I am so confused tonight that I had to crowbar the booze cabinet in order
to calm my scrambled soul and ease the pain in my pseudo-analytical chest.
That's right. "PSEUDO" as opposed to "QUASI" and as
opposed to "FAUX." The latter two adjectives imply vagueness and
deceit and I would expect that my ramblings are a far cry away from vague
and, despite the fact that I spent thirty-seven years employed peddling
securities to people, certainly not with "deceit." Well, maybe a
tad of deceit but never of my making and always with honorable intent. Then
again, deceit is deceit and it might take a hard look into the inner workings
of the mirror to honestly decipher "intent." Outcome and impact are
far better conditions to observe in order to make any semblance of
"moral judgement" so I beg you all to be the final arbiters of this
tripe.
What sent me into veritable agony was the ease with which the surgeons of
market operations were able to pivot from "fiscal integrity" to
"monetary irresponsibility" with nothing more than a "written
statement" and a "rehearsed press conference." Every single
Federal Reserve Board "event" is rife with drama, suspense and the
inevitability of surprise, but not this one. It was carefully scripted,
cautiously crafted, and magnificently delivered by a man who claims that the
current POTUS has no authority to "fire" him. The result is that we
have just entered into the Twilight Zone of pre-election politics with the
"mightily revered stock market" as the scorecard from which the
U.S. voting public will decide. You will recall that in all elections prior
to the Millennium, GDP and employment numbers were all that mattered while
the stock market averages were a mere yawn on the face of John Q. Well,
welcome to the world of instantaneous satisfaction, delivered by others and appreciated
by none. The scorecard has been now officially rendered: Speculators 10,
Savers 0 (as in a great big fat ZERO). No need to ever again shop the
oh-so-trustworthy banks for a "competitive rate"; they have been
ordered to screw you by taking your savings with a positive-return
"teaser" with the full knowledge that in due course, you will be
paying THEM for the privilege of using their "services," which is
capsulized by the term "usury," which is a felony in most countries.
We, as a global money-changing populace, are now officially embarked upon
the ultimate fiscal and monetary voyage of "Spin 'til you Win"
processing; it is government officials telling you upon which horse to bet,
which lottery ticket to own, which roll of toilet paper to buy. It is about
everything about to which Ayn Rand objected; she wrote "Atlas
Shrugged" in 1957 and spoke of "totalitarian capitalism" where
citizens were no longer assisted by government but where government DEMANDED
the assistance (obedience) of its citizens, resulting in a total and complete
breakdown in cause-effect outcomes. Anyone who has never read the book has
zero knowledge of the significance of what this Russian Jew told us. Her
father, well-trained in free market capitalism until 1917, had his business taken
from him by the Bolsheviks in the year after the revolution, the impact of
which prompted his daughter's masterful work. It is now far beyond the time
that citizens of North America demand that our elected and non-elected
"officials" step up to the plate of fiscal integrity and swing the
bat as opposed to hiding from TV cameras and radio microphones and every
other type and sort of digital sound byte audit trail. Elected officials
absolutely MUST defer from any person representing the banks because the Canadian
banks are the financial valets for the government; bankers and government
bureaucracy are like moss and lichens: they are completely dependent upon one
another and represent the true and final definition of the "symbiotic
relationship," where both parties are totally reliant upon one another
for survival.
Speaking of co-dependence, gold and uncertainty used to enjoy a wonderful
symbiosis; in the 20th century, every time a saber rattled, the
gold price shot up and took gold miners and gold explorers along for a
wonderful ride, and every time that peace was celebrated, it declined. It was
only in the 1970s with the oil shock that people actually began to understand
the relationship between oil and cost-push inflation. A higher gasoline price
was the primary component of consumer inflation and when the supply of gas at
the pumps in Des Moines, Iowa, and Little Rock, Arkansas, and Stockton,
California, became non-existent, creating huge lines of cars waiting for
fill-ups, then and only then did the American public arise from the post-WWII
slumber upon which the media and politicians dwelled until the Vietnam War
defeat cemented the definition of failure, so alienated from the American
conscience until then.
