Omm Nom! Nom! Nom!
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Looks like Mr. Limm and kin are trying to take away our punch bowl.   Not bloody likely, I say.

You see, the Chinese really only have one way to cauterize the inflation wound they are already seeing in their economy — and that’s by removing themselves from their peg to the U.S. dollar.  They can make all the noise in the world about raising reserve requirements and dampening loan growth, but they will will still strain to be heard over the “clack-clack-clack” of the U.S. Mintex 3ooo Printing Robots in the basement of Ben Bernanke’s Transylvania Castle.

I say, if the Chinese refuse to de-peg their currancy and let the Yuan run free, naked and untethered, they ought to just continue to get drunk and buy stocks.    It’s the only rational thing to do when you are allowing your currency to be devalued right along with that of the Great White Ghost across the Pacific.  

And let’s face it, there’s only so much iron ore, coal, copper, lead, zinc, chromium and every other heavy metal for industrial usage left in this globe.   Outside dredging the Hudson River, that is, but even that reclamation project is years away.   The Chinese know all this and realize the only way to keep those prices cheap to them is by miming along to the dollar prop story.  

Again, raising Chinese reserve ratios is not going to do that if Helicopter Ben is easing quantitatively as fast as his machines can print, purchase and store massive haystacks of U.S. cabbage like he is.   We all know (and yes, the Chinese leadership knows) that fast cash to you is just heading right back into the Chinese economy via click-bought and big box consumer goods purchases (oh, and look here, retail sales are strengthening… wonder where those goods are coming from?).  What’s more, that money, once washed up on the shores of the South China Sea has to go right back into the commodity markets as the Chinese continue to build out infrastructure and purchase raw materials inventory.

Here me now and believe me later — The Chinese cannot “whip inflation” by themselves while they are tied to the dollar, and while their growing economy is tied to our consumption.   These are infrastructural realities that are not going to change because the Chinese CB has decided to take a stern line on lending reserves.  So sorry.

My take?  Eat a samich (sic) this morning until at least 11 am to see where the market settles out.    Gold is currently down only about $16 (less than 1.5%) and silver, as usual is taking it harder, down 44 cents (2.8%), with the DXY at a current $80.64.   I continue to believe this is a shakeout, and that the dollar will not continue much higher than here, despite all this “nooze” circulating to keep it propped.  If we break much above $81, however, I will be forced to reassess, and perhaps take a little off some of my riskier metal plays.

Best to you all.

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Update:  I notice in my haste to get out this morning’s post that I neglected to give you a run down on yesterday’s purchases (which were recorded in real time on The PPT, of course, as were today’s).   Yesterday I added to the following positions:

2k Petroleo Brasileiro SA (ADR) [[PBR]] @ $40.60

4k Exeter Resource Corp. [[XRA]] @ $8.46

2k Eldorado Gold Corporation (USA) [[EGO]] @ $12.66

2k Thompson Creek Metals Company, Inc. [[TC]] @ $12.67

10k NGAS Resources, Inc. [[NGAS]] @ $1.62

1K Sociedad Quimica y Minera (ADR) [[SQM]] at $37.06

This morning’s purchases (also “adds”):

2k [[PAAS]] @ $21.75

4k Gold Fields Limited (ADR) [[GFI]] @ $11.75

 

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Truck O’ Molten Assets
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That beeping sound you hear is me backing up the truck, and grabbing some more lovely PM positions as the sun goes down on this day of dollar death.

I’ve mentioned that I love Allied Nevada Gold Corp. [[ANV]] for the long term, almost as much as I like Silver Wheaton Corp. (USA) [[SLW]] on the silver side. IAMGOLD Corporation (USA) [[IAG]] and Eldorado Gold Corporation (USA) [[EGO]] cannot be ignored here either.   They are running on Greek kisses and Spanish wishes, but so what?   With the dollar (DXY) and it’s proxy, [[UUP]]   down 53 cents and 17 cents, respectively, as we speak, I think we may have that turn in the dollar we were looking for at last.  If we continue to stay below that magical $80.20 line, I’ll be even more sure of it.

