drbubb

Very good questions, AJC. Especially since the damage may not be apparent just yet. Not "all currencies" are being managed this way, ie printing money, or borrowing from abroad, to flood the system with cheap money. Many are, that is true, but the extent to which government debts are growing in the UK is alarming, even more severe than in the US, where it is also alarming. After all, someone has to be providing that credit, if the "borrowing from foreigners" occurs, or it must be done through money printing. In either case, borrowing or money printing, the claims against the government are growing, and if the people holding those claims try to convert them out of Sterling, they hold the potential to crash the currency. The UK got a taste of that last year, see chart: And another sharp drop in Sterling may lie in the future, when those claims are aggressively converted, at some future stage. The chart above does suggest that the "next slide in Sterling" has started already. + + The problem is the malinvestment that is occurring now, adding to the previous malinvestment that produced the 2008/9 crisis. If the government was borrowing to invest in high yielding investments, above the long term interest rates they will be paying, then the investments would be fine. They would be adding to the wealth of the country. But this is not the case. The money is being handed to the banks, to replace capital that has been written off (thanks to the previous wave of malinvestment), and as subsidies to people and industries that cannot make it on their own. Just as it has in the personal sphere, the UK is helping to create a "culture of dependency" in the corporate sphere to go with it. To make matters worse, the low rates are encouraging another round of homebuying, to match that of the buyers curse period of 2005-7. People are looking at today's low interest rates, and making calculations about whether it is better to buy or rent, and they are believing that it is worth the risk of buying. If rates were higher, they would not be buying at current prices, they would await lower prices. In this way, they are locking themselves into an asset that will be more expensive, and a cash drain, when interest rates rise again. These housing malinvestments will not only harm individual homebuyers, when rate rise, they may also harm the banks that lent the new mortgage loans, if they default on their loans. The current situation is deteriorating day-by-day, as commercial real estate comes unstuck, as people lose their jobs, and fail to make loan payments, as the UK government debt piles up, and the government's ability to rollover on favorable terms becomes endangered, and finally, as the new wave of malinvestment helps to make the Uk economy less efficient. The only good thing that I can see is the longer the low rates persist, the more debt will be paid off. But this is a very slow cure, and it takes maybe 14 years to pay off half of a 20 year mortgage loan. With such a slow cure at the household level, and debts building dangerously faster at the government level, things are getting worse, and more risky every day. The most likely next crisis will be either: a Sterling slide, or a rapid deterioration of one of the "saved" banks thanks to problems in their commercial real estate portfolios. And then there are a whole host of other risks that I cannot even imagine. Japan has huge government debts, sure. But it also has huge household savings. We do not have that level of household savings in the UK. They were wiped out by Mr. Brown, who encouraged household borrowing in 2000-2003, to keep the UK out of recession, and keep his "end to boom and bust problem" (ie no recession.) Then the pace of househiold borrowing continued as the housing bubble grew and grew. So UK households no longer have the level of savings to match their government's borrowing. Watch the Pound, I dont think you will have anything like 2-3 years before the next crisis.

I actually think you can "protect" your Gold holdings by buying SPX puts

People forget... Almost a year ago, the BofE and the Fed panicked, and slammed their fist down hard on the Panic button, reducing rates to historically low levels. We are still in the panic mode, which was meant to be a temporary response. And people have begun to think it is normal, and they are entering transactions, buying property, with the insane notion that today's "panic low" rates can somehow be maintained. If they are, it will lead to another wave of malinvestments, which is what we are beginning to see now. If, the bofE regain's its courage, it will have to raise rates, and that will kill the recovery. If I was going to buy property now, I might consider going so, while taking out a massive put on Sterling. But that idea is more of a thought experiment than a real suggestion

I know it can be frustrating. But try to look at it rationally: this rally was manufactured by the government, through reducing rates to record lows. The low rates are ruining the future of the pound, and the UK economy. They cannot be sustained forever. The UK cycle doesnt bottom until probably 2012/13 (or longer), and there's room for a 30-50% fall (maybe more) from present levels. Look away,and dont even think about buying until late 2011, when it is worth studying the market. Dont fall for the low-rate-con-job ! Keep building savings, and you will be in a strong position to buy when the market does bottom.