Here in the very early days of summer 2019, we have a rocketing gold price
and an elevated stock market. We have trade wars and partisan battles and
those that would have us eagerly believe that all is well in the world of
"Growth" and "Productivity" and "American Capitalism"
have pulled out all the stops to ensure that stocks continue to fuel the
lifestyle requirements of the elite classes. As much as I detest the methods
used to create asymmetrical wealth by way of rising equity values, I sit back
in awe of the sheer genius behind the execution whether from the central
banker news cycle management to the FOMC drumrolls to the financial media
coverage finally resting with the futures markets interventions which
conveniently and collusively confirm that every bullish murmur uttered by
POTUS, Mnuchin, Jay Powell, Mario Draghi, Kuroda, Leishman, Santelli, and
finally, Jim "BUY,BUY,BUY" Cramer must absolutely be true.
As a result, I present the first of a series of charts. First and foremost
resides the reigning heavyweight champion of the financial world, the mighty
NASDAQ, replete with every wild-eyed IPO-runner on the planet and the
birthplace of every great technology company of the past fifty years. Beside
it is the chart of the S&P 500, the index most representative of the
broad market and its performance has been utterly magnificent. The last
bastion of conservative companies is the Dow Jones Industrials and one
glimpse at all three as they are presented below gives you all that need;
they are all governed by the same master and that is why they all look so
much alike. Those three charts are the hideous horns of "managed capital
markets" where only the privileged few are allowed unblemished entry
into "the club."
Ladies and gentlemen, the charts posted above are 20-year charts that
clearly show how effective the price management doctors have been in ensuring
the patient's health. Just as an aging superstar is forced to listen to his
doctors, these aging bull markets have been attended to better than Bobby
Orr's knees, Whitey Ford's elbow or Mickey Mantle's liver. These are
masterfully painted charts and they embody the highest order of excellence
and vigor in both their form and their symmetry, and it is the word
"symmetry" that has, over the years, sidled me with Bobby Orr's
knees (from kicking the dog), Whitey Ford's elbow (from throwing far too many
quote monitors from the 9th floor window), and Mickey's
eviscerated liver (from over-medication brought about by maniacal
frustration) all the result of government intervention in our once-sacred
FREE capital markets. Now, does ANYONE, ANYWHERE, for as much as a New York
minute, believe that the charts shown above represent "FREE"
capital markets? It is as if we are looking at three sisters, all less than a
year apart, and all daughters of the greatest plastic surgeon in world
history. They all appear youthful and spry with vivacious smiles when in
reality they are old and saggy and very frail, filled with steroids and
opioids and sedatives and tranquilizers all designed to make all around them
feel happy and SAFE in their presence. In reality, they are clinging to life
because their bankster doctors have no other recourse than to administer meds
they surely know shall kill the patient.
Now, the charts posted below are of a shorter-term duration than the
equity charts shown above but the intent is to define where we are in
entry-point analysis. As I have boasted about since late 2015, the birth of
the "New Bull Market in Gold" occurred in early December 2015 with
the miners following in January 2016. You can see most clearly the
unmistakeable bottom in the metal but you really don't see the bottom in the
miners until a month later. Importantly, those investors (like me) that were
long (and levered up to the small intestine) were able to get that first
double off the lows in unimaginable speed. It was on April 25th of
this year that I posted a chart of the JNUG at $6.35 with the annotation that
it "could be the bottom" only to watch it close on Friday at
$12.70. However, of utmost importance to all is a) what to do with the basket
of gold stocks we owned BEFORE the rally and b) what to do if we had NONE and
want to own SOME. Well, turn off your TVs and block your gold bull Twitter
feeds and try to think and process the charts on your own and by yourself.
Before I explain the obvious caution I am advocating in the arrow and
dotted lines in these charts, be it known that the explosion in RSI levels,
which has taken my beloved gold and gold miners to record RSI levels, is
emphatically bullish from both sentiment and technical perspectives. Massive
changes in DESI (not shown here) and RSI are incredibly bullish inputs to the
monthly charts and to the weekly charts BUT (and I shout "BUT
BUT!") they are NOT telling you to load the gun tomorrow. I have
liquidated all of my late-April leveraged gold positions (GLD calls, NUGT,
JNUG) while retaining all non-leveraged ETF positions (GDX, GDXJ) and getting
whacked for a 0.1% portfolio hit on DUST and a 0.07% hit on the GLD puts.
