some pearls of wisdom here
AU_NB @ '79 charts -- trotsky, 13:59:12 09/13/06 Wed
many thanks. looking at them again, '79 actually had altogether three triangles. the one i was referring to was the large one in the low 400ds, shortly before the blow-off move commenced. this one as well as the 1973 triangle are the formations that sport the strongest similarities with the current one.
Hambone@breakdown -- trotsky, 13:54:52 09/13/06 Wed
funny enough, i agree that there's a strong probability that the breakdown will fail on TECHNICAL grounds. :)
this includes the divergences noted yesterday, as well as the supportive quantitive sentiment data backdrop.
one must be aware of fundamentals of course, but it takes a lot of guesswork what the FUTURE fundamentals will look like, or rather, what effect they will have.
let me illustrate this by way of example: if i had told a gold investor in 1980 that the broad money stock M3 would grow from then $1.8 trillion to the nearly $12 trillion it had reached by 2006, that the gross Federal debt would grow from then $1 trillion to the $8.5 trillion it is now, and that the consumer price index would go from then 75 points to about 210 points now, would he have believed me when i'd added, "oh, by the way, the present gold price won't be seen anymore for the next 26 years. in fact, in the next 20 years, you can prepare for a decline of over 70% in the price of gold"?
i'm willing to bet he wouldn't have believed me about this latter point. he'd very likely have said, "if the other data points develop as you suggested, it will be impossible for the gold price to fall".
i could tell a similar story about the stock market, only the other way around (it experienced its biggest rise ever during the weakest period of GDP and profit growth since the beginning of the supercycle in 1932).
iow, one never knows for sure how fundamentals will actually play out in the markets. there's little that's actually rational about the financial markets. they move largely due to psychological factors - wherever the herd wants to go, that's where they're going. it's the herd's mood that decides the outcome.
@blaming the electorate -- trotsky, 13:31:51 09/13/06 Wed
on the one hand, this is true, but if one really thinks about it, one must come to a more nuanced conclusion. first of all, a democracy is basically mob rule - what about the percentage of people who do NOT vote for whatever madness transpires? whom should they blame? surely not themselves.
the next point is actually invalidating the first a bit, in the sense that it only SEEMS to be mob rule. we think there is a choice, but is there really a choice? e.g. Americans can choose between two parties only - which when looked at closely, only differ in cosmetic aspects. they do not offer an alternative to the welfare/warfare state, since they both support it. so who's to blame? what's a voter to do?
lastly, let's not forget that the system is very well thought out, and in a sense, it's not a fair contest, as one side is basically unarmed. with that i mean, deliberately misinformed. the electorate at large doesn't even get the idea to DEMAND an alternative, as the media which provide it with information are in bed with the ruling elite. therefore, alternatives to the present state of affairs are never presented or discussed.
note btw. that European democracies, while generally offering a wider choice of parties to vote for, similarly have inbuilt taboos that are seemingly beyond debate. certain pillars of the system are simply not offered up for deliberation. not a single newspaper, TV station or politician would e.g. ever question the fiat money system, to give an example. and so it goes.
as Lew Rockwell has observed, while Leviathan continues to grow and amass more power, there are more and more people simply tuning out. they regard the state as the mafia uncle it is, who now and then drops by to extort his protection money, but otherwise they wisely try to simply stay out of its way and sight. iow, they try to ignore it as best as they can. it's not worth starting a violent insurrection over after all, and obviously 'if only they voted, things would be apt to change' is a myth.
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# Hambone@charts -- trotsky, 13:03:45 09/13/06 Wed
you should know better. chart signals only describe probabilities, not certainties. therefore there's nothing remarkable or deserving of apologies when they fail - it happens sometimes. for instance, a break-out over a multi-week or multi-month resistance has a probability of 70-80% to lead to higher prices, but that still means that there's a 20-30% chance that it won't work. a trader must think like a professional poker player. every poker hand has a certain probability of being a winning hand. when you sit with AA as your hole cards, you MUST play them aggressively, even though there is a chance that the hand will fail. the point is, it succeeeds more often than not, and thus the aggressive play pays over time. it's the same with charts - you play the probabilities. when things don't go according to plan in spite of favorable probabilities, you adjust to the new set of circumstances.
