All doors wide open for higher gold and silver prices.

Expectations Permanently Changed

Trading and investing education has now become sheer survival.

Analysts had expected a QE-3 announcement similar to previous ones. Instead, they got an unrestricted new policy for quantitative easing to print more currency and bonds with no limits imposed whatsoever. Markets liked what they heard as investors in larger numbers jumped in to buy and buy with some serious power. For those of us less reactive and shall we say, more studious about the outcome, it signals rabid inflation with a potential for hyperinflation.

 

With interest rates so remarkably low, the majority were holding zero inflation ideas on their collective minds as they heaved a joint sigh of relief when the Federal Reserve had indeed come to their markets’ rescue, and that all is well for now.

 

We suggest that these new policy decisions are ominous indeed as the FOMC is in fact accountable to no one. We see a powerful group of private banker reserve governors at the beck and call of big money capitalists sprinkled throughout the world without any accountability to their respective national governments and their supporting taxpayers.

 

This means they have absolute power to do as they wish, when they wish, with all international currency, credit and bond markets. What this is saying for all to hear is that there is nothing in this old world that can begin to compete or impose any kinds of rules on this private banking cabal at all.

 

The old paradigms with at least some restraints are invalid and old news. One of our top analyst colleagues just reported a fabulous history of similar events since the 1700s throughout the world. His excellent historic work proved these economic catastrophes always end the same: in a massive bubble that blows up. Further, as he wrote, the healing time is usually one full decade.

 

We were pleased to see he also reported something we noticed and discussed at length before, the epic USA bad times from 1873 to 1896. This cycle arrived after the American Civil War and was a massive, rolling, recessionary depression. Some economic historians prefer to tell us there were intermediate cycles of better times during that period. We agree with the latest analyst’s report that it was just over 20 years of hell.

 

What was further interesting was the fact this mess landed in the middle of America’s Industrial Revolution, which seemingly should have given major support and jobs growth as new industrial might was blossoming. This was not case however.

 

The truth was, once again political and governmental economic intrusions protracted this depression and would not let it heal itself naturally. Between 1897 and 1906 things were much better. Then the Panic of 1907 ensued and a new nastiness began all over. This malaise extended from 1907 to 1916 in broader stock markets. Only World War I cranked-up the soldier jobs program and related defense industries as a prelude to better times in the roaring 20s.

 

We strongly suggest right now, and have many times before over the past few years, that the cycle from 1900 to 1920 in America is being replicated all over again from 2000 to 2020. How interesting 1908 and 2008 had similar frightening market moments. In both cases it was so bad that some observers were saying those markets were permanently toast.

 

 

 

Trading and investing education has now become sheer survival.

 

Steve Roach, a top economic mind and analyst, has called this entire cyclic event a “Charade.” For those of us immersed in the financial industry, for the most part in precious metals and commodity related reporting, we cannot disagree. We can all complain until the cows come home as the entire situation is unlikely to change in any way.

 

What we must do is educate ourselves fundamentally on a broader view for most markets and then make decisions determining how we can best manage to successfully trade in this very unusual and volatile environment.

 

We are not saying that buy and hold for the short, intermediate and longer views will no longer work or ever be successful. What we are saying, is as traders with basic instincts, we have to move faster and more often, and that might be a better way to procure a happy outcome with your trading and investing money.

 

We attribute the first half of 2012’s trading problems to market controller’s “indecision”, which extended the choppy, sideways action and in turn delayed the settling down cycle. Media manipulation has created lots of Wild West unruly trading, which would not have been possible years ago. We’re not whining, we’re just saying we’ve got to be better and obviously more nimble than in “the more normal environment” of yesteryear.

 

Based upon our experience over the last decade, it is safe to say we have now entered a new and unusual trading and investing atmosphere where numerous bedrock rules have been thrown out the window.

 

Current advantage we have: knowledge they will print fiat paper forever.

 

With the announcements by the FOMC last Thursday, we have some guesswork removed from the trading equation. It is very clear now that the Federal Reserve and the central bankers of Europe will flood the markets with paper until they are satisfied they have won the battle and beat Greater Depression Repression II. History has proven over and over again that they are mistaken.

 

The current messes are nothing new. This stuff has gone on for centuries and it always ends up the same: they lose the battle and all that paper goes down (and in some cases re-values to zero).

 

Define the Problems

 

The rule of law for big bankers does not seem to matter. With the elimination of the Glass-Steagall Act, banks can take depositors funds and commingle them with trading accounts. This started with the late Enron disaster and has continued openly and notoriously.

 

With interest rates so low, passbook savings and other types of “buy and hold” investment vehicles pay so little that they are unworthy of investments at all. In our view the global bond markets have now been damaged beyond recognition.

