Goldrunner's ripost - touche

Again, taken from the G.E. site, Goldrunner steadies his sword with some of his finest analysis since May. North's post is worth reading, too, over at G.E.


Sorry, Half_Monty................
(goldrunner) Aug 28, 21:50

....But I certainly am not buying that crap.....smile. So, you are a trader, now?....LOL.

IMO, we are certainly not in any kind of extended Wave II after having moved to new highs. Wave III commenced at HUI 165 and ran to new highs. This sideways movement will only define the coming runs higher in the rest of Wave III as "even higher than expected." You mentioned the deflation/ inflation scare cycles, but those are exactly what I have talked about all along as having created the fractal relationships that have appeared in the HUI index all along. I might have termed then in relation to "liquidity cycles", but effectively it is the same thing- a massive deflationary backdrop intertwined with massive dollar inflation by the Fed.

While the HUI had moved basically sideways the fundamentals for the PM sector have climbed steadily on all fronts. It is only the "psychology of the market participants" that has run down the illogical road, IMO, over a short-term course of time. This has certainly been helped by the Fed cloaking M3, messing with the CPI numbers and the CRB index, in fact, the Fed has openly discussed "the perception of the markets" because that has been their focus. Yet, those things do not change the facts and fundamentals of the PM sector in this Historical PM Bull Market.

There has been absolutely no PM crash, only the expected drop in the HUI from the 400 levels down to what I was suggesting would be to around 320ish long before we ever reached those 400 levels. Thus, the HUI has only moved in a sideways band while the Fed has printed dollars out the wazzu, pointed to the "Cayman Islands" buying the US debt, and changed the CPI and CRB indices around to affect market psychology as best it can while it tries to support the general markets........and that does not even mention the apparent monetization of this real estate/ subprime mess, spelled "D-e-r-i-v-a-t-v-e M-e-l-t-d-o-w-n."

In fact, the general markets have topped, and I still expect the general markets to rollover all the way into 2008 with the usual rallies along the way. The general market topped and dropped while the HUI has been moving sideways- a sign of strength if you will, if not of outperformance. Every single one of those PM companies still hold the ounces in the ground that they held, before, and as the smell of "paper burning" eventually inundates the olfactory senses of mass psychology of the market participants, the PM sector will be the small "Island of Safety" that investors have left to seek.

I find it curious that you have "bought" the Fed's line at this time like the average Joe across the board.......Goldilocks, eh? Well, a tidal wave of inflation might keep the general markets from completely melting down, in fact, might support them in the long run, but if so, then the PM sector will look like a rocket heading for Venus.

So, why the Fed assault on M3, the CPI, the CRB, market perception, monetization, etc.....at this time? Well, that is quite obvious since the next run on the upside will be to new historical highs in Gold which will set off alarm bells and whistles all over the world.......Stagflation City. The Fed can twist arms and stall things out because people get caught up in all of their distractions, but they have already created the fundamentals of what is to come.

Will the PM stocks sell-off as the general market falls deeper into September/ October? I guess that all depends on how many investors pee their pants and sell off their PM holdings that common sense and the fundamentals suggest they really need to protect them into the future. The truth is that the Fed has not control over anything at this time except for the minds of investors. In reality, the "Fed has no clothes." In reality, the rubber band of PM fundamentals just keeps getting stretched farther and farther. There can only really be one result to all of this........SNAP!.....AND ONLY THE PMS WILL PROVIDE YOU WITH SAFETY.

The only question remaining will be "Physical only, or a combination of Physical and PM stocks?" If pure deflation was the answer, then holding only physical Gold and Silver would be the answer. If the Fed is going to continue to fight the deflationary backdrop with massive dollar inflation, then it seems to me that a combination of physical and PM stocks is the better route to take. There is little doubt in my mind that the Fed will continue the massive dollar inflation to protect "their own" while they burn the dollar down. Thus a combination of physical and PM stocks will be my choice for the immediate future. Or, as old Ed Hart used to say on the old FNN station, "We might be going to hell in a handbasket, but by GOD, we are going to trade our way, there."

