As of 8/20/2010, the CPI adjusted 2000 dollar is worth 75.31¢, and the CPI without lies adjusted dollar is worth 41.32¢. The world purchasing power value has dropped by 10-20% more (based on other measures of dollar value), for a drop of 60-70% (otherwise known as inflation) since 2000, and more since 2002 when the dollar value peaked.

Our comments & predictions...
... as things change and develop

Sideways to up...

Not much news this coming week, Case Shiller on Tuesday will show continuing down trend in US housing.

Update 12/27/2010 - a significantly higher than a "normal" chance of a large down day tomorrow, our warning algorithm fired today.

Probable up week...

An outside chance of an explosive move up in precious metals in the first half of the week...

Update 12/20/2010 - good chance of a down stock market day tomorrow, best guess.

Next turn...

Ideal date, Jan. 4th with a range of Dec 28th-Jan 7th. And as usual, we'll let the market tell us which way it will go although we're biased towards the downside.

Update 12/13/2010 - our indicators point to a large upmove in gold & silver tomorrow or overnight, better than 2 in 3 chance... BWTFDIK.

Update 12/15/2010 - we blew it on the gold & silver upmove call, and we're back on the side after a small loss.

Update 12/15/2010 - It appears that the US Treasury ESF (Exchange Stabilization Fund) has discontinued weekly reporting, so our dollar intervention work/sleuthing has likely ended. There has been no reporting since week ending November 12. The internet link is no longer working and apparently there is no replacement link. So much for transparency.

Word of the last few decades (hat tip" Barry Ritholtz): Agnotology

Long but very good article on GDL and SLV: GLD and SLV


QE3 mentioned by Bernanke on "60 Minutes", quite probable up weeks ahead in the U.S. - aka the "reflation trade" that's been on overall since Jackson Hole.

Update 12/7/2010 - Well, that was quick. We have another set of signals that point toward today having been a key reversal day, we covered over 3/4 of our open long positions.

Tax Negotiations: No help for 99ers

Just a hunch...

Something other than Ireland or N. Korea or what's in the current news will unpleasantly surprise the US markets during the mid to late period this coming week. Spooky - yes... its just a hunch... and who knows, but we give it a 2 in 3 chance. We're wrong at least 25% of the time - and this is not intended as investment advice either (see our disclaimer at the bottom of the page), but rather a "for what its worth".

Update 12/3/2010 - China- A Profiteers Bagunca (Mess)

Choppy, slightly lower...

Gold & silver options expiration on Wednesday likely to put pressure on prices, S&P 500 making another run at 1225 but likely to stay in a small and bear biased range. We're mostly still on the side.

What Could Trip Gold Up? (gold top indicators)

Biff, Bam, Pow?...

Likely very rough week ahead. We're out of most of our agricultural trades, mildly hedged on precious metals and on the lookout for S&P 500 shorting opportunities, in spite of QE2 and all the POMOs this week.
Reminder: please read our disclaimer at the bottom of the page.

Update 11/18/2010 - What Could Trip Gold Up? (gold top indicators)

Best guess, next turn...

We're looking at another "hot" period during the 10th-18th, with an ideal turn date of November 12th.


What a week upcoming with both the FOMC meeting and an election, plus PCE on Monday and unemployment numbers on Friday. We're on the side in stocks, mildly hedged on metals and still long in the ag area. We probably will not take any "obvious" trades right after the FOMC meeting minutes are released, but rather wait for some dust and various black box trades to settle.
The 'year of volatility' that we forecast last December is quite alive and well, and we strongly suspect it will continue well into 2011 - probably even until the false inflation/deflation and other dichotomies are more clearly resolved in the investing & trading community.

FOMC, Nov. 3...

It's our feeling that if the Fed credibly announces less than $1 trillion or so for QE2, the stock markets will fall - but will be "rescued" within a week or two.
We also expect the current drop in precious metals will be over within 1-2 weeks, with an ideal turn date of November 1st.

Update 10/25/2010 - for those who watch these things, the S&P 500 had a gravestone doji today (bearish).

Update 10/26/2010 - beware, now that GS and others have pointed out the POMO correlations to the stock market, its well beyond possible that it will become a lot less useful for trading - and may even reverse and be a trigger for shorting, at least on the very short term.

Best guess...

