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Thread: A Bubble or a Bull?

  1. #21

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    Hello FMS,

    Strong day today! the fight for $23.5 is over. It looks to me that it is clear sky to $25.50 after that I don't know. But this move is big.

    Normally I will advise some of my previous customers what to do....I think I am going to tell them I am out of business! I don't want any one to know about me and PM's any more....told a previous customer I went broke and could not help her! ha ha ha... at the bank no less!

    I am willing to bet $50 before $17. This action will only attract more action IMO.

    BTW...I did trade my PT for silver today in the morning. I kept two coins because I really liked them. Got engelhard 10oz's for only .50 over! Very happy on that one. found a local dealer that had a lot in stock....I called a major dealer in TX and they only had 7 engelhards and 2 JM....and for $1.5 over....what's with that! Silly no name junk bars .75 over....?

    TX, not withstanding, Silver still seems plentiful and that is a good sign, I remember the last run up when things got out of stock quickly and premiums went up. That may come later and is something to watch, but I don't see it now. In fact, I see a lot more inventory for gold and silver then I did a couple of weeks ago. Normally that would be a sign of a drop coming. I don't think that is the case now. Retail Gold and silver availability, at this time, should not be mistaken for lack of investment gold and silver demand....(especially paper gold and silver) A lot of people are selling because they have to and the rich are buying it! I see those that have cash are buying and those who need cash are selling. This is a wealth transfer happing right now before our eyes! It is happening on main street and on wall street and on a political.national scale. The elite must be so happy right now!

    Obviously, we don't want to be on the bottom of that transfer. It seems to me that we just hit the end of the stealth phase some time ago and are somewhere in the investment phase. I think we are still some time away from the mania phase and blow-off top. Truth is, there may never be a blow-off top to this cycle other than gold becomes money once again.

    We will see. I am still accumulating.

    Thanks for all your work and posts FMS.
    What are your thought on the CAD right now?
    Look forward to more of you thoughts,

    Argentine
    Last edited by argentine; 10-13-2010 at 03:11 PM.

  2. #22

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    Im a cycle person....but this market has made me step back and look at fundamentals and evaluate them as a larger driving force - sure I cant help myself so I look at sto's, macd's, rsi's, adm's, trend channels etc. but the e-waves have slapped me down when I have traded out of money making positions. The facts havent changed - the game is rigged and the major players are trying to save their a$$es with inflation and cooking the numbers. Fiat is on its last legs....the world (West and advanced markets) have spent more then they can ever repay...done, simple, fact. as true as the sun rose this morning. Now how we get to it becoming a universally accepted realization and what attempts will be made to save the system that has allowed this to happen...??? I dont know. When will it collapse? Dont know. There are lots of powerful influences that dont want it to happen... They will inflate to pay debt. There will be a global currency war....if you know of some realistic other way they can even attempt to fix it, please share! I cant see any other way for them...and I think they will fail!

    So buy stuff that is stuff, ie., has value intrinsic in it's nature! PM's food, a house, steel, a cow...Dont really care, but its value cant be based on some one having 'faith' in its value, it has to have real universal value for my life....PM's have the history. Every nation and nationality knows what it is. Its been a medium for wealth storage since recorded history...Not the only one but pretty much a front runner....So Im buying. Yes on dips and im trying to get a deal, but the buying hasnt stopped.

    FMS - great thread and awesome posts by the way!
    Smooth is fast...

  3. #23

    Default What a Day!

    Argentine dear friend, this day is yours! As per our recent discussion, you called it.

    What a day it turned out to be! I left home toward the late afternoon due to a new project I have in the making concerning. Something I would gladly share with you once the idea is a complete one. I have only now just returned home to see what we have been discussing about the PM markets has become reality.

    Let us together now examine this much anticipated move in Ag and see what it affects and what it was caused by.

    The Bleeding USD

    $USD:
    The more the USD keeps "winning" the battles in the currency wars the more it will keep depreciating of course. The $USD (dollar index), still in a "dead cat bounce", has finally broken out of the dreaded sideway movement it started in 10/06/10. There is however much less uncertainty now as to the direction of the $USD, or is there?. Let us see what the indicators tell us:

    The RSI is below the 30 level on all charts apart from the two most important ones WK and MN. On the Weekly it is at RSI = 31.3x at the time of writing and on the more heavily weighted Monthly chart it is at RSI = 42.6x. Needless to say, the MACD is negative and negative trending for all time frames up to and even the monthly chart, this trend is not easily reversible at all. I have one important observation to let share with you on this but let me first share some thoughts one the most important FOREX pair.