Make NO mistake; when the RSI went into the 70s 10 days ago, I was taking
profits like a drunken sailor with 40% gains across the board on the
leveraged gold miner ETF's and as I look back, I was in error. I THOUGHT I
was going to be a "legendary timer" in the call but you just know
that just when you think you are the next coming of Nostradamus, you wind up
as "The Simpleton of Saint Pierre" and wind up in well off the
beaten track, at least for a while. The impact of the jump from RSI 72 to RSI
85 was significant in that it took many of the positions up another 30% from
my exit level. AS much a bummer as it was, you will recall that the only
reason the GGMA portfolio outperformed the S&P in the past 24 months is
that I used RSI and the COT report to avoid the drawdowns that have been
horrific for long-term portfolio managers dealing specifically in gold and
gold miners.
Listen carefully: Gold has been in a bull market since December 2015. It
has been experiencing a series of higher lows and higher highs since 2016 and
has slowly decoupled from the trend of the U.S. Dollar Index. It is now
unarguably in a MASSIVE bull uptrend called to the exact DAY by this
publication 3.45 years ago; it is today in a feeding frenzy mania of buying
from generalist portfolio managers following the likes of Paul Tudor Jones,
Ray Dalio and Stanley Druckenmiller. Despite all of that, I urge you all look
at the charts posted above and ignore all of the "I told you so"
rhetoric you're now hearing from the gold newsletter crowd. The metal (which
I love) and the miners (which I adore) are in the singular most overbought
position EVER. I advise that you take profits on 50% of your holdings NOW
while getting ready to sell the balance at HUI 205 (now 195). I swore I would
never sell my physical metals back in 2009 and I will not; I will however put
up 50% of the GDX @ $27 (cost $20.27) and 50% of the GDXJ (cost $30.22) @
$37.
These markets have now become unglued with the unbridled thirst for gold
exposure and if you have never been exposed to "gold fever," you
have zero clue to which I refer. RSI readings above 80 are massively bullish
when accompanied by sustained above-average volumes and there is no question
that some very large unencumbered pools of capital have decided to descend
upon our market like terminal predators, therein creating the problem for us
all. Have these monstrous pools of capital finally decided to take on the
bullion banks? IF (and that is a very large "IF") they have, then
we have a problem in that it is a problem based upon the definition of
"infinity." Since central bank liquidity has been proven to extend
into "infinity," where is the point where they are incapable of
being issued a margin call? Better still, does the Fed "ever" get a
"margin call" that requires a cash injection? We absolutely KNOW
from experience that the average investor and the typical fund all get
"calls" but if the bullion banks are short 500,000 August gold
futures contracts, are they obligated to deliver if called? Or is it a
"delivery notice" presented to the U.S. Treasury? This is what is
going to emerge now that the CNBC mega-Titans have decided to engage. Whether
or not you decide to invest, we are in a continuation stage of a massive bull
market that began on December 4, 2015, and received validation when Jay
Powell told the world that "Trump can't fire me" in June 2019.
You all know where I sit on gold and silver; there is nothing more I can
write that could convince you.
[NLINSERT]
Charts provided by the author.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of
the data provided. Nothing contained herein is intended or shall be deemed to
be investment advice, implied or otherwise. This letter represents my views
and replicates trades that I am making but nothing more than that. Always
consult your registered advisor to assist you with your investments. I accept
no liability for any loss arising from the use of the data contained on this
letter. Options and junior mining stocks contain a high level of risk that
may result in the loss of part or all invested capital and therefore are
suitable for experienced and professional investors and traders only. One
should be familiar with the risks involved in junior mining and options
trading and we recommend consulting a financial adviser if you feel you do
not understand the risks involved.
Article originally written on June 20.