Another mixed week, with an upward bias, while we all wait for details on QE2 and the US election results. POMO (very likely up) days - Monday, Wednesday, Friday.

Update 10/22/2010 - Likely Golden Cross in the S&P 500 (50 & 200 dma crossing) etc. augurs for bearishness ahead.... MACD & RSI not über bullish - yet - but are in high ranges... AAII and other sentiment measures are quite bullish but haven't reached extreme bullishness - yet... today is a POMO day and the "normal" bullish push isn't evident - yet (as of 3PM EST)... BKX & BDI are both short term bearish...

Not high certainty...

Probable mixed week for US stocks and precious metals, assuming no unexpected dollar trend change due to intervention, etc.

Update 10/15/2010 - lightened up on paper commodity & precious metals positions pre-weekend.

Precious metals small correction starting this week?...

Ideal date, Oct 6th. Watch the gold silver ratio for hints, especially stochastics and RSI.

Update 10/5/2010 - POMO activities delay ideal date of metals and stocks turn until the 7th.

Update 10/7/2010 - U3 unemployment contrarian based guesstimate - 9.7-9.8%%, actual about 10.2%.

33 Conspiracy Theories That Turned Out To Be True


Bastiat's Candelmaker's Petition

Very light the next two weeks...

Taking time off and doing some traveling. See 9/5 comments for our general thoughts and warnings and guesstimates. The normal Friday afternoon chart updates may be delayed as much as to the following Tuesday, although we're hoping to have them done by Sunday evening.

Update 9/20/2010 - our work is showing a 75-80% chance of a down day tomorrow... possibly quite a large move, although its also an FOMC meeting day. We're on the side.

Beware ag markets spike, new crop data out soon...

Probably another up week......

Similar comments to last week.

Update 9/13/2010 - Likely US stock market up days

Update 9/17/2010 - The 10 Biggest Myths About Gold

Sad to say, but in our opinion Mish has had about 14 of his 15 of minutes of "fame".

Probable up week...

We're on the side. QE2 is in the process of being discounted in many US markets. Ag commodities bullish, both technically and fundamentally as we noted was likely in a comment back in May. Next "hot" turn date range - September 17-24th, ideal date Sept. 21 - next one around Oct. 8th.

Update 9/10/2010 - Iran allows foreign banking


About a 2 in 3 chance that Treasury bonds have topped on the short term... we'll see, we're out on a limb. Although we exited 2/3 of our S&P 500 short position last Friday, the down trend line around 1067 was not broken as we thought was going to happen.

Best guess, U3 unemployment rate comes in at 9.8-10.2%, 9.9% being closest to our expectations.

Note that we expect an M3 dip of about 4-6 weeks duration to start in a few weeks, and then it will resume its uptrend. Total money supply still growing...

Update 8/30/2010 - stopped out of remainder of S&P shorts overnight at about 1068.

Update 9/3/2010 - unemployment came in .2% below our range at 9.6%, no comment on BLS "massaging" probabilities, nor any comment on pre-election political effects.
Per recent Securities Lending OMO data, it appears that the Fed targeted 2.5% as the low in the 10 year Treasury.

Total money supply growing...

M3 continues its uptrend from a bottom about 5 weeks ago, M2 is growing faster (up to 2.5% YoY growth from about 1% a few months ago), and M1 is growing YoY at over 5%. Many forms of credit are also showing recognizable signs of having at least temporarily reversed their downtrends. Federal debt continues to grow at 13-15% YoY. Total non-financial credit still growing (per most recent Z1) at over 3%. Velocity appears to have bottomed per our preferred measure too.

Total money supply is unquestionaly growing faster recently. Whether its a real bottom remains to be determined, but facts are what they are.
Note that we expect an M3 dip of about 4-6 weeks duration to start in a few weeks, and then it will resume its uptrend.

Still short the S&P 500.

Update 8/27/2010 - Our estimate for initial 2010 3Q GDP: .5%, real -1.1%.

3:03 PM ET - Exited 2/3 of our S&P 500 short position, partially due to upcoming weekend and partially due to expected down trend line break around 1065 (basis cash).

Ben Bernanke, Jackson Hole speech extract:
"The Committee will certainly use its tools as needed to maintain price stability--avoiding excessive inflation or further disinflation--and to promote the continuation of the economic recovery …. the Federal Reserve remains committed to playing its part to help the U.S. economy return to sustained, noninflationary growth." (emphasis ours)

M3 still uptrending...

