Gold, Food, & Oil Tactics Update
By Stewart Thomson07/06/2010
- For the past 6 months or so, I’ve tried to show the gold community the blood-relative link between GOLD and FOOD. Here’s the wheat chart. It’s been a cornucopia of profits for those who bought into the lows. Wheat Daily Chart July 6
- I’m talking about the markets, not the survival pouches of both gold and food, although that should not be ignored either. One of my richest paid subscribers, billionaire T-Rex, has been buying massive tracts of farmland over the past few years.
- Jim “mighty man” Rogers has done the same, and Mighty Man calls the agricultural markets the best value in the world today.
- Value plays are where all the real wealth is built, and food is right now the ultimate value play. Here’s the Corn Chart
- Note the Fibonacci retracement line at the 370 region. That’s your first buy point IF price corrects, and IF you are out. It should be very modest in size. Always assume you are wrong in the market when calling a top or bottom, if you are interested in making money. Money-making and projecting the market are related, but not the same thing. Profits had to be booked this morning in the food markets, but only on trading positions, not core positions.
- The banksters understand this reality the best, and, not surprisingly, Public Investors have the lowest grasp of the concept, and the lowest wealth. Is there a correlation? Obviously there is. Public Investors if you can believe it, are actually net short the food markets. See COT reports at Comittment of Traders and you can see the public investors (non-reportables) holding massive net short positions in corn, wheat, soybean, and doing it with huge leverage, against the banksters, into the recent lows. The public “knew” the food glut would never end. Wrong. Some of you know the Canadian Wheat Board is projecting the smallest wheat crop since 1971. Is the public paying attention? NO. What entity is going to buy that short position when the public bails? Answer nobody at these prices.
- I emphasized the new horror reported on Bloomberg News, the new horror that “Elmer Fudd” Public Investor has been focused on buying the “principal-protected” derivatives products, which could be a “growth with safety” scam hawked to him by the laughing banksters, after they blew him to kingdom come in the stock and real estate markets. Public investors tend to disdain value, and patience. Wealth is built with an understanding of TIME & VALUE. Respect time, and understand there’s a reason it’s called “Father Time”, not “My Personal Slave is called Time”. Professionals understand time rules them, not the other way round. Most investors want “the juice”. If a market offers 1000% gains, they want to leverage it to make 10,000%. This thinking is madness for anything but wild gambling money. What the banksters do, and the best hedge fund managers do, and this point is all-critical, what they do is they leverage consistency.
- If somebody is gaining 5% a year with tiny drawdowns, there is vastly more opportunity in leveraging that performance, than trying to figure out that since gold could rise to $1500, if I leverage that 10 times over, I make $3000. That’s true, but if the item has volatility, I’m wiped out long before I make any $3000 an ounce.
- Those of you that are gamblers need to sit down and decide the right amount of leverage. You’re probably trading 5-10 times too big. Professional hedge fund managers will typically allocate 1% of their fund assets to a gamble and carry just 1 or 2 gambles a year. The rest of the assets are allocated to leveraging consistency.
- Corn, wheat, and soybeans are on a short-term tear upside right now, while oil and gold flounder, with the shorter-term charts looking terrible. Much more importantly than any hot streak this week, the food markets may be putting in bottom prices that may not be seen again for 10, 20, or 30 years.
- Here’s the oil chart, basis USO-nyse. Oil Wedge Chart I see a lot of technicians frequently drawing wedge chart formations on various charts, when there is actually a parallel upchannel. Using high and low points from a previous up or down trend to create a wedge pattern in a current up or down trend produces a “fantasy wedge” (and real losses on positions put on based on these fantasies). The gold community lost millions trying to short the stock market based on a perceived rising wedge that I adamantly maintained was a parallel upchannel. I’ve highlighted a real wedge pattern on the oil chart, using a blue demand line and a red supply line. Here’s the Oil Monthly Chart.