    The EURUSD registered another very significant rise today despite having attempted a small retracement 3 days ago. This was evidently the launch pad for more rise as we saw today. In my opinion this new break of the 1.40x level will lead to more EUR strengthening. On the EURUSD charts, we can see the reverse of all we mentioned in the $USD paragraph. All RSI here are at or about the 69-70 level apart from the Weekly and Monthly. (This is no surprise since as we all know the $USD in nothing more than a composition of relative currency strengths of which the EUR is the most heavily weighted). What is very interesting again is the fact that there is strong momentum scattered across all harts apart from one, the Weekly. But as before I will get to this very soon.

    Very well at this point since we have discussed our much hated Fiats let us make relation to our most precious (metal) , Ag.

    Ag, Spot:

    Ok, we have all seen todays "spike" graph dear friends now lets get a bit deeper into its composition. As before let us use RSI and MACD (I personally prefer the StochRSI but this is more difficult for me to explain without the actual chart but you can use this if you want, i would agree with this choice). Not on one chart (from H1 onward) is there an RSI less than 70. For example, on MN chart, RSI = 73.2x. Very strong indeed. Silver had a long term future one might say! I will refrain from saying more about Ag here since I would like to expand on the more recent developments and technicals obtained from the aforementioned.

    The idea...

    Using the MACD (12,26,1) in Ag, Spot, we see huge momentum and using the RSI (14) we see huge strength across all time frames. We see a uniformity on all time frames and this is no surprise, it reflects the belief that Ag will continue to do what it is good at doing, Rise.

    (Please read this part)
    On the other hand however, the $USD is showing extreme weakness through the RSI except for the WK and MN, which are still weak but not extremely weak.

    The EURUSD is assuming very large gains and indicates momentum like no other. Apart from the MN chart MACD, which is still very bullish, so to speak, but still below the zero line.

    This makes me believe that only a great event such as JPMC derivatives news or the November Q/E++, or both events, may well put us well in position to have a positive MACD on the MN EURUSD and weak RSI on the MN $USD. when this occurs it will be make PM, specially Au and then Ag (but Ag % much more of course, narrower GSR that day!).

    We are not too far now. I would urge you all good friends to look for this sign. As soon as the EURUSD becomes positive all across the times frames check the RSI in the $USD. Ag will be moving very fast then so buy in the Hong Kong session of days before if you can.

    One last note, the above may be so close to being realized that I assume it may well coincide with the breaking of the ultra support of $USD, 74.5x (please see weekly graph for exact point, it is very evident there) if so it would be very interesting to observe movement speeds then.

    This post does no good in conveying my immense excitement for a day such a this. I apologize for a delayed response but at these hard time we must strive to find alternative ways to store our hard acquired wealth, such as we are doing here. I anticipate your replies and by all means your insight, input and criticism.

    PS: To my dear friend Argentine, as you know the CAD belongs to the commodities Fiats, though this may seem as a contradiction in terms (which it is) it reflects that the driving force behind the price of CAD is OIL/USD. If OIL demand rises so does CAD. However we have seen calmness in the OIL market due to the global recession and yet the CAD is doing just great. This is again due the weak USD. How we know this is because the EURUSD is very strong right now but has inherited a V shaped MACD on the monthly chart still below the zero line. I hate to have to trade and prefer investing where possible but
    specifically with the CAD I am Short the USDCAD and Long the EURCAD. Let us not be confused however, that neither of the above are not long term sustainable and there will be huge reversal! Specially in the EURCAD, when the indicators change if you reverse this trade you are in the money very soon.
    The CAD is not a bad currency to buy by selling USD, specially when or if it trumps the EUR but it is certainly no Ag!

    Thank you


    -FMS.-

  4. #24

    Default Very well said.

    Quote Originally Posted by Gunslingerdoc View Post
    So buy stuff that is stuff, ie., has value intrinsic in it's nature! PM's food, a house, steel, a cow...Dont really care, but its value cant be based on some one having 'faith' in its value, it has to have real universal value for my life....PM's have the history. Every nation and nationality knows what it is. Its been a medium for wealth storage since recorded history...Not the only one but pretty much a front runner....So Im buying. Yes on dips and im trying to get a deal, but the buying hasnt stopped.