M3 has reversed its 2010 downtrend and has been moving up for 4 weeks.

Still short the S&P 500 and expecting a bounce sometime this week - best guess either Monday or Wednesday. Trend lines will tell... and this being options expiration week liekly means that any down moves will be muted.

Fundamentals are working fine, just not your father's ones.

Update 8/20/2010 - M3 continues its uptrend from a bottom about 5 weeks ago, M2 is growing faster (up to 2.5% YoY growth from about 1% a few months ago), and M1 is growing YoY at over 5%. Many forms of credit are also showing recognizable signs of having at least temporarily reversed their downtrends. Federal debt continues to grow at 13-15% YoY.

Total money supply is unquestionably growing faster recently.

The 36 Stratagems of War (Sun Tzu)

M3 and QE2...

M3 appears to have reversed its 2010 downtrend and has been moving up for 3 weeks, having broken its down trend since early 2009. Perhaps a pre-cursor to (a stealth) QE2?

'Wall Street's Big Win', by Matt Taibbi

Nixon Ends Bretton Woods International Monetary System

Still watching & waiting...

Still looking at next major turn will be around August 9th, plus or minus one week. Likely (at least short term) bottom in gold last week. We'll likely sell any S&P500 spike up over the next two weeks.

Milton Friedman, 28 minute interview from 1975

Update 8/2/2010 - 75%+ chance of a down day in the S&P 500 tomorrow.

Just watching & waiting...

The cover is still on the pressure cooker, and the pressure is still quite high.

America's Ruling Class -- And the Perils of Revolution

Update 7/27/2010 - over 60% chance of a down day tomorrow...

Next significant turn...

Our best guess - around August 9th, plus or minus one week.

ECB recently buys over 500 tonnes of gold - 7/22/2010, error in our valuation method, there was zero change in ECB holdings - mea culpa, our sincere apologies for the error. The ECB changed the valuation date and we missed the change.
Link to our 2007 article on ECB gold sales and purchases

Humorous thought for the week:
"Time is that quality of nature which keeps events from happening all at once. Lately it doesn't seem to be working all that well".

No double dip?...

The whole "double dip" controversy in one sense is a classic misdirection, since in our opinion we've never exited the recession that officially started in 2007. Real GDP, with CPI and CPI w/o lies corrections, same but using GDI (Gross Domestic Income).

Also of interest: Net Interest Margin for all U.S. Banks

M3 components, 1980 to current, public data


Under the weather, more later.

Update //2010 -

Down with Doom: How the World Keeps Defying the Predictions of Pessimists


2010 2Q *real* GDP growth estimate, 1.7% tops - probably closer to 1.1%, especially on the final revisions.

Still watching for stock shorting opportunities. Gold cup & handle formation tilts us bullish (credit and HT: Jesse).

Grading Financial Regulatory Reform

Great but long overview...


What might history tell us about the Greek crisis?

M3, a telling story...

The relationship of M3 and recessions/depressions since 1870.

Update 6/9/2010 - Cool chart showing bear market averages against the one since 2000, from Martin Pring

Still on the side...

Probable up and high volatility week ahead, but the risk/reward is still too high for our taste... yet... significant overhead resistance in the S&P 500 1135-1140 area. We're overall still quite bearish, disinflation and double dip etc. ahead. Next significant danger zone - late June through mid July.

Update 6/3/2010 - chart and site updates tomorrow will be up to two hours late, due to personal obligations.


Probable down and high volatility week ahead, but the risk/reward is too high for our taste.

Update 5/27/2010 - See "Wall Street's War, Matt Taibbi (Mr. T.)" at


Our eclectic cycle etc. work is still pointing at the 18th as an ideal turn date, per our comments on the 4/11, so we're primed for shorting. The volatility has been outrageous (2010, the year of volatility) so we're not likely to use high leverage. Options expiration week.

The failure of deficit spending and inflation

1:43 PM PT, "crash" or large down day indicator flashing, we're going short the S&P with a small position to start.

Update 5/10/2010 - Shocking (not) - Goldman Sachs Hands Clients Losses in ‘Top Trades’

Gold & Greece (Ken Gerbino)


Quite the almost vertical move in the dollar last week, and it has hit our expected initial target and is subject to at least a short term correction.

We're not going to fight the "Mondays up" stock market trend.

