Yin Yang - Deflation & Inflation

I just dredged this up from last October, when the inflationist touts were in full swing. Now, it's the D boys' turn. Yin Yang, Deflation & Inflation... wash rinse... repeat as needed to screw up the maximum amount of people most of the time. Meanwhile, inflation continues as embedded policy with the help of the deflation cultists that are being let out of their cages for a while.

SPX 60 minute

Say, do you suppose the 1040 level is kind of important on the S&P 500?

JAG back below neck line

I have no position here, but it is interesting watching this stock grapple with the neck line of its H&S.

Gold-Silver Ratio (GLD-SLV proxy)

Once again, a geek's possible road map:

Inverted H&S breaks neck line > liquidity drains from markets > policy heroes ride to the rescue > handle forms with downward bias as a muted hope blip expresses > policy err, fails again > handle breaks to new highs in GSR > last one out, shut the lights.

Or something like that. Hey, it's just a bunch of squiggles and pretty shapes on a chart. But it could happen.

S&P 500

Call it an H&S or call it just an ugly topping formation. I'll call it an ugly topping mess, below important moving averages but not yet confirmed by a break below the neck line. You bullish on stocks?

Deflation...

The Baltic Dry Index is declining below support, the gold-silver ratio is in a bullish setup, the long bond is on new highs for the move...

What's it all mean? Why, it's Prechter time! And the lord of darkness is getting a lot of airplay and is sure to get more as the deflation story begins to bite hard. You know my stance on deflation and on Robert Prechter; a lot of good and helpful information (I would not be in t-bill only money market funds if not for him, as an example) and some things I obviously disagree with.

But that does not change the fact that there are some very basic things one can do for protection as these deflationary bouts descend upon markets and economies. Here's 20 questions for Robert Prechter that I think should be considered:

Free Download: Our friends at Elliott Wave International have just released a brand-new interview given by Robert Prechter. A devoted inflationist asks the leading proponent of deflation tough questions about fiat currency, gold, the Fed, the Great Depression, financial bubbles, government intervention and how to protect your money -- and even profit -- in today's environment. Learn more below or access the 20-page report now.

Long term treasuries - negative divergence being fulfilled

Last weekend, NFTRH (on vacation edition) noted the following among several bearish factors for stocks:

"Long term treasury bonds remain in a bullish stance, titillating the deflationists and providing a non-confirmation or bearish divergence for stocks."

Today, long bond fund TLT breaks upward. For reference this updated chart shows the consolidations in the GSR and USD proxy UUP in the lower panels. All these items are liquidity barometers to one degree or another.

The market's primary job seems to be to confuse the maximum number of people as often as possible, and heading into this week there were indicators on both sides. While my intermediate term bias is very bearish, I was leaning to very short term upward activity, despite things like the bullish structure of the Gold-Silver ratio, the bearish breakdown in the BDI (Baltic Dry Index) and what was going on here, in the long bond. With a "high risk" qualifier on stocks, since this is/was nothing but a hopeful attempted bounce.

All indications are that liquidity is getting sucked out of the markets. Short of cash and short term treasuries, there are no sure bets in the very short term.

Alcoa (AA) - H&S still on target

Was that all there was to the rebound? I am currently unable to watch the markets closely for the next few days, but I checked in to find AA, and a lot of other things are aborting the little recovery scenario they tried to get going. I leaned toward the attempted relief extended a bit higher, but today is really damaging that prospect.

Gold-Silver ratio, Baltic Dry Index... but two very bearish indicators for the near term. GSR is a liquidity barometer and the BDI is a leading economic activity indicator.

Meanwhile, the gold stock sector is getting hit, but you look at the structure of it and you cannot find much that is bearish. At least not yet. Nothing has been broken there. Nor has it been with gold.

Dow, SPX, NDX and many others... these things appear to be broken. Regardless of whether they pull it together today. Attn: Subscribers, recall the support tolerance level indicated over the weekend for the general markets. As loss of this likely puts the wraps on the relief blip rally.

GSR monthly

The weekly shows a well defined inverted H&S. The monthly shows a beautiful consolidation to bleed off the excess down to RSI support, while forming a symmetrical (continuation) triangle. You bullish on stocks?

GDX - nothing but a gap fill

All the hysterics early in the week and what did we have? A gap fill, which is a good thing. Still, volume is uninspiring and I have selectively added to some individual positions this week. I think I will take a profit on GDX today as it moves back up toward resistance. Edit (a few minutes later): Dohhh, have not yet sold and still thinking about it. Edit (a few minutes after that): See you later GDX. Thanks.

Check out guest post @ Rickackerman.com

How Deflation Threat Helps Policy Makers Inflate

As mentioned previously, this is a guy I like... a lot. Straight shooter and a long time pro, not given to hype or naivete. Very pleased to have the chance to post at RA.com. I will be even more pleased if/when Rick submits a post for me to post here.