Bizarro@ Shrub in the revivalist tent -- trotsky, 12:51:59 09/13/06 Wed
"Bush told a group of conservative journalists that he notices more open expressions of faith among people he meets during his travels, and he suggested that might signal a broader revival similar to other religious movements in history. Bush noted that some of Abraham Lincoln's strongest supporters were religious people "who saw life in terms of good and evil" and who believed that slavery was evil. Many of his own supporters, he said, see the current conflict in similar terms."
he would of course dearly love to be equated to Lincoln somehow, in the erroneous belief that Lincoln deserves his reputation , built up through decades of statist propaganda.
as to seeing the current conflict in similar 'good vs. evil' terms, it only proves how simple minded and dangerous Bush and his followers are. this primitive black-and-white view of the world may be appropriate for a Hollywood movie, but it should have no place in politics, least of all when it comes to foreign policy.
lastly, religious revivals are in socionomic terms hallmarks of a secular bear market psychology. in other words, people feel bad - it's odd that Bush thinks this is a reason for celebration. but then again, his domestic politics mainly consists of spreading and maintaining irrational fear, so maybe one shouldn't be too surprised.
@messy the gapologist -- trotsky, 11:11:46 09/13/06 Wed
well, there's still a gap open between $106 and $108, dating from September of 1976. i hear Prechter is still waiting for it to be filled. non-gapologist trotsky predicts it'll be a long wait. :)
@gold corrections -- trotsky, 11:04:29 09/13/06 Wed
it is often instructive to look at the three major triangles that gold built in the 1970's bull market, specifically, the '72 and '73 as well as the '79 triangle (not included here: the mid cycle bear market from '75-'76). these were pretty violent corrections, very similar to the current one in terms of percentage moves, time and form.
the interesting thing is that upon conclusion of those triangular corrections (all of which featured retests of the initial decline low at their apices) , prices meandered a bit and then proceeded to soar almost straight up.
this does of course not necessarily mean that the current correction will resolve in a similar manner.
still, i'm sure many people back then were also calling for much lower targets...in the thick of these corrections bearish sentiment surely got similarly pronounced as it is now. take for instance 1973 - at the high of '73, gold had soared by about 285% from its '71 low, and then a violent correction in the form of a descending triangle took it back from about $130 to $90 in the space of a few months. it sure looked like a breakdown by November '73, as all rally attempts had given way to lower lows, and the rallies looked ever more feeble. who would have expected that from the November '73 low, the gold price would take off like a rocket and produce a gain of exactly 100% over the next 4 months?
you know what the talk was in '73? it went someting like: "the recent wild rally in gold is nothing but speculation...now that gold has been demonetized, it should actually fall below its previous fixed price - after all, what's it good for? the little speculative episode is now over for good."
i'll try to find a way to post the charts later on.
@weapons testing on civilians at home -- trotsky, 10:39:27 09/13/06 Wed
what a splendid idea! avoid bad press by first stomping on your own before you stomp on assorted ragheads et al. overseas!
aren't you glad you have such nice and wise people in charge...what awesome depths of strategic thinking they reveal at this time of war, it leaves one positively breathless with admiration.
of course, as it says in the headline, it won't be just any US civilians these weapons will be used on - no, they will be 'US mobs'! for instance, the pinko traitors that are often corralled in 'free speech zones' when the emperor is nearby would probably do fine. certainly we could think of quite a few more deserving recipients of these beneficient tough love dispensers the air force has developed...after all, at least half of the population are potentially turrsts that hate our freedumbs!
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# @pm sentiment -- trotsky, 10:12:23 09/13/06 Wed
a few brief observations: the bullish divergence between the Rydex pm fund CF ratio and the fund's price continues, as Rydex traders are reluctant to pull out money here (outflows over the past few days have been very small).
this is per experience a positive sign.
meanwhile, there has been a big surge in put buying in the XAU options yesterday, with the volume p/c ratio clocking in at 2.82. this is generally bullish when 1. it occurs close to lows and 2. it pushes up the p/c OI ratio, both of which were the case.
these data points presently suggest that both the XAU's uptrendline which was touched yesterday, as well as the HUI's lateral support at 300 are likely hold for now.
no near term miracles should be expected of course.