Dress rehearsal for the fully automated crash (the Austrian economics side, with which we only partially agree)


Echoing our comments of 2/14/10, being long the general agricultural commodities is probably the least risky of all positions currently, especially on the intermediate and long term. Many are trending.

A Summary of the Goldman Sachs Fraud Case, and the Downfall of Icons

"History doesn't repeat itself, but it does rhyme."-- Mark Twain

Real total money supply, with velocity...

New charts - First public cut of 'total money supply' including M3, all credit, US total debt, derivatives - and with a velocity adjustment,        Same, but long term

Wham, bam, biff, pow...

Could it be that real fundamentals are actually starting to make a difference? Time will tell, but what's happening to GS is encouraging... and we're watching trend lines and momentum etc. for possble shorts, almost across the board.

Update 4/19/2010 - High probability of a down day tomorrow in US stock markets - could be a whopper down day...

Update 4/20/2010 - Yes, not a great call yesterday for a down day today... but at least we didn't open a signifcant short position today. The chart patterns and momentum just didn't match our expectations well enough to jump in with even one foot.

ECB simultaneously confirms and denies currency intervention

Disaster and Emergency AlertMap, worldwide and regional (ht ZeroHedge)

Update 4/23/2010 - Chances seem to be growing a lot for a sudden reversal in the dollar.

May Day...

Our eclectic work is pointing at another trend change during the period May 7-25, with an ideal date of the 18th, which also dovetails well with the old "sell in May and go away" pogrom. Given the recent "humorous" nature of markets, we'll also be more than usually alert on MayDay (Saturday, May 1st) for hints or bludgeons.

Excerpts from The Corruption of Economics,by Mason Gaffney

Update 4/16/2010 - 'Renaissance 2.0'

Securities fraud action against Goldman, Sachs & Co
Probable result - a head or two on a pike and a relatively small fine since the document only mentions $15 million... but its a start and the pressure is building and unrelenting, regardless of attempted spin. Update - it appears much worse then we originally thought it would be for GS and is expanding far and wide, and none too soon.

Probable US stocks up week...

No big news releases or TA signals/cycles triggering this week.

Looting Main StreetHow the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece, by MATT TAIBBI


18+ month yen trend line broken, major support around 102-103.
End of quarter this week, window dressing time.

Renaissance 2.0, a 4 part Youtube series on much of the real structure of the U.S. and world.

Our best guess on US Q1 2010 GDP growth rate, from 2.4 to 2.8%.


An obvious conclusion or two are available, like M3 leads and turns before the rest:
M3 vs. TMS, AMS and M3 + credit + gov't debt
Same chart, shorter term

Risks Interconnection Map

The next 1.08 year Armstrong cycle turn is due around May 20, 2010 - for what its worth... and there is another Armstrong cycle peak during the first week of April.

Update 3/24/2010 - The Ministry of Truth Limits Reporting on Google in China 03/23/10

Ides of March...

Also options exporation week and at heavy resistance around the S&P 1150 level.

Google Highlights the Dangers of Doing Business in China

Wealth, Income, and Power

Update 3/19/2010 - Former Lehman Executives ‘Giggle’ at ‘Nonprofessionals’ Who Think Losing Billions of Dollars Is a Big Deal (hat tip - Tim D.)

Under the weather...

Will update later this week, but generally our outlook is still similar to last week - our indicators are pointing at a likely trend change between now and March 16

Federal pay ahead of private industry (USA today)

Economics 101: Learning From Sweden's Free Market Renaissance
Income distribution in the U.S and Sweden

Important week...

Wednesday through Friday stock market action is likely to point at what will happen the rest of March and probably through April. We continue to be biased to the bear side and are waiting for another trend break. All S&P shorts stopped out at a small loss overniyht.

Under the weather...

Will update later this week, but generally our outlook is still similar to last week.

Update 2/23/2010 - potential H&S forming in oil and the S&P... our indicators are pointing at a likely trend change between Feb 25 and March 16, ideal date March 4th or 5th.

Update 2/25/2010 - opened small S&P short, closed soybean long at a small loss.

Update 2//2010 - We expect to carry 1/3 or less of our (currently break even) S&P short over the weekend. The dollar is looking toppy, short term - initial support around 79.

Currency Wars

Rothschild family

Watch & wait...

