Yesterday I omitted the other point I wanted to make from Michael Lewis' little book, Boomerang. He interviewed Texas hedge fund manager Kyle Bass several years ago. Bass had called the mortgage collapse in the US & made boatloads with Credit Default Swaps -- think, "bets against mortgage backed securities."
But Bass looked at how the 2008 US crisis was handled, & began to realize that a new phase was unfolding: governments were back-stopping the banks. And it has happened in Europe. Of course, it's impossible for them to do that, because the banks' bad assets -- in sovereign debts, derivatives, MBS, you name it -- are so bottomlessly vast no country could pay them. Yet, that's what they're trying to do. This guarantees a massive financial crisis, perhaps a collapse.
When Lewis asked Bass what he would tell his mother to buy under these circumstances, Bass shot back, "Guns & gold." Lewis gave the equivalent of a nervous giggle over that, intensely uncomfortable with that politically incorrect answer. Yet it was coming from a man who had a 100% track record.
Frankly, I get tired sometimes -- tired of pointing out the obvious. I reckon "stating the obvious" is my only talent, and in the land of the blind the one- eyed man is king. Lately I've been remembering that I have no right to get tired, the world just is what it is, and people delude themselves as they will, afraid to look the truth in the eyes. The ones who have ears will hear, & the rest will never hear anything. The music from Washington & Wall Street will keep drowning everything else out, until the music stops.
The deal in Europe is falling apart, & now the Eurocrats have no plan to present at the planned meeting on Wednesday. Bankers don't want to take a 60% haircut on Greek debt, Germans don't want to bail them out. Greed & pride have driven the banks crazy, since they are being offered 40c on the dollar for debt that is realistically worth zero. But I reckon that's why they call them "banks."
Bottom line for us: whether they banks take 40% or 60%, WHERE WILL THE MONEY COME FROM? The ECB will print it, and never mind the transmission mechanism. And more inflation will beget more inflation, & silver & gold will thrive. May take a few more months to materialize into a renewed rally, but 'twill happen -- y'all take the word of a one-eyed, natural born fool from Tennessee on that.
Fears out of Europe today sent stocks down, the dollar and yen up, and goosed gold & silver strongly.
The Dow lost 207 points (1.74%), 2/3 of the previous two days' gains, to close at 11,706.62. S&P500 lost 25.14 or 2% to close at 1,229.05.
Dow's five day chart peaked a bit above 11,900 yesterday, rolled over, and fell out of bed. If 11,700 cannot hold, then 'twill hit 11,400 quicker'n a frog can tongue a fly out of the air.
The Dow has now reached its 200 DMA (11,967), a frequent barrier to bear market rallies. The pattern formed since August, when the Dow fell from the Jaws Of Death, has been ANOTHER broadening or megaphone pattern. Megaphones are burning up buying power, a market wrestling and writhing before it gives up.
Stocks -- a GUARANTEE for your retirement, but y'all had better ask exactly WHAT they guarantee.
US DOLLAR INDEX rose 9.4 basis points (0.12%) to 76.122. You can bet your last sovereign that the NGM from the US & all over the world, along with the Central Bank Yellow Running Dogs, are working like threshing machines trying to keep that dollar from running away. Euro closed 139.02, down 0.19%. Yen made a new all time intraday high at 132.04c/(Y75.73= $1), closed 131.47, and is trying to take off.
I reckon that WAS an upside down head & shoulders on the gold chart. Once gold cleared that $1,660 neckline about 10:00 a.m. (taking off with a runaway gap) it never even paused until $1,685, took a deep breath, then leapt clean to $1,705. Friends, by the time the janitor pulled out the broom on Comex, gold had added $48.10 (2.9%) & stood at $1,699.60. In the aftermarket it's shoving against $1,705 resistance.
Y'all see how those government surprise parties can mess with markets? Gold was building a rally anyway, but that goose from the dithering Eurocrats really put power behind it.
Measured target for this rise is $1,715, but as long as that European party is raging, gold can keep on rising. $1,725 stands next resistance, then $1,750, then the big heart-stopper at $1,800.
I still expect we will see another decline for a final kiss goodbye to the September lows (not that the price will reach that far necessarily, only that a double bottom will appear), but for right now y'all don't stand in gold's way, unless y'all want everybody to think you've left the room when you turn sideways.
One last thing: y'all watch that 50DMA, now at $1,742.82. Gold might stop there. Also keep an eye on $1,775, where gold collapsed in September. Gold might reach that point, too.
Silver was pleased to slap the jaws of all its detractors today. The Comex janitor found silver up 141.4 cents or 4.5% (if I'm lying, I'm dying) to 3303.4c.
Somebody who had BADLY missed the message was selling silver about 7:00 a.m. and sold down all the way down to 3139c at 10:00 a.m. Quicker than a lightning flash, silver gapped up over 3160c & shot straight to 3230c. It jogged there a little, then shot another 100c straight up to 3320c. In the aftermarket its trading 3317.5c.
Silver is targetting 3400c. Really would not be a good sign for silver to fall much below 3300c, if it expects to keep rising. 3350c is the next big barrier.
This was a great move today, but only brings silver back to resistance at the top of its 5 week trading range. Must move higher tomorrow to confirm its upward ambitions.
Today you are witnessing why you must gird up your loins, swallow hard, and buy silver & gold on sharp declines -- because the sharp rises will follow. It's a bull market. It has an indefatigable upward bias.
On St. Crispin's day, 25 October 1415, English King Henry V won the Battle of Agincourt in France during the 100 Years War. Henry's Welsh & English longbowmen wore out the more heavily armed French troops. With 6,000 to 9,000 men, 5/6 of them bowmen, the English beat 36,000 French troops, inflicting 7,000 - 10,000 casualties and suffering only 112 dead.
On 25 October 1983 2,000 US marines invaded Grenada in response to a political coup by Soviet/Cubans, threatening the vital US supply of Grenadine. Had not that supply line been cleared of communist influence, bars across America would have been forced to stop serving pink lemonade, Shirley Temples, Tequila Sunrises, Cherry Bombs, and Christmas Beer.
Argentum et aurum comparanda sunt —
Silver and gold must be bought.
— Franklin Sanders, The Moneychanger