The producer of the screed’s triumphant cry is…”Ding, Dong, the Bear is dead!”

Old piece of country wisdom: when you shoot a dangerous predator reload your weapon and take your own sweet time before approaching the presumed carcass. With your gun at the ready when you finally decide it is safe to assume the b’ar is actually dead. It may turn out the thing was only stunned — or it could have been playing ‘possum.

Don’t go riling a wounded animal up; let the adrenalin die down first. Yours and its.

Sure, we’re tired of the Bear but the market does not run to our wishes, so let’s be a little cautious. A genuine new Bull will be good for at least eighteen months and it is far better to forego the chance of capturing the market version of golf’s hole in one by calling the bottom exactly and jumping on your chosen stocks lest we find we have leapt imprudently to a ledge halfway between top and bottom with no way out but down (or averaging down.)

Let some braver soul stroll up and kick the bear, because I’m not going to do it.

From my side of the table the proposal gets a solid nix. My soul reaction (sic) is relatively polite surprise and shaking my head at the naivete of the intrepid who rush out to add to the old adage, “There’s a lot of money in the Stock Market. I know; I put a bunch of it there myself.”

Okay, so the Spring Fling has continued through the long hot summer, the Dow is up handsomely, and a pack of Statists who don’t know a round lot from a round up are shouting “Green shoots, ho!” from the Crow’s Nest.

In time, they will choke on those crows who are watching the absurd proceedings with interest.

The whole premise is ludicrous. The Bear is dead because losses have slowed in the durable goods sector, not counting transportation? The Bear is dead because a “jobless” recovery “is still a recovery?” The Bear is dead because connected players have trillions of electronic dollars stuffed in their computerized vaults? The Bear is dead because new job loss claims are down 20% from the stats of the last many weeks? All of which, as I recall, were revised upwards later? The Bear is dead because one of America’s most famous investment firms managed to lose another 15% of what’s left of ten thousand I overlooked two years ago when I meant to get totally out of the market? How can anyone be down to $4750 when the market is up 48% in recent months? Ted managed.

All of that is on a par with the wisdom of “You aren’t jobless if you have been looking unsuccessfully for more than six months or if you are drawing unemployment insurance!”

I didn’t have to listen to the hype coming out of Washington to ascertain whether or not I were interested in government bailouts. I find it equally easy to resist happy cries of, “C’mon in! The water’s fine!” when the swimmer isn’t in a nice, big, clear, chlorinated, filtered, and skimmed pool but has jumped, inexplicably, into one of the lakes here on the ranch.

If anyone asked I would advise against such a course. Our lakes contain a fascinating assortment of wild life I would not care to encounter personally. No, I do not know that there are still leeches in our West lake, but I do know they were there fifty years ago and I see no reason to suppose they have moved on. You can see snakes and snapping turtles. Big fish come out of there, and while we don’t have any alligators, it would be unpleasant to step on a catfish. I know. My mother did it, long ago, and ended up having to visit the hospital to have the spiny fins removed.

“If you can’t see your way clearly, don’t step into it,” sounds like an excellent guideline to me.

I have every reason to suppose that the current financial climate is just as full of disgusting, painful, and dangerous entities and a plethora of particularly potent phenomena and petrifying possibilities, along with, perhaps, putrescent products, to go alliterative on you.

Nope, I’m going to stay right here hunched over my ancient computer (my only “lightning” offer recently took eight seconds to initiate and was on the board for an eternity: thirteen seconds) trolling for bargains in Reed & Barton and terrific trades in Towle. I don’t intend to play “Let’s feed it to Mikey!” by plunging in stocks. Signature chuckle…literally, many times old, slow technology we understand is far more efficient than the latest model with Vista, which I unplugged after two frustrating days. Figuratively…stick with what we know.

A jobless recovery…a jobless recovery…rolling that around on my experienced intellectual tongue, I’m going to spit it out inelegantly. A “jobless” recovery is a concept so inane and insane that only a Keynesian Statist who has never even patronized, far less run, a hot dog stand could come up with such a phrase.

You all know that I’m a technical analyst when it comes to the literal Stock Market and that I use my own bizarre brand of pragmatism when it comes to finding places to park stored value safely. My son is the Finance major with an MBA, and I don’t know if even he mucks around in P/E. I’m the Philosopher and Counselor who “reads” behavior and reeks of common sense.

