Monday, August 22, 2011

The last schwing?

8:09 am (Hawaii) While more and more analysts show up on CNBC talking (my mute is ON) about how bullish banks are, I have to wonder how much they're being paid by their firms to say such ridiculous things. OK, maybe they're bullish on regional, community banks, which makes some sense. But are their firms so desperate to recoup losses in bank stocks that they'll send someone to the network to jabber about something that almost all Americans hate?

I should be relieved. Too much gold bull/bear talk would probably be an indication of a jumping the shark moment in the next scene, not to mention the bloggers and columnists who keep preaching that gold is about to roll over. I'm not inclined to say they are wrong or right about the near term. I just don't view gold as a temporary issue.

Indices are up close to 1% each while gold is just off a new all-time high at 1890. Silver holding some of today's gain at 43.62. The silver miners are tearing higher, led by EXK (9.7%) at 11.38, up a buck plus on strong volume. GSS, PAAS, NUGT, AG, SIL, GDXJ, SVM, SLW, UGL all up at least 4.5%. A robust day for the miners, which goes with the pattern of miners trading up with the indices. I haven't read a whole lot yet today, but before I hit the sack at around 3:30 am (Hawaii), news was out about rebels taking over the capital city of Libya, which spurred a decline crude oil price.

I've been observing AGQ for some time, especially since it was in the 218-220 range last week. An explosion in silver back to 49-50 would probably take AGQ, currently 250.54 (+3.7%) back to its high of 382. Again, that's a gain of 74% from the 220 level while silver goes up 25% (from 40 to 50). That's IF price action follows the same pattern. I've always felt that playing AGQ from 220 to 382 would be the smarter, more logical route to take. However, what if silver price hits 50, then 51 and 52 in rapid-fire fashion, then jets off?

This happened with gold in the past week or so. Once it broke through resistance, kabloooooeey! It could happen with silver, partly because of all the margin requirement hikes back in May that flushed out the weak hands. There may be several margin hikes coming to gold in addition to the one implemented two weeks ago, but that means NOTHING to central banks and the horde of retail peons like myself who are not out to get rich (yeah okay that would cool with me), but are just SICK OF LOSING TO INFLATION. A small-timer like me can't stand it, but imagine a big central bank seeing their collection of US fiat currency shrivel up year after year. They lose billions on that position, so might as well dump it and buy gold.

The economy and politics of everything is intertwined with banksters and it's all a mess beyond imagination. That's why gold works. People understand the inverse relationship between fiat printing presses and the limited supply of precious metals. More so, they understand the lasting power of gold versus the corruption and inevitable decline of peabrained decision makers who are desperate to print more paper currency.

I still expect a bull run with the next QE and I'm ready to ride that wave. (Note: We're 4 days away from Jackson Hole.) But I keep my eyes on reality and that means stacking physical when I can and knowing that any bullish day has more to do with HFT/algo machines than real buying of stocks.

Chasing AGQ or any PM play right now is unnecessary. The dip was earlier today when gold fell back towards 1860 and silver dripped below 43. AGQ came down to 244. I was sound asleep and don't regret it. Eliminating temptation (high end of a range) is a good thing. The real test will be stepping in for more DGP or starting a position in AGQ when the next dip comes. Buying low is not as easy as it may sound, not for me. But it's a test that can be won.

The battle against human nature — chasing momentum — is a tough one. Paying low prices for a valuable asset separates the great traders from the rest of us.

FAZ btw is up 1.4% while most bankster stocks are in the red, with BAC at the bottom. Not a good start to the week for the Keynesians.

Update 8:41 am Not sure how Libya falls and crude oil goes up, now 84.25 (+2.4%). Not that I want to buy UCO or SCO. Just a bit perplexing.

Update 8:48 am Must read: Brother Turd Ferguson's morning analysis. Another takedown attempt by the CME mafia might send spot silver to 41.50. He's a buyer there.

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