Admitting the Obvious......

So the Fed minutes come out today and the Fed finally admitts the obvious, there is runaway stagflation in the economy. DUH............

Oil hit $134 around 4:30, gold was up $13 to $930ish and the market got clocked for 400 points over the last two days. Oh, and not one mention on CNBC about how wrong they were about how peachy things are.

Speaking of CNBC, I have met the enemy and thy name is Guy. Yesterday, on Fast Money, Adami had the balls to call gold's rebound a dead cat bounce and nothing more. Disgusting. They and the rest of that station are a joke and do the average investor a huge diservice.

So where to now? Well, the dollar has resumed getting demolished like anyone with an ounce of intelligence thought it would and gold has responded nicely. I look for gold to reach $1,000 shortly.

As I have always said, all roads lead to gold, no matter what CNBC says.

Traderneal the Contrarian

In my previous post I indicated that the attendance at the gold show was light and that I thought it was a good sign for the gold market. I received a few questions as to why I thought that.

I was only at the show for thes second day, and like I said having attended these shows for the last five years both in NYC and Vegas, the attendance looked very light to me compared to those other five years. Normally, the first day of the show is the heavy day, but I have heard that attendance that day was just "ok."

Whenever one is an investment for the long term, no matter what it is, when that investment gets really going, the late money starts pouring in trying to catch the move. This late money is always the quickest to bail as it is usually the small retail investor hopping in.

In gold, as the late money sells, it creates a waterfall effect as the stops are hit and the price drops dramatically. (Like we had from $1030 down to $850.) Also, if you are in an investment like gold for the long term, you want it to be a quiet party and you don't want the unwashed masses in for as long as possible, for exactly the reason as what happened; the price drop.

So, gold hit $1030, was all over the mainstream media and these shows were packed, does that sound like the "ideal" investing opportunity? Flash forward two months; gold is down to $870ish (the days of the show), out of the spotlight and the show was lightly attended. Yet, and this is the important part, the FUNDAMENTALS TO BE IN GOLD HAVE NOT CHANGED ONE BIT!!! You will see the price move higher as the stronger hands start taking over. That is why it is a contrarian sign. I only want the unwashed masses involved in gold, when the fundamentals no longer apply as to why gold should go higher. I want them pushing the price to an absurdly overvalued level. In other words, when all that happens, I need someone to sell my gold to. When what has happened over the last two months, I need someone to buy gold from.

I'm Back......

Sorry for the lack of posts over the last few days. Got back from vacation on Wednesday, and honestly was not in the writing mood. I will only say that no matter what is going on in the gold markets, my faith has not waivered one iota. In fact, I spent the day at the NYC gold show today, and here are my highlights.



Just got back from a long day at the NYC gold show and drinks and dinner with the boys from Van Eck. Thoughts from the show:

1. It was very sparsely attended. This is very bullish as I have been going to these shows in both NYC and Las Vegas for the last five years and they are usually pretty crowded. Now the fact that this was the second and final day of the show may have been the reason for the sparse crowds, but I have never seen crowds this light. It is bullish for gold as more and more people are losing interest in the metal. (Contrarian play)

2. Larry Kudlo was the keynote speaker and to sum up his speech:
....Thinks McCain will win ....Is bullish on equities and bearish on commodities (kind of like the last 10 minutes ....If anyone has every done anything in importance in gov't or finance, Larry is friends with him ....Thinks rates will be 75bps higher by this time next year. ....Thinks the dollar will be significantly higher under McCain ....Thinks gold will be 20% lower.
Way to play to your audience Larry. Gee, think he did this for the check?

3. Heard this from two different and somewhat relieable sources: The reason for this correction in gold is the fact that Bear Stearns was extremely long gold and extremely short the dollar. These trades have not yet been unwound. One of the folks who told me this that the Fed sent out a communique saying that any member bank that puts this trade on in size will not be able to borrow at the discount window. (Take the last part FWIW).
Truthfully, I have heard that theory before and was somewhat skeptical. But the people who I heard this from are in touch with what is going on and make the theory more incredible.

4. Had a long and very nice chat with Dennis Gartman. I was prepared for war as Dennis has been extremley negative on gold without giving a good reason. As it turns out, we agree on many of the same points.
......Thinks gold could bottom around $850 and should go no lower than $797. .......Agrees that Bob Pisani from CNBC is totally clueless ......Thinks that the Fast Money guys, especially Guy Adami, should know better when it comes to gold. ......Thinks that CNBC is constantly bashing gold and commodities, not from any company mandate, but from the fact that more people own stocks than commodiites, and that higher commodites means lower stock prices which in turn means lower ratings. In other words, CNBC is bashing commodities simply in the hopes of avoiding lower ratings.

5. Agrees that at some point we will Gold and the dollar going higher at the same time. This will freak many people out as no one will have a clue why this is happening. When this type of move finally does happen, he thinks it will be violent thrust to the upside. (CNBC will be committing suicide---my thought, not Dennis's.)

Listedn to James Dines presentation which was that he is wildly bullish on silver, thinking it will hit $100 ounce. Also likes palladium. He feels that since gold and platinum have already taken off, it is these two metals turn.

Dinner with the Van Eck Mutual Funds really didn't uncover too many nuggets except for the fact that the head trader thinks gold will bottom around $820, and will be at new highs by the end of the year.

The traderneal Theorem.......

I am going on a brief vacation and will be back on Wednesday night. Now, whenever I am gone for a few days and out of the office and away from a computer, gold has a tendency to do very well; I call it the Traderneal Theorem. So enjoy the nice rally that will ensue from Monday to Wednesday.

What can I say that is worthwhile? According to CNBC all is well and commodities are dead. In fact, they act like you are an evil person and should die if you own commodities are commodity stocks. This is an actual quote from Bob Pisani earlier today:

"The markets are off their highs because commodities are higher, and that's a problem."


With logic like that, what is one to do?

Look around, read the newspapers, read financial news online, things are still horrible, terrible in fact. The Fed did not increase the TAF from $100B to $150B, and agree to take in AAA CMO's because things are hunky dory. Funny, but every cruise I have been on, the life boats and life jackets are safely stowed away.

Without a doubt, all roads lead to gold. Hell, I plan on adding if the price goes lower.

Enjoy the rally and see you Wednesday.

Don't Worry Be Happy........

From our frineds at www.minyanville.com