All of the above is only my opinion, of course, but we shall certainly see what happens. The HUI has rock solid support between 250 and 260.

GR

If we are Rome, Wall Street's our Coliseum

The analogy of the US as modern Rome has been made before. But with the frozen corporate paper markets and companies and institutions rush to cash we could see the biggest financial crash of our lifetimes over the next few months. This article focuses on an honest man who holds one of the highest fiduciary offices in America. America's Comptroller General, David Walker, has been telling it like it is for sometime. I thought that today's article published in Marketwatch was worth reposting here. Although I take issue with Walker's point on "entitlement reform". Surely raising taxes on the rich would be more like it! They've got off scott free for years and are mostly responsible for getting us into this mess.


PAUL B. FARRELL
If we are Rome, Wall Street's our Coliseum
Comptroller General warns (again), we're 'bankrupting America'
By Paul B. Farrell, MarketWatch
Quotes ARROYO GRANDE, Calif. (MarketWatch) -- What do Cassandra, "Chicken Little," the "Boy Who Cried Wolf" and David Walker, America's Comptroller General and head of the U.S. Government Accountability Office, all have in common?

Nobody pays attention to them!
Well, at least not until it's too late. Or till a brutal catastrophe wakes us up, forcing us into action. History's a great teacher, but so few graduate. Nobody listened to Churchill's warnings, until Hitler invaded France. We sat on the sidelines till Pearl Harbor.

It takes a 9/11. Before the direct hit, history lessons are academic. The David Walkers of the world are merely tolerated. We're polite, but nobody's really listening. In fact I missed his recent talk in Chicago. ... even though the Comptroller General may be the only Washington insider we can trust to tell us the unvarnished truth ... even though he was interviewed on "60 Minutes" in March, where he admitted that elected officials don't want to hear that they're "bankrupting America" ...even though he's now on a "Fiscal Wake-up Tour" traveling across America taking his message directly to the people in town-hall style meetings ...
and even though he's one of my heroes, and I encouraged readers to make him a write-in candidate during the 2006 elections. See previous Paul B. Farrell.
Except for a short piece in London's Financial Times, Walker's warnings were generally ignored by the American press, by the public and even by the very Congress that hired him and has the power to do something, yet still refuses to heed his warnings.

We're in denial, tuning out ... Americans just don't want to hear this modern day Cassandra's wolf cries about the sky falling ... ignoring history, we're determined to wait till the last minute, until the sky does fall, until the wolf does bite us.
So why did I do a double-take and listen? Because this time Walker used the "R" word. No, not recession, but "Rome." Listen:
"America is a great nation, probably the greatest in history. But if we want to keep America great, we have to recognize reality and make needed changes ... There are striking similarities between America's current situation and that of another great power from the past: Rome.

"The Roman Empire lasted 1,000 years, but only about half that time as a republic. The Roman Republic fell for many reasons, but three reasons are worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government. Sound familiar?"

History lessons
Truth is, Americans rarely learn from history. We're short-term thinkers, reactors. Crises turn us on! In fact, we love setting them up, tempting fate, waiting at the brink of disaster ... even when we have intelligence warning us of an eminent attack.

Why? Because America's economic brain is a myopic computer programmed for instant gratification, not long-term planning. Years of brainwashing focuses on the latest fashions, today's store sales, Wall Street's relentless minute-to-minute trading. We assume that "tomorrow will take care of itself," and that the government will bail us out, like the Fed did recently with the discount rate. But, Walker warns, you can't trust government with your future:

"Unfortunately, our government's track record in adapting to new conditions and meeting new challenges isn't very good. Much of the federal government remains overly bureaucratic, myopic, narrowly focused and based on the past. ... Hurricanes Katrina and Rita brought that point home in a painful way ... Public confidence in the ability of government to meet basic needs was severely shaken ... If our government can't handle known threats like natural disasters, it's only fair to wonder what other public services may be at risk."

