Saturday, December 25, 2010

THE BEAR WILL RETURN IN 2011

It's almost impossible to find anyone who is long term bearish on the stock market or economy at this time. In the recent Barron's poll every single analyst expected a rise in stock prices next year and continued economic expansion.

I think they are all going to be wrong, horribly wrong. I believe next year the stock market will begin the third leg down in the secular bear market. And the global economy will tip over into the next recession that will be much worse than the last one.

I've gone over the 3 year cycle in the dollar index many times. The dip down into the next 3 year cycle low this spring should drive the final leg up in gold's massive C-wave. What I haven't talked much about is what happens after the dollar bottoms.

I actually expect this three year cycle in the dollar to play out almost exactly like it did during the last three year cycle. When the dollar collapses this spring it will not only drive the price of gold to a final C-wave top, it will drive virtually all commodity prices through the roof, the most important being energy and to some extent food.

It was the sudden massive spike in energy that drove the global economy over the edge into recession in late `07 and early `08. The implosion of the credit markets just exacerbated the problem. You can see on the following chart just as soon as Bernanke drove the dollar below long term historical support (80) oil took off on its parabolic move to $147.


What followed was a collapse in economic activity and the beginning of the second leg down in the long term secular bear market for stocks.

This was mirrored by the dollar rallying out of the 3 year cycle low. That rally was driven by the severe, but brief, deflationary pressures released as the global economy and then credit markets collapsed.

We will see the same thing happen again. In his attempt to print prosperity and reflate asset prices Ben is going to spike inflation horribly as the dollar collapses down into the three year cycle low next spring. Just like in `08 that will tip the global economy back into recession and another deflationary period as the dollar rallies out of the three year cycle low.

The stock market will begin the trip down into the next leg of the secular bear market that it's been in since 2000. The global economy will roll over into the next recession which I expect to be much worse than the one we just suffered through, mainly because it will begin with unemployment already at very high levels.

Contrary to what economists and analyst are telling you, at the dollars three year cycle low next year it will be time to put our bear hats back on, prepare for hard times, and the next leg down in the stock market bear.

I will leave the special Christmas subscription offer, (15 months for the price of 12), up for a few more days. If you want to take advantage of the discounted price, click here.

24 comments:

  1. Anette,
    I cover all that in the premium newsletter. It's for subscribers only though.

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  2. Thanks again. If your analysis is correct, energy prices are set to spike, along with select E&P stocks. I think there are some attractive plays right now within the small cap independent E&P universe.

    That being said, the US economic per barrel price energy ceiling is in fact lower this time due to constrained economic and credit activity. I doubt the United States could tolerate much over $135 per barrel. We're just not set up yet for $4 gasoline, let alone $5.

    Using the ten year note yield as a guide, bonds may become a buy relatively soon. Perhaps just a bounce at first, then an aggressive buy as your bear market unfolds in earnest. I hope I'm wrong on that, a sideways S&P for 2011 would be a gift.

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  3. Toby this is a bold call. What got into you to come out and throw down the gauntlet? I don't think the US govt can tolerate a big deflation. Maybe a correction of ten to twenty percent in the major indices, and the reason for this in my belief would be to temporarily create some real demand (rather than just the bullsh*t QE monetization that just isn't working) for bonds. But then I think it's back to the business of intervention, money printing, plunge protecting, and mysterious buying of S & P futures around 3 AM when not a mouse was stirring. Heck, maybe another flash crasheroo around April to May just to give everything a good washout, and then back to normal low volume 1984 "Orwell Zone" trading which leads the market back into the precious metals for the protest vote since the fed and the banking cartel now account for a huge percentage of the overall every day trading. But as things roll on maybe things will change and get more "free market" - like. If you're right, do you think gold goes into a bear market next year along with the overall markets? Like I said, I can't see anything too prolonged because of the fear on behalf of the Fed overseers that a sell off could start feeding upon itself and lead to a momentum gaining collapse. How about a general rise in the market starting from mid to late January going into May, then a brief but powerful sell off, then another slow steady rise into next fall. Then maybe another attempt at a sell off, but then the Fed just says "Awww, heck, let's just kick the can into the election and try to get Banana Barack voted back in". I just think the Fed can't handle any deflationary forces getting a grip. They're just in such ridiculous denial along with the overall collective consciousness of the populace. That's why I think gold just stays bullish along with the fact that physical demand will continue to apply upside pressure. It will be interesting to see how everything plays out.

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  4. The first thing I would suggest is for you to throw this manipulation, PPT nonsense in the trash where it belongs.

    The markets are too big for anyone to control. If the government could control the markets we never would have just gone through the second worst bear market in history.

    Money printing isn't the cure for what ails us. It is the cancer that will cause the next leg down in the secular bear. It's what will cause the dollar to collapse down into the three year cycle low. That will spike commodity prices and just like in 08 surging commodity prices will collapse the economy.

    Aka recession, deflation, bear market.

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  5. Gold will drop down into a D-wave decline during the first part of the deflation. There won't be anyting mysterious about it although I'm sure we will hear all the conspiracy nuts crying manipulation.

    Gold just moves through normal waves and we have been in a very massive C-wave advance since April of last year. Those always end in a parabolic move that's unsustainable and are always followed by a very severe profit taking event.

    This time will be no different.