I still find it hard to believe that the UK has such a Mickey Mouse system for selling homes. In HK, sales typically close in about 45 days after the price is agreed, with the following system: + Deposit paid (usually 2-3%) on the day the price is agreed. Either side can still drop out for a few days, typically up to 10 days. But if the buyer drops out, he loses the deposit. If the seller drops out, he pays back the deposit, plus the same amount again. This is nice and symmetrical. And so if the buyer has not yet line up his bank, he can get out, but pays a useful penalty for tying up the property and wasting the sellers time. + Rest of the initial 10% is paid at the contract signing date, usually within 14 days after the price is agreed. + Sales closes, and the seller get the remaining 90%, usually 45 days after price was agreed. WHY, oh why, does the UK use anything different? This is the 21st century, why does the UK use a system from the 17th century? BTW, something that helps everyone in getting these transactions done "so quickly", is the transparency of the system here. Every transaction is reported immediately, and is available in a central databank, which is highly accurate, with no cash bonuses hidden, or other such nonsense. So buyers and sellers, and their banks can easily check the real market price, without relying on some pirate EA's "price estimate." Every week, average prices are released for each major estate in Hong Kong. Following is the price index for the estate where we still own several properties: This is in HK$ per square foot, so you can multiply the square footage of your property by this number, and make some adjustments for the floor, view, etc., and you have a very good idea what your property is worth. Also, there are websites where you can input the location of your property, and get a precise valuation. Here are the valuations from various banks for a property we sold 9 days ago: Using the Centaline index figure (see above) : $3,200 x 657 sf = $2.12 Million I like using the MMI x a Multiplier: 68.5 x 46 = $3,151 x 657 sf = $2.07 Million (ours is on a high floor, and deserves a premium) HSBC valuation.. : $2.36 Million (they usually overvalue high floors) Hang Seng bank : $2.13 Million Average value.... : $2.24 Million Our selling price? $2.2 Million

Fascinating chart - look at that amazing similarity I stumbled across this relationship as I was examining the last 18 year cycle peak Previous peak in 1989 was Pds.62,782, and I noticed that when I scaled it up by 3x, the peak was in line with the 2007 high (Pds.184,131) I asked myself, what about the drop from the 1989 high, how big was it, and how similar was the drop to what we have seen in 2007-9. When I ran the numbers it proved really striking, almost spooky. From the 1989 peak, the market dropped to almost exactly 50,000, and 3x that would be 150,000. How close did the actual 2009 low come to that? I decided to run the numbers more precisely, and I found this: .. 1989 x Multiplier = .. 2007 ===== .. ======= . ===== 62,782 .. x 2.933 ...... 184,131 Peak levels, precise ratio: 2.93286 62,782 .. x 2.963 ...... 186,044 Nationwide NS.Oct07, ratio: 2.96333 50,000 .. x 2.963 ...... 148,150 "expected level" The actual level (Nationwide, Feb.09 Low) was very close to that : 147,746, a remarkable similarity I also note that 50,000/62,782 is a ratio of 79.6% (very near to a 20% drop), and 147,746/186,044 is a ratio of 79.4% - that is really rather amazingly close! What does this mean? Well, that the level from whence the Dead Cat bounce started looks as if it could have been predicted months ahead of time with amazing accuracy. But this does not mean that we have hit the ultimate low, simply a nice "harmonic ratio" in accord with the prior cycle low. My own view is that the Feb.2009 low will be busted, and that will usher in a panic which will demoralise the bulls, probably sometime in the first half of 2010. Once this shock hits, the market will move lower, as homeowners realise the market will have to grind down and find a lower low somewhere, possibly out in 2012/13.