Walker's the one person in America with a nonpartisan, solidly analytical understanding of America's economic future, backed by 3,000 GAO employees analyzing every possible scenario ... and yet, his message is largely ignored. Nobody wants to hear the Comptroller General (or anyone else) warn us that ... "Entitlement reform is especially urgent. Unless we reform Social Security, Medicare, and Medicaid, these programs will eventually crowd out all other federal spending. Otherwise, by 2040 our government could be doing little more than sending out Social Security checks and paying interest on our massive national debt."
We've written often about this "coming storm." See previous Paul B. Farrell.

Debt burden
But here it's coming from the one Washington insider who knows the facts and has no "axe to grind." Walker delivered a powerful speech in Chicago, titled "Transforming Government to Meet the Demands of the 21st Century." And it boils down to the single problem that'll destroy America from within ... oppressive debt from out-of-control spending:

"Transforming government and aligning it with modern needs is even more urgent because of our nation's large and growing fiscal imbalance. Simply stated, America is on a path toward an explosion of debt. And that indebtedness threatens our country's, our children's and our grandchildren's futures. With the looming retirement of the baby boomers, spiraling health-care costs, plummeting savings rates, and increasing reliance on foreign lenders, we face unprecedented fiscal risks."

After reading Walker's speech the real reason nobody listens suddenly hit me. He's too nice. Too rational. Too matter-of-fact. Maybe he should go wild like cable-TV showman Jim Cramer, throwing a childish tantrum to get Daddy Bernanke's attention, forcing him to drop the Fed's discount rate. And yet, if our economy and markets are ever going to be "transformed," it'll take a cool, rational, long-term thinker like Walker, not a myopic stock market fanatic going ballistic, demanding a quick-fix from daddy!

When Walker talks, he undoubtedly has in the back of his mind Cullen Murphy's bestseller, "Are We Rome? The Fall of an Empire and the Fate of America." You can find many online analyses of Murphy's six scary parallels between America and Rome:
-Self-centered aggrandizing of the capital city
-Overextended military unsuited for global empire
-Myopic, distrusting, isolationist view of the world
-Big government, too complex, unmanageable, risky
-Privatization of public responsibilities breeding greed
-Porous borders and failed immigration policies

But the scariest of all parallels is not one either Walker or Murphy see between the two empires. The scariest parallel is Wall Street with millions of daily duels to the death.

Wall Street is a metaphor for the Coliseum where Romans fought not just individual duels, but fought a much deeper battle for the heart and soul of the republic -- and lost. The Coliseum was symbolic of their obsession with wealth and material excesses, destroying its values, exposing its vulnerability ... until eventually Rome was overrun by outsiders. "Sound familiar?"

Here's Walker's history lesson for Wall Street: "It's useful to remember at the end of the 19th century, the original Dow Jones Industrial Average consisted of 12 stocks. These were all powerful companies, the leaders in their fields. Names like National Lead, U.S. Rubber, and Tennessee Coal and Iron were the Microsofts and Wal-Marts of their day. It's sobering to realize only one of the original 12 Dow Jones companies survives today, and that's GE. The rest couldn't adapt to changing conditions and either merged with competitors or went out of business."

Makes you wonder if maybe, just maybe, Wall Street itself might eventually look like today's crumbling Roman Coliseum ... and take "The Empire" down with it?

"Becoming Jane" a movie imaginitively based on young Jane Austen

With the new term just over a week away students, especially those sitting the exam in January, would do well to see "Becoming Jane", a movie loosely based on Jane Austen's life. The historical and literary contexts of Austen's novels are well presented in the film and AO5i is the most important assessment objective for "Emma" in AS. Here's a taster video and a trailer from the film.

Goldrunner and his fractured fractals

This is another post about interesting posters on gold and the PM markets.