    FMS - great thread and awesome posts by the way!
    Dear Gunslingerdoc, I thank you for your kind words.
    Very well said indeed. This is the right place to lay such applied macro opinions. I see things very much from this angel as well. As you say, it is not only PMs we should focus on but first what ever we value the most and perhaps cannot acquire in an inflationary world. After such needs are satisfied we should prioritize in storing our remaining wealth in the historically best way possible, PM. I personally prefer Ag of all PM, though I do so very much love Platinum, (the noblest of nobles) and also Gold. I prefer Ag because of its very long track record, historic one might say. I know it is more accessible to the masses, it is easy to suppress with marginal paper shorts, thus I can still buy undervalued and most of all because it has a dual nature in more recent times.

    I too buy the dips but also the opportunities. It is possible to buy at spot sometimes from others who see Au and thus Ag as a bubble. I do not think these individuals wish to receive scholarship on the mechanics of a failing economic model, that of altruism. I would rather they chose knowledge to ignorance since Ag always retreats back into the hands of those who have understanding.

    PS: I look forward to more of your posts.

    Thank you.

    -FMS.-

  5. #25

    Default Deflation and the Fed Res Syst.

    This is a response to a thread that in my opinion is the most important source of information dissemination currently in Kitco. Since the topics have very rapidly changed, in order not to post a delayed response I preferred to post here. I hope you enjoy the read. It relates to our topic of weather PM is in a Bubble or Bull. You may see this further on.

    Quote Originally Posted by DayStar View Post
    IMO their agenda is don't do anything that would actually help because they are trying to destroy the dollar. Sure, printing money and putting it in motion would lead to inflation, but if the new money went directly to the banks to pay off debt, according to Storm it would destroy probably more FRNs than were printed because of the fractional reserve banking. Storm says that money is created when debts are created because of the multiplicative effect of the fractional reserve system. Storm says that when you destroy debt, the multiplyer works in the opposite direction to destroy money. So, Storm's theory is that if you printed a $1 trillion to pay of mortgages, it would destroy $2 trillion in money when the debt was paid off, and it would be deflationary rather than inflationary. Also, if the money went to the banks, they could just park it in the Fed like they are doing now. The Fed could even make the payment directly to the banks. It's not going to happen, so it's moot, but I don't think it would be inflationary.

    DayStart
    Dear DayStar, this is a very interesting topic purely on the monetary econ aspect of current events. With your permission, I would like to make some additions to the above statement. Our flawed current monetary system is doomed due to the fact that it is based on credit. The Fed creates money and congress (through the Treasury) back it by a guarantee to repay the principle plus nominal interest. This is only step 1 in money creation as you say. The greater problem occurs in our banking system, the reserve system. Currently, banks are required to hold some reserves that reflect a portion of the accounts. The reserves they hold are in part in their "vaults" and in the greater majority in the Fed. They cannot exceed these requirements otherwise they pay fines.

    To see exactly the correlation between the monetary base M1 money supply (the Fed prints money backed by Treasuries) and the rest of M2 and M3 we must use:

    SigmaM = M1*(1+r)/(r+R)

    The sigmaM is the total money supply in this model, and it equals the money M1 the Fed creates times a factor which is proportional to a ratio given by the rate of M1 citizens hold over that rate plus the rate the Fed determines, R.

    As we can see the r is dependent on savings, if see encourage people to save and consume less we r goes DOWN! Similarly, if the Fed encourages banks to lend more R goes down!

    The trick here is: For SigmaM > M1, we must have (1+r)/(r+R)>1 of course, thus 1+r>r+R thus, 1>R, and sure it is!

    This is why every "Austrian" monetary economist is screaming for Higher interest rates. Now this is the simplistic model of course. More analytically, since R and r are correlated when R increases banks will hold more cash in reserves and citizens will deposit more.

    Another way of explaining Storms idea is: In order to create a deflationary environment we must first halt M1 creation. If this occurs (which it Never will under a Fiat system, are far as the eye can see, heed my words friends!) then we will have reversal. In other words, banks will stop depositing (indirectly through client accounts) to other banks and the M2 supply will also fall. This is very deflationary. This is what storm is saying i think. BUT, the M1 that is being digitally created goes no where near paying off any debt. Contrary, it either creates assets Bubbles out side of the US or creates asset Bulls in the domestic economy.

    One last note here please. The rate of change of money creation dM1/dt is very important. If it is greater that the real rate of change in GDP, dGDP/dt then we have failed in that given time frame. We have more SigmaM going after proportionally less goods created. We must have inflation in this case, we simply must.

