Operation "Wash out" has hit first road block at USD 0.8 level.
This historical manipulation in the "free markets" will be remembered as a criminal attempt to change the natural cause of things. US dollar will be the victim, insiders from the Street will make tons of money, politicians will try to postpone day of reckoning, American families will pay for all this party in decades to come.
Until today it looked like new happiness was found: you can take as many debt as you like - your currency will only get stronger. Saudis are very motivated to keep the status in Washington DC and are pumping oil under 100USD, they need to keep in office the same guys who would like to bring democracy to the oil producing countries, next to them.
Problem is that you can run this circus only for a while: there are no friends on this party. Everybody is looking for himself: Chinese will be the first for this fire sell in commodities. Everybody is interested to keep USD alive, but motions are completely different. Everybody apart from Treasury would like to have it higher to sell and make its decline orderly so that they can get out of US Dollar positions. But here I am wrong: what ever Treasury is telling you about the strong dollar is not very true: the only manageable way out of these debts is to inflate it out, more money created - lower value of it.
Situation is very different in the world and rally in the dollar was explained as flight to safety and that there are bigger problems in Europe and outside USA. I have not heard recently that another country took overnight 5.4 trillion debt on its books. European Central Bank has told that they are not going to cut rates any time soon. German export is up 7% in July on falling Euro. China has announced that Europe has become the biggest export market for them. Europe will be comfortable in the range between 1.4 and 1.5 Euro for USD. What will happen with US export at a stronger dollar? Trade deficit recently widens to 62.2 billion vs expected 58 billion dollars.
We are waiting for this weekend news: who will be chosen victim to buy Lehman Brothers LEH and whether rate will be cut even before FED meeting. AIG has penned itself down for a bailout candidate as well. Auto guys are making rounds in order to get for "energy security initiatives" 25 billion dollars in loans.
TYX was flying today signaling that there is less appetite to buy any of the "triple A" staff at Yield below inflation rate.
On another side of trade Russians have announced that they will use their Reserve fund of over 600 billion dollars to buy into local market after 50% sell off. Chinese will be next with their 1.8 trillion in Reserves. Foreigners are taking money from emerging markets back to "safety" of US Treasuries? I like this particular spin - I would dare to tell you that US Treasury was buying with means of PPT from Cayman islands this staff to pop up the dollar and to keep its market together. As for emerging markets and foreigners there - I can not imaging how much should you pay anyone to make it happen: "Chinese strategy" in action. Russia, China and Brasil will be happy in the end to have opportunity to buy back their resources stocks or financials controlling financing for that matter with 50% discount - they can afford it. And wait to see them soon in Canada buying the same staff in the ground. USA is in different position here - deficit has ballooned to 407 billions before all these "weekend exercises".
New Bull Legs are started exactly at this stages of total desperation. Many were burned during this manipulation, no matter how clever you are when phone rings with margin call you are done. I have had these experience first hand and with very interesting amounts, so I do know what I am talking about. From many stupid actions recently I am grateful to myself that I get into this stage of our Bull market in the position that I am not forced to sell and still have "Dry Powder" for rock and roll using my proceeds from PUT options. Recent fire sell was caused by panic selling and margin calls liquidations, few hedge funds exploded and such clever guys as RAB Capital are negotiating freeze of redemption from their Special Situation Fund. Another option is fund liquidation.
Yesterday action was very important in the Gold market: when HUI and XAU rallied with Gold under pressure, it is first bullish sign. Today all Commodities, Gold and Silver were railing and just reminding what is the bull market means, when it is not interrupted. Any sign of life out there apart from All Important USA will drive this market back in no time. This things are still needed and they are not coming from the printing press. You have to find them, develop them, finance the mine and start production.
We are facing new stage in the Bull Market which will bring us to the new highs, discipline, home work and commitment will separate those who will make money and those who will participate in the show.
We are all lemmings in this investment world and we need guidance. Going together over the cliff nowadays is considered as a much better option then sitting alone. It is nice to have Jim Rogers on the same side of trade:
“Commodity prices will go up whether governments impose controls or not as there is a serious supply-side problem.”
He said the bull run in crude oil prices is not over yet and expects prices of sugar, cotton and coffee to rise sharply.
“Zinc and silver prices may also witness some upside,” Rogers said. He said despite the fall in gold, he is not selling the yellow metal and will buy more if it falls further."
He said the bull run in crude oil prices is not over yet and expects prices of sugar, cotton and coffee to rise sharply.
“Zinc and silver prices may also witness some upside,” Rogers said. He said despite the fall in gold, he is not selling the yellow metal and will buy more if it falls further."
I am acting as a contrarian and Zinc is attracting me these days, I like that Jim has mentioned it. Price has collapsed to 0.75 USD from 2.0 USD just within couple of years. At this level Chinese started to close production. All that supply calculated in new mines in years to come will not be materialised with recent financial situation and country risk aversion at these price level. Only the lazy once were not shorting it. Should the situation change and everybody will be on one side of trade long position will be the killer. Important as usual country, people, near term catalyst.
My favorite M&A target Zinc play today announced its name change:
All other guys are just waiting for a strong hands to run:
SST.v, SLW, AUY, RGLD, TNR.v to mention a few.
Action of Royal Gold RGLD as an early indicator for Gold is very interesting: stock has hold very well and did not collapsed as others with Gold decline. It could indicate that recovery will be explosive. But in the today real "free economy" world do not forget that you will become rich only if you are solvent at any given point in time to your riches.
Silver has been bitten down more then 50% and should it become unnatural as well and new money will come into the market highly leveraged Silver Wheaton SLW and its small brother Silverstone Resources SST.v will benefit handsomely.
TNR Gold TNR.v has recently decided to sign up new speculators in its club and provided a Sale with 0.16CAD today. Wait for a news on this one: legal action is under way and drilling programmes are well advanced.
I have taken profit from my USD500 Jan 2009 PUTs on Google, so many juniors are selling at value of their office equipment, so drills you are getting just for free and resources looks like nobody needs any more.
Should I be wrong and it is really the case that commodities will not be needed any more: my Google PUTs 430 and 370 will pay off for a few decades of candles supply and oil must be cheap as well to run my generator to enjoy my blogging or will we need Internet after all in those times? Do not get me wrong here: I do not like to read with candles!
I will be grateful if God will soon reveal his plan for positive outcome when real things and assets will be in demand, honesty will be respected and inflated financial assets will depreciate to there real value, discounted on all those relentless derivatives write on them.
I do not even ask that criminals will be put in jail, it will be too much and it is not our prerogative.
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