As I posted once before, there are some D Boys who should be listened to. Rick is one of them. IMO Mish is another. There is nuance to their game and surviving what is in play is all about understanding nuance.

Prechter? Super smart... I learned a lot from him. But he should really try to release himself from this bugaboo about gold.

Hey, have a GREAT weekend.

GSR

Gold-Silver ratio... tick toc

GLD-SPY ratio

Tick toc...

Gold stocks... It's different this time

That has been an ongoing theme in NFTRH, and the reason is fundamenatals, which are way different from the run up to the crash of 2008 when gold mining led the crash. Look at the miners, again trying to fight the pull of the heavy pig (market).

Slowly but surely we are getting confirmation on the investment premise. There are some rough days but generally the gold stocks are in outperformance mode. It is almost as if the market - big dumb casino that it is - is beginning to factor in that this sector's fundamentals stand to benefit from events now in play; and I am not necessarily talking about a rising gold price.

NFTRH90 led off with a bit about not being afraid to be bullish. That is because my main bias is to be cautionary. But all I can say is that things are lining up, gold and its miners are still in major bull markets technically and there are times of opportunity. So I remained bullish in spite of an "elevated risk" environment in the short term, holding positions with personal rules about not selling out of a bull market in place.

Seeing the gold stocks fight the downard pull is a 'tell' for after D Boys have had their play.

Traffic Jam...

AKA the current status of the IYR real estate etf. Updated chart continues to show a not good situation.

Meanwhile, Fidelity is on the bull case for gold

We contrarians cringe when sentiment gets too frothy, gold is pumped on CNBC and a respectable titan of the conventional investment world speaks of gold as an "asset class". We cringe, but also realize that at some point in the process, the public is gonna go all-in. At least that's the script that is usually followed.

A Case For Gold --Fidelity Viewpoints

Edit (11:16) And upon actually reading the entire interview, my conclusion is that the guy is just a conventional "asset class" manager cross dressing as a gold bug. I would think that if he truly believed his own bullshit, he would think about physical first, as an anchor. I think a lot of these gold stock fund managers have to tell themselves (and others) that gold stocks are preferable to gold. They are preferable price-wise on rare occasion, potentially like the one upcoming. But to someone truly interested in preserving wealth on the long term? I think not.

Emailed from a reader...

When it is time for the gold bull to end, don't be like Hitler!

Dow-Gold ratio - Big picture

Gold has been keeping an eye on the great inflation fueled bull market since 2001. Gold is not impressed. Gold is not food, happiness, love, peace or friendship. Gold is a tool; a tool that can come in handy for wealth preservation, and a tool for looking at the 'real' events behind nominal market activity.

Copper-Gold Ratio

Doctor Copper has diagnosed the economy and he thinks it sucks...

Disqus... comments enabled

A commentor made a good point in suggesting I highlight the fact that the blog now uses Disqus commenting. It is easy to sign up and create an account and really nothing like the clumsy commenting system native to Blogger. I know there are a lot of smart people out there, many from whom I learn. It would be cool for me not to hear myself in a vacuum anymore and for the blog not be a one trick pony.

Check it out: About Disqus

In other words, business as usual...

Press Release

Release Date: June 23, 2010

For immediate release

Information received since the Federal Open Market Committee met in April suggests that the economic recovery is proceeding and that the labor market is improving gradually. Household spending is increasing but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software has risen significantly; however, investment in nonresidential structures continues to be weak and employers remain reluctant to add to payrolls. Housing starts remain at a depressed level. Financial conditions have become less supportive of economic growth on balance, largely reflecting developments abroad. Bank lending has continued to contract in recent months. Nonetheless, the Committee anticipates a gradual return to higher levels of resource utilization in a context of price stability, although the pace of economic recovery is likely to be moderate for a time.

Prices of energy and other commodities have declined somewhat in recent months, and underlying inflation has trended lower. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to be subdued for some time.

The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

The Committee will continue to monitor the economic outlook and financial developments and will employ its policy tools as necessary to promote economic recovery and price stability.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; William C. Dudley, Vice Chairman; James Bullard; Elizabeth A. Duke; Donald L. Kohn; Sandra Pianalto; Eric S. Rosengren; Daniel K. Tarullo; and Kevin M. Warsh. Voting against the policy action was Thomas M. Hoenig, who believed that continuing to express the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted because it could lead to a build-up of future imbalances and increase risks to longer-run macroeconomic and financial stability, while limiting the Committee’s flexibility to begin raising rates modestly.

GDX fills a gap on Fed day

What, you expected something else maybe? The technicals are the technicals and the technicals say no damage yet. Lots of anxiety out there however, in many markets as the Fed pretends once again to have control of the situation. The deflation scare can present at any time, but this chart does not tell us anything but a routine correction thus far.

