Commentary for the Week of March 8

[Our correspondent and occasional guest essayist Erich Simon has been talking up gold for as long as he can remember. Recently, however, after working some comparison numbers based on grocery bills we would have paid 40 years ago, he discovered that gold’s powerful rise was somewhat anemic before Helicopter Ben opened the money jets. He further notes that our apparent overestimation of gold’s strength is no accident – that even the most astute bullion investors have been fooled by our cunning masters.  For the full story, read his essay below. RA] The dollar is down about 98% since it became global tender. Back in 1971, era of Nixon Shock, the price of an ounce of gold was $35 -- in line with its 1945 conscription. Right after Nixon closed the gold window, the price peaked at $42. All things being equal (and assuming gold doesn't get used up), at what price must gold be valued to compensate for a 98% loss from -- call it inflation, debt or whatever you like. I think the math goes like this: One dollar is now 2% of its former self. If you divide the 1971 “fair market” price of $42 by .02, you arrive at $2,100. The price of gold (POG) is in fact now around $1,365. The $2,100 level is probably more accurate than the $2,500 prediction I made years ago, when I was appalled at the large number of billionaires being hatched from the shells of millionaires. But the higher estimate can stand nonetheless, since we could easily see, from current levels, the equivalent of the 1980 spike to $850. The catalyst might be the postponed bank-runs that are baked into the cake. Mass denial would end in a flash as Americans rushed to exchange paper savings for necessities and other

With The ‘Nank in the hot seat on Capitol Hill Wednesday, our good friend Doug – “the savviest financial advisor we know”  – called to ask whether we were seeing any signs of a paradigm shift on our charts. That would be logical, he said, since the Fed Chairman appeared to be preparing his Congressional inquisitors and the news media for nothing less than The End of Quantitative Easing. Our own reading of Mr. Bernanke’s intentions, based on news reports, was that he was preparing us for more of the same, although he did pay lip service to the idea that, at some point, the Fed would have to tighten. Dow Jones wire service paraphrased him as follows: “[Mr.] Bernanke…sought to reassure lawmakers the Fed wouldn't allow inflation to take root in the U.S. by waiting too long to tighten monetary policy, but gave no indication he is ready to do so right now.”  Although The ‘Nank’s bloviations were much less opaque than the cryptic double-talk we used to hear from Mr. Greenspan, they didn’t provide much reason for us to think that monetary austerity is about to become an actual policy option any time soon. Whatever the case, there was no paradigm shift evident on our charts. T-Bond futures, for one, did not surge to create a bullish impulse leg on the hourly chart (although they could conceivably do so today, so we’ve reserved judgment).  We credit the Dow Industrial Average for having read the Nank’s performance just about right, ending the day up an insignificant seven points. That is not to say traders failed to give the Fed chief his due. In fact, they added a little buying frillip at the close that hauled the blue chip average out of the red, where it had languished for the

AOL’s $315 million buyout of the Huffington Post has to rank as one of the most recklessly extravagant dot-com deals in history, rivaling the Time-Warner/AOL merger in stupidity if not in dollar value. Not that that would stop a few hard-core fans from blogging the deal as though it were the Second Coming.  Here’s what one of them, Jason Pollack, had to say, taking the prize for retch-inducing obsequiousness:  “The Huffington Post has been dramatically ahead of the curve in modifying their site to fit with the latest social trends. Last night they were rewarded handsomely for their brilliance.”  Yeah, sure.  Handsomely. Three-hundred-and-fifteen-million bucks! Hell, give us a measly one million and in three years we’ll build you an online presence with an audience that will rival Huffington’s in size. And unlike Huffington, which only recently began to make any money at all, we could ramp up advertising revenues relatively quickly to pay for expansion, avoiding their mistakes and stealing their best clients. The talent to do this has never been cheaper.  Having come from the newspaper business ourselves, we can attest that Pulitzer-winning reporters, some of them close personal friends, are a glut on the market. News editors we know have been looking for work for as long as seven years. And a few former managing editors have thrown in the towel. Need some celebrity-types to contribute regular think-pieces and commentary?  No problem.  Many will do it for nothing simply because, like TV actors who work for scale on Broadway, they are egomaniacs who crave the exposure.  What does it take to attract Huffington-size audience?  In a word, sleaze.  If you haven’t visited the site recently or used Google news to find the top stories of the hour, you might still think of Huffington as the premier outlet for news, tidbits

