Gold Tactics In The Correction
June 1, 2010
1. From time to time, I mention the possibility
of major Mid-East war. Yesterday, a group of my subscribers,
who consult regularly to Fortune 500 company directors, led by
a retired fighter pilot, and who never talk war with me, sent
me a shocking email. They believe the odds of a major
Mid-East war are 90%, in the next 30-60 days. The blasting
of the Turkish-flagged ship by Israel, regardless of the facts
of the incident, appear to me as the equivalent of the killing
of ArchDuke Ferdinand, the incident that triggered World War
2. I’ve maintained all along that just
the ongoing geopolitical situation of the world, alone, warrants
a $1000 an ounce gold price. I still do. Gold’s function
as a real safe haven from real disaster, not just asset price
declines in markets, justifies that long term pricing. Most Western
analysts factor only $20-100 an ounce into the gold price, for
various geopolitical events. I believe $1000 is the correct number.
T-bonds are a safe haven from asset price declines, and from
nothing else. Calling them a general safe haven is madness.
3. Subscriber GoldLion, arguably the greatest
gold juniors stock trader in the world, noted to me yesterday
that gold often puts in a low in July, and that fits with the
“Gold War Room” group’s war scenario.
4. Meantime, Elmer Fudd Public investor works
maniacally to sell all his gold at the pawn shop before the price
goes to zero “any day now”, to sell his stock market
carcass for cash since the banksters have told him that cash
is king, and Elmer Fudd is taking particular pride in his ability
to set a volume record as he laughs at the possibility of the
Katla volcano going off, while laughing at the same time at the
possibility of MidEast war. He knows the US dollar can’t
fall down any more ever again, and the 98% loss of his paper
against gold over generations of his family is just a “paper
loss”. This time, he’s literally correct! He thinks
he’ll get it all back because his govt heroes will “do
something”. The banksters have told Elmer Fudd that the
US bond bull market is “here to stay”, so he’s
wisely loading up on “quality” investments like Junk
Bonds. He’s locking in juicy 1-4% returns. Here in Canada,
Elmer Fudd carefully polishes his rose coloured glasses each
morning, smug with the knowledge that nothing can go wrong for
America’s largest trading partner (it’s “different”
here), since the Canadian government has wisely sold ALL its
gold at the bottom of the gold bull mkt. Elmer looks all set
to collect a big payoff from his long term master plan, or so
5. The mindset in the gold community is a little
fragile, right now, and the banksters are aware of this weakness.
I don’t believe it would take more than a $100 fall in
the gold price right now to trigger substantial throwing away
of gold positions. Your best defence is always having enough
cash so you can add positions at all points on the gold grid.
That tactic goes hand in hand with taking delivery of your core
positions, so you don’t stare at an account statement denominated
in govt funny money, but instead you stare at an asset in your
6. Gold has gone to a 2 week high this morning
as the Euro carves out new lows. You should be ringing the cash
register on US dollar and GOLD long positions this morning.
7. I’ve been drawing your attention to
the critical importance of following monthly charts. They rule
the dailies, not the other way round. Most investors don’t
find monthly charts “sexy”, and hence ignore them.
That happened to Dow shorters at Dow 6500, and it is happening
now in reverse in some of the currency markets. If you look at
the Australian dollar, you see last week’s super rally
was “predicted” by the daily chart. But it’s
already melting away. Here is the Australian
Dollar Daily Chart. The Australian
Dollar Monthly Chart is "leaning" on the daily
with negative signals, causing rallies abort suddenly.
8. If you live your market life according to
the daily charts you are taking great risk with limited rewards.
My “flagship” approach to the major markets is to
run a 70% long to 30% short allocation of capital. The markets
are arguably a battle that is 70% mental/emotional, and 30% financial,
so it makes sense for a number of reasons. You need to sit down
and decide “how much risk capital do I want to allocate
to the stock market?” Let’s say that number is $500,000.
70%, or $350,000, would be devoted to the long side, and $150,000
(30% of 500k) is devoted to the short side.
9. I prefer it when the up to 30% shorting
component is layered in as a bet against existing long positions,
but it need not be so. If you “bet your wad” on the
shortside, and you are wrong numerous times, you can lose all
your capital. The nail in that shorting coffin when it goes against
you in price, is that you own not an asset, but a BET.
10. On the long side, you own an asset even
if you get the timing all wrong. That is vastly more likely to
be a sure thing with commodities and currencies, than with stocks.
Still, with an item like the euro, which is under substantial
accumulation by the banksters into weakness here and now, there
is no way on the planet that the average investor can mentally
withstand the ongoing weakness dictated by the monthly chart.
Few of you have been thru real market wars, where you buy an
item for years while those all around you have a big laugh while
they entertain the banksters by chasing price in whatever it
is the banksters want to unload onto the wienerheads. To win
a market war requires more than just willpower.