Interactions worth their weight in... gold

Here is an illustration of a fringe benefit I receive from being a newsletter writer. No real explanation necessary I think:

"Gary

Just read you latest blog entry, the one that relates to people who don't get the investment case for gold........

Well, gee, that one brought back memories. Late 1979. I was a commodities broker with xxxxx xxxxx xxxxx xxxxx (on Gold Street, NY, no less!). Had a client, George. He was East European, had a radio talk show. Nice guy. Started buying Gold. Slowly, building a chunky position. And it was because the case for Gold was "lock tight" (his words. Still remember). The Dollar was dead. The US was finished. Inflation would eat us up, the trade deficit, Govt deficit, weak politicians, etc. (kinda like today's headlines).

Well, I don't have to continue, do I? You see, come January 1980, the market pooped (being polite). Old George said it was nothing. He would not sell. People just "did not get the case for gold".

Know where I'm going? He held, and his huge gain became a huge margin loss. The account was pulled from me (it's what they did to a kid broker with client margin problems). I remember his wife calling me, asking if there was something we could do. Well Gary, there wasn't. Not me, anyway.

So yes, I did not get the investment case for gold. Obviously, few others did back in early 1980. Or for 20 years after

You are too smart to believe in that shit. The biggest losses I ever took were when I thought people didn't get what I knew about markets. Or, at least believed. Sorta like all the folks who dumped US dollars and bought Euro's two years ago. Or Oil at $125 'cause it was going to $500. Or a split level house in Arizona.

I don't know what Gold will do next year (let alone next month). And, you don't either. Old George didn't. Yes, he was right. Just at the wrong time. And it destroyed his account. And probably his life

You do tremendously insightful work. Very creative analytical stuff. I like it a lot. As I do you. It's just that when you begin to think that the market, or people, or something is wrong, I think of George. And I shake my head.

Gary, there ain't nothing new under the sun. Not markets, problems, or human emotion.

Best regards,

Jeff"

*****

"Jeff,

I hear you and have heard you since day one. In writing a blog day after day, I am going to write some bonehead things, make screw ups or generally sound like an a-hole once in a while.

But you know that I try not to speak in absolutes, and here in that post I did not do that. But if I do analysis that leads me to the conclusion that there may be a great opportunity upcoming in the gold mining sector (the "investment case" mentioned was about gold mining, not gold), I have got to make a stand behind it as well. I see an investment case for gold miners... a potentially compelling one. That does not mean it will definitely fulfill what I see just because I have some kind of claim to the ability to always be right; I wish. The work I am doing - and I work very damn hard at this - leads me to the conclusion. How many people with how many opinions out there work as hard as I do? My guess? Not a lot percentage wise. I'll take my own conclusions born of hard work (much of it mental) and live or die with them - and if proven wrong, adjust. I have been looking over my own shoulder at my own perceptions since 2002. So far, so good although I know that the worm turns; it always does at some point.

I was relatively (relative to now w/ the above referenced "investment case") bearish the gold stocks from 2004-2008, as I have tried to illustrate by noting the long flat/decline in the hui-gold ratio that resolved into an epic crash. All through those years the 'inflationist' goldbugs held sway. The kind of people who pumped gold, copper, euro, oil... as if it's all one big inflationary theme park. You know I have been belaboring a deflation 'event' in the newsletter since half way through the strong rebound coming out of the 2008 disaster. I belabor it still and it is integral to the investment theme on the gold miners - PENDING RESOLUTION, whether it brings the miners down hard or mildly. That would be the opportunity I also belabor.

So I am in agreement with the deflationists on a lot of issues, but as long as I 'think' gold will decline less (in a deflationary event) than miner cost inputs ('real' POG rises), due to its being a haven in the world of money, and as long as I 'think' that policy makers will not help themselves from taking the easy way out once again in fighting economic contraction, then the case for gold mining as leveraged instrument to gold remains intact, very much unlike 2004-2008, but very much like 2001-2003.

Beyond this, I would like to get on to themes of a renewed US manufacturing sector (I believe it is in early progress), an ascending Asia, along with other emerging and even frontier markets. I would like to get onto a theme that says the world is not ending as the deflationists believe. But first things first. My horizon tends to be intermediate, but you notice that I have been keeping an eye on the big pic as well in the letter.

I love that people like yourself keep an eye on me. It's sort of like dad keeping tabs on junior, who shows some good ability but needs a kick in the butt once in a while. I say this with all due respect and affection toward your thoughtfulness. Again, with respect (for your experience) I would note that you seem to have had defining moments in the 70's. I remember that the subject of gold was a really bad subject [when I was younger - chronological error corrected. It's early and coffee not yet kicked in]. My parents bought into the hype in 1980 at the behest of a friend/stock broker. For years I'd ask them "hey ma, hey dad, does the gold investment still stink?" as they invariably muttered an answer in disgust. That was my only experience about gold until the changes that visited the macro in and around 2001, and to this day I am well aware of it.