 

There is extreme danger in the domestic and global economies creating a pall over most all kinds of lending.  Small business is the backbone of USA commerce and growth. Losing customers in a depression and being on overload with bureaucratic red tape, small business survival is doubtful for many.  Larger others with substantial capital prefer not to take new risks in this atmosphere. There is no recovery and no expansion.  We just continue to pucker-up and shrink each day.

 

 

 

 

Starting January 1, 2013, new and heavier tax burdens will crush individuals and companies, smothering existing potential growth and blocking new start-ups. Banks are loaded with taxpayer cheap money furnished by the federal government. They can just hold it, and earn a small but steady interest income on the rate spread, basically doing nothing. This is much less risky and enables banks to keep doing what they do which is trade for larger gains using passbook savings.

 

The housing industry, a major part of America’s commerce is broken.  It stays broken for a decade until the bond and related credit markets are healed and repaired. You must have a job to pay a mortgage payment, yet unemployment is 25% and still rising. The jobs situation is growing worse ever faster. Only the next world war will change this.

 

Understanding the difference between trading and investing. –Wikipedia

“Day trading refers to the practice of speculation in securities, specifically buying and selling financial instruments within the same trading day, such that all positions are usually closed before the market close for the trading day. Traders who participate in day trading are called active traders or day traders. Traders, who trade in this capacity with the motive of profit, assume “the capital markets role of speculator.”

“Not widely known, the correct definition of an ‘intra-day’ means the move as measured from the previous close and not just relative to another price traded on the same day.  Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures.”

“Day trading used to be an activity that was exclusive to financial firms and professional speculators. Many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among at-home traders.”

We would say that swing trading (a few days to 1-2 weeks) and an entry-exit in a cycle of less than 90 days should be considered faster trading and/or day trading, of a type.

“Investing-investment has different meanings in finance and economics. Finance investment is putting money into something with the expectation of gain that upon thorough analysis, has a high degree of security for the principal amount, as well as security of return, within an expected period of time. In contrast, putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is gambling.”

This last statement suggests faster traders move in and out without proper analysis.  We would argue many futures, commodities and some faster stock transactions based upon both technicals and fundamentals are more safe than the longer view “buy and hold” positions now vulnerable to unwarranted and cowboy-like market manipulation using credit tools, media and street gossip.

“Putting money into something with an expectation of gain without thorough analysis, without security of principal, and without security of return is speculation. As such, those shareholders who fail to thoroughly analyze their stock purchases, such as owners of mutual funds, could well be called gamblers. Indeed, given the efficient market hypothesis, which implies that a thorough analysis of stock data is irrational, most rational shareholders are, by definition, not investors, but speculators.”

Yes, this was formerly the case but now buy and hold is a big banker target. The definitions of trading and investing shown above in a quotation from the Wikipedia website explain what we would call the traditional discussion in both kinds of speculation.

The new and dramatic difference that we see today provides very strong evidence that traditional investing, due to market manipulation and on-going interference by The Plunge Protection Team and the fiat paper printers in global central banks suggests that investing, in many respects, is now more risky, or even exceedingly chancy, as old reliable market rules no longer apply.

Now we are observing a true economic Wild West throughout numerous financial global markets where all the rules are thrown out the window. Just look at the crazy Big Boy Banker derivative trading, commingling of funds, failures to protect sacred capital owned by clients and the on-going massive and widespread fraud. This also includes massive and potentially illegal loans from taxpayers provided by governments.

This cannot be called traditional buy and hold conservative investing but rather it has become an international floating crap game with no rules.

While all eyes are on Europe’s destruction, the USA’s test comes November 6th. It might even arrive sooner if the broader stock markets slide out of control during September 23-25.

Meanwhile, we suggest you gravitate toward physical gold and silver and only the best-of-the-best of related stocks supporting that view. In our work we are busy looking for options and selling ideas for the broader stock markets heading toward the dustbin of destruction. Last week we recommended four new ones in Trader Tracks Newsletter. We see more coming in this new seasonal beginning.

The Greater Depression Repression II is swiftly taking hold now and layoffs will be legendary. Housing has an additional -20% drop from the current USA national average.  Joblessness goes to 30%-35% and food stamps reach over 50 million to 60 million. We will get a 2013-2014 World War in the Middle East and when Obama is re-elected, inflation goes to hyperinflation. Not happy stuff but it’s not the end of the world either.

Somebody please tell us when the global bond markets crash for good and we’ll tell you when this can all get better and we can start all over again, maybe with a partially backed fiat gold currency.

Roger Wiegand is the writer and editor of Trader Tracks Newsletter for gold, silver and energy traders.  Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. Stay tuned for more of Traderrog’s insights and predictions via his exciting new daily audio subscription.  Coming soon! Details at www.wavelengthpublishing.com

Roger also is a regular contributor to The Korelin Economics Report ( www.kereport.com) , the highest rated daily internet radio program listened to throughout the world dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report, which airs on radio stations across the U.S. on Saturdays and Sundays.