The signals last week were not strong enough to put us back on the short side, and we're still in watch and wait mode but very generally biased towards stock & (most, excluding agricultural) commodity shorts, and dollar longs -- too much "noise" & volatility based on the Greece issues, per our expectations of 2010 being the year of unusual volatility and sharp moves with sudden reversals.

Hourly total compensation, civilian vs. government

Federal debt income ratio

Update 2/16/2010 - options expirations week is having its "normal" effect, still standing by except for a small long play in soybeans.

Jim Sinclair interview

Update 2/19/2010 - Quite a week, choppiness abounding. Great cartoons by Ed Stein


Best guess, Monday will be more volatile than normal but will end slightly up. We're standing aside until trends become clearer. (1:08 PM PT, we were wrong about market direction and are looking for a short re-entry point sometime tomorrow or Wednesday)

World Bank’s Zoellick Says Most Countries Back Capital Increase - one way being planned to "help" fix country and bankster balance sheets.

10 free ways to keep track of changes to any website, without an RSS reader


Given the very unusual average number of Monday up days the last few months, we'll be very hesitant to add to our short position tomorrow, and are tightening our stops to under Friday's high.

Inflation Expectations and Inflation Forecasting

7:57 AM PT - stopped out of all but tiny short position. Maybe a 2-3 day bounce?

The Devil's Dictionary Of Financial Terms

There was once a young man who was gifted with the ability to speak, persuade and move people. Rather than using his gifts to improve conditions around him he used his gifts to criticize what others had done or not done.

The people became so riveted by his criticisms that they ignored whether this man had actually contributed anything. Underneath the spell they elected him to become the new manager. It didn't take long to realize that this man didn't have much to offer in the way of truly leading people in changing conditions but rather just leading people in being critical.


Update 2/2/2010 - 10:15 AM PT, *very* choppy S&P today, still standing aside with our tiny short and awaiting a more clear resolution.

Causation Analysis: What “But Fors” Caused the Crisis ?

The Washington Post doesn't tell the full story on government employment - Gov't employment as a percentage of non farm employment Gov't employment as a percentage of the U.S. population

We echo Zero Hedge's comment today - "We sincerely hope that the government will soon come out with an index that tracks the credibility of all its other indexes."

Update 2/4/2010 - 5:37 AM PT, lightly tiptoeing back in - added to short S&P position. 6:42 AM PT - added again, significantly, on trend weakness. 9:52 AM PT - we're a bit wary of a Dow ~10k bounce... 10:17 AM PT, took profits on 1/2 our short position. 12:27 PM PT, another trend break, added to shorts... and we expect to exit them today. 1:13 PM PT, exited all short positions except the tiny one with which we started the day - *wild*(!) day.

Update 2/5/2010 - 6:46 AM PT, added back some shorts based on Dow 10k resistance - conservative position, not much leverage. 12:01 PM PT, exited all by tiny S&P short position at a profit. 1:03 PM PT, exited last S&P short - closed entire position.


Early S&P 500 trading up 6+, still holding a medium sized short.

FromTheRanks™ of IT, some decent articles & views in computer management and related areas.

Update 1/25/2010 - 11:32 PM PST, lifted half the shorts. 1:46 PM PT, put them back on.

Update 1/26/2010 - Troubling similarities between the U.S. and Argentina page updated

Another view of climate & temperature trends & global warming

9:31 AM PT, dropped/exited the short positions added yesterday at 1:46 PM PT at a small loss - nasty & choppy markets.

Update 1/28/2010 - following the down trend lines, adding a bit of leverage.

Update 1/29/2010 - 6:36 AM PT, due to upcoming weekend and *special* GDP & deflator results, exited 2/3 of our S&P shorts at a profit.

Primed but still waiting...

Short term precious metals in a trading range to slightly bearish. S&P 500 still levitating.

Sheehan on Michael Boskin, another fact based takedown of Michael Boskin, the Boskin Commission and one of the biggest lies in the CPI.

Update 1/20/2010 - 9:12 AM PST, LOTS of key trend line breaks today - batten down the hatches... and use stops to protect profits. Just like Frodo, whipsaws live...

Update 1/21/2010 - 1:10 PM PST, cut way back on leverage on S&P shorts since we judge that its more likely than not that tomorrow will be an up or level day.

Ups & downs...