Jeff, you notice that I have enabled the blog with the Disqus comment feature. It is rich, easy to use and really cool. Check it out.

Regards,

Gary"

Bullish signal for gold...

One bad day and everybody's got their pants all in a wad. Gold is over bought in euros and extended in USD. It has also not even begun to correct and yet there is anxiety among the gold bulls and from a guy I really respect, Tim Knight, a hint of... not really chest thumping but maybe gold bug baiting?

The deflationists are on a hair trigger and simply cannot wait to come out and school the stoopid gold bugs and inflationists. The sons and daughters of Denninger will be heard - or is it herd - soon enough. The fact that most people (including inflation bulls and many gold bugs) still do not get the investment case for gold mining currently lining up is really very bullish beyond our deflationary impulse that I believe is in the process of manifesting itself.

Fronteer Gold (FRG)

To be clear - here on the blog where I sometimes use foul language, display alternatively flippant, cocky, mocking and god knows whatever other characteristics, and use a thing called irony on occasion - FRG is most definitely not a "piece of garbage" in my estimation. It is a premium gold exploration company that may one day be a premium producer (or it will be bought out at a premium by an existing producer).

FRG is and will likely remain NFTRH's top gold stock. All this pullback to 38% Fib does is take away any thought I might have had of trimming any of it. Caveat: I own from 2 bucks. It's a long term hold now.

Gold's Blue Mondays

Is it just me or has there been a theme of late that sees happy news (Yuan policy this weekend) manufactured over the weekends by various G20 types, designed to give the broad global market hope trade a boost while at the same time taking a little off the top of gold? While it is a bit annoying, the rest of the story has been that the gold sector generally spends the balance of the week recovering and remaining in outperformance mode.

NFTRH90 Out Now

I Forgot to put the weekly tickler out there. NFTRH90 attempted to wrap up at 10 pages and finally, squeezing out every bit of white space on page 15, it did just that.

There was an extensive look at gold, technically from daily and weekly perspectives and another review of the case for gold mining as I attempt to be clear as to what is at stake and in store. The misperceptions noted in the previous post with regard to what is inflation... what is deflation... are key to our analysis. There will be winners... it's either that or the whole friggin' financial world ends under the collapse of the derivatives construct Mr. Coxe notes below... and there will be losers; big time losers. I don't like losing.

There is also a check in on the expected sentiment-based relief rally currently in progress and combining the state of the weekly VIX with the current sentiment structure, we project the right ingredients (data points) for a time when it may be right to be bearish again on the broad market and commodities. There is no inflation after all. ;-)

NFTRH90 also did technical analysis on some favored gold/precious metals stocks which, as long as I have fundamental reason to be bullish on this sector, will be an ongoing thing. The HUI-Gold ratio is a beautiful thing and in my opinion it truly IS different this time (from 2008) and while traditionally a bottom feeder, I am not afraid to be bullish at these [supposedly] lofty levels. Pending the possibility that the 'misperceptions' trade may provide one final downside opportunity of course.

NFTRH90 out now. Hey, have a great week!

Don Coxe on Gold via Zero Hedge

Aside from the typical linking of the word "inflation" with rising prices and "deflation" with declining prices, which is really where IMO many people make their fatal mistakes with regard to gold, inflation and the entire game of cat and mouse that is the ongoing system of Inflate-Or-Die, I think this is a pretty good look at gold and modern monetary history from Don Coxe:

Don Coxe Dissects Gold, As "The Most Established Store of Value Moves to Center Stage"



"What we believe is unfolding is a rush into gold by individual investors who look at the astronomic growth in financial derivatives—particularly collateralized debt swaps—and government deficits at a time when the effects of demographic collapse are finally being understood. According to some guesstimates we have heard, the supply of outstanding financial derivatives may be in the $70 trillion range, dwarfing the combined value of money supplies and debts. The total value of gold is so minuscule in comparison to the supply of these software-spawned instruments that it cannot be any real help in stabilizing global finances—but it can be a haven for investors seeking to protect themselves against an implosion of majestic proportions."

FRG - End of day

Somebody just had to get rid of this piece of garbage in size, in the last three minutes. Ho hum, op/ex shenanigans I guess. Unfortunately, I have seen this kind of thing many times with the smaller gold stocks over the years. Comes w/ the territory. NFTRH's number one gold stock remains just that.

Email update to subscribers yesterday (DMM.to)

While not my main focus, part of what I do here at NFTRH is highlight interesting opportunities in what I consider to be quality situations. Here's one that went out yesterday along w/ Chart #1. Chart #2 is today's update. Now, of course it does not always go like this here at the letter that makes due without the standard issue guru crystal ball. But all too often things do work out when using patience, a good b/s detector and a little TA.