    *In this model we must use (dM1/dt)USD specifically, since the USD is used to conduct world trade. So it is actually (dM1/dt)USD compared to rate of change of WorldGDP. It is no coincidence that the US is the worlds largest importer and the USD is the reserve currency. We are all the worlds "front runners". This is the most ingenious mechanism to eat away (short term) World GDP growth.-

    All monetary inflation leads to price inflation, though the two are very separate economic phenomena, separated by time and location, there is very evident causation here since one always precedes the other and provides input for the next.

    I thank you dear friends for reading thus far. As always your posts, comments and criticism are more than welcomed here.

    Thank you.


    -FMS.-

  6. #26

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    Our dollar is declining in value. Our declining dollar will force the price of oil up. Our declining dollar will ultimately cause inflation. That is what our government wants. Buy as much silver and gold that you can get your hands on. This will be your only protection as you can't get any interest for you fiat in any banks. I just bought 300 oz. of silver today and I have another 20+K of fiat money to spend tomorrow. I'm unloading all of my cash and putting it into precious metals. Get smart and follow my lead.

  7. #27

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    Excellent thread FreeMarketSystem. I used to be a regular in Storm's thread but have been caught up in other threads and researching the REE sector so I haven't kept up. Glad to have a currency trader on the board. I may ask you about currencies from time to time. I appreciate that you both seem to be a very logical and deductive thinker, yet you don't shy away from non-mainstream thinking on other issues. Wonderful to have a new Kitco member who can make such a splash and so quickly. Good stuff I will visit this thread as I am able!

    Cheers,

    BTG


    Condemnation without investigation is the highest form of ignorance.- A. Einstein

    Always DYODD. Do not take anything I say as a financial tip as it is not.

    Where I got my name a funny video:

    http://www.youtube.com/watch?v=PRA_9_djcPo

    Check out and contribute to the Rare Earths Thread!

  8. #28

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    Hi FMS....

    Thanks for your kind words. I guess even a blind squirrel can get an acorn once in a while! To tell you the truth the only reason I watched the tape for a couple of days was because you started posting.

    You have made some very important points in your last post to Daystar. I would like to comment on them, but I am too tired!

    Simply let me say, I don't know where you came from, but I am glad you are here at Kitco. Your knowledge and kind tone makes for a wonderful presence.

    Quickly before I fall asleep.....
    The action today at midday showed some testing points for the shorts. Also I noticed price resistance in the buying. Although we ended higher there was conflicts throughout the session. the POS indicated liquidity moving into the market.....not solid hands holding the market. This can be dangerous and is what I expected to challenge the $25.5 mark.

    The shorts have to make this work or its light out for them. The commercial position is on the line. There is a lot at stake right now. If this market get much higher than $25 like $27.5 we will see $50. If your a short you cannot let that happen. Look....it's make or break it time for these guys. Now, if I'm JPM this is how I'm going to run it.....

    JPM commercial short play book:
    1. let the price run hard and fast to a psychological level like $25.
    this will get new money in....weak hands are easier to push around.
    2. Along the way see what points and at what times are weak.
    Price resistance will initiate strong hands into selling.
    3. Hit the market hard just above the psychological level. This will initiate a cascade selling and regain control of the short side.

    East and investor long play book:
    1. buy all dips
    2. buy all rallies
    3. fill quickly after a market back up.

    I believe that we will see a huge battle between the buyers of the east and investors vs. the shorts. and like FMS has said...watch the hong kong market. It will happen there to start the cascade selling into the N.Y. session.

    It is my opinion that the POS will hit just above $25 and then the shorts will hit with a wave of selling. It will continue to sell when the market tries to fill. I think it will try to get the price back to the low $20's. I think anything under $20 will be met with heavy buying and make a firm support. If they want under $20 they will have to give the low 20's a while to let new weak hands in so as to rinse and repeat the play book.

    I think the hit will come at a midpoint because that is where I see test for battleground. We saw it today at $24.5 and at $23.5. the longs pushed through but I think they were let through. A consolidation at the 23-24 level is very bad long term for the shorts. It almost guarantees $27.5 and beyond in a solid fashion.

    Now the real question is will the shorts bluff be called! If you can answer that....you can call the silver market!

    If it is, we see POS $50 in a hurry. The best way to take advantage of this on paper is the miners. But that is for people with more knowledge than I.

    The stakes are high....because if you control the silver market you control the rudder of the precious metals market. Right now I see liquidity moving into the market. Control PM's and you control confidence in fiat. Have confidence in fiat USD and you have CONTROL.

    Right now the POS is gaining above the other metals. Tonight we see metals down except for POS fluctuation between + and -. that tells me money wants to come into the silver market and the metals. IS this the pension funds that should be scared out of their mind about getting paid from the mortgages on the hook? well if it is the shorts need to keep them out NOW. If they don't then all the Asia money and pension fund money comes in! And we see the greatest PM move in history.

