10-20% against other paper currencies. You don’t care because gold doubled and your gold stocks probably went up 5-20 times in price. If gold falls hard, you have the cash to buy more. There is a great focus on the rewards of gold in the gold community. But not much focus on utilizing professional tactics to get those rewards.

9. Here is the GDXJ. GDJX 60 minute chart. The immediate issue of concern for technical analysts is that red horizontal line of resistance. I call it a job, not an issue. The job is to get price above that 24.36 area. I’d call that a routine minor job that needs to be done. Not a reason to sell all your juniors at a loss to T-Rex and King Kong if price hits that line, while hiding under your desk, hiding from the Grim Reaper, aka Mr. Margin. Take profit on a small part of your position into strength into the 24 area, positions that you bought into the 22 area lows, yes. Blow out your whole position to “get in cheaper later….No”. As in no way, don’t even think about that action. That 24.36 zone corresponds, I believe, aprox with the 1120 zone for gold bullion. We’ve taken out the short term down trendline this morning, which is a minor positive. Again, looking at where gold might be going is separate from your market actions. Your current profit booking actions. You don’t buy gold after it leaps $40 an ounce. You book profit on what you bought into the lows, lows that you felt would fail as you bought. That is the market, that’s how it works.

10. Remember how you all felt at 1075. Re-live those feelings. It is very important to continuously do that, so you keep yourself “real”. If you felt uncomfortable, that is good. If you felt terror, that is very very bad. Terror means you are carrying a position bigger than you can handle, a position the banksters will take from you in time. Picture all of the fall from 1225 to 1075 compressed into an hour. That is what the banksters have planned, down the road, for goldland. Are you prepared? The gold turtle wins this race. Not the gold blobs and catapults. Here’s the bullion price this morning taking out the down trendline. Again it’s a positive action on the part of the gold price. Not a buy signal for you. You buy weakness and nothing but weakness.

Gold Bullion kicking on the bears chart

11. The theme I’ve been pounding at during the sell-off from 1225 is that gold and its blood relatives are assets. Not bets. There was a great short term play in the wheat market on the short side, one noted by a number of the gold community’s top chartists and traders. I’m not so sure that you are one of the top traders in the gold community, and I think that attempting to follow their actions will be harmful to you. My view: One person’s home run is another’s bunt. The road to the world series championship ring in the wheat market is one that is won by accumulating wheat on weakness. If you do this correctly, you’ll beat all the best traders. If you are leveraged from here to eternity, all you’ll accumulate are margin calls.

12. I’ve been a buyer of wheat every 10 cents down in price, in a pyramid formation. I’ve been a buyer of corn every 10 cents down in price. So the fact that I’m writing this paragraph here and now and I don’t sound like I just got electrocuted, should tell you that the size of my purchases has been fair and reasonable. And some of you who have built large corporations are starting to “tune in” to my message: Give the golf ball advisor what is his, some chimp money that he thinks is all you have. Remember his brilliant statement, “I have to manage all your money Sir, to do a good job.” And remember how reached into your back pocket, and looked him in the eye with a straight face and said, “Business is terrible, this is the most I can do, you’ve basically got it all I think. Don’t let me down.” Sadly, the non-business owner doesn’t have that mindset. He really gave the stock market all he had. And paid a horrific penalty for his greed.

13. Give the golf ball advisor what is his, and understand what the food markets are: The only markets that can legitimately claim they are a lower risk investment than gold bullion. Obviously you don’t start investing in food in size, but investing zero in food while parroting the public and golf ball advisors’ statements that “food is volatile so therefore it’s risky!”…not very smart.

14. Does Jim Rogers look like a flipper? Does he look and talk like somebody very stable in his actions, or does he come across as an “action man”, a leveraged fipper or penny stock hustler? I would suggest that he is a very risk-averse and stable person. I hate to lose. He hates losing even more than I do. So he doesn’t.