Chart #s 1 & 2:




Good afternoon,

You may recall a previous update focused on an individual stock as Sabina Gold & Silver (SBB.to, SGSVF) broke out on a weekly chart. The rest as they say, is very bullish history. In fact, while not the subject of today's update I will note that the 'patience' play hit its breaking point and I added starter positions on Tuesday on this former NFTRH holding at USD $1.95. I hope it goes lower to add more, but could not risk being out of the stock any longer. Importantly, I personally have nothing but positive experiences and profits with this stock dating back several years, so my mental framework is supportive of being able to take positions and endure/capitalize on subsequent downside if it happens. Not everybody has that makeup.

On a related topic, I have used this week to sell some non-essentials like GOZ.v (sold out), CPN.to (reduced), in favor of adding to RIO.v yet again along with the SBB.to noted above. I also took profit on a small amount of the XAU.to positions on its news-related upside. For me, it is all about improving the quality and balance of holdings. As to balance, between FRG and XAU, the portfolios were heavily exposed to Long Canyon, a quality asset for sure, but profits needed to be trimmed for the sake of balance so XAU got the call.

On to today's subject: Fledgling gold miner Dynasty Metals (DMM.to, DMMIF) has an interesting chart I want to call to the attention of anyone who may be interested. It is similar to what happened with SBB.to several months ago, only on a daily basis. This has been a tough stock to hold but hold it I have and now I will consider adding to existing positions if a) noted resistance and the SMA 50 are successfully surmounted (see attached chart) and b) if the macro view continues to support adding to positions. I am currently well stocked on gold exploration and mining companies (incl. DMM) so I am not in a vulnerable position as a would-be buyer.

The chart is for your review to do with as you will. If the above noted resistance is dealt with positively, MACD goes Zero+ and RSI holds support, the stock could be in business for a while.

Regards,

Gary

Gold Proxy GLD Updated...

There's the breakout. If it holds, the next target is 1300 or more accurately, close to 1325 for gold.

Inflation Impulse?

Here is an excerpt from NFTRH89 centering on inflation/deflation dynamics currently in play. You know, humans being intelligent but herding animals, tend to flock toward one easily understood or rationalized pole or the other when it comes to the inflation/deflation debate. But folks, unfortunately this is not a one size fits all situation. There is inflation by policy and there is deflation by nature, and there are assets to own and others to avoid.

More and more I find that my newsletter is a specialty thing and that I do not speak to anything even resembling a majority of investors. While I am loath to tout NFTRH with a typical 'try our monthly subscription for more insightful blah blah blah...' I will say that if you are looking for something different with a track record of remaining on the right side of events, check it out. Some might consider it a good thing that the letter does not speak to the majority. We are setting up for a great opportunity in the gold stock sector after all, and for that opportunity to play out, a counter party must exist.

Inflation Impulse?

You may have seen my 2005 conversation about deflation with Rick Ackerman noted on
the blog recently. That was probably about the time I came up with the term “deflation
impulse”. It was a way of illustrating the view that systematic and ongoing inflationary
policies are periodically interrupted by the need of the economy, markets and financial
system to purge themselves of the toxins routinely injected by policy makers on a
Keynesian business-as-usual continuum of diminishing returns.

The diminishing returns are of course measured in our gold ratios like Dow-Gold, for
example, in which the Dow has endured a sustained bear market in ‘real’ terms. Since
the inflationary saturation point in 2000, the anchor to real money – gold – has acted as a
light of truth shone upon the people who control ‘official’ money and thereby attempt to
control asset markets. I think I once wrote an article comparing gold to the kid in 5th
grade who used to sit in the front row, hand up and ready to give every answer – not to
mention tattle on other kids for a few more brownie points. That is gold’s role in the
sordid world of modern money.

Not that it matters much to our analysis, but when reviewing the long-term monthly chart
of the yield on the 30-year bond, it occurs to me that it is probably more appropriate to
view our often-watched exponential moving average 100 as the deflationary ‘backbone’
that has firmed up Greenspan, Bernanke, Summers and Geithner over decades of
inflationary monetary policy ON demand.



Each time long-term interest rates have risen toward the EMA 100 – attended by bouts of
rising inflation fears – they have been repelled (red arrows), as economies and/or markets
have weakened and talk of deflation once again hits the media. This is the ‘Prechter
fright mask’ theme I sometimes have fun with on the blog. This dynamic is critical to
policy makers’ ability to keep the game going. No stable T-bond, no ability to monetize
confidence in the bond.

We are on a deflationary continuum against which monetary policy is eased in various
ways and with varying degrees of intensity backed by the confidence implied by the
EMA 100 backbone; there is implied confidence in the Treasury because each time there
is a bout of deflationary activity, ‘investors’ run en masse to US Treasuries. Early
subscribers may remember the ‘Lyin’ Larry’ theme that NFTRH came up with at the end
of 2008 when Mr. Summers very publicly cajoled the fearful masses to buy the safety of
US Treasury bonds, right into the teeth of an oncoming inflationary impulse that brought
the yield on the long bond all the way back to the EMA 100. The fearful lemmings were
summarily blown up as inflation players once again went full tout.

