Monthly Digger - November 2009

[Gold Majestic]

gm that is very cool. My uncle used to take me and my brother up there to watch the cadets march. that was in the late 60's. when were you there?

 

 

That was before my time. I was there in the mid-seventies in the 17th Squadron "Stalag" my "Doolie" year and the 16th Squadron "Hawks" as an upper classman. You were probably up on the Chapel wall watching the cadets' "Pass In-Review" "Eyes Right!" march to the Air Force band's tune of the "Stars and Stripes Forever" on their way to the Mitchell Hall dining facility. With all the daily spectators watching, we called it "the Zoo" for a reason. 4,000 cadets being seated for lunch, in and out in 30-minutes, and then back to class was quite an amazing feat.

[Surfer Dood Doo]

That was before my time. I was there in the mid-seventies in the 17th Squadron "Stalag" my "Doolie" year and the 16th Squadron "Hawks" as an upper classman. You were probably up on the Chapel wall watching the cadets' "Pass In-Review" "Eyes Right!" march to the Air Force band's tune of the "Stars and Stripes Forever" on their way to the Mitchell Hall dining facility. With all the daily spectators watching, we called it "the Zoo" for a reason. 4,000 cadets being seated for lunch, in and out in 30-minutes, and then back to class was quite an amazing feat.

i forgot the part about the chapel. i remeber us going inside. it hade spirals. really impressed me. a long time ago. thanks for the memories.

[Gold Majestic]

i forgot the part about the chapel. i remeber us going inside. it hade spirals. really impressed me. a long time ago. thanks for the memories.

 

Yes, the Chapel made of aluminum, glass and steel with its 17 spires soaring 150 feet into the sky was certainly a popular visitor attraction. Nice reminiscing, but I don't want to piss off the natives so I better leave it at that. Thanks for the discussion.

[traderfromhell]

Most of us have been here since the beginning of this bull. I think we go quite a bit higher longer term but would like to see a new high in Silver one of these months. That a full moon?

[Charmin]

Remember those Who Da Thunk times back a year ago? Back in Sept. 2008 we had one of those $90 up dayz. This feels like one of those dayz, although back then the bias was still working it's way lower.

[Gold Majestic]

A "Gold Blast Off!" it was and with maximum thrust "wet" full afterburner!

 

Why? Well we keep going over the why. And I believe we continue seeing the value of understanding the fundamentals that determine where market prices go.

 

Is it because the Indians bought 200 tonnes of the IMF's 403 tonnes allotment? Yes, that is part of it, but certainly not all of it. Instead of thinking in terms of single events, think in terms of the sum of multiple events, and replace the "+" sign with the "summation" symbol. Yes, technical analysis is important but without a correct understanding of the fundamentals is often worthless as so often demonstrated here. Not to pick on Bearvest, but to illustrate as an example, just yesterday evening his "chart analysis" devoid of an understanding of the fundamentals predicted:

 

"GOLD:

It gets beaten back with a stick at 1065.

I doubt that this time it will be different."

 

But anyone that's been following what has been going on realizes that we're currently experiencing the best environment for Gold, Gold that has been in a long-term secular Bull market! Gold / Gold Stocks, the "place to be" in this on-going perfect inflation/debasement beneficiaries environment.

 

An environment in which the Global Economy is improving, with FOREIGN Economies improving FASTER THAN in the US. In the US where the Fed REMAINS TRAPPED by RISING UNEMPLOYMENT, which PRESSURES THE DOLLAR and thereby PREVENTS Foreign Central Banks (who are interested in their own currencies not strengthening too much against the dollar) from TIGHTENING AS FAST AS THEY SHOULD in order to keep INFLATION SUBDUED.

 

So once again, ALL EYES ON THE FED at tomorrow's FOMC announcement (and ramifications for the US Peso).

 

Yes, India's purchase of the 200 tonnes that hit the newswires yesterday was most obvious as to what would happen to the Gold price today, MOST OBVIOUS. So why did the "Charts Tell All" miss this too obvious expectation in their chart prognostications? Because simply, they don't understand what's going on.

