July 27, 2010
I’ll just start with a repeat of a few lines from my last newsletter…I still believe the statistic cited below is mindblowingly astounding…
During April, May and June of this year, Gold exchange-traded product (ETF’s) inflows were up more than 11-fold over the previous quarter. What does that mean? That during the last quarter, which includes all of that trading up above $1200, and all of that stupid hype about Europe failing, ELEVEN TIMES AS MUCH MONEY WENT INTO PAPER OWNERSHIP OF GOLD (IN OTHER WORDS, NOT THE REAL THING), AND TO ME, THIS JUST REEKS AND REEKS AND REEKS OF A TOP IN THIS MARKET.
If you expect hyperinflation, or believe the world economic system is disintegrating, or that gold is actually going to replace the currencies of the planet, then you do need to go out and buy all the gold you can...My own view is all those expectations seem almost medieval here in the 21st century...and that 3-6 months from now, investors everywhere will be thinking how OBVIOUS (in retrospect) it was that Gold was a monster short.
Again, this is the ONLY market we trade which is currently recognized, almost unanimously, as a BULL MARKET. How many times do you need to hear about SPDR GLD before you understand this mania MUST be a short. I mean, how many widely popular, widely known MUTUAL FUNDS do you have to witness becoming horrible investments before you understand GLD (and others like it) today is the same thing?
Maybe, I’m dead, dead wrong but I do think Gold is a major short sale…immediately…and do fully expect to see it at least bust $900 an ounce long before we get to year end.
Think about it…A month ago NOBODY who was long this market was thinking sell…Now with the last three months of buyers having piled in (11 times the volume of the previous quarter!), and ALL of those buyers now losing money, I’d guess there now have to be at least some percentage of them starting to reconsider, and starting to sell…which is all it takes…Next thing you know losses start to get serious and more selling develops…What I never, EVER forget is that ANYTHING can happen in the futures market (the most leveraged instrument on the planet) and especially when you are looking at the potential end of a very popular, and extremely overhyped, bull “story”. I still expect to see at least a $100 down day or two as Gold goes in the tank…I see today’s $25 down day, into new three month lows, as nothing but a blip compared to what may be coming…
We’ve had to sit through yet another rally back up to the middle of the now unprecedented 22 month sideways range...EVERY time I can get myself to take a fresh look at this, I still see an incredible trade...but I do confess this market has worn me out...And if my own flagging enthusiasm can be considered a contrary indicator, this market MUST be ready to go...Believe me, I don’t just sit here and blindly keep saying “Sell!”. I DO still see this as an absolutely monster short, and yes, the absolutely perfect “2 and 1”, but I have gotten as tired of repeating it as you have gotten in hearing it.
I STILL WILL TELL YOU THAT A 12-15 CENT DROP WITHIN THE NEXT 2-3 MONTHS WOULD NOT BE A BIG DEAL IN SOYBEAN OIL.
Here’s one way to do it…
Or, if you assume, as we head towards soybean harvest pressure, this thing IS going to break and IS going to fall sharply out of the bottom of this 22 month consolidation…and want more leverage, here’s another way to go…
I’ve never seen anything like this, but I do know, “Futures are inherently volatile”, and the odds do favor, more and more, a breakout one way or the other…I still firmly believe it will be to the downside and firmly believe that those who DO stay on this, WILL get paid. We’ll see…
And for what it’s worth, it certainly doesn’t mean I’ll be right, but I think this gold idea is so, so obvious…and I know many of you have just had your wallets worn slap to nothing with the bean oil…but virtually no one has shown even the smallest interest in shorting gold…
Give me a call if anything here interests you,