Tuesday, August 30, 2011


1940 BMW 328

10:48 am (Hawaii) Got up to see the indices rally from the red and into green before the close. Spot gold and silver maintained the early-morning gains despite some minor selling. Volume overall is still weak and there is still no true direction, no wind behind the sails of the USS Armageddon and USS Print to Oblivion.

That's why I'm content to sit tight on cash. Not happy, though. While DGP trades at 68 and AGQ flirts with 225, I'd love to dip in just a bit, but with the market trading on the whims of alien techonology, aka High Frequency Trading machines and algorithmic cyborgs, peon retail traders (like me) are just runt prey.

Therefore, rather than be a tortoise in the middle of the highway, I'll stick to my guns. Fundamentally, there is no saving the banksters, which tells me FAZ will be at 100 sooner or later. It's trading at 52-53 today, perhaps finding a bottom and prepping for another run to 60, 70 or 80 again. Is the bottom in for Eurozone banks? Hardly. The toxins are impossible to remove without fiscal surgery and monetary chemotherapy. The bullshit comes to an end at some point whether I have my little position in FAZ or not.

Gold and silver have bypassed "nutcase" status. If slaves like myself think owning PMs is critical, how can I be insane when central banks are hoarding as much of them as possible? Why would massive short sellers take the hit over and over while spot gold runs above $1,900 an oz? The only question is price, not choice. Gold returned to about $1,700 briefly last week and is now at $1,835. There are gold and silver bugs who insist that just about any price is right before the rocket launch of the fall season, when India and other Asian countries go into festival mode and buy tons of jewelry. Coupled with global demand from behemoth buyers, there is no reasonable argument to be on the short side.

That alone, however, could keep gold and silver less exciting on a day-to-day, hour-by-hour basis. Without massive shorts getting burned (or winning occasionally), price action stabilizes. If the banksters have, indeed, gone long the PMs — remember JP Morgan reversing field to tout $2,500 gold a few weeks ago? — there aren't going to be a lot of competing shadows on the other side of the field.

Speaking of which, Dr. J (Jon Najarian) just said this on Fast Money:

"In any area of the world, India, China, the US, everybody's buying gold. People are scared. The volumes we saw, options volumes (in GLD) are up. There's less participation to the upside, but there's nobody (stopping) it, so we could float to the upside."

Much as I see the facts, still I can't chase DGP and AGQ here. But being completely out of these race cars (ultra ETFs) as gold and silver may be set to rebound higher off recent selloffs, the logical strategy may be to scale in. If not, idling is just fine.

No comments: