PM Rally

[68Camaro]

$40B / month is (again) half a trillion a year - forever - not just in expenses but in NEW money. They are depreciating the dollar significantly. Eventually when the money leaves the banks, which it will and is still from the earlier QEs, it will continue to add to pricing. QE to infinity.

[mflugher]

I disagree, on the short term only...

Compared to what was expected $40bn/month is rather sedate imho, We were expecting not less than 500Bn all at once, (approx qe2) up to $2.2TN (approx QE1), Its going to take us till November next year just to get the same amount of cash that was released in 1 day last year during the QE2...

Yes it will add up, Yes someday it will hit circulation and drive some inflation, its not nearly enough to make Zimbabwe happen, its probably one of the early steps, but we have a while before hyperinflation happens. $500BN/yr in a $14TN economy is what 3.5% extra inflation? That isn't the Wiemar republic by any stretch.

I just believe the market had already priced in $500BN to $1TR for immediate announcement/release. We got $40BN/month... To me that's disappointing if you were expecting a new round of QE. To put it in perspective US mint/Bureau of engraving print/coin $20BN/month in new coins/bills already per 2010 stats...(I was surprised I thought it would be more when I went to look up numbers), and that doesn't cause runaway inflation either.


I am not suggesting you quit stacking physical. A long term plan of buying phys. in regular tranches can't really go wrong imho. I bought just over 5k today @ Monday's price, 2x $20 coronet, 1x $20 St Gaudens, 1x $5 coronet.

But for paper I think it was time to sell yesterday, and there will be buying opportunities in the near term future (prob <2 months), when JPM decides to raid another Billion or 2 from the silver future markets...

Do your own research, think about your risks and opportunity costs, and follow your own path, I'm just trying to provide another perspective. I'm assuming in the long term on continued appreciation...

If I'm wrong I'm wrong, and I pray for this country, I have some phys (food, guns, seeds, land, and pms) to fall back on.

If I'm right, all the better, and in the long term I still pray for this country. My electronic play money is off the table right now, I don't think I'm going to lose a large amount to inflation over the next month or 2 while I wait out a better price to jump back in the silver market.

If I'm completely wrong and suddenly we are back at $3 silver and $300 gold forever, My prayers have been answered, and I'm royally screwed, but I'm sure sometime between now and that happening I'll find other opportunities.

[68Camaro]

We may just end to agree to disagee - I suspect I could hardly be further away from your views while still being on the same end of the spectrum (I'll presume that much).

Don't know what you expected but the general concensus of even conservative commentators is that the QE-F is shockingly high and indicative of Fed panic - it's all they've got. Keep in mind they are still doing operation twist, and they are buying 80% of our $1.5 trillion in ANNUAL new debt using money printing as well, all this on top of this new program.

And QEs 1 and 2 were not single point events, but were spread out over time.

God help us if $40B/month of NEW money generates blase responses. (And the money/coin generated by Treasury are, by and large, replacement amounts, not new money.)

I might go so far as to suspect you are under 40, or certainly under 50? In which case you didn't experience the "modest" inflation of the mid-60s to early-80s. Only 3.5% adder? No matter what the government says, we're already at a real inflation rate of 8%. And 6% year after year is enough to destroy all savings after a few years. Add 3.5% to that - that's bad. (And it won't end there.) And we're in a fundamentally weak industrial position, with zero savings rate, versus the strong state we were in in the 60s-70s, with positive savings rates. During that period my grandparents had to eat into their capital to live and essentially lost all their savings and were almost relieved when they realized they were at end of life and were going to die so they wouldn't have to worry about how they were going to live. I remember prices going up dramatically, even due to single digit inflation, when that inflation lasted for years. (That's where we are, and are going to be.) I remember twice per year cost of living allowances of 5% or 10% just to allow people to keep up with food and energy prices.

Nope - 6-10% year inflation is BAD. And it isn't going to stop there. We don't have to hit hyperinflation to induce massive pain, especially when we are in the extremely weakened state we're in.

[slickeast]

I work in a grocery store. There are a lot of things that are taking place to offset price increases. Products in new packages with 10-25% less product. Same price as before. Bryers Ice Cream has started using ingredients that you can't pronounce instead of all natural ingredients to lower production costs to keep the price point down. Unknowing to most consumers they are sacrificing quality to lower costs. Inflation isn't always just the price of goods going up. It could also be the cost staying the same with you getting less for your money. Either way it costs more in the long run

[mflugher]

We may just end to agree to disagee - I suspect I could hardly be further away from your views while still being on the same end of the spectrum (I'll presume that much).

Don't know what you expected but the general concensus of even conservative commentators is that the QE-F is shockingly high and indicative of Fed panic - it's all they've got. Keep in mind they are still doing operation twist, and they are buying 80% of our $1.5 trillion in ANNUAL new debt using money printing as well, all this on top of this new program.

And QEs 1 and 2 were not single point events, but were spread out over time.

God help us if $40B/month of NEW money generates blase responses. (And the money/coin generated by Treasury are, by and large, replacement amounts, not new money.)

I might go so far as to suspect you are under 40, or certainly under 50? In which case you didn't experience the "modest" inflation of the mid-60s to early-80s. Only 3.5% adder? No matter what the government says, we're already at a real inflation rate of 8%. And 6% year after year is enough to destroy all savings after a few years. Add 3.5% to that - that's bad. (And it won't end there.) And we're in a fundamentally weak industrial position, with zero savings rate, versus the strong state we were in in the 60s-70s, with positive savings rates. During that period my grandparents had to eat into their capital to live and essentially lost all their savings and were almost relieved when they realized they were at end of life and were going to die so they wouldn't have to worry about how they were going to live. I remember prices going up dramatically, even due to single digit inflation, when that inflation lasted for years. (That's where we are, and are going to be.) I remember twice per year cost of living allowances of 5% or 10% just to allow people to keep up with food and energy prices.

Nope - 6-10% year inflation is BAD. And it isn't going to stop there. We don't have to hit hyperinflation to induce massive pain, especially when we are in the extremely weakened state we're in.

I am under 40 yes, I guess that's young by your opinion, and I'm sure someday I will think its young as well, I know when I hang out with people near my age, I feel really old, so I must be mature at least...

I'm not saying in 5 months, 2 years, 5 years we aren't extremely likely to see PMs increase in price significantly.
I'm not trying to say we are not going to see some pain over the next few years.
I'm not saying Operation twist, and this latest QE, QE-F are good things.
I'm not saying the fact the Fed buys so much of our Natl debt is a good thing either.
I'm not saying we aren't fundamentally weak industrially.
I'm not saying the fact we can't mine or drill any of our natural resources is a good thing either.
I'm not saying the govt spending and entitlements are tenable or feasible in the long run.
Frankly I agree with you on every point, and am prepared for these issues as well as I can be with the resources I have.

So far as I can see we agree 100%...

But, All these fundamentals were in place on Monday too... except the QE3 thing... Just don't over blow this one single event on Thursday is all I'm trying to get at...





I believe there will be better buying opportunities (5-10 maybe even 15%) in the near future on silver and in the short term we are slightly overbought at this point in time, we will find out over the next 2 weeks if I'm right or wrong or both. This QE is not the end of it all, volatility will continue to happen, and in fact it will probably get worse as prices get higher...

If you are a phys stacker, this doesn't affect you, Ignore my previous statements, buy as much as you can as cheap as you can as often as you can while still minding risk and opportunity costs. In fact you should probably just ignore this whole thread. The blips and volatility are not where the money is made in the Phys game. When silver is $100/oz who cares if you bought in at $25 or $35 or even $45? ( have bought at all 3 of these levels)

If you have some paper to play with, working it in your IRA etc like me... I think we have some short term volatility to play with in the near future, whereas all summer we were just flat. In the paper game volatility is where the money can be made most efficiently. This thread to me at least is more about the blips and volatility and the paper game... Big ups are often followed by big downs, we have gone up almost $7 in the last month, 25% increase, pretty short time, And its been pretty much all up...

On aug 14: silver was 27.84
On aug 17: Silver broke $28, hasn't seen $27 since
On aug 22: Silver Broke $29, hasn't seen $28 since
On aug 23: Silver Broke $30, hasn't seen $29 since
On Sep 3: Silver broke $31, hasn't seen $30 since
On Sep 4: Silver broke $32, hasn't seen $31 since
On Sep 10: Silver broke $33, hasn't seen $32 since
On Sep 14: Silver broke $34


Tell me that isn't classic overbought Territory, We have priced in QE3 4ever in $7 of increase over the last month. Our price is way over the Moving avg lines.

Everything tells me that Thursday is the best we are going to see for this particular event. We will need new dismal news, as of now I think the price is right for a short seller raid, or as CNBC calls them "correction" once those shorts are covered in the $29 to $32 range, we will probably see $39 to $41ish before our next correction. If we don't see somewhere in the $30-$32 again before we see $40 I will be quite surprised. Hence on the paper side I'm all cash at the moment, I don't like betting against silver ever or I would probably be short... However I figure the election cycle will likely cause more movement than normal (which is great if you are in paper)...



Operation twist has been pumping out about $45BN/month in liquidity all summer, the PM prices didn't go to the moon then either.


No big deal, Just don't over blow this one event guys. It seems like every time something positive for the PM prices happens everyone jumps on a bandwagon that it will never ever go down again, even for a minute. I'm just pointing out every time so far they have been wrong, and buying opportunities jump up all the time... Be ready to grab them, they won't last long.

[68Camaro]

My comments and concerns are more global and long-term. The concerns is this is literally Fed now being "all-in", and even the MSM know this. The FED is now keeping interest rates to zero (by printing money) for year after year, and buying T-bills and mortagages in unlimited amounts by printing money.There is literally nothing left that they can do, and they are now committed to printing money without end (until Congress tells them to stop, which they won't). Investors will be giddy with all the paper money they are going to make - but soon will realize that paper can't buy them what they thought.

Every time I go to the grocery store I'm further sickened with the price increases. I've been with RC less than 2 years, and in that limited time food prices are up by roughly 20-30% overall. Inflation is here, and getting worse.

[beauanderos]

My comments and concerns are more global and long-term. The concerns is this is literally Fed now being "all-in", and even the MSM know this. The FED is now keeping interest rates to zero (by printing money) for year after year, and buying T-bills and mortagages in unlimited amounts by printing money.There is literally nothing left that they can do, and they are now committed to printing money without end (until Congress tells them to stop, which they won't). Investors will be giddy with all the paper money they are going to make - but soon will realize that paper can't buy them what they thought.

Every time I go to the grocery store I'm further sickened with the price increases. I've been with RC less than 2 years, and in that limited time food prices are up by roughly 20-30% overall. Inflation is here, and getting worse.

Two years? Was that the start of your stacking?

[68Camaro]

It was when I got into copper. I'd been doing PMs for awhile, though not as much as I should have soon enough.

[mflugher]

God help us if $40B/month of NEW money generates blase responses. (And the money/coin generated by Treasury are, by and large, replacement amounts, not new money.)

God help us then, only 10-20% of the population even know what this means... Of that probably only half of them actually think its a bad thing. (I'm one of them of course)



regarding the replacement amounts:

Disclaimers:

1st. If you are a physical stacker only, ignore this entire post it doesn't have any real relevance to you, all the facts figures and equations boil down to: stack as much as you can, as fast as you can, on a regular basis until you have reached whatever your own comfort level is, while minding your risks, lifestyle choices and opportunity costs. That's it, move along...

2nd. If you aren't good with numbers, math class gave you a headache, statistics was always boring, or you don't consider accountants and economists your heros, look away, avert your eyes and find something else to read, I take no responsibility for anyone getting nosebleeds, eyes popping out sockets, or brain explosions. As Glenn Beck used to say often, This is a not a drill please wrap your head in duct tape now, it won't stop your head from exploding but at least you will be able to find most of the pieces when its all over.

3rd, I'm not doing this to change your mind, In a Christian sense I want everyone to do well, and if my thoughts (right or wrong) help you do so either through following them or debunking them, then great I'm happy for it. However at the end of the day my reasons are quite selfish. I hope some one smarter than me can read this and rebut my ideas logically, I'm pretty sure I'm right, but I'm open to other opinions and hope to use them to improve my own understanding, additionally by looking up facts and figures to back my arguments I learn things I might not have without a debate, and if I'm going to all the trouble I might as well let you all know what I found out. I hope all that take the time to read this enter under the same understanding. 68 this is actually for you I'm not convinced, but thanks for trying its much appreciated, I hope you and all who agree with you feel the same...


So...

When reading the Bureau of engraving website where I got the figures to come up with $20BN/month I saw the following disclaimer:

"95% of the notes printed each year are used to replace notes already in, or taken out of circulation."

How does one replace notes already in circulation??? That made me furrow my brow for a bit, also note that it says 95% of the notes, not 95% of the face value of the notes, IE in 2008 there may have been 500BN notes in circulation with a total value of $829 BN, but now there are 600BN notes in circulation with a face value of ??? I'm sure its a lot higher than $829 Bn looking at the charts. but I thought it was a distraction from the conversation at hand...

Lets delve into this a little more:

but first Really... HOW DO YOU REPLACE NOTES THAT HAVEN'T LEFT CIRCULATION??? Isn't that what replacement means, you have to remove something to replace it don't you??? If its not removed, its not replaced, its just added to... Eh when looking at the stats apparently they are right on about he 95% of notes thing, but the statement really irks me on a deep visceral level.

The best statistics I can find is that in 2008 the actual cash money (not including digital only actual physical paper/coin currency) supply of USD was $829 BN, about $2500 for every man woman and child. That's believable, and probably close to what we need to run our economy, and all the economies around the world that play with our dollars (foreign held dollars of course skew way more digital over phys though).

Now in 2006-2008 we printed an avg 1.1Bn $100 bills per year, 2009 we printed 1.7 Bn $100 bills, in 2010 we printed 1.9Bn $100 bills, 95-05 we printed on average (and this is a shot from the hip average didn't get my calculator out) 500M $100 Bills, thats a pretty large upping of the printing on those $100s, supposedly the 3rd least used bill $2 first (complete joke), $50 2nd, $100 3rd... Keep in mind these are counts, not the face value... So that's $360 BN face value in 2 years in $100s.

When we add in $20s the additional is about another $59BN

All the other denominations (including coins) for 09 and 10 combined are frankly inconsequential amounts when talking numbers of this size, approx another $40BN total for both years.


Here look at this Extremely ugly chart... If you want to see the perty version go to http://www.bep.treas.gov/uscurrency/ann ... gures.html.


Denomination FY 2005 FY 2006 FY 2007 FY 2008 FY 2009
$1 3,475,200,000 4,512,000,000 4,147,200,000 3,577,600,000 2,636,800,000
$2 N/A 230,400,000 N/A N/A N/A
$5 576,000,000 800,000,000 1,401,600,000 1,203,200,000 384,000,000
$10 512,000,000 851,200,000 83,200,000 1,094,400,000 345,600,000
$20 3,059,200,000 889,600,000 1,971,200,000 633,600,000 716,800,000
$50 345,600,000 N/A 428,800,000 N/A 371,200,000
$100 668,800,000 950,400,000 1,088,000,000 1,209,600,000 1,785,600,000
________ ________ ________ ________ ________ ________
Denomination FY 2010
$1 1,856,000,000
$2 N/A
$5 352,000,000
$10 N/A
$20 2,265,600,000
$50 N/A
$100 1,907,200,000

Figures shown represent number of notes printed.



You will notice that 1s have gone down precipitously while 100's have gone up a lot, in fact if you read the chart linked in full you will see that prior to 2007, only 2 years did we exceed 1BN $100 notes printed, while the avg for 09-11 is 1.7 Bn $100 notes/year. also you will see that $1 printing has gone way down, in fact one has to go all the way back to 1980-84 to find years when we printed less $1 bills, and there is no date prior to 2010 when less $1 bills were printed. Now some of this was the $1 coins which we all know really never entered the money supply, and are still in their mint bags at the fed happily awaiting public acceptance. But did the fed order the bureau of engraving to stop printing as many bills when we started substituting these coins??? NOOO... They just said throw a "00" behind the 1 and keep the presses going we wouldn't want to lay people off and buy less ink/paper in this down economy so lets keep the jobs and the printing presses rolling!!!



Ok so whats all this wall of text mean? well in 2 years we added $460BN 60% to our currency supply assuming no bills left circulation... Taking the Bureau of engraving's figure of 95% replacement notes at face value...


2008, x notes worth $829 BN,

Assuming that the bureau of engraving only replaced bills that were destroyed (IE they printed a $1 for each $1 bill destroyed, a 20 for a 20, a 100 for a 100 etc) , there should be 1.108x $829 BN or $918.55 BN in notes in circulation, that's 5.4% inflation just in actual physical currency assuming the govt was true to the underlying assumption that they aren't printing new money in excess of 5%/year...

Now based on http://www.federalreserve.gov/publicati ... able12.htm we know that in 2009-10: 12 Bn notes were destroyed with a face value of 223BN. the average value of a destroyed note is therefore $18.58.

Now we know from the Bureau of engraving website above that 12.6BN notes with $460 BN face value was created in that same time frame. The average value of a note created was therefore $36.51

But hey they were right, they printed approx 12.6Bn notes, and they destroyed about 12Bn notes.



So:

For every dollar taken out of service in the 2009-2010 period, $2.06 was added. (50% inflation/yr on money "replaced" after all 95% of notes are "replacement" notes)

For every Note removed from service, 1.05 Notes were added to service. (5% more notes/yr)

The average value of any note added to service was 96% higher than the average value of any note removed from service (96% inflation on replaced notes)


$240 BN was added to our money supply of $829 BN 28.9% more cash out there at end of 2010 than at end of 2008 (14.5% inflation annual)

This is Cash money Actual physical notes, not blips on the Feds computer screen, not moving Mortgage backed securities bundles around between the baby banker and the daddy banker like QE does, that money by and large has stayed in the banks. Now we know the electronic money over the same period did not contract, in fact it expended even more, but with all this going on...


Hmm so they didn't technically lie about the 95% replacing already existing currency, but they hardly told the whole truth either.

<DEEP BREATH>


During this same time period silver's average annual price went up 34.7%, or 17% annually wonderful, keep stacking.
During this same time period Gold's average annual price went up 40.4% or 20.2% annually, again wonderful, Keep stacking.



Both of them kept pace and surpassed actual money printed($240BN, 14% annually), However:

Going into recession of 08 the fed held $800TR in assets, by end q2 of 11, fed held $2.85 TR in assets, by the way assets to the fed means Treasury notes, and Mortgage backed securities mostly... So the fed increased its balance books by 2.05 TR in 2.75 years a 156% increase (56.8% annually), and by increasing its balance sheet it effectively digitally printed the same amount of money... (wish I could just increase my balance sheet, don't you)

when factoring in 08/10 QE ($2.05 TR) and Fed debt increases (1.3TR to Fed, and 0.9BN to others (china mostly) $2.21TR)for a total increase in digital money of 2.95TR of 08/9/10 added. (ouch we picked the best possible investment vehicles and we are still WAY behind the increase in money supply, we just barely outperformed the Physical currency supply increases which are only 15% or so of the actual money increase...)


<Breath>

<Relax>

<Breath some more>

<Try to stop the head explosions>



So now the question is How much money was there in 2008, and how much money was there in 2010, I wish I could bring these analysis further into the future but the data just doesn't seem to be out yet...

July 6 2008 M2 data $7.699Tn (before we printed all this money) M1 $1.602Tn, MB ~$0.8Tn
Dec 12 2010 M2 data $8.793Tn (after we printed all this money) M1 $1.852Tn, MB ~ $2.8Tn

So how can we print/digitize $3T and only see $1.1Tn in M2, only $2Tn in MB, and a scant $0.25Tn increase in M1?


Ok so the M1 (Currency in existence, FRN + Coins, plus demand deposit, ie checking, accounts) is basically only going to be affected by the additional FRNs which have been printed (previously discussed $240BN FRNs printed), the numbers coincide, M1 is not really affected significantly by fractional reserve banking multiplier anymore due to some accounting tricks the bankers pull with your checking accounts that reclassify the majority of deposits as savings).

M2 we are only going to define, its movements are sufficiently described above and below and there is no need to repeat them. M2 is M1, plus savings accounts, and Cds, along with Money market accounts and other forms of Savings which theoretically are not available on demand, even though most non CD type accounts are available on demand. Savings is where the Fractional reserve system really kicks in, we get our multiplier effect which should be 10x MB based on our 10% fractional reserve system.

MB or monetary base is currency plus bank reserve deposits in Fed reserve. This is the basis upon which the Fractional reserve multiplier should be working. You will see in 2008 M2 was $7.699 Tn, while MB was $0.8Tn Approximately 10x and with our 10% Fractional reserve requirement it makes sense. Now in this 2 year period we are discussing MB went up by $2Tn, for a total of $2.8Tn, so therefore M2 should become $28Tn and we should see massive runaway hyperinflation... Why didn't we? Because the banks aren't doing their job and lending out against the reserves they now have... And the Consumer isn't cooperating either, they are doing their damndest right now to save money, pay down debt, they are afraid to take on new debt because they don't know that their house will appreciate in value, if they might lose their job, basically we are in a recession, and if it weren't for all this printed money flying around it would appear much worse than it currently looks.(note I didn't say it would be worse, I am saying we are hiding it with the new money) Also Dollars are leaving the country, Europe and the rest of the world are destroying their currencies just as fast, we are all in a race to the bottom. Non US entities and individuals are seeing this and running to the relative strength of the dollar, our dollars are going overseas and sitting in foreign bank accounts where they aren't being lent out and creating new money supply/jobs/stimulus/inflation, these dollars are called Eurodollars, but they can actually be anywhere overseas, its an old term from when most of it was going to Europe, and that is still true today so I guess the term still applies, but not as much. Once these dollars hit Europe, they are no longer included in M2, but are now M3, a statistic the Fed has decided we no longer need to track (but that's another story)... These 2 factors (and probably some others) are whats keeping inflation at bay for the 2008 to 2010 range we are discussing and the same forces are in play right now.

So for inflation to kick in we need to see at least one of these 2 happen:

1. Consumer confidence go up, so the banks start lending and the consumer starts borrowing. The Frac reserve system actually does it's job and we see the M2 go way up, we now see inflation, and depending how much QE/money printing is backed up in the system not having been fractionally passed out and redeposited, possibly hyperinflation.

