The Art Of Misdirection
The following is an excerpt from commentary that originally appeared at Treasure Chests for the benefit of subscribers on Thursday, May 1st, 2008.
Central planers and Wall Street prestidigitators are getting better at having people concentrate on the wrong things at the wrong times in my opinion. In terms of present circumstances are concerned, we are referring to their ability to have the street focused on a manufactured rally in the dollar ($), while the effects of their previous inflation efforts run rampant throughout commodity markets, all the while having no material impact on improving the credit crisis, which is of course justification for printing the copious amounts of fiat currency they enjoy so much. What's worse, this latest round of misdirection, a technique used by magicians in case you are unaware, will likely only make the effects of rapid monetary inflation worse over time as more will be needed, despite present claims that the worst of the crisis is over, and that it's onward and upwards from here.
And while it's true market rates have been rising of late, it must be recognized this is not so much the result of improving credit conditions as much as it's a reflection of the Fed's failed policy; which again, is doing a better job of goosing commodity prices than healing troubled financial institutions, or the economy for that matter. Be that as it may however, with Europe now showing visible signs of slowing, US-centric speculators could continue to be caught off guard in the relative fiat currency game, which in turn could keep downward pressure on gold just when investors need the opposite most. You see investors need to know that the feds will continue to accelerate currency debasement policy now, not after commodity prices are through the roof. Again however, such is the art of this self-serving game of misdirection perpetrated on the masses by master planners, having the public looking at their right hand (a declining gold price), while the trick is in the left.
Further to this theme, if not chance, the fact mining companies (like Newmont Mining) are reporting record earnings on increasing gold prices (which in any other industry would make the shares go higher), must be yet another glaring example of this convenient timing thingy 'miss-directors' seem so lucky at as well; either that, or the gods are crazy. Make no mistake about it, this is less irony at work, and more price management in front of the election, where a $ rally needs to occur now if it's to fall into November, hopefully buffering potentially unruly financial markets this fall. This is of course the promise of precious metals into a period of seasonal good times again however (a low in May points to a high in November / December seasonally), which as you know we have embraced fully in our now bullish disposition with respect to accumulating at this time.
What's more, we are emboldened by what appears to be favorable technical factors confirming these thoughts, not only from a structural perspective on key charts; but also, within the flow. The flow - what the heck is this guy talking about? Does he mean we will be floating aimlessly down a river, which is kind of how I feel right now based on the lack of appropriate respect investors still attribute to precious metals? It's a big - NO - to that query, and sentiment. No - what I was referring to was the fact a historically favorable harmonic signature has a possible time line related bottom coming this month on the Amex Gold Miners Index (GDM) / Gold Ratio, seen below. Please ensure to click on the chart for a sharper image. As well, also note one may also need to click the image again in the larger panel to arrive at the final image. (See Figure 1)
As alluded to above, we would be amiss in not pointing out what I will characterize as the truly remarkable structural underpinnings in precious metal share to the commodity ratios at present, where this time around we will employ a weekly GDM plot in remembering it is the broad measure of precious metals shares within the index universe. [i.e. One may wish to simply by the GDX (the GDM's ETF) in portfolio base building and diversification purposes.] Here, the first thing one should notice the presence of what I will label large and striking diamonds wrapping indicator patterning these past 10-years now, where the big takeaway message here is for whatever reason(s) (investor ignorance and interventions), a great deal of 'structural pressure' has been built underneath the trade and is ready to be released once the appropriate trigger(s) are set off. (See Figure 2)
What will trigger a retreat in precious metals pricing management on the part of master planners? How about a tide of investment demand that simply overwhelms them. Here, with physical stockpiles so low and inflation so high, an educated man would agree the stage is set for an explosion higher in precious metals. Therein, and as Dave suggests in his most recent commentary, it's only a matter of time before the public figures out the high and rising price environment that has snuck up on most people in their ignorance is not temporary, as they hope it is, which will be a big 'wakeup call' for the great unwashed. And what the public lacks in individual capacity, they make up for in numbers, where more recently acquired bipolar tendencies in the masses could have them all wanting gold and silver at once as the lights finally come on. (See Figure 3)
Unfortunately we cannot carry on past this point, as the remainder of this analysis is reserved for our subscribers. Of course if the above is the kind of analysis you are looking for this is easily remedied by visiting our newly improved web site to discover more about how our service can help you in not only this regard, but also in achieving your financial goals. For your information, our newly reconstructed site includes such improvements as automated subscriptions, improvements to trend identifying / professionally annotated charts, to the more detailed quote pages exclusively designed for independent investors who like to stay on top of things. Here, in addition to improving our advisory service, our aim is to also provide a resource center, one where you have access to well presented 'key' information concerning the markets we cover.
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Good investing in 2008 all.