U.S. DOLLAR INDEX BELOW 77
October 28th, 2007Just getting started in Asia. It’s going to be a weird week.
Gold Futures Close at Highest Level Since 1980
October 28th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
I worry more about Cryptogon readers’ investments than my own.
When I see the commissions on BullionVault, before I think, “Wow! That’s great!” I think, “I hope folks are diversified. I hope they know when hedging might be an appropriate option.” (Key word: Option. As in, put option.)
Several Cryptogon readers have taken positions in physical gold that, I’m almost sure, are larger than what would be considered prudent by even the most in-the-bunker financial planners. Very few people in the world are in a position to hold hundreds of thousands of dollars in physical gold as a component of a diversified portfolio—even a portfolio geared toward doom—yet, there are several Cryptogon readers who have done this. (Yep. Cryptogon is read by bag people and millionaires alike.)
If your outlook is years, or decades, stop reading now. But… If you chased this recent move, if you’re in heavy and sweating it…
Look at that weekly chart. Throw a stochastic and RSI on that thing. Look back to the left. Notice the other times when those indicators got this whacked out, and the resulting red candles…
It’s like a rubber band that has been stretched very far one way. When it is released, it whips back hard the other way. I’ll be the first one to admit that oscillators can go extreme for a long time, and, on gold, they have. It has been happy days for gold bugs.
My concern now is that the oscillators have been extreme for weeks and now the press is fanning the flames. There is so much negative economic news. There is literally a consensus in the media now about “safe haven” buying on gold. This should be a cause of great concern with short term outlook gold longs.
This might be what Dow Theorists call the “Public Participation Phase.” This is the phase in a trend where average retail investors read about something in newspapers and/or see the Money Honies on TV and then actually make an investment decision based on that information.
If you are in a profitable investment, and your outlook on the investment is short to even medium term (depending on how close to vertical the chart has gone), you should be thinking things like: “CAUTION. WARNING. DANGER. The sheep are now doing that same thing as me. The Money Honies are now saying things that I was thinking before the frenzy kicked in. CAUTION. WARNING. DANGER.”
Forget fundamentals, for a moment, as thinking about the fundamentals can really screw you when it comes to anything that’s traded on margin in real time, including gold. Look at that chart again.
Is this it? Is this what gold bugs have been waiting for?
Maybe.
Maybe not.
I’ll be the first one to admit that I have no idea what’s going to happen. It wouldn’t surprise me if I woke up one morning soon and saw a price quote with four digits to the left of the decimal point. In fact, this is what virtually the entire gold bug industrial complex thinks is about to happen. Again, for gold longs: Caution. Warning. Danger.
Indeed, I can’t make much of a fundamental case for gold going down. It seems like gold should just keep going, with all of the panic and uncertainty out there, and the Fed possibly cutting rates again next week. Right? Again, for gold longs: Caution. Warning. Danger.
Am I saying to consider selling?
Not exactly. Gold is, in my opinion, almost certainly going to go much higher in the long term, and if you’re able to withstand the possibly grim whipsaws ahead, stand fast with confidence.
But for those of you who are in heavy, you should seriously consider an options strategy when the thing gets so extreme; like right now. Consider spending some money to hedge your long bets.
Of course, we’re talking about December gold put options. The premiums on the strikes from 725 to 760 seem VERY reasonable.
How about strikes under 725?
Look, if that thing really unwinds, if the speculators—or people wearing black capes and masks—(temporarily) kick the main pole out from under the big top, the move down could leave new gold longs walking funny. New and inexperienced gold players will start to see gold as another four letter word that shouldn’t be uttered in polite conversation. Good. When they tap the mat, buy their gold at a discount.
I wouldn’t call you reckless for taking some put options in the 700 to 720 range. I mean, I wouldn’t take too many of them, and I wouldn’t expect them to ever be in the money… But that’s why I might be squinting at them with one eye after too much to drink.
Anyone who bets against this freight train is probably going to lose money, but that’s not what I’m asking you to consider, you big gold holders. This is a hedge against the unthinkable.
Don’t ask me how They would kill this rally. I have no F-ing idea. My hunch is that it would involve central bank collusion and tons of yellow stuff showing up on the spot market without warning.
The wider economic picture looks unbelievably grim to me. And in nearly twenty years of thinking The End was near, guess what… Here we are.
I’m not the kind of man who plays options anymore, but I’ll tell ya, that 725 strike for $200 (at the moment) is tempting, looking at that weekly chart.
