T Nation

John S... The Moment I've Been Waiting For

John, you will recall our little wager of a month or so ago. Your bet, gold would run and the dollar fall. My theory, the opposite. Well, we know how that has panned our. The markets gave me a “bitch slap.”
I wanted to give you an update. The reason I was confident in conceding defeat with plenty of time to spare is that charting is a large part of my methodology, and when both asset groups broke my resistance levels, I knew we had further to go.

The larger and more important resistance lever for me (though at the time I was not sure we would get there) is the 74.45 level in the DXY (US dollar index future). The DXY hit 74.445 early this morning on a fairly sharp five wave move down. It immediately bounced off of this point. The coming days should be interesting. If this line holds and the dollar begins to rally, would most likely prove to be the lynch pin that reverses gold and the equities markets.

If not, well it won’t be the first time I was wrong.
Just wanted to give you a heads up and something to observe for a few days.

Since we haven’t had this great a credit contraction since GDI, it stands to reason you’d see a certain amount of “break-out” behavior from gold prices.

Yuo think the dollar has bottomed out at this point? It definitely seems like a buy.

If I really knew what I was talking about, I would be posting this from my private island. However, I just can’t get past the fact of such extremes in sentiment in both gold and the dollar. We have been over 90% bulls in gold for well over two weeks. We have actually been to 97% bulls within this time. Who is left? The opposite extremes are seen in the dollar. No one thinks it is going up.

In the meantime, we owe money to everyone, and in big sums. Isn’t it convenient for the fed to be able to print money like a Kinkos, devalue the currency approximately 20%, and be able to service our debt at basically 80 cents on the dollar. If I was doing you like that, how long would you put up with it?

Historically, moments of such extreme sentiment have proven to be turning points. Again, I point to oil last year. As it approached $150, virtually everyone was predicting $300 oil. So what happens next?

We do live in interesting times.

The dollar is right now at 74.27.

Gold is at 1186.08.

China and India have officially begun dumping the dollar.

I keep hearing Gold goes up in deflation, I was wondering if someone could point out a time that happened.

The only reason Gold went up in the great depression is because the Government confiscated all the gold then set the price from $20 to $35.

You could be right, but from what I am seeing now it looks like the dollar is going to fall like a stone.

It certainly went through another resistance point like a hot knife through butter.
It is a dangerous game this administration and Fed is playing. Devaluing the dollar lets us pay back our debt at a discount, but it weakens our position in the world markets to an alarming degree. What happens if the Saudis now decide they will only accept gold instead of dollars for their oil? Could you blame them?

[quote]JEATON wrote:
It certainly went through another resistance point like a hot knife through butter.
It is a dangerous game this administration and Fed is playing. Devaluing the dollar lets us pay back our debt at a discount, but it weakens our position in the world markets to an alarming degree. What happens if the Saudis now decide they will only accept gold instead of dollars for their oil? Could you blame them?[/quote]

We go in and bomb them? When our dollar falls what else do we have?

I am not sure about your question on gold going up in deflation. By its very nature and definition, deflation means that virtually all commodities go down in price.

I will say this. First the first time in my adult life, I am scared. Logic and reason have served me well most of my life. However, over the last two years they seem to be ineffective. It is as though we have entered an “Alice in Wonderland” period where all the rules are reversed. Government does not prosecute criminals, they subsidize and bail them out with our money. Live responsibly, pay down debt and save money, the Fed devalues your savings by 20%. I have two children, 5 and 8, and it deeps me up nights thinking about the world they face in the future.

Maybe Gerald Celente, the trend predictor is right. Tax and food riots, with the emergence of a third party that eventually takes over. Who knows.

On a lighter note, the dollar is at a new low for the day.

[quote]JEATON wrote:
I am not sure about your question on gold going up in deflation. By its very nature and definition, deflation means that virtually all commodities go down in price.

I will say this. First the first time in my adult life, I am scared. Logic and reason have served me well most of my life. However, over the last two years they seem to be ineffective. It is as though we have entered an “Alice in Wonderland” period where all the rules are reversed. Government does not prosecute criminals, they subsidize and bail them out with our money. Live responsibly, pay down debt and save money, the Fed devalues your savings by 20%. I have two children, 5 and 8, and it deeps me up nights thinking about the world they face in the future.

Maybe Gerald Celente, the trend predictor is right. Tax and food riots, with the emergence of a third party that eventually takes over. Who knows.

On a lighter note, the dollar is at a new low for the day.[/quote]

My question on gold going up in a deflationary cycle was directed at PRCALDUDE.

I too am scared, I have been on the phone all day with my school. I am getting ready to take out some loans so I can buy gold and silver.

Celente is usually right, and given our American traditions a good old fashioned bloody tax riot sounds about right.

“I too am scared, I have been on the phone all day with my school. I am getting ready to take out some loans so I can buy gold and silver.”

snickers
and I don’t mean the chocolate bar, I’m fucking laughing at you.

[quote]archiewhittaker wrote:
“I too am scared, I have been on the phone all day with my school. I am getting ready to take out some loans so I can buy gold and silver.”

snickers
and I don’t mean the chocolate bar, I’m fucking laughing at you.[/quote]

Its ok, in a year or two I will be the one laughing at you.

In a year or two?
Can’t you be more specific? Judging by the nonsense you spew, the world will end in 2012.

[quote]archiewhittaker wrote:
In a year or two?
Can’t you be more specific? Judging by the nonsense you spew, the world will end in 2012.[/quote]

I spew a bunch of nonsense but yet you can’t refute any of it. Interesting.

Sometime in 2010 or 2011 the dollar will reach a low point in which the rest of the world will bail. It really depends on how the world views the money that is going to be injected by the stimulus next year.

I am leaning towards the currency crisis happening in 2010.

So, we have 1.6 trillion dollars in debt. We have wars that literally cost millions of dollars a day. We have an ever growing defense budget with global militaristic aims, appeasing foreign governments with contracts in infrastructure, weapons technology and training, in return we get their strategic land. The reasonings for this can be discussed in another thread, but where does that money come from?

Oh, its printed. Money supply 101, more money = less valued money. Fiat means an authoritative order, as in government decreed legal tender. Something tells me that if you are force to use fiat money as an instrument of transactions in a global market place that is saturated with them from a country on a credit binge, people are going to hoard other assets as a hedge.

long story short, lose the dollar, it aint coming back for a while

Yes, the dollar is down vs. major currencies (that are also on a downturn)

How can I refute your promises of future events? I’m saying that your predictions are bullshit that you base on youtube videos.

[quote]archiewhittaker wrote:
Yes, the dollar is down vs. major currencies (that are also on a downturn)

How can I refute your promises of future events? I’m saying that your predictions are bullshit that you base on youtube videos.[/quote]

Once you understand why the dollar is down, along with the other countries you will understand why what I am saying is not bullshit.

JEATON and I had a bet, he was saying the currency would return to normal too. I was right. But please keep on doubting, I promise I won’t laugh to hard at you when I am proven right once again.

edit*
But right now the dollar is up at 74.55 so it looks like the dollar will be in the 74 range for a while.