    FMS...your technical knowledge is very great and no doubt it has served you well as a trader. But ask yourself....are the indicator right now telling you what will happen or what HAS happened. I believe they are only telling us what did happen.

    The wave pattern - the bi-annual pattern I mentioned is also indecisive right now. The energy could be dissipated and a break down in momentum continues the pattern we have seen in the last 10 years or the energy stored in the wave from the last short slaughter extends the wave resulting in a tsunami for POS. It really is up to the human story right now. What will is greater. The huge short position or the hard money and asset base of the East. how fast wealth transfers will depend on the stronger will.

    This is all my very very humble opinion. Tomorrow, I will watch the action and if I like it I will load up on some junior miners. I have already got my PM physical position set. I plan on cashing out incrementally the miner profits into PM. They should run harder than the metal if the East wins. If not....we have to wait.

    And this is the key....right now it is only a matter of time. But the time is getting shorter. As Cyclist once told me...."There never was a time that did not come. Patience is being attentive to one's self." Physical PM's let you be patient. PM's are emerging as money. I just can't tell you what will is stronger at this very moment.

    All the best,
    Argentine

    P.S. watching tape takes a lot of time tick by tick day and night in the gold and silver market.....more time than I can give right now.
    My Dad needs me and I have probably devoted a little too much time to predicting our monetary future. What will be...will be with or without me. I will come back when I can. I want to write a piece on how the Hunt's effected POS and how the shorts right now are magnifying the effect to a factor of 10 or better. But that will have to be later.

    All the best FMS.....it has been a pleasure conversing with you and all the posters on your thread and on SD and DS thread.....
    and I agree with you.....that thread is the best on KITCO.

    I will read you when I can.....your a talented person, most of all I think you are humble and kind.

    Many blessings too you and all here,
    Argentine
    Last edited by argentine; 10-14-2010 at 11:06 PM.

  9. #29

    Default Agreed.

    Quote Originally Posted by Radar View Post
    Our dollar is declining in value. Our declining dollar will force the price of oil up. Our declining dollar will ultimately cause inflation. That is what our government wants. Buy as much silver and gold that you can get your hands on. This will be your only protection as you can't get any interest for you fiat in any banks. I just bought 300 oz. of silver today and I have another 20+K of fiat money to spend tomorrow. I'm unloading all of my cash and putting it into precious metals. Get smart and follow my lead.
    Dear friend, it is my belief that all commentators here share your view as well. They are Long on physical PMs and primarily Ag, which I thinks holds the key to future (short term) wealth. The reasons Ag is preferred to Au are the ones I have explained before. The multiple reference's to the GSR definitely reveal my sentiment.

    I too would advise others to heed your call for an exchange of currency for real money. We do see monetary inflation but many of our less fortunate friends here in this Forum do not see the this as a sign of Price inflation. The Financials markets react much sooner than the mainstream but this should come at no surprise.


    Thank you.


    -FMS.-

  10. #30

    Default

    Quote Originally Posted by Bring the Gold View Post
    Excellent thread FreeMarketSystem. I used to be a regular in Storm's thread but have been caught up in other threads and researching the REE sector so I haven't kept up. Glad to have a currency trader on the board. I may ask you about currencies from time to time. I appreciate that you both seem to be a very logical and deductive thinker, yet you don't shy away from non-mainstream thinking on other issues. Wonderful to have a new Kitco member who can make such a splash and so quickly. Good stuff I will visit this thread as I am able!

    Cheers,

    BTG
    Dear BTG, I accept your kind words with humility. Indeed Storm's thread is one which deserves as much respect as it does attention. The invaluable work that has been put in it, a result so much of Storms insight as his fellow thread contributors. As for me, I always believed we must have some knowledge of the world of Finance in order to best understand economics, which are often clouded in politics.

    This thread is more an inquiry in why the prices move at the speed they do, what fundamentals cause the move and what the consequences are. So far the view I believe is that the price movement will be further up, strongly and will cyclicaly further influence the $USD. Though this thread specializes mainly in the understanding of the causality of this recent price inflation in Ag and Au I find interest in most of Storms topics as well.

    Your questions are always welcomed here as is your insight. The last few days I have been very busy with the immense break outs in FOREX, PM and now even in bonds (we shall talk about this soon I should hope) but I always consider it an obligation to provide a well thought answer to a well thought inquiry.

    A sincere thank you.


    -FMS.-

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