Do you wait for the Halloween Trick or Treat from the Fed? They’re probably going to cut rates again, if you’re to believe any of the thousands of articles saying as much. Gold should spike up on a rate cut. For hedging purposes, use that as your blow off top moment to buy higher strikes on your December puts so that you have a better chance of being in the money on any breakdown by expiration on 11/27.
If none of this makes any sense to you, that’s probably a good thing. And gold could just as easily keep rising. I mean, maybe this really is “it”. Nobody knows, least of all me. But if you’re sitting on several hundred thousand dollars worth of metal right here… Blowing a few grand on some December put options might be worth it.
If you’re interested in learning more about options, there are plenty of resources online (Yahoo’s option education center is pretty good). Options may be traded online for very low fees. I encourage all heavy gold investors to familiarize themselves with the use of options for hedging purposes.
Via: Marketwatch:
Gold futures closed at their highest level in nearly 28 years on Friday, as gains in the metal were fueled by record-high crude prices as well as the tumbling of the dollar to a new all-time low against the euro.
Gold for December delivery rallied $16.50, or 2%, at $787.50 an ounce on the New York Mercantile Exchange. Gold futures posted a gain of $19.10 on the week.
Earlier in the session, gold hit $787.80, its highest level in nearly 28 years. The all-time high for a benchmark gold contract on Nymex stands at $875, set on Jan. 21, 1980.
“Gold is reaching new highs on the back of record oil prices and a weak U.S. dollar,” analysts at Action Economics said.
Gold climbed to its “highest level since January 1980 on a combination of inflation concerns and safe-haven buying in the wake of a sensitive geopolitical environment and renewed concerns about the U.S. growth outlook,” they said. “Coupled with the prospect of further Fed easing this will continue to underpin gold.”
Dollar hits record low vs. euro
The dollar was lower against most major currencies except for the yen Friday, dragged down by surging oil prices and expectations that the U.S. Federal Reserve will cut interest rates again next week. The euro was trading at $1.4383. Earlier, it rose to $1.4392, its loftiest level since the European unit began trading in January 1999. See Currencies.
The dollar index, which tracks the performance of the greenback against a basket of other major currencies, fell 0.3% at 77.04. Gold, as a dollar-denominated commodity, benefits from dollar weakness.
OPEC to Study Currency Basket for Pricing
October 28th, 2007More good news for U.S. Dollar holders. —Sarcasm.
Via: Yahoo / AP:
OPEC is likely to discuss creating a basket of currencies for oil pricing at its next summit due to the steady decline in the dollar, Venezuela’s Energy Minister Rafael Ramirez said on Friday.
“The need to establish a basket of currencies … will probably be a point of discussion in the next OPEC summit,” Ramirez told reporters during an evening event in the presidential palace.
“The dollar as a benchmark currency has been weakening quite a lot and it creates distortions in oil markets.”
The cartel is slated to hold a summit of the heads of state of OPEC nations in in November and a meeting of ministerial delegates in December.
Ramirez added that world oil markets are well supplied with petroleum inventories above average, reiterating suggestions earlier this week that OPEC is not likely to hike output to calm record-high prices.
“We have enough oil in the market, the inventory levels are above the average of the last five years,” he said.
Oil prices have soared in part because of a weakening dollar that tumbled in the wake of an interest rate cut by the U.S. Federal Reserve.
Officials from the United States and China — the world’s two largest oil consumers — have expressed concern that current crude prices are too high.
Research Credit: PD
Much of U.S. Could See a Water Shortage
October 27th, 2007Via: AP:
An epic drought in Georgia threatens the water supply for millions. Florida doesn’t have nearly enough water for its expected population boom. The Great Lakes are shrinking. Upstate New York’s reservoirs have dropped to record lows. And in the West, the Sierra Nevada snowpack is melting faster each year.
Across America, the picture is critically clear – the nation’s freshwater supplies can no longer quench its thirst.
The government projects that at least 36 states will face water shortages within five years because of a combination of rising temperatures, drought, population growth, urban sprawl, waste and excess.
“Is it a crisis? If we don’t do some decent water planning, it could be,” said Jack Hoffbuhr, executive director of the Denver-based American Water Works Association.
Water managers will need to take bold steps to keep taps flowing, including conservation, recycling, desalination and stricter controls on development.
“We’ve hit a remarkable moment,” said Barry Nelson, a senior policy analyst with the Natural Resources Defense Council. “The last century was the century of water engineering. The next century is going to have to be the century of water efficiency.”
The price tag for ensuring a reliable water supply could be staggering. Experts estimate that just upgrading pipes to handle new supplies could cost the nation $300 billion over 30 years.