We sometimes forget that trading can be more humbling, even, than golf.  Who could have imagined we’d predict the Dow’s intraday high within a point, only to blow the short trade we’d advised from that high?  That’s what happened, mainly because, when the trade started to go our way, we lowered the stop-loss by a hair to all but eliminate the theoretical possibility of even a small loss. Here’s the way it played out:  Anticipating a 100-point rally in the Dow on Monday, we put out the following recommendation to subscribers Sunday night, referencing the March E-Mini Dow contract: “The futures look bound most immediately for 12142, a Hidden Pivot shown in the chart.  The target looks not only like a high-odds bet as a minimum upside price objective, but also a good place to attempt shorting with a stop-loss as tight as 12151.”  The chart we used to project the high is shown below, and although for proprietary reasons we have not labeled all of the coordinates employed to predict the exact top, you can learn how to do this nifty little parlor trick yourself by taking the upcoming, six-hour Hidden Pivot webinar. For further information, including a detailed description of the Hidden Pivot Method, click here. Getting back to yesterday’s price action, the Mini-Dow futures got off to the strong start we’d expected, and so we opened up an impromptu virtual meeting room for Rick’s Picks subscribers to give them precise advice in real time for getting short at the target. At the time, the Mini-Dow contract had traded as high as 12130, getting within 11 point of the target. They tiptoed still higher, to 12141 – a point beneath the target, and that’s where we “declared” ourselves short.  The entry was not merely hypothetical, however, since someone in

It seems we were premature when we wrote here a week ago that the Mother of All Bear Rallies had perhaps breathed its last.  Just that, with stocks and gold diverging sharply at the time, it seemed for one brief moment that something like fear, or a vestigial remnant of it, had re-emerged on Wall Street. How silly of us to think anything less than the sight of a mushroom cloud billowing over Saudi Arabia’s oilfields would rattle NYSE speculators.  And yet, here was the caliphate, ablaze with protests, the prospect of radical political change in the air. A week later, that prospect remains not only possible but likely.  Alas, how were we to know that, within the week, America’s stance toward Egypt would be, “Like, hey, we’re cool with whatever you guys want to do.”   And thus, there was this remarkable headline in the Jerusalem Post yesterday:  “[Hillary]  Clinton Tentatively Welcomes Muslim Brotherhood Involvement”.  Although we can understand why Mrs. Clinton would want to try and put a big, smiley face on the mounting geopolitical disaster that is Egypt, we would have preferred she’d said nothing at all. Instead, she continued in the Obama-esque tradition of speaking softly while carrying no stick at all: “We’re going to wait and see how this develops, but we’ve been very clear about what we expect,” the Secretary of State said while attending the Munich Security Conference. In Their Own Words You have to seriously wonder what “we” actually do “expect”. After all, the very name “Muslim Brotherhood” does not exactly conjure up images of benign leadership, religious tolerance, a free press and neighborliness.  Not that Wall Street could care about such things, nor about the implications they may hold for the uneasy truce between Arabs and Israel that arguably has been postponing Armageddon.

The recent Resource Investment Conference in Vancouver may well have set a new attendance record for that venue. So many company booths filled the display area that they overflowed onto the confines of the massive Vancouver Convention Centre West. I was asked to speak in place of Kitco’s Jon Nadler, who was unavoidably absent from the conference. My topic was entitled The Precious Metal’s BIG Money Train is Leaving the Station...Are You Ready?  The thrust of my talk was not whether a major new leg up is imminent, or even a mania phase like the dot-com bubble of the late 1990s. The more immediate concern is that anyone who intends to ride what many of us have long believed will become the Mother of All Bull Markets had better establish and hold onto a core, non-trading position, and sooner rather than later. These holdings should be kept in the portfolio until the owner makes a subjective decision that the precious metals bull is either over or on its last legs.  Trying to play top-caller, going 100% into cash before a “reaction,” then attempting to get “all-in” again before prices blast off, is a sure-fire way to get knocked off the precious metals bull, landing on one’s back, and most likely staying there for the duration. Granted, there is nothing wrong with trading some holdings into market strength and then looking to buy back on a reaction.  Doing so is part art and part science – and, yes, it’s not always possible to get back in at a lower price. However, the greatest traders out there - the iconic Jesse Livermore, the late great Sir John Templeton, legendary goldmeister Jim Sinclair and his father, Bert Seligman – all sought to lower their cost basis by carefully selling certain rallies and buying