The American poster,Goldrunner, made his name as a PM poster by making several extensive contributions to the Gold Eagle Forum from 2003. He seemed to arrive shortly after Captain Hook when the latter left to sell his skills on his own site. From late 2005 Goldrunner also produced articles detailing his analysis, opinions and forecasts for gold and the HUI.

http://www.goldeagle.com/research/goldrunnerndx.html

He is by profession a dentist although he could probably make a good living through technical analysis as he probably one of the leading exponents of this “art”.

Vronsky, the moderator of Gold Eagle valued Goldrunner so highly that gave this poster the epithet “venerable” when praising Goldrunner’s “wisdom and posts”. Goldrunner always praised Vronsky at the end of his articles and in particular, Vronksy’s Gold Eagle Forum for offering such an informative platform for goldbugs. As the moderator was given to blocking posters’ posting privileges for no apparent reason, or perhaps, for not being interesting enough, Goldrunner’s thankful comments sometimes seemed overly grateful and even obsequious. Although with such a control freak running Gold Eagle Goldrunner was probably trying to stay the on right side of him.

Goldrunner is very good at fundamental analysis; however he is known best for advocating fractal analysis as the fractals have similarities in charts that show identical movements over time. They have, as Goldrunner stated in his most recent article, “historical chart patterns”. The term, fractal, is also used to relate how clouds or images in art or wallpaper can have similar if not identical recurring patterns. Like Fibonaci numbers the patterns are regular and natural as they can be found in nature.

Goldrunner has argued for some time that Wave III of the Eliot wave in gold is due and that it will take gold and the HUI (the unhedged goldminers index) to new highs. He freely admits that he expected this wave some time ago and that the chart pattern seems to be playing out longer than he expected. Given that almost every goldbug, this one included, is mostly wrong, that does not invalidate Goldrunner’s fractal analysis. This is because he argues that sometimes fractals can only be fully seen in a retrospective manner. It is possibly also true as the central banks’ manipulation of the gold market on account of the weak Dollar, fragile stockmarkets and falling house-prices, unhelpfully elongated the timescale for the next upward move up in the bull market for gold and its associated PM stocks.

This poster obtained real kudos by calling the last move in gold and the HUI in late 2005. He nailed its high and he was also accurate on how far the HUI would retrace its move. The only problem is that this retracement did not just happen once, it happened twice. Still, this does not invalidate Goldrunner’s charts or figures. He seems to have coined the term “Verticalicious” as this is how he thinks the next move up in the HUI will appear.

Goldrunner's "Ride on a rail" charts from February this year.

Click on the charts for their full size.

The long correction in gold and the HUI has led to some sniping of Goldrunner by other posters at the Gold Eagle Forum. Posters who are careful not to give timescales for the next HUI advance and are cautious over the path of gold and silver have attacked Goldrunner over the last few months. Maddog, who is seemingly English, is one such poster. Half Monty is another. Ultimately, these posters disagree with Goldrunner’s ideas on fractal analysis. Given the length of the correction they have a point. Although that does not invalidate Goldrunner’s chart targets once Wave III actually begins. And he had the courage to commit himself to time-scales and figures when others would not do so.

Another poster, Stephen Swink, has successfully traded the trading ranges within the 18 month HUI correction. Goldrunner preferred to wait out the correction and only trade the wide range from its top to the bottom and not the swings between a narrowing trading range. This also led to friction between the two posters with each one suggesting that greater profits could accrue by either trading or not trading swings. Goldrunner disparagingly sees short term trading as “nickel flipping” because one could miss the real move in gold stocks. Again, the central banks’ manipulation of events has led to a longer period of swings between the trading ranges than perhaps even Swink expected. Still the move up, when it comes, will be a great money-maker and the buy and hold strategy at around HUI 320 should be a great bet!

Goldrunner may now be fed up with the barbs and seems to have lost his enthusiasm for posting; he may be waiting it out for the anticipated Wave III and will then resume posting when this gets underway. He would do better posting at Goldtent as there is much greater freedom there and his views would probably not attract envy or criticism. This, of course, would mean leaving Gold Eagle. But then perhaps such a move is way overdue. He is a clever poster whose take on events in the gold market is always worth reading. By now he has large following of readers who want to know his views. Talented and courageous Goldrunner has always been generous with his charts and ideas on the PM markets.

