Ag Gravation

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Jonathan, a guy I admire like few others, writes "weekend reading shows stunning confusion from people who should know better".  I have no clue whether or not he includes me (NFTRH124) in there, but he well could.  That is because I am stubbornly awaiting signals other than the tanking GSR, as silver has risen along with the hot commodity plays.

Now, is Cu topping off?  Is crude oil bear flagging?  What the heck are grains doing?  Will silver continue upward with only gold in tow, with this becoming a grand show all about the precious metals?  If so, I will take note, and take note well.

But people do not pay me to make up answers or worse, see them in a crystal ball.  They pay me to chart things and interpret things.  I personally did not believe it, but the charts told me silver's intermediate targets were 31 to 33 many months ago.  Right now, the chart in this post (from NFTRH124 w/ a theoretical Cup marked up for this discussion) shows why silver bugs may talk about $100/oz.; because that would be a measured target of the Cup.

But what Cup?  There is no Cup as yet because Ag has not yet risen to or above the Hunt-induced upside near 50.  If silver should make that move and begin forming a Handle, 100 bucks will indeed load.  Think it can't happen?  It can, because mania is a funny thing.  Just ask Pets.com. 

But until other indicators confirm a hyper inflationary Wonderland (i Inflationista, after all as I believe inflation is the trend, interrupted only by periodic bouts of deflation scare) has been entered - well, check that, I believe we have entered that Wonderland (err, dat's why the newsletter is so named) as We Are Already Hyper Inflating - but it is the herd's breakout inflation fears I am focusing on with regard to macro signals; not the ongoing and systematic inflation practiced as an ongoing matter of policy.

A commenter a couple posts down figures I am bashing silver as it relates to gold.  No sir... I am following technical signals, macro theory and not trying to impose my will on anything.  Regarding the first segment of NFTRH124, I was fascinated by the journey through some longer term history of Ag and Au.  That is all there is to it.  Hey, I have some Ag kicking around for hyper inflationary barter for when we need eggs and butter and stuff.  ;-)  Again, i Inflationista.

But i also Inflationista that does not want to help inspire readers to lean the wrong way pending confirming signals.  We are so close now, but I have no clue which way will prove right.  All I know is that answers are coming soon.  So say various charts of various important indicators.  So, will silver form the right side of the theoretical Cup around 50 imminently?  I'll take a front row seat and watch it play out.

Want to see a confirmed Cup?  Here it is, direct from NFTRH124.  All the noise and hysteria of 2008 merely shook out the herd, formed a Handle and launched gold into the next leg:

So, my summation is that there is risk in the macro to bulls and bears because we have not yet crossed into a phase of uncontrolled inflation expectations.  We may soon do so, but have not as yet.  Gold is the right asset for inflationary times, especially when punctuated by economic failure.  Silver is the right asset for true believers of the idea that a continuum that has been in place for decades is about to break.  I have waited this long, so I think I can afford to wait a few more weeks, managing risk.

My primary holdings are what I consider premier gold exploration stocks.  Some silver, some global emerging plays, but primarily gold stocks.  They too are right for the times, and may provide a nice profit opportunity well higher if one scenario plays out, and possibly another great buying opportunity lower if the other continues to hold.

Meanwhile, physical metals, debt elimination, preparation initiatives and finding a way not to get so wrapped up in this mess that you forget to ENJOY LIFE, remain the favored stance.

Later.

Edit (11:05)  I just skimmed the i Inflationista post from 2008 (pre-crash) and the following jumps out.  In particular, gold did indeed pick up on 'successful' policy first and so too did it then under-perform.  That is why I now write that if you forecast silver to continue out performing gold, you also forecast continued 'success' for the inflators.  The analysis has been consistent on this. 

Recall that Greenspan's inflation regime took some time to take hold (credit and housing bubbles) and it is far from a sure thing that today's policy makers will be successful in keeping the bubble economy alive. But that does not change the fact that we are in for a whopper of an inflation cycle. It's all in how you define inflation. If the Fed is successful, gold will pick up on it before positively correlated (to the economy) commodities and then under-perform as it did in the middle of this decade. If the policy does not succeed, the collapse predicted by the 'deflationistas' will indeed visit us, in which case there will be a continued mad scramble for liquidity, which means cash and gold. And one of those two will actually have intrinsic value in such a scenario. But the point is that there will be massive inflation (by policy) even as the collapse in credit and general liquidity continues.

Edit (11:59)  One more edit and then it is off to either take the girls sledding or to Guitar Center, which ever is the choice once they finish arguing.  Since this has been a really intensive and reflective morning, I'll share an 'interlude' from the weekend's newsletter betraying a bias of mine and showing why I am a better bottom feeder/portfolio manager than trader/momentum manager:

Interlude

We now interrupt this charting sequence for a personal mini editorial…

NFTRH is written by a human, not a stock trading, asset buying robot.  This human dislikes what he sees in the GSR, because he dislikes dishonesty, especially when it sets up to disenfranchise simple, honest people of what they have worked for their entire lives. 

The image in my mind at the moment is older people, who may have worked a lifetime in service to the American Dream, and have been put into the ‘safety’ of income bearing instruments like US Treasury bonds, which are ‘a certificate issued by the government promising to repay borrowed money at a fixed rate of interest at a specified time’.

If the GSR breaks down, bond yields break up and inflation expectations get impulsive, these people get killed, we are forced to become speculators and it is all at the expense of bailing out the biggest abusers from the comeuppance they would have rightly suffered in the meltdown of 2007-2009.

This is the bias that is behind NFTRH analysis and it is never far from consciousness as I continually chart the GSR, Treasury yields and the like.  It is why I tend to have a derisive attitude toward the ‘fly boys’ in stocks, commodities, etc.  They tend to cheer events that are born of what I consider crooked policy.  In short, it pisses me off and I have to continually work at making sure my bias does not mess with the analysis.