Let’s face it folks, it would be great if the European Central Bank could maintain this Teutonic “austerity” charade with regard to it’s wayward little brothers to the South,  but the fact is, if they want to keep their phony baloney Starfleet Federation currency trading with any credibility, they will have to continue to subsidize the mistakes of the least common denominators.    And yes, this seems anti-intuitive, to save the Euro by weakening it with these bailouts, but the fact is the world markets prefer stability to necessary nut cutting.

Truth is, the Germans will some day emit a huge sigh of relief when they get their beloved Deutschmark back and they can once again run rampant over the rest of the Europe in currency blitzkrieg, if not via their formerly preferred method of  “Large Iron Rolling.”    Until then, they will stubbornly continue to try to make this European Union thing work,  and cope with continuing annoyance at those who would rather hang out in the sun, drink Ouzo  and go sailing, whilst dancing the mazurka and opening large menu diners.

All this brings me back to the punch bowl party over on this side of the pond.  With the Euro saved,  for this week at least, the robots at Goldman Sachs have been re-programmed to short the dollar and buy Barbie dolls and other such Mattel, Inc. [[MAT]] toys — Hasbro, Inc. [[HAS]] anyone?

We, the proleteriat, can now come back down off our panic chairs and continue with our most profitable line of employment — namely, fondling gold bars until their corners go smooth and sucking on silver ingot lozenges until our colds go away.

I continue to love, and accumulate the above mentioned names, and in addition I am grabbing, as I type (with my other hand) some [[EXK]] , Royal Gold, Inc. [[RGLD]] , Exeter Resource Corp. [[XRA]] and the “N’s” — NovaGold Resources Inc. (USA) [[NG]] , New Gold Inc. (USA) [[NGD]] and Northgate Minerals Corporation (USA) [[NXG]] .   

Last but not least, I like lithium (you know why, don’t you?) in Sociedad Quimica y Minera (ADR) [[SQM]]  , and I like to say “molybdenum” ten times frontways and then ten times backways.   If Thompson Creek Metals Company, Inc. [[TC]] is not bought out by the likes of BHP Billiton Limited (ADR) [[BHP]] or Freeport-McMoRan Copper & Gold Inc. Freeport-McMoRan Copper & Gold Inc. Freeport-McMoRan Copper & Gold Inc. [[FCX]] or even Teck Cominco Limited (USA) [[TCK]] (its fellow Jackson) within two years, then I’ll be greatly surprised unto paralysis.

Peace be upon you, my brethren, as our plan “comes together, right now, over me.”

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Freeeeeeee-ddddoooooooooooommmmmmmm!!!

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Just wanted to let you know that I’m still here, albeit with my guts wound around a spool and looking forward to that “Can’t-Get-Here-Soon-Enough” beheading.

I kid, of course.  But I didn’t want you to think I had abandoned you all, or my positions.  No, I’m sticking hard here, and have not deployed any more money today, although a couple of things are looking very tasty. Royal Gold, Inc. [[RGLD]] is one of them, already up more than a buck off it’s lows of the day. I may dabble in that one more time before the day is out.

[[AGQ]] is presently suffocating me, by means of a large rock laid across my larynx, choke-out style. This is the way this stock trades, though, so you have to be ready for “double draw-downs” as it is a double ETF. I will be looking to add that final 600 shs here, however, and it may be today or tomorrow. Silver Wheaton Corp. (USA) [[SLW]] is equally as ugly, but has (as a kind reader mentioned on the previous thread) quite a reputation from pulling back hard off of highs. Whether it gets all the way to 35%, I cannot say, but I’m also waiting to see how that on develops.

For golds, RGLD aside, Eldorado Gold Corporation (USA) [[EGO]] is performing the best of my three cabelleros. Next IAMGOLD Corporation (USA) [[IAG]] and dragging up the rear is the less liquid Allied Nevada Gold Corp. [[ANV]] . I continue to think Allied Nevada Gold Corp. [[ANV]] will provide the best long term bang for your buck, but I’d only nibble until a turn is confirmed.