“Unfortunately, there’s just not going to be any more cheap water,” said Randy Brown, Pompano Beach’s utilities director.
It’s not just America’s problem – it’s global.
Army Medics Train at Miami Trauma Center
October 27th, 2007Via: AP:
For two weeks, 28 Army medics, nurses, doctors and nurse anesthetists have been learning trauma medicine and teamwork under pressure at the Ryder Trauma Center at downtown Miami’s Jackson Memorial Hospital, a place that sees such carnage it often resembles a war zone.
Ryder is one of the busiest trauma centers in the nation, seeing an average of 11 trauma patients a day — about as many as the biggest military hospital in Iraq.
Jackson Memorial serves some of the city’s most crime-ridden sections, and patients arriving at the trauma center have been stabbed, injured in grisly auto accidents, wounded in shootouts with high-powered assault weapons, or hurt in falls and fights.
The Army sends 10 forward surgical teams a year through Ryder, which was selected six years ago because of the volume of bloodshed. It is the Army’s only trauma training center. The Air Force has similar programs in Baltimore, St. Louis and Cincinnati; the Navy’s trauma program is in Los Angeles.
…
This team’s live-action day turned out to be relatively quiet, with just a trickle of stabbing, motorcycle crash and car accident victims arriving. Just a week earlier, four police officers shot with high-powered assault weapons had been rushed to Ryder.
One died and two suffered easily treatable wounds, but one had her knee blown apart and required extensive treatment by Ryder’s nonmilitary staff.
“That one cop, she was shot by an AK-47,” said Spc. Joshua McCann, a 22-year-old medic and Kent State nursing student. “That’s exactly what we’re going to see over there.”
Lengthy SWAT Standoff Over Foreclosure Ends in Suicide
October 27th, 2007Freedom, for an increasing number of Americans, means choosing how they’re going to go down.
Falling Down, for real…
Via: Houston Chronicle:
A 12-hour standoff ended this morning with a north Houston man lobbing Molotov cocktails at Houston Police before taking his own life rather than vacate a home he’d lost to foreclosure.
James Hahn, a chemist, had told police he would not be taken from the home alive, said Capt. Bruce Williams, an HPD spokesman.
” ‘You know what I do for a living and you know what I am capable of,’ ” said Williams, recalling one of the conversations police had with the man on Wednesday.
The standoff began at 1:10 p.m. Wednesday when police said Hahn pulled a gun on Precinct 4 constable deputies who had attempted to serve him with a warrant for eviction at the home in the 21000 block of Covington Bridge in Spring, authorities said.
California Home-Loan Default Numbers Set Record
October 27th, 2007Via: San Jose Mercury News:
A record number of California homeowners entered the foreclosure process in the third quarter, a real estate information service reported today, showing the effects of loose mortgage lending standards, falling home values and slumping sales.
Statewide, mortgage companies sent 72,571 notices of default to borrowers last quarter, according to DataQuick Information Systems, which collects the data from public records. That total easily exceeded the previous record, set in the first quarter of 1996, of 61,541 notices sent.
Violent Radicalization and Homegrown Terrorism Prevention Act of 2007
October 27th, 2007This is an effort to devise a coherent legislative package that is geared toward counterinsurgency operations inside the United States.
But… Why?
Americans, in general, are the most docile and gullible people I have ever encountered. They have proven, time and time again, that they are willing and able to swallow any manner of excrement that dribbles out of the television, no matter how absurd or detrimental to their own lives.
I wrote about the awesome perception management systems that the American Corporate State employs for counter insurgency purposes.
And before the American Culture Bomb was deployed abroad, it had to defeat Americans at home. In Constant Conflict, U.S. Army Major Ralph Peters wrote the following:
Contemporary American culture is the most powerful in history, and the most destructive of competitor cultures… It stresses comfort and convenience–ease–and it generates pleasure for the masses.
…
Secular and religious revolutionaries in our century have made the identical mistake, imagining that the workers of the world or the faithful just can’t wait to go home at night to study Marx or the Koran. Well, Joe Sixpack, Ivan Tipichni, and Ali Quat would rather “Baywatch.†America has figured it out, and we are brilliant at operationalizing our knowledge, and our cultural power will hinder even those cultures we do not undermine. There is no “peer competitor†in the cultural (or military) department. Our cultural empire has the addicted–men and women everywhere–clamoring for more. And they pay for the privilege of their disillusionment.