 

India's purchases of half of the IMF Gold that's for sale between the dates of October 19th and 30th represents a country stepping in front of the Chinese who wanted the Gold at a discount, paying Full Retail. But that still leaves 204 tonnes that I'm willing to bet the Chinese won’t wait long before buying. This news can not be interpreted in any other way other than Gold Bullish. Not only do we have a portion of the OFFICIAL SECTOR clearly interested in trading its US Dollar reserves for Gold, but we now have 200 Tonnes LESS Gold supply available as well. This is yet more fodder for Gold being viewed by investors as “money.”

 

But just as importantly, as with all Bull markets, moves don’t tend to occur just because of any one thing. They’re a combination of many things. It is becoming clearer to many that the Fed can’t do anything to arrest the Dollar’s slide until the US economy picks up more and employment improves. Yes, they can talk tough Fed but can’t really walk tough by actually doing what is necessary, reducing the balanace sheet, raising rates, etc and a few well placed adjectives/adverbs in the FOMC's statement tomorrow isn't going to change that. "Chopper" and company are just too terrified of upsetting the financial markets. And meanwhile, the FCBs continue to raise rates, although they’re likely to drag their feet in order to try and slow the US Peso's decline a bit, which will insure that Inflation breaks out in the foreign economies as well.

 

In this Bullish environment for Precious Metals we keep seeing the reports such as China’s official October PMI that rose from 54.3 to 55.2, which was its highest level since April of 2008. This of course indicates China’s manufacturing sector continues to expand contrary to all the so called experts (as posted here) that have continued calling for China's demise the last several years (especially since last Fall).

 

Likewise, we learned yesterday that the EU’s October PMI rose to 50.7 from 49.3 in August. This was the first time this PMI edged above “50” to indicate that the manufacturing sector was expanding since April of 2008 (the same as China’s PMI).

 

And in the US, the October ISM jumped from 52.6 in September to 55.7, which is its highest level since early 2006. Nearly all of the major components of the ISM rose, including the prices paid component, which surged back to its August peak at 65 from 63.5 in September. But when it comes to the United States and its fledgling recovery, the Services ISM employment is really more important. Services make up most of the US economy. And unfortunately, the Services ISM employment component correlates nearly exactly to the nonfarm payroll numbers, which we’ll see on Friday. In other words, the Services ISM could be a key data point ahead of tomorrow's FOMC results and Friday’s jobs data. The market will be largely keying off the Fed, which in turn is keying off the upcoming US unemployment report.

 

Such is life. It's really no big deal but just the way things are done and important to understand for our investments.

Meanwhile the "Prechter" Shorts continue to fade Gold based on swings in the Dollar index. But as we witnessed today (oh surprise surprise, surprise, not) it’s blows up in their faces (Short Gold / Gold Stocks / Long USD).

 

I've posted a series of charts here over the years, several times, that have clearly demonstrated what happens to Gold Stocks that get too undervalued relative to their product, Gold, while their product, Gold, remains in a long-term secular Bull market. As we saw today:

 

KABOOM!!!!!

 

Yesterday, Gold was basically back to its recent highs, but the GDX remained off its highs by nearly 14%! And we saw what Gold Stocks did today (oh surprise, not). History was predicting a "catch-up rally" as we saw today.

 

More comments:

 

Sometimes just reading about what investors like Buffet are doing sets the tone for the financial environment. I'm fond of reminding the "Charts Tell All" crowd to ask themselves if any of them have been successful like Warren Buffett has? And the answer of course is NO.

 

So when we learn that Buffett is "Going All In" on the Inflation Bet, wise investors put aside their "play charts" to pay attention. Buffett’s bid for this railroad is lifting all the transportation stocks. But as an aside, unlike the rails, the rest of the transports are highly sensitive to rising fuel prices the forest dwellers are still scratching their collective heads over as to the why. So as a caution, once this bounce in the truckers and airlines is over, they’re likely headed back down against the rails based on rising fuel prices.

 

Buffett's big bet: $34B on 2nd-largest railroad

 

“NEW YORK (AP) -- The biggest name in investing is making what he calls an "all-in wager" on the U.S. economy -- $34 billion to own a railroad that hauls everything from corn to cars across the country.”

 

“The acquisition of Burlington Northern Santa Fe, the nation's second-largest railroad, would be the biggest ever for Warren Buffett's Berkshire Hathaway investment company.”