2. The US$ (estimated at $5Tn) held overseas becomes less attractive to keep because Europe or other countries suddenly start getting their own house in order. Right now we are all doing our best to inflate our currency to keep up with the rest of the world. If we don't then our exports become expensive in relation to other countries and we ruin our own economy. Eventually someones gonna fail at this game, somethings going to get cleaned up in some country and then they might become the nation to invest in, then the US$ start going back to USA and getting traded for goods, we then see inflation, this absolutely someday has to happen, we don't get to decide when this happens, they do, its a little scary, actually its a LOT scary...


Ok back to silver and Gold

Silver prices High Low Avg
2008 $20.92 $8.88 $14.98
2009 $19.18 $10.51 $14.67
2010 $30.70 $15.14 $20.19

Gold Prices High Low Avg
2008 $1011.25 $712.50 $871.96
2009 $1212.50 $810.00 $972.35
2010 $1421.00 $1058.00 $1224.53


So as we can see while all this money was printed, one could easily have bought Silver in 2008 and sold it in 2010 and actually lost money 25%... The money printing did not make silver go straight up forever with no volatility or dips to jump back in if you missed the last opportunity to buy in April 08.

A similar story can be said about gold, your gains could have been quite modest in a worst case scenario.

Now when we are dealing with Physical accumulation where buy/sell margins are rather cumbersome, 10-20% Jumping in and out to take advantage of the volatility would not be good, however a constant purchase every month would have done you very well, the avg price is what comes into effect here, and I know all of us would like to go back and spend the $ we have today on gold at those prices in the past. I believe these patterns will continue slowly until one of the 2 above happens, then they will happen quickly. So as I said at the beginning, If you are a Phys stacker, keep stacking, don't look back until something fundamentally changes in this world we live.

Now when we are dealing with paper plays, with their significantly lower transactional costs, you can see there is a lot more money to be made buying the dips and selling the overbought scenarios multiple times throughout the year, and parking in cash while you wait for the next chance to move appears, yes you have to watch diligently and keep track of the news. Yes you can make money just buy and hold too. But the point of all of this is that there were, and still will be opportunities often to buy low and sell high, or the opposite if you screw up ... If this is play money, you can invest the time, and afford the risk, take advantage of the volatility and go for it. If its money you need in the next 10 years, park it in GLD or SLV and sit back, you won't earn as much but you won't have anywhere near the risk. <if you are over 45 and you aren't way behind on your retirement such that you are forced into riskier plays this is NOT FOR YOU ya old fogey , seriously drop it in PHYS, SLV or GLD, or even put a small percentage into a leveraged ETF if you can stand the risk, don't try to play these games unless you have 20+ years to recover from your mistakes, or at least realize the risk you are taking>



So in 2008, 9 and 10 we had opportunities to buy the dips and sell the overbought times, we had dozens of events with similar repercussions to this most recent QE3 announcement. After QE 1 Silver broke $20, there were people saying we would never see $10 silver again, But look in 2009, it happened, in fact in none of those scenarios on the chart was the high of the previous year lower than the low of the following year, in fact the Averages were more likely to be comparable to the following year lows. It wasn't a straight line upward, it wasn't a parabolic jump to infinity never to see volatility again. Now its 2012 and I see people saying QE3 its all over to the moon we will never see $25 again, Possibly yes possibly not, we will never see $20 again, yah probably not, but maybe, we will never see $30 again, eh I think we probably will. I have seen all 3 of these statements on this board, and I believe on this very thread... Past performance indicates these statements are highly unlikely to be the future results. That's all I've been trying to get across since the beginning guys, I guess I could have explained my first statement better than "$40bn/month is not that much" but I didn't, se la vi.

God help us if $40B/month of NEW money generates blase responses.

So yah from my short term high risk paper trading perspective, and that of many Wall Streeter's playing this high risk market every day... $40BN/month...

Meh, we saw the bump already about 12:35 on thursday... <blase response>

there will be new buying opportunities in the future for my paper holdings, I'll stick with cash for now, I might even put 20% of that cash into a silver short position just for fun if we don't see a drop on Monday, I'm sure I will find an exit opportunity before the election that will give some profit...

Long term...

WE ARE ALL TOTALLY SCREWED <not so blase>,
keep stacking that physical, get as many FRNs out of your possession as possible and into hard assets, while minding your risks and opportunity costs to your own liking, don't overreach, the fed and bureaucrats might actually figure this one out yet and it will be the mid 80s to 90s all over again, boy will you be sorry to be sitting on all that excess gold and silver because you overreached... . <LOL yeah right, but seriously don't overreach>


Ok guys I put a lot of work into this, learned a lot of new things doing it, read and analyzed some very interesting statistics, I'm already a better man for it... Please read it, try to debunk my stats and opinions, and please come back and do me the same favor and tell me what I missed, I'm more than open to revising my opinion I hope you save me some mistakes I would have made without discussing this. God bless you all, especially 68 .

[mflugher]

My comments and concerns are more global and long-term. The concerns is this is literally Fed now being "all-in", and even the MSM know this. The FED is now keeping interest rates to zero (by printing money) for year after year, and buying T-bills and mortagages in unlimited amounts by printing money.There is literally nothing left that they can do, and they are now committed to printing money without end (until Congress tells them to stop, which they won't). Investors will be giddy with all the paper money they are going to make - but soon will realize that paper can't buy them what they thought.

Every time I go to the grocery store I'm further sickened with the price increases. I've been with RC less than 2 years, and in that limited time food prices are up by roughly 20-30% overall. Inflation is here, and getting worse.