So is this it, the final deflation? If so, a world of assets is going to decline hard and
opportunity is going to present for the ‘D Boys’ to finally buy all those assets from all
those frightened and naive inflation believers.

Or are policy heroes preparing a mother of an inflation yet to come, with the recent
decline in yield from the EMA 100 and the confidence (and mandate to inflate) that
would come with a continued decline? The chart tunes out the inflation/deflation debate
and simply states that for now at least, it is business as usual.

Nothing has changed over decades – although the impulsiveness of the 2008 decline can
be read as a warning that things may have become more unruly in the macro markets.
But even here, this begs the question of whether that was an initial downward thrust
toward deflationary resolution or a harbinger of an equal and opposite inflationary
reaction?

As has been the case since the ‘Hope 09’ rebound got strongly underway, I am not going
to read too much into either potentiality. Rates have neither strongly declined nor busted
our EMA 100 ‘back bone’ or ‘inflationary line in the sand’. Until one or the other
presents, we remain on the business as usual continuum where implied confidence
remains with our policy makers and they can be expected to do as they have done
throughout the continuum; they will sell treasury bonds and monetize the debt in an
attempt to keep business-as-usual intact.

Smart investors stopped listening to Lyin’ Larry long ago and got off the modern
financial Ponzi grid. It is really so simple… pay off debt, own insurance in the form of
gold, have ample cash as long as confidence remains in fiat currency (don’t fool
yourselves, this confidence remains embedded), become involved in productive endeavor
whenever possible, and with an inner smile that comes from knowing you’ve done your
best to get your house in order, go forth and speculate if you so choose.

To summarize the NFTRH stance, I would say that the structure of the macro situation is
that of a deflationary continuum against which free license is given to policy makers to
continue their regime of inflation on demand. Every time there is stress in the system
(US credit contraction in 2008, European one in 2010 for example) inflation – in the form
of debt-based money supply ramp up – is brought forth. This cannot continue forever but
it takes a greater thinker than myself to be able to call it a wrap right here and right now.
Eliminate debt, own value and pursue productive endeavor.

Chart Speculation - Crew Gold (CRU.to)

I looked over the fundamentals and then had my friend Otto make sense of them (they're not that good at this time). But I took a small position on CRU.to just for the chart and for the fact that Endeavor Financial (EDV.to) has been buying shares (up to .49) and the flag consolidation that has resulted from the recent lack of said buying.

This is a chart study only. My position is very small and can be vaporized and not really affect anything. There is a bit of bullish divergence and a wedge down to support, but no important moving averages have been broken to the upside. Let's see how it works out, with the idea being that this purchase is made at a level that EDV began buying last time.

Separately, I found a nice looking hint of a breakout on an NFTRH fledgling gold miner yesterday and got an update out to subscribers. The last time this happened, the result was SBB.to going from 1.00 to 2.14. You know, I put up a lot of boring macroeconomic stuff on the blog because that stuff is absolutely necessary to remain on the right side of events. But it is as a stock trader/investor that I have had some of my best and most profitable times.

Gold (GLD proxy)

Okay, one more. A new chart of GLD.

I have been expecting some protracted handle making - perhaps into summer end off of the very bullish formation. But now we are complicated with a mini ascending triangle beating on all time highs resistance for the 3rd time.

The next target for gold is 1300, and it could easily get there very shortly if this resistance breaks. Then maybe some consolidation/correction before the real rise begins later in the year. Well, it's one scenario and it could play out right in the face of the gold hater deflationists. The smart deflationists will be on the right side of things however. Just ask Mr. Hoye and Mr. Ackerman.

Okay, that's enough blogging for today. I feel a sort of know-it-all tone creeping in that is surely a precursor to my portoflios getting whacked. :-)

Newmont & $TYX

Okay, here's an interesting chart... is NEM projecting a rise in rates? Is TYX projecting a decline in NEM/Gold miners? Or have these things ceased to correlate with each other? Questions, always questions.

Okay, enough with the chart list stuff. I have got to get back to work now.

Jaguar Mining - Close but...

Silver - Gold Ratio

That resistance err... held. Not only that, but it's in a H&S topping posture. Of course this is just an opposite view of the GSR inverted H&S, but being a visual learner I appreciate seeing pictures from many different angles.

Liquidity Amigos - Updated

Remember this chart of the 3 amigos from several months ago? This was a chart I used in support of an anti-inflationist, Hope '09-ending case. Again, drawn up back when it was friggin' HARD to go against the greedy, wild eyed inflation bulls on the stampede to make up their losses.