So, the Violent Radicalization and Homegrown Terrorism Prevention Act of 2007…
Did I miss something here? Does the U.S. Government have a reason to believe that the American people are about to snap out of their zombie trance and actually do something? Personally, I wouldn’t have bet on it happening any time soon. The way I saw it—before I left the United States for good—was that 9.9 out of 10 Americans would gladly dig their own holes, get down on their knees and pull the muzzle of the executioner’s weapon against their skulls. It’s their patriotic duty to be spineless followers and boot lickers, no matter what.
All of that assumes a steady flow of crap from WalMart and another iteration of the PlayStation every few years.
Maybe… Just maybe the USG knows that the situation on the ground is going to change substantially and that the general level of comfort is going to drop. In other words, less bread and fewer compelling enough circuses. If that was the case, increasing numbers of people could become radicalized. The USG will do what all other governments do as they collapse: Turn inward.
As the level of sociopolitical cohesion falls, the state increasingly views the people as a national security problem.
To wit, from the Violent Radicalization and Homegrown Terrorism Prevention Act of 2007:
(2) VIOLENT RADICALIZATION- The term ‘violent radicalization’ means the process of adopting or promoting an extremist belief system for the purpose of facilitating ideologically based violence to advance political, religious, or social change.
(3) HOMEGROWN TERRORISM- The term ‘homegrown terrorism’ means the use, planned use, or threatened use, of force or violence by a group or individual born, raised, or based and operating primarily within the United States or any possession of the United States to intimidate or coerce the United States government, the civilian population of the United States, or any segment thereof, in furtherance of political or social objectives.
NYSE ELIMINATES TRADING CURBS DATING BACK TO 1987
October 27th, 2007Via: Bloomberg:
The New York Stock Exchange said it will no longer impose curbs on computer-program trading that were put in place after the crash of 1987, claiming they’re no longer as effective in damping swings in prices.
The exchange will stop prohibiting brokerages from entering some program trades when the NYSE Composite Index rises or falls more than 2 percent, according to a notice sent to member firms today. The so-called collars had been in effect since 1988 and were triggered 17 times this year, according to a filing with the Securities and Exchange Commission.
Research Credit: PD
“We’re Inching Dangerously Close to the Point Where Consumers Run for the Hills”
October 27th, 2007WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
The reason I’m posting this is because Jim Jubak provides confirmation that my strategy for dealing with this system is viable.
In America (and wealthier parts of the West in general), people don’t have to blow up a natural gas pipeline and shut down a factory or cut enough fiber to crash the NYSE and the NASDAQ market systems for a few minutes, hours or days. Voluntary simplicity, or, living well on very little money, kicks evil people in the nuts and gouges out their eyes. (Pacifists may think of this as sending the enemy Joy and Happiness if they desire.) Doing this in the U.S. has a force multiplier effect because the U.S. is the largest source of the funds that keep the global ponzi scheme running. When people in wealthy countries opt out, the action causes major economic damage to the machine.
Look at me and Rebecca. In the normal world, in our normal careers, we would have an annual combined income of roughly US$100,000. What horror would the U.S. government commit with the portion of the taxes it would demand from us? We now live well on a tiny fraction of what we would make in our normal careers. We have no debt. We own our small farm and our vehicles outright. We convert what’s left over at the end of the month into cash savings and gold. We also give money to people who are doing good work.
Whether you decide to leave the U.S. (like we did), or not, doesn’t matter. Living well on very little, encouraging others to do the same and actually funding people who are doing good work (allocating resources to values) are the main tactics of the frugal insurgent.
…
It’s a matter of hacking The Matrix in an efficient and innovative manner to reduce your monthly expenses to a fraction of previous levels. The extraction/domination system in the U.S. has few effective defenses against people who opt out—to the extent possible—by making smart use of available resources. The system assumes that you’ll stay hooked forever on a lifestyle built around profligate waste and going deep into debt to buy crap that you don’t really want, or need. Indeed, most people are content to go through life this way.
Living simply on very little money kills the system slowly.
And now, Jim Jubak:
My worst nightmare about the collapse of the subprime-mortgage market is coming true.
The horrors let loose among mortgage borrowers and lenders by falling housing prices have begun to sink their fangs into the market for auto loans and credit cards, too. We’re inching dangerously close to the point where consumers run for the hills — taking their wallets and prospects for economic growth in the United States with them.
…
It’s the folks in good shape that the economy has got to watch out for. If consumers who are in good shape decide to cut back on spending in order to reduce their credit card balances, that would take a considerable amount of spending out of the economy. There is some evidence that this has started to happen.
Funny, isn’t it, how my lifestyle represents a nightmare scenario for proponents of paper investments, like Jubak?
That should provide you with some pretty good insights on the nature of those investments.