Take up Hunting, Ammo prices are up too, but 1 bullet is a lot cheaper than 80 lbs of meat

[68Camaro]

Love data, but in the end after some years in leadership I've become a bottom line type of guy. And this has really hijacked JFF's thread which I don't like to do, so suggest any further discussion on this be put in a new thread with some other appropriate title.

So Treasury is printing more cash than they are replacing. I'm not surprised - at some level it has to make sense; we're experiencing inflation and the money supply needs to expand with it. Question is, how much, which you've tried to address. But on the other hand you'd really need 6-10 years of data to be sure you quantitatively knew what was going on. I believe others have gone down this path, but regardless, do it from 2001 on, not just 2008-2010, for both cash and gold/silver, and see what you get.

As far as playing the paper system (which was the OP topic), more power to you and others. If you're smart you can work it. But, less any appreciation, it's a zero sum game so be careful out there - anything you make is someone else's loss. I did it for a time in 2011, made some "money", used it to buy physical, then got trapped out (stupidly) in PHYS and PSLV and with many other things going on in my life at the time decide to just let them ride rather than selling and going back into trading, anticipating that they will eventually come back up (and they are getting there) while I take care of my other life business. I may get back into it in a few months, but at the moment I have my hands full with other parts of my life, so I'm only working basics, which are overall preps, and modest continued physical accumulation.

[ZenOps]

I believe QE2 worked out to be about $72 billion per month.

So QE3 is infact, a significantly lower level of money printing than many were expecting. I get the feeling the runup in the last few weeks was on expectation that it was already in the cards.

If they had done more like $1 trillion or so, or maybe $100 billion per month, that would have definitely been the alarm to start buying with both hands, but $40B is sad to say - not as much as many people feared (or hoped)

[Jonflyfish]

Jon, if you have time;

How are you hedging? I assume you are buying futures contracts on margin as your main PM vehicle. How does one hedge against losses without also losing possible future gains?

Albeit all my paper trading is done via my IRA so I have limited options, mostly using the leveraged ETFs... I'm just wondering, I'm all out sold Uslv @ $40.85, it is now about $1 more which is fine, that's close enough to the top for me I have open buy orders @ 36.xx and 34.xx for approx 2/3 and 1/3 my PM play money, but as of now I'm out.

Honestly $40BLN/month doesn't seem like much QE to me, heck the pentagon uses that on their monthly taco bar I believe...

Hi mflugher friend. Depending on where in the price cycle the market is, options (collars/and or selling puts), futures, and fixed for float swaps are primarily what we've been doing to layoff risk. As for the primary PM vehicle, it is primarily physical along with some spec events to accumulate cheaply after the event is complete via conversions.

Cheers!

[Jonflyfish]

I believe QE2 worked out to be about $72 billion per month.

So QE3 is infact, a significantly lower level of money printing than many were expecting. I get the feeling the runup in the last few weeks was on expectation that it was already in the cards.

If they had done more like $1 trillion or so, or maybe $100 billion per month, that would have definitely been the alarm to start buying with both hands, but $40B is sad to say - not as much as many people feared (or hoped)

+1 Sadly $40B seems like a lot when one thinks of their own wallet but QE3 is a scaled down effort, not an all-in panic by any means...not even close to the MANY $trillions the fed freely dealt to so many banks and non banks in 08-09.
QEx may go on in perpetuity but the vast ocean has already been created and is well known and digested. So adding a few streams and rivers will not be the major upset.
The larger problem that currently looms in the race to the bottom is still Europe IMVHO.
Cheers!

[68Camaro]

That's three votes here for "not a big deal", and I have to respect your opinions, even if I don't fully buy into them. I appreciate/understand what you're saying - it certainly isn't a large percent change in a short period of time. And yes, Europe is a problem, though they have found and accepted the same solution - printing money, so I'm not sure they are the same type of problem they were. I am now somewhat less concerned about immediate European financial failure of a bank or a country, because they will simply print themselves out of the immediate problem and kick the can down the road another few months. I'm not sure now who will fail first, or if some other different type of event will precipitate everything failing at once.

But, let's go back to half trillion a year - it's roughly 1/30th of our GDP, say 3%. If that number WAS our GDP, it would still put us in the top 20 or 25 of GDPs in the world, more or less above Switzerland depending on which list you use. Yep, that's smaller short-term than one-third our GDP, but it's still a big deal and it would continue year after year - on TOP of all the other QE still underway (as well as that being done through the back door).

So, I disagree that adding a big river (this river isn't small, ans the river/ocean analogy doesn't match in proportion) to the "ocean" won't eventually create a tipping point. Eventually a straw will break the camel's back. And this isn't a straw, it's a log - a big log. And there are a small finite number of logs that you can pile on the camel before it breaks down, especially when it is already carrying a record load.

[Jonflyfish]

With all respect, the market doesn't care who votes for what on RC. The market reflects capital at risk. I don't see fear or panic out there based on QE3. The reason I think Europe is the biggest problem is because Draghi has said much and done little. Further, he can't do much. The Euro is flawed by design whereas debt is created at the sovereign level but the currency is not. Spain, Portugal, Italy et al issue debt but can't print their own currency, unlike te US. Further the ECB is not chartered the saw way the FRB is. Without Germany's blessing at each corner, there is no lasting policy to handle the serviceability issue by members who have already bloated their debt loads to the point where the open market has driven yields beyond serviceability. "kicking the can" down the road is far more difficult in the EZ and they have yet to deal with what was already swept under the rug. I could go on for hours but in the end the write doesn't care what I think either. I only care about what the market is telling me, not the other way around.
Cheers!

[Jonflyfish]

Interesting price profile for gold. There are some deep canyons.
Always mind your risk.
Cheers!