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  6. Well, well, well.... Just about an hour or so ago, here's a report coming in that JPMorgan Chase is getting sued for securities fraud over SLV. Anyone who invested in SLV from March 1, 2008 to now could be eligible for damages and possible settlement. I just registered as a possible plaintiff. Do not under any circumstances invest in SLV or GLD. These vehicles will blow up before the bull market is over and this could be the sign to get out if you are in these bait and switch machines. It has been known in the blogosphere for a long time that these vehicles, especially SLV, are just mechanisms by which JPM Chase and HSBC use to amass their short positions against the actual investors that are purchasing the shares. By buying these funds, you're literally pulling a lever to have a shoe kick you in the ass. This all sounds bizarre, but it is true and the lawsuits are flying fast and furious. It is quite vindicating. Soon they could be found guilty and then there will be no more arguments here. The JPMorgue is guilty as OJ and they were actually suppressing the price of silver and gold.

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  7. Things don't break during a bull market and certainly not during the final bubble phase. They break once the bull market comes to an end and the decline starts to put stress on everything.

    If GLD and SLV are going to go bust it will be after the bull has already topped not before.

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  8. Gary,

    Couldn't GLD & SLV go bust if they were not able to get there hands on the physical metals?? During the latter parts of this bull market, the physical metal will be scarce.

    At some point, investors may demand that the government intervene in these ETF's because they are not able to gain access to their physical metal. Hence, bust before the bull market busts.

    What are your thoughts?

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  9. Why? Is anyone taking delivery of gold or silver from either fund?

    I'm not even sure that's an option. Maybe someone who has read the prospectus can chime in and let us know if one can take delivery of actual gold in exchange for 10 shares of GLD.

    If not then how does it matter if they don't have the exact amount of oz. they are supposed to have?

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  10. Gary, Gold is late in the weekly cycle. Yet it popped over $1400 today. Is the down leg coming, or it just runs up while dollar drops as outlined in your latest chart?

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  11. Ahh if only we had a crystal ball. I'm just going to watch the dollar. If it breaks below 78.82 then we have a failed daily cycle and the odds are strong that the final decline into the three year cycle low has begun.

    We've always expected that to drive the final move up in gold's C-wave.

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  12. It appears the withdrawals need to be substantial and from 'authorized' participants only:

    Redemption of Baskets of iShares; Withdrawal of Silver

    Authorized Participants, acting on authority of the registered holder of iShares, may surrender Baskets of iShares in exchange for the corresponding Basket Silver Amount announced by the Trustee. Upon the surrender of such iShares and the payment of the Trustee’s applicable fee and of any expenses, taxes or charges (such as stamp taxes or stock transfer taxes or fees), the Trustee will deliver to the order of the redeeming Authorized Participant the amount of silver corresponding to the redeemed Baskets. iShares can only be surrendered for redemption in Baskets of 50,000 iShares each.

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  13. toby,

    are you and gary same person or different person but partners?

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  14. Same. John Townsend (my partner)and I author the GS site under the pen name Toby Connor.

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  15. ok thanks. not sure what is difference between this blog and your other free blog of smartmoney as it seems there also people normally discuss gold only. is not difficult for you to have multiple blogs. John has seperate TSI trader too. but of course its just my opnion.

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  16. I pay John a commission for every subscription that he brings in. We needed a site to track those subscriptions. So whenever he publishes one of my articles it's as Toby and it is linked to the GS site.

    That way I can easily calculate his commissions.

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  17. The great Jim Sinclair is calling for the bust of these phony funds before it's all said and done. Here's an excerpt from good ole GLD:

    "The Custodian's selected sub custodians may appoint further sub custodians. These further sub custodians are not expected to have written custody agreements with the Custodian's sub custodians that selected them. The lack of such written contracts could affect the recourse of the Trust and the Custodian against any sub custodian in the event a sub custodian does not use due care in the safekeeping of the Trust's gold. See "Risk Factors" - The ability of the Trustee or the Custodian to take legal action against sub custodians may be limited...."

    Now if that's not 1984, I don't know what is! What a worthless pile of horse sh*t!

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  18. Gary,

    John Townsend just stated he thought the rally had about another 2 weeks in it. Do you think that's about right?

    Thanks.

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  19. Well golds daily cycle may top in a week or two. John tries to call every wiggle with his TSI indicator.

    I don't try ot do that. I learned a long time ago that is usually just a good way to underperform.

    The risk is that gold moves into a runaway move and the dips down into daily cycle lows become very muted. In that scenario you will just shoot yourself in the foot by trying to get in and out of positions.

    Much safer to just hold on until the C-wave tops.

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  20. I have read the prospectus for GLD

    It does not even guarantee the physical existence let alone delivery

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  21. In amongst a myriad of things I was reading yesterday. (So I cannot track it down at the moment)
    I read that to take delivery of physical gold from the GLD ETF would require a ninimum $14 Million draw down.
    Crikey that would be more than half my holdings!!!

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  22. Toby, just to get this straight in my head to see where we're going here. You stated back in November that gold's current C-wave began at $860. Do you think we'll see the C-wave top in the next few weeks, or will it likely run through spring?

    I'm holding off on pulling the trigger on any more PM in this run up as an investor, but would love to pile on during the coming D-wave correction.

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  23. I am and have been buying silver like a mad man. I will continue to do so and find some other ways to raise some additional capital to put into silver.

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  24. Looks like you nailed it back in 2010. It's comical watching those clueless talking heads on CNBC.

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