Sunday, July 24, 2011

Here goes the roller coaster

8:23 pm (Hawaii) I sorta expected some kind of news out of Washington tonight that both parties had mashed their puny brains together the past 48 hours to come up with some semblance of improvement in their negotiations over this debt ceiling issue. (I'd call it a disaster, but until China finally decides to get out of the dunking booth and put its big foot on our neck, it's "only" an issue.)

Apparently, Boehner went on air today and added fuel to the fire. Both sides are spewing fire, i.e. playing to the audience. Hey, free air time is free air time, especially with elections getting closer. It's not just Boehner, of course, but actually everyone in the House and Senate and White House who has yet to come out and articulate the honest truth. Well, actually, Ron Paul is the only guy who has consistently merited our collective attention for speaking without forked tongue.

Anyway, Spot Silver is 40.62, up a tidy sum from Friday's close of 40.07. Spot Gold is at 1616, up from Friday's close of 1600. Not a surprise with the post-market bickering of both President Obama and Boehner. So I'm taking this approach.

1. I waited until the hour before the Asian markets opened today to pick up more precious. I wanted both gold and silver, but with gold near an all-time high, plus the small positions of XG and DGP in my hand, I opted to acquire more physical silver. Besides, my physical stack is about 50-50, and I'd like to lean more toward the white metal in the long run, while price is still at this level. With spot at 40.17 before Asia opened, I was content. Not happy, but content, to increase my silver stack by roughly 55%.

2. If somehow Boehner and Obama find middle ground and happy talk of an agreement hits the market today or tomorrow, fine. I'm prepared to see PM prices slide, which will allow me to acquire more at cheaper prices: 35, 32 ... even 29 would be great. I've chiseled my way into physical and that approach has done well for me. Less pressure on trying to time things perfectly, and my average spot price entry has been around 34-36 for silver.

3. Probably — I put it at 75% — there will be no real progress on these talks until Wednesday at the earliest as both sides try to gauge where the public is throwing its support. If polls show that we are blaming one side or the other rather than blaming both, then that losing side will have to cave in quite a bit. Boehner is right that higher taxes will NOT help small businesses and lead to higher unemployment rates down the road. But I can't say I'd side with him, either. Whoever is calling the shots (in real terms) for the military will have to back down and get us out of these six wars before there is any sign of REAL progress in our debt crisis. Otherwise, it's all just chatter, a deal gets made by Aug 2 and life goes back to "normal."

4. Until an agreement is made, gold and silver climb. That's why it's key to keep an eye on price, maybe put in stop-loss orders (which I'm loathe to do) to protect profits. If this stretches out until next week Monday (Aug 1), that's great news for short-term gold and silver traders. So I plan to keep holding DGP and XG, and will likely trade AGQ and EXK in this scenario, with an itchy finger to get the heck out once a deal is made on Capitol Hill.

5. After the lovin ... when metal prices slide in the post-agreement ecstacy, I'll be looking for the bottom. Once stocks are done riding back up on this orgy of fake progress/kicking the can/expanding the credit-card line/drinking to sobriety, it will be time to load up on physical gold and silver like never before. Not you. I'm talking about me. I'll back up the truck and buy unprecedented amounts. Question is, will that discount price be silver at 40 (after a fall from 46 or 50)? Will that be gold at 1600 after a fall from 1650 or 1685?

Or will the fall in metals on the news of a debt ceiling agreement (and possible QE3 announcement) send PMs crashing through recent support? Will we see silver back at 32? Gold at 1490?

I'm prepared for any of these scenarios. (I may play ZSL short term in that stage of this crisis.) That's why I adhere to a slower approach rather than try to keep up with the space machines. I might miss that OTHER scenario, the one where Gold explodes without slowing for months, finally settling into a level around 1800 ... where silver erupts to 75 without a pause. It's possible, no question, though unlikely for the time being.

Long run, both metals go to new heights because there is no cure for the national debt crisis. The nation is already bankrupt. No question. There's no cure. War is not a cure. It's the big bully taking everyone's lunch money, but it's not a solution long term. If and when we overtake Libya (I have my doubts there), what's the first thing we seize? Oil? Sure. But I guarantee you we'll be even quicker to corral every ounce of gold in those banks.

Whether we like this policy or not, the byproduct will be far more talk about gold than we could have ever anticipated. It will continue to arise in every pocket of hostile activity near and far. Wherever the US Dollar declines, talk of gold will emerge. It's the history of civilization, just rewritten in a new chapter. I don't enjoy that prospect, but I don't expect to sit idly by and see my hard-earned dollars, few as they are, turn into pennies due to my own negligence.

After all, I can't claim ignorance any more. It's either take action or take a beating. I continue to take action. The sooner the mercenaries on Capitol Hill get an agreement together, the better. I want more physical cheap and I want it now. But I can wait. I'll have to.

Metal that arrived a couple of weeks ago. Some silver rounds and ASE proofs. Silver secures sound sleep.

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