The dollar (DXY) is most frustrating here, as it ran all the way to $79.97 only to fall back to the $79.84 region. I was hoping it would clear out all the way to $80.50 or so, but it looks like we may have to wait on that action again, at least until tomorrow.  

There’s also a possibility that $79.97 was the high water mark, but I’m not counting any of those quail’s eggs yet.   

Note — 1,035 or so is a 10% retrace on the S&P (or $103.5 on the [[SPY]]  — that could be a nice target for any resumption in the overall cyclical bull.  I imagine we’ll all be pretty exhausted at that point.

Hang in there, folks.  

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 Special Update:  

[youtube:http://www.youtube.com/watch?v=tcoVxbutl8g 450 300]

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Best to you all.

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Krull Leaves the Poker Game for a Quick Smoke Break
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Up 3% yesterday, even with all my hedges still in place, I must bow to the volcanic power of the precious metal rebound we experienced yesterday.

That doesn’t mean I’m abandoning my post on the 12th slippery rung of the main municipal sewer — the cosy seat next to the extrusion pipe but before the extrusion weld.   No, I’m still expecting a pullback today from yesterday’s Ode to Joy/Bunny Rabbit Massacre, unbounded. 

But the dollar (seen on the intraday as [[UUP]] or DXY) still continues to fall off here, and I’m wondering if we will ever get back up to that $80.10 or so pivot (on DXY)  I’d talked about as a trigger for another downturn last week.    I won’t be surprised, however, if we get another exogenous shock out of Davos, the PIIG’s or even President Obama’s recently unveiled near $4 trillion FrankenBudget. 

For now, I’m liking what works on the rebound, and thus far, it’s the fast movers of the junior golds like Allied Nevada Gold Corp. [[ANV]] , Eldorado Gold Corporation (USA) [[EGO]] and “the X-factor” — Exeter Resource Corp. [[XRA]] .   I also like IAMGOLD Corporation (USA) [[IAG]] and Royal Gold, Inc. [[RGLD]] of course, and Lindsay made a nice rec yesterday on the nicely pivoting Taseko Mines Limited (USA) [[TGB]] .

Of course silver is my true Tsar Bomba play in 2010, as it has been lagging the 2009 move in gold, along with platinum [[PTM]] , Stillwater Mining Company [[SWC]] and palladium [[PAL]] .   Right now, in this first updraft, I like the double silver play [[AGQ]] a whole lot, and of course my core group of miners — in order — Silver Wheaton Corp. (USA) [[SLW]] , [[EXK]] , [[PAAS]] , [[CDE]] , [[SVM]] , Silver Standard Resources Inc. (USA) [[SSRI]] and the lowly Hecla Mining Company [[HL]] .

All of these should be gnawed at opportunistically, as one would a bread wheel from the boulangerie, deep under the steam pipes of Manhattan.

I am still not taking down my hedges (in  [[SPY]] puts and [[QID]] and [[BZG]] ), and will happily bleed money on them here, as that insurance policy has served me well these last weeks.   Nothing could please me more than taking them down at lower balances, however, as that would mean all of my other plays are working well, as they did yesterday.

Don’t forget about the banks, here, as they’ve never really suffered much of a pullback, even in last week’s deluge.  Today, they seem to be leading the red dogs, which may turn out to be an opportunity for you.   Again, I like BB&T Corporation [[BBT]] for the longer term hold, Fifth Third Bancorp [[FITB]] and Huntington Bancshares Incorporated [[HBAN]] for the Ohio pop, and Pacific Capital Bancorp [[PCBC]] for the lotto play (stay small and remember, it’s only a game).

Best to you all, First Amendment scholars.

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You’ll be Fortunate if You Can Keep Your Moustache Clean
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Just get in the manhole and try not to mind the company of the rats.  That is, unless you get hungry over the next couple of days. 

I think we are going to hit that dollar high in the next few days, probably by Wednesday, as this Greek PIIG drama doesn’t seem to want to go away.  That means we will probably see one final washout in the market as well, before a recovery.   