Fascinating chart - look at that amazing similarity I stumbled across this relationship as I was examining the last 18 year cycle peak Previous peak in 1989 was Pds.62,782, and I noticed that when I scaled it up by 3x, the peak was in line with the 2007 high (Pds.184,131) I asked myself, what about the drop from the 1989 high, how big was it, and how similar was the drop to what we have seen in 2007-9. When I ran the numbers it proved really striking, almost spooky. From the 1989 peak, the market dropped to almost exactly 50,000, and 3x that would be 150,000. How close did the actual 2009 low come to that? I decided to run the numbers more precisely, and I found this: .. 1989 x Multiplier = .. 2007 ===== .. ======= . ===== 62,782 .. x 2.933 ...... 184,131 Peak levels, precise ratio: 2.93286 62,782 .. x 2.963 ...... 186,044 Nationwide NS.Oct07, ratio: 2.96333 50,000 .. x 2.963 ...... 148,150 "expected level" The actual level (Nationwide, Feb.09 Low) was very close to that : 147,746, a remarkable similarity I also note that 50,000/62,782 is a ratio of 79.6% (very near to a 20% drop), and 147,746/186,044 is a ratio of 79.4% - that is really rather amazingly close! What does this mean? Well, that the level from whence the Dead Cat bounce started looks as if it could have been predicted months ahead of time with amazing accuracy. But this does not mean that we have hit the ultimate low, simply a nice "harmonic ratio" in accord with the prior cycle low. My own view is that the Feb.2009 low will be busted, and that will usher in a panic which will demoralise the bulls, probably sometime in the first half of 2010. Once this shock hits, the market will move lower, as homeowners realise the market will have to grind down and find a lower low somewhere, possibly out in 2012/13.

I bought just two Gold coins, which was merely as a trial run. I am still waiting. If the Dollar starts a rally, it could be trouble for Gold This long triangle is going to break very soon.* Seasonally speaking, it should go higher. But we never got much of a dip in July/August, so gold could be tired. Falling stocks may hurt gold again this year, as they did last year == == *Note: Such triangles often finish with a brief "false break", and then a major move in the opposite direction

Glenn Neely's book... Mastering Elliot Wave: Presenting the Neely Method: The First Scientific, Objective Approach to Market Forecasting with the Elliott Wave Theory (version 2) (Hardcover) Review Excerpts: (1) Not for the faint of heart--for serious traders only! Just about 5 years ago, I began seriously studying the markets. I was heavily influenced by many experts that this thing called Tecnical Analysis was a bunch of BS. Five years, and thousands of dollars (in profits) later, I can tell you that technical analysis is a crucial tool in dealing with the fundamental uncertainty we traders deal with every day. ...more (2) Loads of great knowledge, but hard, hard work! I read this book a couple of years ago, and found it fascinating and highly detailed. I imagine that for some very technically minded people this is something they can really get their teeth into and enjoy. But for simple folk like me, it was just too much, and I found much simpler methods to interpret Elliott waves that didn't take half as much time or knowledge. So, I give it a 3 star rating as its brilliance is somewhat dampened by its complexity. (3) If you are looking for a general introduction to Elliott Wave theory and practice this book is not for you. I would suggest starting with Prechter's "Elliott Wave Principle" from 1979. If you are prepared to spend a lot of time working through the minutiae of the rules and conditions contained within this book, however, (especially using your own data) you will find this a most rewarding endeavour. Wave theory is not for the faint-hearted, it requires a lot of time and application to give you the building blocks to come up with a view of the market. ( A. M. B. Stevenson - Midlevels, HK) /see: http://www.amazon.com/Mastering-Elliot-Wav...howViewpoints=1 BOOK:: http://www.scribd.com/doc/14344292/Elliott-Wave-Glenn-Neely