- Note the huge HSR (horizontal support and resistance) in the 40 area. It is actually more in the 42 area, but I like to deliberately be inaccurate with charts, erring on the side of risk, not reward. It also serves to remind me that I’m not smarter than liquidity flows. What is happening in the oil market now is that investors who bought at the 40 area on the way up to the high at 119, and bought in the 40 area on the way down, well, all want OUT of oil. Many want out of risk altogether. They are going into cash in another price-chase, and doing so at the most horrific time to do so in 80 years, and arguably the most horrific time in all of history.
- Nick Moore, head commodities guru for Scotland’s top bank, says commodities will be back in vogue within 12 months as the “go to” asset. You need to be already in the market when that happens, or you’ll be back chasing price, back getting whipped in and out of by the banksters. Again, remember my statement in the next paragraph, that to avoid being attacked by the banksters, your market entry points need to be isolated from the actions of other groups of size, namely the fundsters and Elmer Fudd Public Investor. Oil looks lower, yes. In time, USO at $42 will look like gold at $400 does now. Don’t back up any oil tanker truck on the buy, but feather in, as the banksters do, using my pyramid generator to execute in action professionally. Preferably, your buys grow in size, all the way to zero. The oil market is getting lonely, which means the banksters are not that interested in mauling the new buyers of these levels.
- The banksters have so much wealth, that their MARKS are always, by definition, huge groups of investors engaged in mass-action. If you want to survive the market wars, you are best served by not being a target. The idea that “well, everyone else is worse off, so I’m relatively the same” works in a market correction, not in a wipeout. If everyone else is headed to the breadline (very possible if not likely), or the gulag, I would suggest that type of “relative logic” is flawed at best. The lower the price of a solid asset is, the less the odds are of it going to zero. The lower the price of an item is, the more that Elmer Fudd public investor will scream that it is going to zero. With food, if prices fall low enough, starvation occurs as farmers abandon fields. Bottom line: Elmer Fudd goes to zero long before food does. This horror can happen more quickly than most people think, and has many times over history. Starvation tends to be a bit of a wake-up call, agreed?
- The time is now for leveraged investors to use modest leverage in the grains markets, as it was at gold $300. If you like getting electrocuted on a regular basis with a million volt bankster powerline, then wait for the grains to trade over $20 a bushel before using leverage. Using leverage is VERY difficult NOW in the food markets. At $20 a bushel, it will be hundreds of times more difficult. The typical futures trader uses 10 to 1 or 20 to 1 leverage. That’s vastly too high, and is the sole reason they build a blood bank, not wealth. Options can mitigate some parts of that risk, but how many people build wealth with options? Answer: Almost none. If you bought $4 of wheat with $3 of paper money, that is a huge amount of leverage, and can build enormous wealth. Do you drink a few glasses of fine wine with dinner, or swig down 20 bottles? Approach leverage the same way, with class.
- If you don’t normally use leverage, should you use it now in the food markets? NO. You don’t need leverage to build wealth, but for those who have a history of using leverage, now is the time to consider looking in the mirror, and making the decision to use leverage professionally to build real wealth with a real opportunity. It means a big step down in the amount of leverage, and a big step up in the amount of time you are prepared to wait for your leveraged wine to age properly. As price rises, you withdraw leverage, phasing down to zero, the exact opposite of the action of most investors.
- Obviously, I’m ringing the cash registers in the grains markets this morning with my trading positions. Price rises, the pyramid generator triggers the sells into strength. Strength must be sold, and weakness and that’s non-negotiable if you want to build wealth and sleep properly.
- Just because your analysis tells you a market is going lower does not mean you should not be buying now. That concept is another little-understood one, and big surprise, another key wealth-building tool. The gold chart looks lower. You know it, I know it, the banksters know it, the funds know it, and even some Elmer Fudds know it. The banksters are buying anyways and so am I.
- Why would you buy now, when you “know” price is going lower? A number of reasons: First, if you are committed to gold as the ultimate asset, you know that over time, the current price gridline points, in terms of paper money, will be dwarfed. Second, natural and man-made super events, like the Iceland volacano that has yet to explode but likely will, or a nuclear attack by a rogue state or terrorist cell, could cause the gold price to explode upside, turning your bear signals on your charts into graffiti. There is the possibility of an emergency G20 meet to deal with a looming US dollar currency crisis, caused by the use of OTC derivatives by now technically bankrupt city and state govts. There are the long term gold buy programs of the world’s central banks. The list goes on, and on, and on.
