Fish, Wasps, the Dollar & Gold
1. The US dollar rally. My grandfather was in the orchard business. Fruit trees. He used to hang a big fish from the trees. The wasps that ate the fruit would eat the fish. They wouldn't just eat it, they would gorge on it in a frenzy, until they couldn't even fly. Then they would just fall to the ground. My grandfather was a pretty popular fellow with the wasps.
2. Unfortunately for Team Wasp, my grandfather wasn't as generous as he appeared to be. He placed a bucket of water under the fish. As the greedy wasps ate too much, they did fall, but not to the ground. They landed in the water and drowned.
3. Right now, the bankers have hung giant fish from the gold market tree. It's called the US dollar. There's a big bucket of water underneath it. As gold built its massive head and shoulder consolidation, investors gyrated from shorting gold into 930, to finally buying into 1070 as a number of readers sent me emails like,
4. My suggestion in such a situation is always the same: "Price sin" by the amount needed to kill that overwhelming greed or fear as the case may be. In a rising market, buy at the point when you can't stand being out anymore, yes, but only with a tiny amount of risk capital. You'll be surprised how little money it takes to successfully regain control of your emotions.
5. As gold broke out over the huge head and shoulders neckline, the bankers considered loaning out all the trillions they got by blackmailing the US govt to collect on their OTC devivatives contracts. But they knew, "If the economy does a nosedive, what do we gain by doing a repo on these businesses after they melt away, we're getting garbage, we'll be holding the bag. For 20 years."
6. As people get poorer, it's harder to pry their money from them for the next failed deal. The banksters needed something big. They came up with "The US Carry Trade." After doing well with the Yen trade, the funds were game for what "just made sense" with the US dollar carry trade. So the media trumpets were blown and the ultimate carry trade was a go! A failing US currency, a gov't spending insane amounts of newly printed money rather than cutting back, a potential bond market crisis, the list of fundamental reasons to short the US dollar and buy the other majors against it, is endless.
7. The banksters worked quickly to outline how the carry trade would make the funds big money: "If you borrow US dollars at a low rate, and buy another currency where their taxpayers pay you a higher rate, you can't lose! We're so sure, that to prove it, we'll give you more margin for this deal than on any other deal we offer you, so you can leverage it 100 to 1 if you like! You'll be the next John Paulson, don't you want to make 10 billion dollars, yes or no!"
8. The funds rushed forward and signed up for their free billions. Of course, somebody had to take the other side of that trade or it couldn't exist. The banksters "volunteered."
9. Remember the movies about the spies pretending to be double agents? I do. The bankers aren't idiots like the fundsters. They know the US dollar is in a major bear market, because they created it! They know there's big money to be made. And they are working feverishly to figure out how to take the Lion's share.
10. At this point, the banks are making money on fees and interest as they sell the funds their carry trade positions. When you carry a position on leverage, you pay for that "privilege." If you carry too much leverage, you may pay more than just interest, but that doesn't worry most fundsters as they engorged on shorting the US dollar.
11. Investor memories are short. What happened to the Yen carry trade? Answer: It blew up as Lehman detonated. The yen on a cash basis rose from 90 to 114. That's a 26 percent move, with no leverage. Picture a highly leveraged fund that has rolled all its past winnings into an even higher leveraged bet on the yen carry trade. When it melted, a supercharged rush into the US dollar occurred, which combined with the bustouts from the stock market joining them, blasted the USDollar right thru the supposed cement lid at the 80 marker on the index.
12. Now picture this: The banksters convince the funds that OTC derivates on the US dollar carry trade will make them even more money than leveraging their forex and gov't bond currency spread trades. The only question the fund managers have is, "Where do I sign my name, can we do this before the market closes today?"
13. At this point, it wouldn't take much of a rally in the US dollar to cause a huge malfunction of the carry trade. The funds made the right call, the dollar is toast. (Brilliant call, fundsters, noticing the dollar is in a bear market 7 years after the top). The problem is they got carried away with the reward side of this deal. They want to be John Paulson, but they forgot that he did a massive amount of homework on the housing market and then shorted it with huge leverage into an overbought market. He did not price chase it into an oversold market.
14. Sadly, it will take only a small rally to put the carry trade into the hands of the banksters as the ultra-leveraged funds have to liquidate. Bottom line: Don't behave like a fundster in the market!
15. Why did John Paulson, with his massive booked winnings from shorting real estate, buy PHYSICAL GOLD and not some major paper currency, for his play on the carry trade? I'll tell you why and it will blow your mind. First, he bought GLD-NYSE, the gold ETF run by the banksters. But then he sold that soon after he bought it, and bought physical gold. Why? I have information that the President of a major mining company asked the banksters to prove that the gold held by the GLD ETF really exists.
16. He was taken blindfolded in a van with no windows and driven around London until he had no clue where he was. He was then taken into a massive underground storage facility where he was shown the massive GLD ETF physical bar holdings.
17. I personally believe that the ETF did buy all the gold they claim they bought with the shareholder funds. And I believe those are the bars that he saw. I just have to wonder whose name is on those bars. Why all the secrecy, the James Bond action? If nobody can access the gold in a normal way, well, if I was Mr. Paulson, I'd be looking for some assurance that there was some link between the billions I handed the banksters, and the actual gold that money bought.