The good news is that the precious metals — gold, silver, and even more so platinum and palladium, are hanging in there and remaining rather unfazed by this most recent 50+cent appreciation in the DXY.   This is encouraging and may signal that the metals themselves will be turning before even the market.  

That being said, I wouldn’t be surprised to see one final reach down as the dollar heads to our target in the $80.20 range.   For gold, that might mean a test of the $1,030-40 area after all, and for silver, likely a break of the $16.00 mark.   I will be poised for that event — and on any rapid shakedown to these levels I will be adding egregiously to my [[AGQ]] and Royal Gold, Inc. [[RGLD]] for certain, and quite possibly I may add a touch more Allied Nevada Gold Corp. [[ANV]] , Eldorado Gold Corporation (USA) [[EGO]] and [[EXK]] as well.   I am holding out for one last purchase on the June $11 Silver Wheaton Corp. (USA) [[SLW]] calls too — hopefully in the low $3.00 range this time. 

We had quite a beard-curling day on Friday and I wouldn’t be surprised if we opened strong on Monday, only to give it all back in a nervous, feckless cowardly bout of trading that meanders thoughtlessly even unto Wednesday.

I say to you, now, do this:  Grab some cigars and some cheap bourbon and call five of your favourite (sic) comrades for a poker game below the city streets, under the comforting aegis of a two inch thick Neenah Wisconsin-forged steel manhole cover.    There, among the hollow echoes of  the moist, steam-filled tunnels and amidst the occassional squabble with the rats over the Cheez-it bowl, you will remain relatively unscathed — and perhaps more important, distracted — in the days ahead.  

Later, this week, we will comb out our moustaches and re-take our rightul places on the street-side of the manholes, where we shall kick various bears and their entourages down aforesaid (still) open cataracts, where they shall each reside again in bitterness, without the aid of kerosene lantern, cozy parka, or thrilling paperback romance novel.  

Off to price expensive cigars and cheap, but bracing bourbon.  Bless you, my friends.

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Stepped up the buying today, in the teeth of the downdraft.  I see these fat white bloated English bodies piled high, but stand firm in my resolution that we are approaching an oversold bounce in the precious market.   [[GDX]] gives me more than a ray of hope with it’s action today:

Note the 61.8% retrace hit on this weekly chart.   That’s a very significant level, which will usually put up a ton of support from the underside (as well as resistance on top).   Now we may get another tap of this level tomorrow, but I think this is the place we should all be accumulating our PM’s of choice.

You know I have.

Today, I added another 2k of Silver Wheaton Corp. (USA) [[SLW]] at $14.03, and yet another 40 June 11’s of the same name, this time at $3.90.   Don’t ask me why I keep buying 40 contracts at a time, there’s probably some internal fibonacci mechanism at work here.  I also added 2k more of Allied Nevada Gold Corp. [[ANV]] below $13 and another 4k of [[EXK]] at $3.32.  Last I put on 1k more CDE at below $15-.   I think that’s it for me in that name.

I also added significantly to my [[AGQ]] net weurth (sic), with another 800 shs at $51.52, give or take.   I now have 2k shares total.   I will add, but cautiously, to this bucking bronco.   I think that the dollar — [[DXY]] may scoop to $80 here, which could some additional pressure on the PM’s.

It will all be temporary, I aver.  

On the hedging side, I dumped another 50 of my [[SPY]] puts at a nice profit, which generally means that there will be a waterfall decline tomorrow morning.

You think I’m kidding.   I’m not.   I have 100 SPY puts left, and am still “full up” with 14k [[BGZ]] and 10k [[QID]] .   This has cushioned some of my long losses these last few days, but I can tell you verily that I look forward to blowing out of these positions.

I think we approach that time.   Keep in mind silver is trading right now at one sixty seventh the price of gold.  That’s nuts, and could presage a gold drop to $1,030-ish.    Even there the POG is still well over 60x the price of silver.  

Short summary — silver is already sold.   I don’t feel it has a whole lot farther to go.  Trade accordingly.

Best to you all.

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