Look at the picture... beautiful. "He was on the outside... of whatever side there was" sang Dylan. In the markets, such a stance often proves fruitful.

You've gotta either love the markets, or get out of 'em. Because the misperceptions - not to mention the swings - are getting ever more pronounced.

Treasury bond progress...

Back to the task at hand, which is of course GETTING THIS RIGHT as traders and investors, as opposed to mentally masturbating the intellectual details of inflation and deflation. Here in simple minded biiwii land we will just review our old chart that was projecting bullish setups in various treasury bond durations.

Bear in mind that I originally produced this chart when it was hard to do; back when the inflationists held sway in the waning stages of Hope '09/Full Hubris '10.

Treasury bonds look to have higher to go, which will embolden the deflationists into full lecture mode, counseling the silly inflationists about all their sins. Then? Things change... again.

It's the way markets work, silly. A lot of mirrors out there, not to mention smoke. At least as long as the structure of the current system remains in place, and for now it does.

Gold - Euro may be stretched...

But gold-Canada Dollar is not really so. Here's the old chart I found rummaging around in the chart list. Could new highs be just ahead for gold as measured in the 'commodity currency' CAD?

Fronteer Gold - Through Target

FRG goes through a long-standing target and I still seem to be holding. Why? Because you've gotta have a few investments to go along with the plays. Unless of course you are a strict deflaitionist; then all you need is cash and treasury bonds I guess.

They're at it again... inflationist & deflationist

Karl Denninger's posts have been linked over at the main site on several occasions but more and more it seems to me as if he is rabid in his viewpoints and too emotional about nearly everything. I think he is smart, but maybe so much so that the forest is obscured by too many trees (signposts, data points... what have you).

Mr. Denninger & Gold - Part Deux

Gekko - No Wonder He Went To Prison

The pissing contest continues... and it's all part of the fun of these periods when the inflationists and deflationists are at each other's throats, with the prize being your would-be ability to suspend all nuance and go full bore into one ideology or the other. Wash, rinse, repeat.

You gotta love the markets and the players therein.

Edit (10:39) Look, nobody is harder on the gold bugs than me. I get disturbed when I see them drag religion into it. I don't like the 'us against them... good against evil' imagery. I get nervous when the cheesy gold commercials come on Fox and I am well aware of the long tradition of PitchManitis that comes with the old monetary metal.

The fact remains however, that Karl - and many other deflationists have been wrong since 2001. Flat out wrong and not seeing the forest for the very thick growth of trees on the financial landscape.

Crude Oil

Pretty good analysis here: The talk of the day is Crude Oil. I think this is counter a larger (down) trend in the making, but oil is in line with the idea that relief will usher us into summer.

SPX - not bearish in the short run

Monday's S&P 500 chart updated... resistance was surmounted and bearish is probably not a good idea until/unless the resistance turned support, fails.

Rut Roh!... for bears?

I would not be short against this index right now. But that's me, a risk-averse sort. Risk remains high for bears in the short term. Here' s the Russell chart from a few weeks ago, updated.

Gold-Silver Ratio - Nightmare Scenario Still Viable

Hi, I am the GSR and I remain poised to move higher, after a little more consolidation and refreshment of bull spirits.

I really want to go on and break the neck line, usher in deflation as the dominant macroeconomic topic, consolidate against hope as policy makers once again spring into action and then finally, as the illusion that these clowns actually have the power to effectively control markets fades away (as credit continues to contract anyway), proceed higher off of the Cup & Handle.

At that point we should be just about ready for a new system.

Aren't these scenarios dreamed up by random financial bloggers fun?

Euro breaking resistance

...as unsustainable momentum is reversed in the short term.

Doctor's in the house... for the moment

Now & Futures

This is a really good site to visit during the current confusing crosscurrents in the inflation/deflation debate. Bart is a real geek (written with nothing but admiration) for this stuff and his graphs provide great perspective.

I am only popping this up here because I was just over at N&F going over some money supply charts. Bart and I communicated a few times in the past, but I really don't even know the guy.

Incidentally, looking at this graph you can see why the deflationists are getting excited right now, yeh?

Bully... where to from here?

Well, first the resistance that coincides with the 38% Fib must be surmounted and then, if all goes well for our hopeful friends, there is a reasonable shot at a 62% retrace to around 1150. You buyin' it? Well, I know you day traders are, but how about sincere bulls looking for value... you buyin' it?

NFTRH89 Out Now

89 starts off with further delineation of the mechanics in play for the entire inflation/deflation debate. Also, as promised 89 looks at various precious metal, commodity, emerging and developed market monthly charts and comes up with some conclusions for the big picture. These aid in keeping perspective beyond the current deflation/inflation intermediate term struggle.

Technical analysis was also done on four NFTRH gold exploration companies, two of which (at least) are core holds for the speculation portfolio.