- Here’s the daily gold chart for the GDX, the gold stocks ETF. GDX Daily Chart. The Sell Signals are Buy Signals for YOU
- Most in the gold community own gold stocks, and a lot of them. I don’t see anything on that chart to be of concern. Projected lower price and concern should be separated. You should be concerned if you are piloting the good ship Gold Cork; if you are fully invested in gold at the 2006 highs or the 2008 highs, you should be concerned, but not in the way that you are likely concerned now.
- Here’s where I differ from most gold analysts, and from most investors: If you are a “gold cork”, I would not be concerned about your current positions. That concern is directly correlated to your obsession with paper money, as opposed to wealth building. You should be concerned that you have no ability to buy more as the price of your gold items in paper money declines. That’s a key point that is very well understood by gold fund managers, but not very well by individual investors in the gold community.
- The $55 zone on the GDX is widely followed in the gold community, because it is such a key high. It is a key high because so many people bought there, afraid gold stocks were “getting away”. To make money, you want to operate against your own emotions and under the radar screen of the banksters. I’ve termed the fall to $49 “Black Thursday”, and have noted to subscribers that I absolutely believe the gold community and the fund community bailed on hundreds of millions of dollars of gold into those lows at gold $1196 and GDX $49, and horrifically, they are using the same failed tactics, now, that failed them then, to look for a bottom.
- Let me elaborate further. You bought in size basis $55 on GDX and liquidated at $49, or at least considered bailing. The chart now shows some short term signs of bottoming, but it looks like the daily chart “downcycle” has further to go. The problem for you, is that the banksters operate by creating large bait traps. While the GDX may well bottom at say, $45, what if it doesn’t? When you PLOP in a big wad of capital based on your analysis at $45, what happens to you if the banksters maul the price to $40? Answer: You bail. While $49 is unlikely to be any final bottom, price could gyrate between $49 and $55 and you could book profit, perhaps numerous times, while everyone else stands there in audience mode. Move in the market quietly, not waving a flag. “Here I am Mrs Bankster, together with the MACD cross mob, come and get me!”. I don’t suggest you engage in that action unless you have a death wish.
- Calling tops and bottoms with technical, fundamental, and cyclical anlaysis doesn’t build wealth. All the banksters need to do is whipsaw the market, and since they see where all the stoplosses and entry points are, it is not rocket science for them to say good-bye to you in very short order.
- Here’s the bullion chart, in paper money. Gold Daily Chart. Looks Lower. So Start Buying, Obviously.
In time, you’ll find the price of gold in paper money starts to lose power and lose meaning for yourself. “So what if the price is up $30, or down $30”, you say. What matters is how you use that information to accumulate ounces. What matters is your ounces count, not your paper money count. I gave subscribers a very clear picture on the week-end of the difference between a display case full of gold bought last week, and a display case full of toilet paper money that is the remains of failed market plays. That’s a double kick in the financial head. You attempt to buy gold, but buy too much, panic, and end up with even less paper money than you had before you bought the gold! Now you are staring at a display case full of paper money unsure of your next smove, totally demoralized. Let’s end that insanity today:
- I discussed the GLD-n ETF product that is highly suspect, in terms of whether it holds the gold it claims to, for the people it claims to hold it for. This ETF is far more liquid than the others, and trades early in the morning when the others have massive bid-ask spreads. It is the ultimate gold shorting vehicle with the kicker that it could be a fraud! I’m currently running a short GLD-n program with my pyramid generator, using about 15% of my long gold allocation. I would NOT trade GLD-n from the long side. Rather than playing Sherlock Holmes and trying to pick the exact bottom of the gold sell-off, I suggest running an up to 30% short position against your much larger gold long positions, while you buy this weakness of gold against paper money. That weakness of gold against paper money should NOT be a concern for your existing positions of gold ultra-wealth, but only a concern if you are not in a position to build more gold wealth.
About Stewart Thomson
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