18. One can only conclude that Mr. Paulson wasn't satisfied with that link, and probably incurred a substantial cost to dump GLD and buy the real deal, and store it where he could touch it, and create the comfort that what he was touching was both really his and really accessible. I doubt he would have been thrilled with being driven around blindfolded and told, "here's some gold that may or may not be yours, but if you want it, you have no clue where it is. Ha ha!"
19. Focus on being wrong on your market trades. I want to remind you all of the Day of Dow 6500. There was huge volume as a giant changing of the guard from weak to strong hands occurred. Today, the situation has changed totally. 500 million superbulls compete to announce "the new bull market." When I said "buy" into that low, I felt ill. The Dow really felt like it was finished. As I bought the market, I thought, "this is all toilet paper, I'm insane, these stocks are going off the board, the Dow is finished". I bought anyways, feeling ill. At the same time, I continued to remove, on a weekly basis, money from the banking system. I still believe what occurred at Dow 6500, the "hours away" near shutdown of the global banking system, admitted by the Bank of England, was a warm-up for the main act. Near-shutdown will become: Repeated Shutdown. I continue to remove money from the banking system on a weekly basis. I can count the number of weeks I've missed over the past 12 months on one hand. Do things over time and in moderation. Rome isn't built in 24 hrs. But it might fall down in 1 hr.
20. Any bonehead can be a bull on the market now after a 3500 point astroblast higher. 3500 points of paper profit I've put in my pocket on core positions bought into the low. And several thousand points of booked profits, on my trading positions. I began shorting the Dow at 9000 and recommended a shorting program every 100 points higher to 11,500 in a pyramid formation, with a SMALL amount of risk capital. 11 of 25 fills have been executed in the 2500 point range... hit Dow 10,100 now. This is how a professional operates in the market; you don't pick tops, you buy weakness and sell strength and do it systematically, with modest risk capital.
21. Many of you know I have been buying the US dollar into the weakness over the past month, as have the bankers. I rang my long USD cash register this morning so I'm definitely a happy camper! I'm not sure how the camping is going for the fundsters today as they bail on their failed leveraged USD shorts, but I suspect the margin man was probably their alarm clock this morning. Many of you have joined me, understanding this is a trade with a modest amount of risk capital, only a tiny portion of your gold positions. It's also a tactic to book profit on your gold without selling it, a subtle yet profitable action. Most importantly of all, it's a tactic to keep you mentally in the gold game as we enter an extended period of mega volatility. The public doesn't have any money to buy gold, and those that do are buying non-US paper currencies instead. They will simply get less poor than those who hold the USD bag for the next few years as the gold bull goes into hyper-acceleration mode. There will be no public participation in this gold bull market, except at the end, when the banksters implement a new gold cover ratio, a watered down gold standard, to end the USD bear, and hand the public the gold bag to hold at the US Treasury.
Thousands of dollars an ounce official gold price will become the flagship policy of the US Treasury, the opposite of their official 40 bucks an ounce clown act policy now. Team Al Queda is also a player in this gold bull market. They didn't attack the financial headquarters of the United States for fun. They want to mangle the US dollar. If they show their face again, perhaps in a much larger way, Official Treasury Gold Price could go to tens of thousands an ounce. Notice how those engaged in top calling gold now have two things in common: a. They ignore OTC derivatives. b. They ignore the total implosion of Pakistan as a nation. And perhaps, like the terrorists, the top callers have a death wish, only it's a financial one. Picture fifty thousand maniacs in your city, whose sole goal is to get control of nuclear material. They don't care if they live or die. In fact, they want to die. That's Pakistan. And that will affect gold. The gold bears are dancing around singing, "na na na you can't hurt me!". Keep laughing. We'll see who's going to get hurt by throwing their gold in the garbage on this latest top call. You think 930 saw pain for those who bailed? How about 905? Look thru an electron microscope at the experience at 930-905 and you have: Now.
22. Any US dollar rally is designed for one purpose only: To transfer the bulk of the carry trade into the hands of the banksters. Markets rise and fall on loss taking. Any USD rally now will be no different. The funds will make bits of money on the carry trade all the way down over the next several years, but give most of it back on rallies because of their overleveraged price chasing. The end of the USD bear will see the banksters long the USD against the rest of the world short. Before that end, all paper currencies will probably melt against gold in an amount that makes the paperland carry trade meaningless. Focus on gold. Or you will suffer the same fate as the public. If I'm wrong, you come out slightly ahead buying paper currencies against the USDollar versus holding gold. Do you think that if the US dollar really hyperinflates against gold, the other paper currencies won't do the same?
23. Use any USD rally to buy gold, not to bail on it as the bankers send a wave of Dr. Pinocchios to tell you why the gold bull is all over. The big picture for all paper currency that is not backed by gold is: The Furnace. Because the gov't listened to the banksters and waited 'til the OTC derivatives reached a quadrillion before even considering a gold standard, it's too late now. There can't be a gold standard at gold $1500 and probably not even at $2500. Because the system has already blown up. Implementing a gold standard at anything but thousands of dollars would be effectively marking the OTC derivatives debt to market. The financial system would be closed in 30 seconds.
24. The cost of a gold standard at gold $250 was in fact $250 an ounce, or close to it. Now the cost is not $1000 an ounce, because of the mark to Pinocchio accounting of the OTC derivatives. It's many thousands an ounce, maybe tens of thousands! Here's a message to the US dollar bulls out there: "all is not ok," this is not a "new bull market." This is financial Armageddon. I see our special friend, Mr. US T-bond, is having a little trouble keeping up with brother dollar. The relationship will only get rockier.
|Wednesday Nov 25, 2009
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