NFTRH89 out now.

Is there a doctor in the house?!

You know, the house with the copper roof? There is a patient in need of resuscitation! Today's chart updates with a red arrow for STO below 20 and another for AROON weekly trend down. Not to mention a serious flirtation w/ support failure.

No relief yet says Copper-Gold ratio...

S&P 500... Real or Memorex?

This quick video sums it up quite well:

Battle of Bulls & Bears (S&P 500)

Euro indicates relief...

The question is how much relief will casino patrons experience? Euro had probably better exceed this initial resistance level and get on with a 38% retrace to strong resistance for players to start feeling okay about themselves again.

Gold will be weak... Uncle Buck will get hammered (as will gold in euro's for that matter) if this rebound means any kind of business. The sentiment backdrop is all lined up and now it appears the pig has stated a strong intention to behave for a while.

Too much fear and angst could use a reset here. If euro follows the minor daily MACD bullish divergence (weekly is a mess) through resistance and STO breaks above 20, the bulls could get obnoxious once again; which is of course exactly how I like them. I am uncomfortable in a bearish view when they are really scared.

Satan playing a different game this time...

Risk back in play

Even as the Treasury auctions debt paper today, the risk trade is back in play - for the moment - and the assets of real and perceived safety take the hit.

Security	Auction Date	Issue Date	Offer Amt.
30 yr(r) Bond	06/10/10	06/15/10	13B

Come on (Bulls)... I want you to do it, I want you to do it...

Hit me!

It's about time we got a little hope stirred up.

WSJ - Bernanke 'puzzled' by surging gold price

A subscriber sends this my way... "This gem, in today's WSJ, is worthy of the Onion." I agree.

By Jon Hilsenrath

Federal Reserve Chairman Ben Bernanke says he’s a bit puzzled by surging gold prices. The 30% rally from a year ago, on top of gains in previous years, might be interpreted as a loud signal from markets that big inflation pressures are building in the U.S. Gold is seen by many investors as a hedge against inflation risk.

Ben: All we did was ramp the money supply to whatever level was needed to raise asset prices. What's all the fuss about?

In this case, it might instead be a risk against risk broadly [Huh? --gt]. Mr. Bernanke notes that the inflation signal isn’t confirmed by movements in other asset classes. Yields on Treasury bonds tend to rise when investors worry about inflation, but those yields have been falling recently. Inflation expectations as measured in Treasury Inflation Protected Securities (TIPS) markets remain low. And other commodity prices are falling. Gold is breaking records, but copper prices are down 17% so far this year.

Ben: Duh, the assets we targeted for price increases like the stock market, oil, copper, food... you name it, they are all in danger of dropping again. But since there is no inflation - other than whatever the heck this pesky gold is saying - we will simply inflate the reserve currency again. No biggie; I think err... hope.

“I don’t fully understand movements in the gold price,” Mr. Bernanke admitted. But he suggested it might be another example of investors fleeing risky assets and flocking to assets that are perceived as less risky, not only Treasury bonds, but also ones like gold.

Ben: This real world stuff is a lot more challenging than I thought. So many confusing crosscurrents. Back in academia, every theory I put forth was accepted at face value by sycophants and mental masturbators throughout educated society. Why the fuck won't gold cooperate without coordinated intervention?!? Okay, gotta go... time to call Goldman and Morgan.

Blogger Gazes at Navel

In the form of a response to a new subscriber trying to get a read on how the blog and newsletter go together. Short answer; they don't. Just an FYI since you are here reading this right now anyway.

Hi Pierre,

I would look at the blog as a stand alone thing. People tell me I speak in riddles and I do it for a reason. You are paying for full on analysis in NFTRH and I don't feel I need to be working too hard for free (and undercutting subscribers). Too many analysts out there give away too much info IMO. What is the point? The blog is fun for me and I have been told that people, once they get a read on me, find a lot of value in it. But again, NFTRH is a business. The blog is just a blog. Ag? You mean the Agro post? Just a potential trade is all. Not worthy of taking up too much space in NFTRH.

So, with that said I really do want to try to make NFTRH a bit easier to read. But it is hard because the markets are not easy and I believe hard work needs to be done to succeed. So I will repeat that you can ask me for clarification any time if I am unclear, as you have done here.

I am strong on gold's VALUE and neutral on its PRICE right now. That is a key concept; price vs. value. It is how I was taught and it is the opposite of the gambling mentality so prevalent out there. Gold is always about value, not price. Silver is something I suppose I am constructive on beyond the deflation impulse scenario.

I think it is irresponsible for so called gurus to be making predictions and statements that scare or worse, stimulate greed in people. 'Oops, I was wrong... but thanks for the yearly subscription fee'. Nobody knows what is going to happen. I just try to do this hard, confusing work to get hints.

Hope I could make a couple things more clear.

Regards,

Gary