You can’t have a “jobless” recovery for reasons so basic a reasonably bright pre-schooler can discern them. People without jobs cannot consume more than the most meager basics, if those. The jobless cannot make payments on credit card debt or mortgages. They do not buy new cars even during the tragi-comedy which lasted less than a week, the duration of the destructive (literally) “Cash for Clunkers” program.

Statists come up with cute slogans for their idiotic ideas. America took a very large capital loss, destroying billions of dollars’ worth of perfectly good used car parts for a Green victory. That was the purpose of the drill: to ensure that other older cars would be harder to repair. To reduce the inventory of usable radiators and hubcaps, transmissions and dipsticks. It “worked” so well Congress has thrown twice as much money in the pot to see how many more can be induced to give up workable cars in return for lesser vehicles which will never make back their cost in gas savings.

What concerns me isn’t what I see and advise you to do, it is what I see and back away from telling you for reasons ranging from the fact that this is an investment site, not a political one, although those factors are definitely intertwined inextricably, to not wanting to look like more of a domestic errorist (If I put in the T it will trip an automatic program to have this e-mail read by some bureaucrat I would prefer not to benefit from such wisdom as I have) than Janet Napolitano already says I am.  The same day an overeager columnist declared the Bear’s demise, the Daily Bell, out of Switzerland, mentioned in print something I had known about for a couple of weeks. I believed it the first time a source sent it to me, and have had two different reports come across my screen prior to then.

Let’s make this hypothetical…what would your analysis and reaction be if you were told that large amounts of cash were being stuffed into diplomatic pouches with instructions, “Purchase all the local currency needed for a year’s operations?” Well…perhaps that the government thought it could save money because the current price is low? Snigger. Uh…that anticipated rising JP4 prices would curtail flights? Perhaps that electronic transfers of digits were not likely to be honored in host nations? Really reached for that one..who would dream of refusing USD..particularly considering the splendid reception of the last couple of offerings of US bonds? (Pretty much, we’re printing the things and selling them to ourselves, paying for them with money we printed ourselves. At last, a true perpetual motion machine. The world’s taste for fiscal cotton candy appears to be waning.)

How about if accumulating foreign currency is linked to a projected shortage of bank services, as in the anticipated imposition of bank “holidays?” That makes sense, the “holidays,” which would be “closures,” of course, have been on the table sporadically for a while…and just to make the matter more deadly, potentially, are usually linked with official devaluing of the dollar. Uh-oh. That one has a ring of plausibility to it greater than ding, dong, the Bear is dead.

You don’t need my (possibly paranoid) decision that the two best things we can do with money are to get it out of banks and to turn it into durable goods with all due dispatch.

I am definitely putting my remaining funds where my fears are. If Jesse James raids the banks he isn’t going to find much of mine to steal. Now, if Sherman marches through raping the pigs and stealing the chickens he’s going to do pretty well, at least on the first pass through. Yuh cain’t bury the livestock, but you could be hiding the smoked hams and great-grandfather’s gold-headed walking stick. And your clunkers.

Y’all do as you deem best, but here at the Whiskey Outpost the big pit over on th’ South Forty isn’t to bury the Bear in. We’re going to have a pig roast–and all my instincts say that so is the market!

Regards,
Linda Brady Traynham

August 11, 2009

P.S.: It is said that “Hindsight is 20-20,” which is another very large piece of nonsense. Few people ever figure out what happened in most instances. They do not learn from experience. A pertinent example is those twin debacles, the policies of FDR and the purported efficacy of socialized medicine.

The US is heading to the Greater Depression and our dear leader is determined to foist not only Canadian-style medical practices on us, but also the biggest “budget” deficit since the world began, the business-killing tax known as “Cap & Trade,” and the destruction of the small farmer and rancher under the noble title of the Food “Safety” Act, while Congress is hoping to add a VAT. I’ll discuss the everything-less “recovery” soon.

Ding, Dong, the Bear Is Dead was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.

Facts: The open interest in futures contracts on the Comex has fallen to its lowest level since summer 2005, breaking a general uptrend in place since 2001. From a contrarian standpoint, the short-term bottoms in these data tend to favor the buyers over the sellers. However, the statistic went into orbit during the last half of 2007 — it broke away from the upper channel on the charts, creating a bubble in appearance. The current extremity could simply be a symmetrical reaction to that extreme.

Nevertheless, this is a bearish fact, technically speaking, if it represents a lasting new trend.

It is tempting to suggest that the threat of a raid in futures contracts is causing a short squeeze.