15. My suggestion is that you take the food markets very very seriously. Throw the crop reports in the garbage can. T-Rex is of the opinion they are fake reports anyways. Faked by the Gman. He’s been buying farmland. In size. The last thing on the planet that T-Rex cares about is if wheat broke some micro support point and triggered the abandon ship call to the leveraged wheat traders. T-Rex eats wheat flippers like wheaties in a cereal bowl. Hope you aren’t on his menu, hope you haven’t leveraged yourself into his cereal bowl, because his mouth is very large and his teeth are very big. In addition to T-Rex action, the rumour going around in the farming community is that Dow Chemical, Monsanto, and Dupont are on the buy. The farmland buy. Quietly picking up huge tracts of farmland. They don’t buy anything with a plan to make a 5% gain, if you know what I’m saying. They don’t care about playing the supposed “weal westate webound” on particle board homes at 500 grand a pop with 1% down and a 3 month teaser mortgage, a teaser that rolls over to triple payments.

16. They buy what is solid. Gold is solid. Food is solid. And they don’t sell because of a fake crop report or run to mommy because it might fall down 20% in price. If it falls down 20%, they respond to that price decline. On the Buy. And send the Gman a thank-you note for making it happen. Use the Gman and the banksters to your advantage. Snip the puppet strings and start operating them yourself. Make the Gman puppeteer your personal puppet. It all starts with looking down from the current price, and managing what you see down there. With buy orders.

17. Food is going to the moon and the only question is whether you are on the spaceship being piloted by Jim Rogers, T-Rex, Monsanto, Dupont and Dow, or whether you are on a leveraged balsa wood plane with an elastic band for a motor.

18. Gold Mining is risky business. Farming is risky buness.

19. Gold bullion is the lowest risk investment in the world and food is right behind it challenging for that position. The banksters play on gold and food’s price volatility, to make the world’s investors think these Mighty Man items are fundamentally risky, when the exact opposite is reality. Sadly, they have a 99.9999% success rate at painting gold and food as risky investments!

20. Here’s the wheat chart. Wheat is exploding higher this morning. Wheaties For Breakfast. Are There Any In Your Bowl?

21. That’s a 6 month chart and price is off 20% from the highs at 6 dollars a bushel. You can buy a mini wheat contract for about $5000 fully paid, zero leverage, or you can look at the ETC (exchange traded commodity, sort of a etn-etf hybrid) on the London Stock Exchange for under 2 dollars a share. 100 shares is 200 bucks. Wheat falls 20% and you know the big boys are in there on the buy. Can you handle allocating 200 bucks to one of the world’s lowest risk investments? I’m going to make a wild guess and say “affirmative!”. Yes, wheat broke down from a head and shoulders, and yes, this, and yes that. The fact is that the world’s bond markets are turning from bull to bear. They are on the verge of a possible crash. That would put massive pressure on the world’s Gmen to raise cash to maintain their Blob operations. They can’t raise the cash, so they’ll print dollars. As dollars go down in both price and value, up goes gold in price (value remains basically unchanged, it’s a wrecking ball, not a puppet) and the rest of gold’s relatives join the party.

22. The primo invitations to the gold party were handed out between gold 400-250-400. Meaning as gold came down from 400 you began accumulating, and more over time in that price range. Only a select few of you acted on your gold invitations.

23. The food invitations are being handed out now. The banksters want you to ignore those invitations. The major players got their invitations, acted on them, and continue to act on them. We can’t know if where we are in the wheat market now. Is it like gold 400 on the way down? Is it like gold 400 on the way up? Or maybe it’s like the wheaties floating in Jim Rogers’ cereal bowl say, it’s all a giant overvalued bubble that’s topped out so you should sell it all and bet it goes to zero and leverage that bet. No thanks.

24. The volatility of price in all major markets is only going to increase as the bond market creaks while UBS bank non-bankster depositors get ratted out to the American Gman. That’s one way to manhandle your competition. If the bond market blows thru 112, and I think it will, huge pools of money will pour out of the bond market looking for a home. The VIX, the volatility index, is going to go ballistic! Are your buy orders in the key major markets in place, Are You Prepared?


Feb 2, 2010
Stewart Thomson
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