 

Freight expectations: Warren Buffett goes `all-in' with $34B bet on railroads and the economy

http://finance.yahoo.com/news/Berkshire-bu...l?x=0&.v=18

[Gold Majestic]

G.M.:

 

Here are 2 relpies to October 2008.

 

They're current, but locked in that thread.

 

As the're the latest, simply scroll down.

 

http://www.capitalstool.com/forums/index.p...9179&st=860

 

B.V.

The point was is that you took my post out of context after complaining that I was taking your posts out of context. There' a word for that. And you said I was recommending CKG at $4.11 or something like that which I clearly did not. I gave you the link and hope you read it more carefully the second time.

 

As for your question:

G.M.

When did it trade at $1.50?

 

The day of my post, Oct 24th 2008. I supplied you with the CKG / $CDW "Chart (supposed to) Tells All". Did you examine it?

 

If so and you're still questioning it:

This is how currencies work. It's quite simple. As an American investor, I'm exchanging my US Dollars for a stock listed on a Canadian exchange denominated in Canadian Dollars. This "exchange rate" continually fluctuates on an hourly, daily, weekly, monthly, yearly basis. As you could have clearly seen on the chart provided to you, on October 24th 2008, the Day I was recommending ALL to "Back up the Truck" on Precious Metals stocks, and the specific day I recommending buying CKG on that "significant dip" when it traded as low as C$1.89, the Canadian Dollar could only buy .7823 of the US Dollar (See Hourly chart). So although you as a Canadian see $1.89 as the price of the CKG share, and although today C$1.89 can buy US$1.77, back then on October 24th, 2008, C$1.89 was equivalent to as low as 0.7823 x C$1.89 = US$1.4785. In fact as posted then, I was the buyer of the bottom and given the low 25,000 share volume that day, I was THE GUY BUYING THE BOTTOM on what I consider to be a somewhat trivial amount of shares. None the less, I was filled down to as low as US$1.48 a share on up that day as per my TD Ameritrade Stock Buying History statement.

 

Any other questions?

[Gold Majestic]

October, 2008.

 

G.M.

 

Here's what I said on Friday, October 24, 2008.

 

Of course, as a trader, I'll change my position.

 

The day before the Monday lows.

 

I posted the chart for that day earlier in this thread.

 

And as far as your comments about explanations go, every chart I post normally has MACD and Stochastics and an interpretation of one or the other or an Elliott wave count.

 

Simply put, I believe that any fundamentals are graphically portrayed in the chart.

 

So I disavow fundamentals.

 

My reasons are expressed in purely technical terms.

 

B.V.

 

"Of course, as a trader, I'll change my position."

 

Yes, but as I've pointed out, sometimes you have simultaneous Up, Down and Sideways scenarios. Unless a "day-trader" rather problematic for making money, especially when the "deep pockets" are notorious for Bull / Bear traps getting the herd to zig when they should zag. Also there's the problem of constantly changing your position as you did in November (as well as October) getting Bearish near the buying opportunity bottoms.

 

"So I disavow fundamentals."

 

IMHO, therein continues to lie your biggest problem.

 

"Simply put, I believe that any fundamentals are graphically portrayed in the chart."

 

Then why did you think Gold was going to head back down today as you expressed yesterday given the news of the Indians buying the IMF Gold? After all your trading experiences demonstrated here, have you ever thought to quit disavowing fundamental analysis and begin to include it in conjunction with your technical analysis, since it has worked so very well for those of us that employ its use?

[Surfer Dood Doo]

gm thats an interesting article on Warren Buffet. can you explain why its a bet on inflation? i know it would be good for gold stocks. tnx

[dharma]

beauty is in the highs of the beholder

kgc-from the lows of 6.85 to the recent highs of 23.31

a .382 correction =17.40, todays low was 17.44

also the market is Dover Sole and will have daily rsi divergences w/a close below or at 18.

it seems to have suffered a normal correction. so, i added it to my permanent portfolio

 

 

tfh-the normal gold/silver ratio in the past was 16:1 . it has widened out to where it is today. i know you know this. i have been of the mind the whole time that silver would lag gold. no cb owns silver. in spite of all the fundamental story for silver it continues to lag. maybe when gold gets out of reach, silver will catch up. but, i still think gold will be the leader. if cbs own gold, so should i. i own some silver, but i think gold is the place to be

dharma

[Gold Majestic]

gm thats an interesting article on Warren Buffet. can you explain why its a bet on inflation? i know it would be good for gold stocks. tnx

 

Surfer, another way to look at Buffett’s purchase is that he is getting rid of exposure to $16 Billion in “ZERO-Yielding” US Dollar Confetti in exchange for BNI [iNCREASED DEMAND for Coal (needs rail transportation) and the coming impact of sustained, higher Oil Prices on other forms of transportation (Truck/Air Freight)].