[Thogey]

With all respect, the market doesn't care who votes for what on RC. The market reflects capital at risk. I don't see fear or panic out there based on QE3. The reason I think Europe is the biggest problem is because Draghi has said much and done little. Further, he can't do much. The Euro is flawed by design whereas debt is created at the sovereign level but the currency is not. Spain, Portugal, Italy et al issue debt but can't print their own currency, unlike te US. Further the ECB is not chartered the saw way the FRB is. Without Germany's blessing at each corner, there is no lasting policy to handle the serviceability issue by members who have already bloated their debt loads to the point where the open market has driven yields beyond serviceability. "kicking the can" down the road is far more difficult in the EZ and they have yet to deal with what was already swept under the rug. I could go on for hours but in the end the write doesn't care what I think either. I only care about what the market is telling me, not the other way around.
Cheers!

Just curious

Is it a struggle for you to be objective? It seems like some members argue their points based on what they think, or hope will happen. That's a tough nut to bust.

Is it hard Jon? Or are you totally able to divorce yourself from your wishes, wants and feels.

I'm always impressed with how you present your interpretation of data, and "that's the way it is'"

Just a respectfull question. No matter how you respond. I'm stacking to the ceiling. because I have nothing better to do.

[dannan14]

Bryers Ice Cream has started using ingredients that you can't pronounce instead of all natural ingredients to lower production costs to keep the price point down.

Thanks for the heads up. This is very sad news. Breyer's was the one brand of non-organic ice cream that i never checked the label on because i knew they used real ingredients.

[Jonflyfish]

With all respect, the market doesn't care who votes for what on RC. The market reflects capital at risk. I don't see fear or panic out there based on QE3. The reason I think Europe is the biggest problem is because Draghi has said much and done little. Further, he can't do much. The Euro is flawed by design whereas debt is created at the sovereign level but the currency is not. Spain, Portugal, Italy et al issue debt but can't print their own currency, unlike te US. Further the ECB is not chartered the saw way the FRB is. Without Germany's blessing at each corner, there is no lasting policy to handle the serviceability issue by members who have already bloated their debt loads to the point where the open market has driven yields beyond serviceability. "kicking the can" down the road is far more difficult in the EZ and they have yet to deal with what was already swept under the rug. I could go on for hours but in the end the write doesn't care what I think either. I only care about what the market is telling me, not the other way around.
Cheers!

Just curious

Is it a strugle for you to be objective? It seems like some members argue their points based on what they think, or hope will happen. That's a tough nut to bust.

Is it hard Jon? Or are you totally able to divorce yourself from your wishes, wants and feels.

I'm always impressed with how you present your interpretation of data, and "that's the way it is'"

Just a respectfull question. No matter how you respond. I'm stacking to the ceiling. because I have nothing better to do.

Thogey,
Thank you for the kind inquiry. My objective when it comes to the markets is to create and preserve wealth. My wishes wants and feels, while personal, are never able to influence the markets, never. This is a lesson I had to learn the hard painful way (sometimes excruciatingly so) many times in the past. One day it finally sunk in. The market doesn't care. It simply doesn't care.
The market doesn't care how hard you work, how punctual you are at being at the trading desk, how you feel about The Bernank, Barack or Mitt. It doesn't care if you craft a 1000 page thesis to support your feelings about inflation. Unlike a child who receives a participation award for showing up to some event, the market does not owe any positive outcome for participation.

What I learned is that since there is no emotional concern in a free market auction feedback loop for any action taken, acting on emotional appeal can only cause an unexpected emotional outcome that is rarely understood and accepted properly. This often leads many to not only abandon their hopes and dreams that they had just before being surprised by the newly unexpected emotions but denial generally seeks conduits to be released and unfortunately they unload these emotions by taking them out on others. Without going into details or naming names, we've seen that happen before on RC on several occasions.

So, instead of imposing anything on the market by telling it what I want, I let the market tell me what it wants. My trading is price action oriented and not indicator or opinion driven (i.e. market is oversold, news was good/bad etc etc) Trading price and not emotion has served me and most importantly my clients very well over the years.
And so the market will do what it does, causing surprise and shock to most as they fight their way into loses. This is because most people decide what is supposed to happen and market be damned if they will be wrong! There is no way to know the nonexistent future. Once that is fully accepted, it is very simple to listen to the market and what it says to do then act in a very non-emotional and mechanical way by following the path of least resistance.
I think of it as being logical. Perhaps it is objective as well.

Here's a quick example. Most folks are hearing the news about US embassies being threatened and attacked, Israel preparing to strike Iran etc. What should a rational person think this would do to crude oil prices? Well I will show you a chart of crude oil intraday today along with mechanically displayed price action triggers and references. While my clients and I were selling heavily all the way into this what was the "rationally emotional "trader doing? This move was $4000+ per contract. So, if you were mechanically selling 100 contracts (100,000 barrels) or 1000 contracts (1,000,000 barrels) your personal goals, dreams, wants etc might be closer to being achieved but in a zero sum game, who was paying for this? The emotional trader- "and that's the way it is"
Cheers!

[68Camaro]

Jon - I respect your views even if I don't always agree, and in the context of "price" (i.e., short-term) I agree far more often that not. I really think you're spot on there. But (again) you've got the better tools and experience to take advantage of what you know - not for the "average" trader or investor.

The points you make about Europe are, of course, the issue - no doubt. I've echoed them myself. I just see that they've loosened the noose a bit, and may be able to continue that for a time.

Your discussion of "emotional trading" appears to lump in with emotion investing based on an accurate view of long-term fundamentals. Investing (not short-term trading) on belief in long-term fundamentals is not trading on emotion. I have traded on emotion before - and I believe I've lost every time, so I work hard to not do that anymore. But investing (long-term) on fundamentals can be a sound strategy. I've exercised it successfully over 30 years, and while it tends to limit gains, it also decreases loss risk. You've just got to be patient enough for the long-term to play out.