(Glenn Neely tackles a question that many may want to ask) He had stated: "June 11, 2009 would be the high of the year" Question: The market has moved higher since you called for a top. Is that a failure of wave theory or did you make a mistake or misjudgement? Answer: To understand the answer to this question requires a complex understanding of wave theory and its limitations. Most followers of Elliott Wave (EW) assume the theory is capable of explaining - in real time - all market action at all times. Unfortunately, that simply is not true. The world thought Newton had everything figured out until Einstein came along. Even though R.N. Elliott's Wave principle was the most revolutionary and comprehensive theory of its time, it had flaws, namely the absence of logic and self-confirmation (traits NEoWave brings to the table). But, even with the great advances NEoWave delivers, there are still "holes" in the theory. For that reason, there are times when EW and NEoWave analysts simply can't predict what will occur next. For example, during the early stages of a correction (i.e., during wave-A), predictability will be high and both EW and NEoWave analysts can appear to have an almost supernatural ability to predict the future. This occurred for me during wave-A of the current bear market starting at 2000's high through mid 2003. Once wave-B got underway, day-to-day, week-to-week and even month-to-month predictability dropped noticeably, which always occurs during B-waves. The larger the B-wave, the longer the period of uncertainty. At best, during B-waves, one can hope to get market direction correct, but predicting future price action in detail is extremely risky and likely to produce embarrassment. As wave-B ended in late 2007, structural clarity increased once again. By January 2008, as wave-C got underway, predictability returned and the ability to make specific forecasts was possible for the next 12+ months (i.e., during the first 25% of wave-C). With the first year of wave-C now history, and as the S&P moves closer to the center of an even larger correction, predictability has dropped to its lowest level since the start of the bear market September 2000. We can say with near certainty that wave-C will be a four year correction (i.e., it will last until 2012), but we can't say what type of correction it will be (i.e., whether a Flat, Triangle or complex Correction). For that reason we won't be able to predict exactly how the S&P will unfold the next few years. There will be brief periods, at major market turns within wave-C, when I'll be able to project future price action, but trading (based on wave theory) will be difficult until at least early 2010. In early 2000, based on my knowledge that wave structure would become increasingly more difficult to decipher as the 20 year correction progressed, I began work on a completely new way of thinking about, dealing with and trading markets. I knew substantial portions of time would exist during that 20 year period where I would not be able to predict what was going to happen next, or that forecasting errors (and embarrassment, like what I experienced recently when I stated June 11, 2009 would be the high of the year) would become more common. As a result, a completely new way of looking at and dealing with markets, with a focus on trading technology and risk management, would be necessary to survive the next 20 years. That was the beginning of what has evolved into NEELY RIVER THEORY - a now crucial part of all NEoWave Trading updates. There is always the possibility an analyst will make a mistake or miss an important concept when doing wave analysis. That does not change the basic fact that wave theory does not have all the answers at all times. It is for that foundational reason I missed more than half of the March 2009-to-present rally in the stock market. It simply was NOT predictable and could not be counted on. That statement is correct whether other EW analysts took the chance and stayed bullish on the market from March's low. Logically speaking, and from a certainty and safety standpoint, only 1/3 to 1/2 of the March-to-present rally could be depended on. The rest of the rally did not ruin or negate wave theory (structure could be adjusted to allow for it), but the rally could not be expected with certainty at the time the pattern was developing. /see: http://www.neowave.com/qow.asp

NEELY's Warning of an upside spike (1) Aug.17: A couple of critical gaps need to be filled, both higher, over SP1K (futures, emini contract). Neely put out two emergency bulletins, one for the S&P and the other for the Euro. Both indicate he expects a surge as well, in the S&P and the USD. All in all, it looks like the Final Surge is on and a new top is ahead. If so, the market should truly surge up. No more choppy overlapping confusing moves. We shall learn more tomorrow. Maybe I can still win my bet of Dow10K by Aug31. SPY, etf for S&P500 .. update : SPX-10day : SPX-6mos : INDU-10d : INDU-6mos (2) Aug.21: Final Surge! Today was quite a surge day. The STU thinks we should see a relatively brief affair with a sharp reversal, but first it has to run. Neely told his traders to stand back until at least 50 SP pts have run up. This looks like minor wave 1 of C, which should break in five waves. If I had to paint a scenario, it would be this: a spillover up Mon am as the weekend herd jumps in, followed by profit-taking; this is minor wave 2. It should be over quickly. Then the big surge up in minor wave 3, powering through Dow9700 towards Dow10K, which it will probably not make. Then an annoying plateau in minor wave 4 testing our patience near the fable five-digit level. Then BAM! the final spurt up through 10K to the 50% retrace of Dow10330. If this happens fast enough (six trading days) I could still win my bet. Of course, this is just one of a myriad of scenarios. We will know when the final top is in: the reversal will be violent, steeper than the run up. Source: http://yelnick.typepad.com/yelnick/

I had a quick look at the two sample chapters, and I will definitely go back and read them in detail when I have more time. Have you got a publisher lined up? What's the expected publication date?