It is true that the commercials are liquidating their short positions promptly. But the funds are increasing their short bets, and the liquidation of longs is such that the net short ratio has hardly budged off its mid-September low — which, incidentally, is a level that has coincided with strategic buying points at seven other junctures since the bull cycle began in 2001.

However, the record of this statistic in gold is unique in that during bear markets, the commercials tend to be net long (wrong) most of the time.

So the fact that they are covering their short interests on net does not necessarily presage a rally if a bear market has set in. A bear market would mean that gold prices could fall as far back as US$500.

Fundamentally, the conditions just don’t look ripe for a bear.

I don’t believe the COTs (Commitment of Traders report published by CFTC) have any real predictive value. They tell us only whether the market is too much extended one way or another; they don’t tell us how long those conditions will last. Right now, the structure of the market is healthy. The commercials are covering their shorts, the funds are getting short and the numbers basically favor the bulls. The contraction in open interest worries me a little, but it could be explained in terms of a collapse in spread trades linked to various index products.

In its most recent report on gold demand, the World Gold Council said as much in trying to explain the drop in the gold price in the context of soaring physical demand. In its third-quarter report on gold demand, the WGC noted growth in both jewelry and investment demand across the spectrum relative to both the last quarter and the year-ago quarter. I don’t want to go into a critique of the method here, except to point out that it chronically understates investment demand and overstates jewelry demand.

The inclusion of ETFs all but proves the point.

In just one year, investment demand has grown in importance from under 15% to over 30% of total gold demand, causing the deficit (supply shortfall) to grow nearly tenfold. The WGC interprets this deficit as supply coming from speculative sources, like futures trading or changes in inventories at the various exchanges — like at Comex. Thus, it calls it “inferred investment.” Formerly, it called this the “balance.” But as it grew, the WGC decided it meant something. What is causing it to grow, aside from growing demand in general, is that while the WGC is “identifying” new kinds of demand, it has not kept up with the various sources of supply. Gold bugs have argued for years that the supply of gold is not limited to mine production, officialdom or scrap… that it is not like other consumable commodities.

It is more useful to assume that most of the gold ever produced is held as a reserve, or store, aboveground. And if this is true, then investment demand must be much larger than the WGC calculates, or the price would, frankly, never go up. If the WGC is smart enough to include producer hedging (or dehedging) in the equation, it should also include a measure of demand that expresses itself through all the exchanges and bring itself up to speed on all the sources that supply the market. It assumes that jewelry demand dominates the market, which is incorrect, but even if it were, it still has the wrong idea.

Jewelry demand may be price sensitive in the short term, yet it has grown every year, at successively higher prices, since the bull market began. Despite my objections, however, I am in total agreement with the council’s explanation why gold prices have fallen despite the evidence of soaring gold demand:

“Notably, the selling captured by the [inferred] investment category was mainly by investors with a short-term focus. It largely reflects the fact that gold was caught in the downdraft of other commodities and other assets — it does not reflect a questioning of gold’s value or role as a safe haven. The strong buying in the ETF and bar and coin markets during the quarter, which reflects investors with largely a longer-term focus, suggests that investor belief in gold’s role as a safe haven and store of value is stronger than ever.”

Morgan & Citigroup Gold Analysts Bullish on Gold Regardless of Dollar

No wonder the commercials are covering. The establishment is getting hot for gold.

PMorgan’s gold analysts “urged” investors to stock up on gold this month, citing counterparty risk and tight supplies. See the article here.

Citigroup’s foreign exchange group also put out a bullish tout.

Well, that’s an understatement, actually. “[Gold] continues to look like a bull market to us. We continue to believe that a move of similar percentage to that seen in the 1976-1980 bull market can be seen, which would suggest a price north of $2,000,” Citigroup’s FX group said last week.

What I found particularly intriguing, besides the timing of these calls, was that they both discounted the dollar. That is, they noted, as I have in the past, that the foreign exchange value of the dollar may not be important at this stage. Morgan said, “It is not an absolute given that a rally in gold means a falling U.S. dollar,” while Citigroup pointed out, as I also have, examples of just such a situation during the 1970s.

Anyway, it’s not a sure thing yet, and it all makes great fodder for the bull market in gold.

Regards,
Ed Bugos

December 18, 2008

Bulls Rev up for Comex Raid, Commercials Exit Stage Left was originally featured on Whiskey and Gunpowder. Visit Laissez Faire Books for the best selection of libertarian book titles.