11. When you buy anything, you need to be prepared
for many many years of battle, but no matter how much preparation
you do, it can’t beat ringing the cash register!
Carrying even a small counter position to your main bets can
give you an unbelievable amount of additional mental strength
and happiness. The destructive “all in on one side of the
trade” mentality was what killed the Dow shorting team
at Dow 6500 and is killing many of the brave euro buyers in the
gold community who never believed the euro could fall as it has.
They never had one long position in the Dow at 6500, not even
a token position. And they have no euro short positions now.
12. Here’s a look at the vastly different
method by which the banksters operate in the market. Here’s
the banksters’ positions in the Euro, represented by the
commercials position on this table:
Euro Bankster Bookies In Action
13. Yes, they are holding over 200,000 euro
bull bets, and are adding to that position in almost all price
weakness, but they also hold 100,000 bear bets, bets that the
euro falls further! They are ringing the cash register on that
14. The banksters have additionally booked
a fortune in otc derivative bets where the fundsters bet Greece
would default. When Greece didn’t default, the fundsters
had to pay up, and couldn’t. So the banksters got euro
politicians to steal a trillion dollars from euro taxpayers and
flow it thru to the banksters, a smaller but still profitable-for-the-banksters
version of the Lehman Show. The euro trade has been a monster
winner for the banksters, not the the fundsters. As usual, not
all is as it appears.
15. You don’t have a trillion coming
to you in bailout flow thru money, nor the power of fractional
reserve banking. Don’t you take yourself beyond your own
personal mental breaking point, because by definition, you will
break if you do. That mental break is almost always followed
by capitulation, the throwing away of one’s positions.
The charts, the mine reports, the gurus and the fundamentals;
it all becomes meaningless, and in a heartbeat, all that exists
in your world is that big red sell button. That’s what
the banksters live for; to see you in agony banging that button.
16. Seasonally, the June-July period is generally
pretty good for the stk mkt, but not so good for gold. I would
not like to see GCPs (gold community people) shorting the stk
mkt and booking zero profit in gold, only to see a huge stk mkt
rally and a gold sell-off. That would break many, if not most,
17. At the same time, I recognize that there
is a near-universal “it’s all over for the Dow”
mentality out there. There is nothing wrong with shorting the
Dow. Not at all. Provided you do it into strength and with Gambling
Money. I did it from Dow 9000 to 11,500. We peaked just over
11,200. You can use the Dow DOG-nyse ETF to approach the Dow
with a shorting mission, and I’ve outlined the tactics
to do that on my website with the “HowNowMr.Dow”
Part2 video report.
18. The Plan. There is no plan right now in
the gold community. There are only thoughts of gold either astroblasting
or crashing to nothing. June-July is the weak season for Gold.
Are You Prepared? Gold has soared to $1250, and the GDX has almost
made a new high, while the Dow is far below its highs.
19. The most frequent emails I’ve been
getting are: “What happens to my gold stocks if the Dow
tanks?” The question you should be asking yourself is,
“What happens to my gold stocks if gold bullion falls $100-200
an ounce, while the Dow rallies in June/July?” The answer
is likely that you blow up on your Dow put options that you booked
zero profit on while waiting for the Dow to go to zero, and you
eat blood on your gold items that you also booked zero profit
on your trading positions, with no plan in place to grip you
gold core positions tighter than ever.
20. The time is now to get prepared, to get
serious. What happens if the Dow soars and gold drops $100 an
ounce? Are your gold buys in place now? If not, why not?
21. If the Dow blows thru the 9700 area lows,
are you going to book profit on your shorts, and some longs,
or start screaming “I got it, this is the big one, buy
me more put options, I’m going all in!”
22. IF there is a coming gold correction, it’s
critical to remember your mindsets at previous lower levels.
No professional sells their core positions because they anticipate
a correction. It is the amateurs that secretly tell themselves,
“I’m special, I know I can buy it back cheaper.”
23. If gold starts to go south, out will come
the bears. Where are they now? Use the period in time that is
now, to make sure your capital is in place, and your orders are
in place, to buy if gold does correct.
24. You’ve been mauled by bear talk during
every single previous correction in price. It will be the same
again. Accept it. Your mindset goes into fear on price weakness.
There is no getting around that fact. We’re entering what
is arguably the weakest time of the year for gold, yet a literal
plethora of bull market rocket fuel tanks are sitting around
the globe. Israel, Iran, Turkey, Pakistan, Sovereign debt, otcds,
etc. The list is endless and each component, alone, is hugely
powerful. Together they make the act of disposing of one’s
core bullion an actual act of insanity. The above situation makes
it very difficult to know what to do, particularly given the
possibility that the stk mkt probably has a 50-50 probability
of either hyperinflating or going into a death spiral. Despite
the govt-created horror show, US corporations are doing extremely
well, given they are operating in this firestorm!
June 1, 2010
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