Very sluggish upmoves on the S&P recently, not unlike pouring molasses. RSI just under 70, the slope of the up move is flattening, light volume, MACD above 11... but no trend line break yet. Opened a small silver long position late afternoon.

Options expiration this week.

Update 1/12/2010 - 4:37 AM PST, opened another tiny S&P 500 short position, closed silver long at a tiny profit. 10:29 AM PST, starting to add positions, based on trend lines. 1:44 PM PST, dropped/offset shorts added about 4 hours ago at a profit.

Japan is pumping, money supply & debt up

Inflation Expectations Approach Pre-Crisis Range

Update 1/13/2010 - 10:31 AM PST, stopped out on last portion of S&P short at a profit.

Thoreau: On the Duty of Civil Disobedience

Trend watching...

We may have peaked on the S&P 500 last week at around 1130, and we're up about 5 points late Sunday night... and we're tentatively short with a tiny position and will be watching the trend etc. We will add on significant weakness.

Contrary yet again to a certain deflationista blogger whom we've commented on many times before regarding his incomplete and/or dubious conclusions etc., the actual facts show that the gold price tracks the real CPI (without lies) direction very well.
A side note about his weird CPI reconstruction substituting Case Shiller for OER - he should pay more attention to John Williams work at, whose reconstruction doesn't even use OER and also allows literal apples-to-apples correct long term comparisons since its simply carrying forward the actual calculation methodology from 1982, while excluding the silly additions from the somewhat politically driven BLS like OER, hedonic pricing, geometric weighting, etc.

Update 1/4/2010 - 7:12 AM PST, dropped the tiny S&P short position at about a 10 point loss - we were obviously too early. The next resistance points where we'll be looking to short again is 1140-1160 or so... and will only jump in if the trend breaks and others of our signals go off. Also dropped remaining gold shorts at a profit. 9:09 AM PST, dropped all except one contract of our remaining USDX longs.

Bond-fund flows at an all-time peak, a partial answer to the Sprott ponzi scheme piece in December. There's also "trading assets" on the Fed's weekly H8 report, their 2009 3Q breakdown being at another Fed page. Update 1/7/2010 - Unusually large jump in Fed reverse repos last week - from about $66 billion to about $75 billion. The Fed is trying to send a message about draining liquidity... and M3 has been contracting on a year over year basis since late October of last year.

Possible turning period, repeating...

We've isolated a likely turn date range of between 12/28 and about 1/19 (ideal date is the 19th) per our cycles and other indicators, but aren't "religious" about it - we'll still not fight the markets or their displayed trends, especially since more than a few others are expecting a turn during this period.

Note also that FASB has apparently backed off again on tighter accounting standards in the mark-to-market areas - FASB 157. For those that may not know, the SEC is over FASB...

Update 12/29/2009 - Best guess, 2010 will be a year of unusual volatility and sharp moves that will reverse rapidly as the dozens of extant major economic and political issues ebb and flow... and as real fundamentals return to more favor and attention... BWTFDIK.

A well known deflationista blogger and an Australian economist are currently trying to sell the mistaken "interesting" view of bank lending preceding deposits and reserves. The actual historical facts since 1950 show otherwise (click for chart)(note also that we normally agree with the huge majority of what the Australian economist has said and done).

Update 1/1/2010 - Most weekly charts have been updated. The Fed & Treasury published early. COT charts will be published on AMondasy, soon after the data relaease.

Holiday schedule, etc...

Most weekly chart updates will be delayed from their normal Friday afternoon time until Monday afternoon, due to the holidays and delayed reporting from the Fed, Treasury etc.

Repeating due its importance: NB: FASB is on the move with attempted changes back towards mark-to-market, after loosening up date coincident with the stock market bottom in March - fair warning...

Probable continuation of the dollar uptrend, and pressure on precious metals.

Update 12/20/2009 - 4:29 PM EST Over 70% chance per our work that there will be a large down day tomorrow, barring massive behind-the-scenes intervention..

Update 12/21/2009 - Crash alert still live, and combines well with our other work which points at a large turn between 12/28 and 1/19 or so.

Update 12/23/2009 - 8:11 AM PT, lightened up about 1/3 and took profits (pre 3 day weekend and holiday) on PM shorts and dollar longs.

Update 12/24/2009 - 5:45 AM PT exited half of the remaining PM shorts and dollar longs.
Happy Holidays to all!

Dollar trend...