Options expiry today. So I took a nap, to be back for later trading. The market has held its gains pretty well, except the Dollar is now off its lows, and Oil is giving back some gains. The close has potential to bring a bit of a selloff today

We cannot expect an exact match. Having said that, the comparison is very good so far If the pattern holds, we may see a rally to $1,000 or a bit higher, and then one more large selloff before it takes off

Seasonally, this the the RIGHT TIME for a move up in Gold, But what's wrong is the commercial positions - ie too many commercial SHORTS. Can they break the Commercials? There could be a good test coming, if today's move holds up

This jump in Gold and Oil must be due to the weak dollar. It is not following my script today - support has been broken, down -0.42 today, just below 78. I wish I could see volume better, to know how much is behind this move

That 10-level (Dow/Gold) looks rather important. It looks like we have rallied up to "kiss it goodbye" I expect to Gold to fall with stocks for a few days, before it "finds its feet" and rallies

I will post this chart without comment - to me, it speaks very clearly! US stocks (SPX) -to- Gold Ratio It would be interesting to know what others here think of it

Have a look at how they are reported: http://www.cftc.gov/files/dea/cotarchives/...mxsof080409.htm "Non-Commercials" are normally called "Large Speculators", since they are not using Gold as part of their commercial position. "Non-reportables" are called "Small speculators" ... but I know what you mean. We are hedging against a drop in wealth What is interesting about the chart was that the buying petered away at the small level each time. What we need is another period like 200t when the Commitment to Gold jumps to a new level. Back in late 2007/early 2008, it jumped from under $10 Billion, to near $25 Billion in a few short months. Another interesting point, is how the Commercial short positions rose to accommodate that move up in gold. If you consider what happened last year, when the Gold price dropped sharply, the commercials were SHORT COVERING as the price fell. In other words, they were BUYING BACK their shorts. Without that buying from the short-covering commercials, the price would have fallen much further. So you could say, those shorts are useful, since they can be thought of as a "reservoir" of future buying in the event of another Gold price collapse.

Indeed it has. The current situation of "excessive reliance on Hedge Funds" to move the price up can be easily corrected. If they sell down to a lower level of longs, they may be ready to fuel the next price rise. I am hoping that the present drop, will be building a base for the next strong Gold rally up. But I reckon that we will need to see: + The Gold-to-WTI and Gold-to-Copper ratio to show relative strength (only Gold-to-WTI is so far) + Gold-in-C$ to show a good base + The Swing indicator lower, ideally back near 64% + Gold stocks to stop their current slide, and maybe show some stability in relation to stock indices With those conditions in place, then Gold may be ready to attract MORE MONEY from Large Specs (mostly the hedge fund commodity) on its next surge up. I have been doing some work on how much money they had committed to Gold Longs in the past. The result is surprisingly range bound, as you can see in the following chart: If gold is going to push through $1,000, then the Large Speculators will have to be willing to invest more than $25 Billion in their Gold Longs. Assuming just 10% gearing, supporting $25 Billion only needs $2.5 Billion margin. Surely the Big Funds can find more margin money, if/when they become really frightened about a falling dollar.

That's an interesting chart on COT open interest. I followed the link, and found this comment in Jim Sinclair's MAILBAG = = = = = = = = = = = Dear Jim, Assuming a market crash in September 2009 and an even greater crash in May/June 2010, should a senior like me sell or hold through these events? As a shareholder and gold stock investor, I’m planning to hold all gold stocks and bullion/coins. I’m uncertain as what to do with my holdings in copper, oil and gas. Please share your thoughts with me. Your comments are much appreciated by seniors. We advise them to buy only bullion/gold coins. You are our guiding light. Thank you. Sincerely, CIGA Morris Dear Morris, 1. At first copper, oil and gas will move lower with minor dollar strength. 2. Next the dollar will move lower. 3. Third gold will go higher. 4. All things gold will go higher. 5. The dollar breaks below .7600 and then .7200 6. Copper, gas, and oil will then move much higher. 7. Hyperinflation comes into view. 8. Equities move higher from serious low. 9. Gold moves to $5000 or higher. All the best, Jim = = = = = = = = = = = He may be right in the future. But so far, it has not worked that way. Mostly, when we have seen assets like Stocks and Commodities move down, that move has been accompanied by a rising dollar, not a falling Dollar as JimS may be indicating. It CAN HAPPEN in the way he has indicated, and I think if you see commodities move lower, and the DOLLAR DROPS WITH THEM, that may be a sign that a new game is afoot, and that could be setting the stage for a big dollar collapse. A likely first sign of a new dynamic emerging would be when Gold shows good relative strength versus other commodities like Oil and Copper. Presently, I am getting the idea we could see a rather sharp drop in Gold and other commodities setting up a good buying window perhaps as early as late August - ie the week after next. Gold-to-WTI is stabilising near 13., but Gold-to-Copper looks like it is headed to 3.00, versus recent high of 7.03