Best wishes...

[68Camaro]

Bryers Ice Cream has started using ingredients that you can't pronounce instead of all natural ingredients to lower production costs to keep the price point down.

Thanks for the heads up. This is very sad news. Breyer's was the one brand of non-organic ice cream that i never checked the label on because i knew they used real ingredients.

Breyer's sucks now, frankly. Move to Blue Bell, if you can get it in your area (apparently its not fully nationwide).

[Jonflyfish]

Jon - I respect your views even if I don't always agree, and in the context of "price" (i.e., short-term) I agree far more often that not. I really think you're spot on there. But (again) you've got the better tools and experience to take advantage of what you know - not for the "average" trader or investor.

The points you make about Europe are, of course, the issue - no doubt. I've echoed them myself. I just see that they've loosened the noose a bit, and may be able to continue that for a time.

Your discussion of "emotional trading" appears to lump in with emotion investing based on an accurate view of long-term fundamentals. Investing (not short-term trading) on belief in long-term fundamentals is not trading on emotion. I have traded on emotion before - and I believe I've lost every time, so I work hard to not do that anymore. But investing (long-term) on fundamentals can be a sound strategy. I've exercised it successfully over 30 years, and while it tends to limit gains, it also decreases loss risk. You've just got to be patient enough for the long-term to play out.

Best wishes...

Thank you for the kind reply.Yes I did lump investing in with trading. The reality is that all investing short term and long term is trading. For most folks trading is emotional and the results for long term still produce losses. March 2002, fall of 2008, 2009, and March 2009 would have been ideal times for long term investments. However few people were buying when most were selling. The consequence of decision making using fundamentals (funnymentals) generally does not produce any alpha as well. To make the assertion of an "accurate" assessment of long term fundamentals is not possible until the outcome is known.
Even if such emotional ideals existed the actions taken do not represent the original emotional appeal.
The Dow 30 companies are heavily scrutinized and reflect long term soundness in funnymentals. However, their equity shares are driven by pure supply and demand, which is a function of emotion- period.
Systemic risks exist regardless of which company you choose. Bear Sterns, Worldcom, Lehman, Countrywide are all companies that had sound fundamentals until suddenly, in a vacuum the did not. Same goes for all 29 stocks that are no longer part of the original Dow 30 components. As for the remaining sole survivor, well I was buying GE From $8 down in $1 increments in early 2009 for the kiddos' college fund (accepting that it could go to $0.) When price shocks happen you can throw all non-systemic risk analysis out the window. People accumulate shares using emotional values that make sense to them at the time. The more supporting material and reason they can accumulate the more confident and complacent they become. However, When someone yells "fire", they all head for the tiny exit at predictably the same time... Emotions of survival instincts overwhelm any calm rational feelings they once had when reading analyst reports then and looking sophisticated at Starbucks during get togethers and discussions with their friends, or at Tupperware parties etc, regurgitating some taglines and buzz about why being a long term stock sage will be Buffettesque. Another thing to consider is where shares come from in the first place and what the function of Wall Street firms is. Did Facebook et al hire wire houses to buy their shares or to create the shares and dump them on the street in exchange for capital of well heeled "investors"?

The herd mentality leaves most investors with the same end results. Pinning the tail on the mutual fund donkey with the most stars while blindfolded, chasing prices higher after the big surge and bailing out at the bottom are timeless emotional actions taken by the masses.

But I do agree with you- Investing over a long period of time (and short period of time) can be a sound strategy for success, just that history has proven that most investors can't/don't/won't achieve such success by design.
$Billions have been spent by fund companies and asset managers promoting this "sound strategy for success" for (their) good reason.

Cheers!

[68Camaro]

Good discussion. There are fundamentals at many levels. I was mostly speaking of the overall economy - on whether to buy in or sell off, overall. But on fundamentals of specific stocks I don't often do this, but when I KNOW that a specific company is sound, and their business is sound no matter how the street is punishing it, I have a number of times bought after they've been crushed (or as they have been being crushed) no matter what the charts have said, and done very very well (I just have to be patient). That's one type of the fundamentals I mean.

For specific stocks, the fundamentals are only as sound as the truth you have. Much "truth", sadly, isn't very true. My mom, sadly, lost a ton of money in Worldcom and Enron the year she died at a time when she wasn't able to manage her stocks well. So, their fundamentals were NOT sound, no matter what lies they told- and there were signs of this, if you knew what to look for. Countrywide was, as you say, presented as sound, but the books were cooked and lies were told. You've got to be really suspicious, and very certain of what you think you know, in order to invest that way. Last major stock I owned much of was Ford, when it was killed circa 2008, but I KNEW their business was sound and I made 4x my money. But I hardly practice it anymore during these more risky times.

In the overall market I sold out in late 2007 at market peak because the fundamentals of the market were crappy, and avoided the loss. I did NOT have the balls to fully come back into the market in 2009 (even though there were some signs that one could do this and ride it back up) because I'm risk averse, especially in these times, and viewed (as I still do) the larger market as largley untrustworthy. So I lost some of the gains I could have had, but slept better at night for it. (And I did make some PM gains in this time as well.)

I no longer ever pay attention to a stock broker - at least blindly. Tried that 15-20 years ago with Merrill Lynch and quickly realized they were on the take, pumping stocks.

If I really trusted the overall market (I don't much) and if I had the time (which I don't much) I would dig further into your methods. Not a good fit with me now, but I still like to follow your reasoning.

As you say, DYODD

[TXBullion]

solid post jff