If you ever get to read this, how about it, Goldrunner?

Here’s an extract from his last article for Gold Eagle in May this year as this gives a taste of the quality of his posts. His charts can be seen in his articles using the link given near the beginning of this post.

“Back in early 05 I had put forth a "model" based on a historical chart pattern in the HUI that I thought would likely play out in the future. We saw that chart pattern play out into 2006 with an impulsive move to around 400. Since the following correction was expected to be a complicated affair with flat pattern emerging before another vertical period, my personal plan was to do some selling between HUI 385 to 393, then to re-buy in the 320 area for the next vertical leg of the HUI bull. At this juncture we know that my "time component" was off by about 3 months per year, but still this has been a longer correction than I would have expected strictly based on the earlier fractal sequence. That leaves questions. Why so? For how much longer? Will the fractal pattern still play out? Will the fractal pattern still potentially see the higher runs that I had expected? These are all questions that I ask myself since I invest based on the above fundamentals as I see them, along with my personal chart work.
My opinion at this time is that the fractal scenario will continue to play out. We will know by watching the movement of the HUI into late 2007 whether "time" will allow the potential targets into May of 08 to take the indext to the 1250ish level, or whether such a move will be extended into late 2008. Knowing that the last portion of the move will be fairly vertical, the potentials into May of 08 might still be on schedule. If not, it does not bother me much because the trend channel, if the timing is off into May of 08, will likely give us an even higher price potential the farther out we go.
Let's consider the psychology of market participants based on the perception of the fundamentals at this time. Sometimes markets can remain irrational longer than one would expect. I believe that this "irrational period" is about to suddenly end. Forget the smoke and mirrors that are creating the "market perspective." Forget the COT. The bottom line is that the market fundamentals will rule in the end. Market participants have been sold "low inflation" based on a horribly tainted CPI. They are being sold interesting "TIC data" showing Asian countries buying less of our debt with those losses being picked up out of the Cayman Islands. I can only imagine that Cayman Island debt buying being fueled one way or the other with newly printed dollars.......monetization of the debt either done directly by dollar printing, or indirectly done by a sweetheart deal combining dollar printing with credit being extended to some funds. IMO that is monetization of debt no matter how you look at it. Yet, the Bond participants seem to be caught in the same type of "perceptional maze" that Mr. Greenspan had noticed with "the strong dollar policy" hoax.”

Warwick Castle

Known for its earls in several Shakespeare plays, Warwick is a fine town with a magnificent castle. It's only six miles from Stratford and on a sunny day you can sit outside in the main market square and drink a pint of Polish beer. Not bad. Not bad at all - while I await the turn in precious metals and their associated stocks.

David Petch thinks the turn might take between four and six months. I think that it will be much sooner than that. Late August should see the turn and it will coincide with a gradual "flight to safety" from the main equity market. US one month and three month treasuries saw enormous demand this week. Gold's turn should be next because holders of US treasuries are surely holding depreciating assets. The Dollar will fall well below its current level and inflation is far higher than it is published by the Govt. Most western governments are doing the same - lying about inflation. The truth is the rarest commodity of all these days - rarer even than gold!

Just wish I had some funds to top up here. However I will not get leveraged to buy more gold and silver shares.

My next post will be on the PM poster, Goldrunner.

Shakespeare's birthplace in Stratford

I'm staying in Stratford Upon Avon for a few days, visiting all things Shakespeare. Shakespeare's birthplace is just next door to where I'm posting this message.

The town is just as picturesque as one would imagine. Although it is closer to London than I had thought.

For a man who concealed so much of his life it seems ironic that a whole tourist industry has grown up about it.

"After The Goldrush" by Neil Young

Still waiting for the modern goldrush! Perhaps it's somewhat early to post this - but it WILL happen!