 

For those that pay attention to that which shapes our financial investment environment, we read back in mid-October on Buffett’s perspective concerning Inflation (and indirectly Gold).

 

Buffett: “Today people who hold cash equivalents feel comfortable. They shouldn’t. They have opted for a terrible long-term asset, one that pays virtually nothing and is certain to depreciate in value. Indeed, the policies that government will follow in its efforts to alleviate the current crisis will probably prove inflationary and therefore accelerate declines in the real value of cash accounts.”

 

Too bad Buffett didn’t hear the Bell Ringing Loudly and Clearly when BNI was 45% cheaper early last Spring. But hey, he’s miles ahead of the forest crowd, and who am I to question the likes of a legendary investor such as Buffett.

 

Buy American. I Am.

http://www.nytimes.com/2008/10/17/opinion/...ffett.html?_r=1

[Gold Majestic]

beauty is in the highs of the beholder

kgc-from the lows of 6.85 to the recent highs of 23.31

a .382 correction =17.40, todays low was 17.44

also the market is Dover Sole and will have daily rsi divergences w/a close below or at 18.

it seems to have suffered a normal correction. so, i added it to my permanent portfolio

 

tfh-the normal gold/silver ratio in the past was 16:1 . it has widened out to where it is today. i know you know this. i have been of the mind the whole time that silver would lag gold. no cb owns silver. in spite of all the fundamental story for silver it continues to lag. maybe when gold gets out of reach, silver will catch up. but, i still think gold will be the leader. if cbs own gold, so should i. i own some silver, but i think gold is the place to be

dharma

 

dharma, as you may have read, KGC reported last night and like AEM, it was lower due to higher costs and lowered production guidance related to its mine expansion efforts. But importantly, unlike AEM, KGC is not extremely expensive. So I too think the .382 retracement will hold and a bounce back is to be expected rather quickly.

[Gold Majestic]

A few more quick comments before I retire for the evening:

 

The 3M GOFO that I mention from time to time fell 3 bps to 0.27% and a new 11-month low. Again, this indicates that the physical Gold market is tightening up once again.

 

And as a heads up:

Also tomorrow, we get both the ADP employment report and the Services ISM employment component.

These give us an advance look at the Friday jobs data. Importantly, with "Chopper" and company watching the jobs market very closely for clues, the market will, in turn, be watching these reports closely as well.

 

As a result fwiw, more job weakness in these reports could potentially kick off another US Peso sell-off even before the FOMC issues its statement.

 

gooberoverandoutfortheevening

[bearvest]

HUI and Gold:

 

As I said last night, I planned to exit my long positions Tuesday. I was, and still am concerned with the relative performance of the miners in relation to the metal.

 

KGC's surprise loss caused me to delay matters. But I closed out my ETF at the close, and held KGC. I don't trade on news or short term fundamentals.

 

I close a position once there are 3 waves on the chart. Here's the intra day. I portrays the huge ABC better than the daily. It may turn into a 5 wave pattern. Overlap of 407.58 negates any impulse.

 

I did not short. I don't do so unless daily Stochastics is Dover Sole---and it certainly is not. But it's based on a 3 day average, so it won't take long to get there.

 

GOLD's new high clearly means it's in an Impulse. It should go somewhat higher.

 

But my analysis on the miners (as opposed to the metal), the DOW, and the banks is that they all topped in October, and this is a counter-trend wave 2 up rally.

 

The surprises from AEM and KGC tend to confirm my belief.

[bearvest]

Ratio charts:

 

I've said before that I have little faith in ratio charts.

 

But the relative performance of the metal and the miners is striking.

 

Gold is measured at the spot price--1080 an ounce.

 

With the majors, Gold reserves are valued at about $200 an ounce, less the cost of extraction, according to John Ing.

 

So there may be a message in the chart. The top was September. There are 3 waves on the chart with what appears to be a congested 4th so far.