[Egypt veered toward civil breakdown yesterday as protests turned violent following a speech by President Hosni Mubarak that took a hard line against demonstrators’ demands.  Following is a timely commentary from Cam Fitzgerald, a frequent contributor to Rick’s Picks and the readers’ forum.  RA]  It really is very unfortunate what has transpired in Egypt over the past few hours. The country has abruptly lurched from a peaceful populist uprising against a despised leader and into the makings of civil war within hours of Mubarak’s speech to his countrymen. This is not a big surprise. The leaders of the uprising had demanded nothing less than Mubarak’s immediate ouster. They painted themselves into a corner with a demand that was sure not to be met. When Mubarak subsequently stated that he will stay on for nine more months, the balance of his term,  AND seek to arrest those that were responsible for the instability, arson of buildings and vehicles etcetera, Egyptians everywhere knew instantly that the seeds were sown for an explosive outcome in the words of his speech.  Mubarak said exactly what was guaranteed to make the protesters as uncomfortable as possible. Their worst fears materialized instantly. The much hated leader basically told them he would stick around to pay back those who stood up against him. His words were a clear threat and a recipe for disaster, as every Egyptian heard exactly what was really encoded in his message. I just shook my head in disbelief as I listened to the “analysis of the moment” by one of the media talking heads as she spun the speech in a positive way to leave the impression that Mubarak was an honourable leader who had worked hard to serve his country. Indeed, Mr. Mubarak himself stated that he had “exhausted his life”

[Turns out the Middle East is not the only place on earth where trouble has heated to a  dangerous boil. Superhot gases have recently caused miles of ground to swell dramatically beneath Yellowstone, reminding us that Nature could end life on this planet far more swiftly than any man-made conflict. Even a hydrogen bomb would be a firecracker in comparison to an eruption of the Yellowstone caldera. Which brings us to the essay below, written by a friend of ours with a keen interest in prophets and seers. At least one of them predicted long ago that 2012 would see a spectacular increase in seismic activity, potentially affecting hundreds of millions of lives. This essay originally ran in May, but with Yellowstone’s supervolcano unusually active, we thought it would be a good time to repeat it. Our friend also notes that “the drumbeat of prophecies clicking over is also picking up pace - watch England for potential violence involving the Royal family in the lead-up to this April's royal wedding; Tunisia is only the first North African country to experience destabilizing revolution and Algeria and Morocco could well follow in the year ahead; and watch the Catholic Church as a schism may unfold there as well. “On the economic front, the next leg down in the economy is also due to start this year, and the worst of what will turn out to be this Millennium Depression is still ahead of us. Yes, we have begun the second decade of the new Millennium. 2011 may well be the last year the world at large will not be at a state of world war - for decades to come. I hope the prophecies are wrong, or maybe my interpretation of them is flawed - but that is what my studies of prophecies

Has the Mother of All Bear Rallies breathed its last?  We think so, although if this proves to be the case the climax will have occurred in an odd place, technically speaking. Although we long ago ran out of fundamental reasons to look for higher stock prices, our focus solely on technical indicators suggested that the insanity still had at least a little further to go. Specifically, we were looking for the S&P futures to rise at least 56 more points before topping out in a big way.  That would equate to a rally of approximately 400 points in the Dow.  Gold and silver quotes also sharply reversed direction on Friday, rising from a similarly unexpected place.  Although we’d called for a potentially important low at 1296.50 for the February Comex Gold contract, the futures appear to have made a bottom well above that number, at a 1307.70 price that wasn’t even on our radar.  Very clearly, it was news of the fiery upheaval in the Middle East that drove the markets wild. However, that shouldn’t have had any bearing on whether our price targets were reached. In fact, we’ve come to regard news simply as the catalyst that drives stocks to our “hidden pivot” targets.  Under the rules of the proprietary Hidden Pivot System, if a trend reverses decisively without having reached a clear target, it is assumed the new trend will have legs -- especially when this dynamic plays out on charts of degree above the hourly.  Our conditions were not met on Friday, not quite, but it is probably just a matter of time before this occurs. What to Look For So what would it take to suggest that the steep moves that we saw on Friday -- one potentially reversing a nasty correction in precious-metal prices, the other potentially terminating a