GLD : 91.61 Change: -1.39 // chart Open: 91.49 High: 91.8574 Low: 91.28 Volume: 6,832,834 Percent Change: -1.49% That's below average volume. Average would be more like 10 million. Gold shares / GDX were down 4.87% (!!) on above average volume : GDX-chart

Sure. It will be interesting to hear Jim Turk's comments on those points Another Question: When the gold price rises and approaches $1,000, the number of Commercial Shorts expands to 70% of total shorts, or even above that (using the Combined Futures and Options data), and when the price drops, the shorts are closed, so that when Gold is bottoming, Commercial shorts may be just 64-65% of the Total. Effectively, it is that wave of Commercial selling hitting the market which tends to overwhelm the buying from the Large Speculators (Hedge Funds et al.) Now here's my question, does JT expect the that we will see strong enough buying from the Large Specs to overwhelm that selling, when the price pushes through $1,000? If so, then maybe the Commercials will be forced to cover shorts in a rising market, and that would add an explosive dynamic to the upthrust. I dont think that this scenario that I have painted is impossible, but if we look at the recent history of the COT data, I cannot find a single instance of this occurring, so I dont want to make a heavy bet on it. It has been safer to just "trade the swing", and sell when the Commercial shorts push up to 70%. Chart (note that when the "swing" indicator exceeds the Gold price, then Commercial shorts are over 64%) The Commercials are buying, covering their shorts when the swing indicator falls below the GLD price

This is EXACTLY what I have been expecting: strength in the Dollar, with weakness in Gold and stocks. The next Manic Swing towards deflation is now underway

Okay. So exactly how does it "recruit Goldman Sachs, JP Morgan Chase and Deutsche Bank to do it, by executing trades to pursue the US government’s aims"? And how do they SHORT gold? Why do the Gata people rarely talk about the function of the banks in managing Gold price risk for their mining company clients? And why do we never hear about how these banks would get around the various risk limits imposed by regulators. I think this is vague thinking, and I wont believe that there is a broad conspiracy until I get some solid answers to these questions. Consider: + The cartel, if it exists. must be using the Gold futures market as a key arena in which to manipulate the gold price. Futures are really the only place where one can readily short the gold price, and hold the shorts for a long period of time. And since the Comex releases weekly reports on trading activity, you ought to be able to see their maneuvers by tracking that data. You wont see everything, since there is a large OTC market, but you will get a good idea of what they are doing. It wouldnt make sense to ahve a huge position in OTC, and do the reverse in the futures market, because one would then be "trading against oneself", and leaving some easy profits to arbitragers. + If they allow the price to rise at 15% per annum, then "the cartel" must be buying gold, as well as selling it. So they are also "manipulating" the price UPWARDS when it falls - we never hear about that from GATA + They cannot keep selling, else they would have run out of gold years ago, so it makes sense that they buy as well as sell + Have you looked at the COT report figures?? I have spent HOURS compiling that data, and reaching some conclusions about it, and they are consistent with the idea that "the commercial" (ie the big banks, the "cartel") are buyers of gold - at times - as well as being sellers. + Once you accept that they both sell and buy, why not learn to read the behaviour of the commercials and buy when they are buying, and be prepared to take profits when they become aggressive sellers. Let them work FOR YOU rather than trying to beat them