Goldfish -- trotsky, 23:25:11 09/12/06 Tue
deflation is a decline in the money supply. there is no other definition.
as such, it is impossible to occur in a fiat money system, however, what i would term deflationary eras, IS still possible. these are reasonable facsimiles of a genuine deflation, inasmuch as some of the effects that would occur in a deflation can be observed. note that there is no such thing as 'not enough money', which your misguided monetarism bases its definition on. in a nutshell, it is not important how much money there is, it is important what it can buy.
in fact, money is nothing except a medium of exchange. it is not wealth, nor is it capital. it follows that there can not be 'not enough' of it.
if i am misguided on that topic, then Ludwig von Mises, Murray Rothbard, and Friedrich Hayek were misguided on it as well. i am happy to be in the company of these poor misguided souls.
Ludwig von Mises:
"Fiat money is a money consisting of mere tokens which can neither be employed for any industrial purposes nor convey a claim against anybody."
"If it were really possible to substitute credit expansion (cheap money) for the accumulation of capital goods by saving, there would not be any poverty in the world."
"The quantity of money available in the whole economy is always sufficient to secure for everybody all that money does and can do."
"No increase in the welfare of the members of a society can result from the availability of an additional quantity of money."
"No nation need fear at any time to have less money than it needs."
"The entrepreneurs who approach banks for loans are suffering from shortage of capital; it is never shortage of money in the proper sense of the word."
these quotes only sum up what Mises proves rather adroitly in Human Action's chapters on money and credit.
it is of course erroneous to lump depression and deflation together, at least in terms of correct definitions.
for instance, absent a constantly inflating fiat money, prices would fall all the time (i.e., falling prices are the NATURAL STATE OF AFFAIRS in a true free market); the only reason why the effects of a deflation, or rather, a deflationary era in a fiat money system, are considered 'bad' is because depressions are caused by the preceding credit expansions - (in a fiat system such credit expansions always go hand in hand with an exploding money supply) - since debtors are hurt by those effects, as are creditors that unwisely lent money during the credit expansion.
in the view that lumps depression and deflation always together however, the 1970's must be erased from memory. naturally the central bank ALWAYS tries to stem the tide of depression by printing even more money. at times it succeeds in generating inflationary effects, at times it doesn't. this very likely hinges on the SIZE of the debtberg relative to the economy's productive capacity accumulated during the credit boom.
for instance, the huge credit expansion in the US between 1995 and 2006 has its corollary in the biggest increase in money supply ever witnessed in human history. your contention that this actually contained a period of deflation is ludicrous beyond words. neither did the money supply shrink at any time in this period (it did the opposite - in spades), nor could any effects of the alleged deflation be observed. the effects of the INflation in this period simply percolated through the economy unevenly through time. various asset prices from shares to houses for instance entered price bubbles, as have commodities in recent years. nobody's cost of living decreased (not even the government contends that, and their cost-of-living indices are really a politicized joke). malinvestment occurred on a vast scale (this is the most damaging and long-lasting effect of inflationary policies) - the technology sector still labors to liquidate its share of them, and the housing sector and attendant industries are likely to do so for years to come as well.
the monetarist theories on gold and money have long been debunked...here is a brief synopsis of the main points of critique.
a little demolition of the supply-sider theories on gold
on a side note, when i comment on central bank policies, i do so from the PoV of what they officially pretend to want to achieve. otherwise i could not make a comment at all, except to say that they need to be abolished forthwith. the monetarist method of trying to prescribe a fiat money policy option that is considered 'better' than what these central economic planning agencies are doing now is akin to telling the Soviets how to better run communism. central banks can not be 'reformed' in any true sense, since they are not part and parcel of a free market. it is IMPOSSIBLE for them to know what the 'natural interest rate' should be, regardless of whether they watch the price of gold or any other metric. one of the reasons that should be obvious is that their own actions constantly shift the natural rate of interest - it is like a cat chasing its tail. less obvious, but hopefully understood by everybody nevertheless is the fact that their actions involve a time lag. all the indicators they use in determining their policies say nothing about the future - a future in part already determined by their previous activities. so it is with the effects of monetary inflation - they do not show up in a 'timely manner' nor do they show up everywhere at once. this makes it possible to both disguise the inflation as well as allowing its negative effects to accumulate over time. |