As most know, the dollar index intermediate term down trend channel has been broken. We put on a tiny USDX long position late last week and will very likely be adding on any breaks.

Excerpted from Charles Kindleberger's book "The World in Depression":

The Creditanstalt

Just as in May 1873 and July 1914, with tension growing among Germany, France, and Britain, the crack, when it came, appeared in Austria. In the early spring of 1931, a Dutch bank wrote a polite letter to the Creditanstalt in Vienna saying that it was obliged to raise the charge on its acceptance credits from 0.25 percent a month to 0.375 percent. It was a timorous letter, says Beyen, not a prescient one, and the bank was somewhat surprised when the Creditanstalt chose to pay off the loan rather than renew at the higher rate. Three months later the Creditanstalt could have used the money.

The Austrian economy had been in disarray since The Treaty of St. Germain of 1920. Its finances had required League of Nations loan assistance, which entailed international supervision between 1922 and 1926...Industrial capital was consumed in the postwar inflation, and financial capital in the unsuccessful bear speculation against the French franc in 1924 that produced failures of the Allgemeine Industriebank, the Austro-Polnische Bank, and the Austro-Orientbank, as well as the private Union Bank owned by one Bosel, with grave difficulties for Kolmar& Co., Kettner, and the Brothers Nowak. Maerz calls this episode "the opening shot of a series of bank failures culminating in the breakdown of the Creditanstalt seven years later...

In May 1931 losses were still at 140 million schillings, and capital at 125 million plus disclosed reserves of 40 million for a total of 165 million. Under Austrian law, if a bank lost half its capital it had to "turn in its balance sheet," or close down. In an effort to rescue the Creditanstalt, the government, the National Bank, and the House of Rothschild, the last with help of the Amsterdam branch, furnished 100 million, 30 million, and 22.5 million schillings, respectively. But the announcement of the support operation on May 11, 1931, started a run, partly foreign, partly Austrian...

By June 5 the credit [for the entire country] was exhausted and the Austrian National Bank requested another. Still under pressure, the bank raised its discount rate to 6 percent on June 8 and 7.5 percent on June 16. The new credit was arranged by the BIS, by June 14 this time, but subject to the condition that the Austrian government should obtain a two-to-three year loan abroad for 150 million schillings. At this point the French interposed the condition that the Austrian government should abandon the customs union with Germany. The Austrian government refused, and it fell...

Update 12/17/2009 - We did pick up some extra dollar longs on the bounce, but not as much as we'd like. The size of the move today is quite unexpected, and gives us pause.
We've isolated a likely turn date range of between 12/28 and about 1/19, but aren't "religious" about it - we'll still not fight the markets or their displayed trends.
Cotton has been on a tear for the last few weeks, coffee hit new highs but pulled back today, sugar and cocoa have hit new highs, cattle and hogs trying to break overhead resistance... all bear close watching, especially cotton.
NB: FASB is on the move with attempted changes back towards mark-to-market, after loosening up date coincident with the stock market bottom in March - fair warning...

Big perspectives and thoughts

Major reasons for gold price changes, in no particular order:
  1. Limits in supply, "peak cheap gold"
  2. Changes in demand (investment, jewelry, manufacturing, central bank etc.)
  3. Inflation direction & speed of change
  4. Real interest rate direction
  5. Fear - social, political, "financial system", peer pressure, safe haven
  6. Changes in confidence of money or a given currency or the "financial system"
  7. Manipulation/control/intervention by central banks and others
  8. Mania
  9. Technical analysis factors
This is not intended as a complete list but at least provides a framework within which to judge price action.

Some of the major ways the whole world wide economic and political issues could play out, in no particular order:
  1. Inflationary or hyperinflationary depression, aka very significant stagflation
  2. Deflationary depression
  3. Debt restructuring
  4. "Rescue" by the IMF, BIS & World Bank (or similar institutions) involving a new world currency etc.
  5. Debt jubilee, partial or not
  6. Wars of varying sizes
  7. Large population decreases, due to disease, weather events, energy and/or food shortages, or other Malthusian issues.
  8. "New World Order" - oligarchy, fascism, corporatism, kleptocracy, etc.

    On the brighter side:
  9. Energy breakthroughs
  10. True leaders and statesmen emerge
  11. "Age of Aquarius" factors, in other words very unexpected positive changes - aka, "white swans"

    And obviously, various combinations of the above.

Prior years blogs