Wednesday, April 28, 2010

A Minor Top Is Nigh

The Greek "crisis" continues to unfold almost uniformly to our expectations, and its ramifications for the EU as a whole are certainly not painting a rosy picture for the coming decades.

The first order of business is to deal with the still-open STD short.  I picked this bank back in December because it was a mirror of the overall psychology toward the finances of Greece itself, being a mammoth-sized financial institution (relative to Greece's overall economy).  Many readers sent emails and posted comments doubting this choice, and even the severity of the debt crisis that is unfolding.

This debt crisis is not a Greek, PIGS, or Euro problems alone - the entire world is going to soon enter another deflationary cycle after this reflationary pause is complete.  I don't feel there is much time left ticking on the reflation clock.  The market has ridden to exceptional highs, over 7.75% higher than our ideal retracement target of 1132 on the S&P500 (at its recent highest peak).  A very respectable opportunity to close out open long positions is at hand, and I suggest taking advantage of it with at least a large chunk of the core funds you don't want to put at unnecessary risk.

Today's break of recent key support opens the path for another sizable drop in Greek bank stocks, and further tensions in the EU


As for the broad markets as a whole, they are far overdue for at least a minor correction to shake off the extremes in positive sentiment we are seeing today and pull some more chasers into another small leg up.

An ideal retracement point on the Dow is around 10,800 before another leg up.  That being said, most are expecting at least another leg up, so there is a chance that a more major top is in the could erase 1/3 or more of the rally since March '09.

Speaking of Sentiment Extremes:



The credit contraction continues as M3's negative move accelerates even further.


As for the broad markets themselves, some small nonconfirmations of momentum and price could be indicating that larger move down.  Coupled with sentiment levels this is not a healthy stock market to be long in for the short term.  Once a small correction has occurred we will re-assess the situation and see where we can expect another minor leg up or more downside.  If the next day brings an immediate push down, the case for further downside is strengthened as this weeks bar would be a reversal bar (





The precious metals run-up seems to be drawing to an end.  The HUI hit the Fibonacci .618 retracement of the first larger down-move from December 2009.  It could not maintain a close above, and turned down in the last hour.   The initial ideal target has been met to mark the correction complete, however one final push up and a new high in 4 days would mark it complete in price target range and time as well.

One further piece of evidence that this move is corrective and not part of a larger trend up is that the slope of the move up is only 54% as strong as the down-move that preceded it.  The impulsive move ahead still seems to be more probably to the downside, and a significant one at that.



The non-confirmation between gold and silver should rectify itself with silver pushing to another final high.  The minimum corrective target at this point is $18.18 with further potential up to $19.00 and slightly above.  If this scenario plays out silver should immediately reverse and rapidly approach a new low for the move below $14.50 / oz


Have a great Thursday and Friday, and enjoy your weekend!

Derek Blain

P.S. Comments or Questions?  Email me at derek@investophoria.com

31 comments:

  1. Derek wrote:
    "One further piece of evidence that this move is corrective and not part of a larger trend up is that the slope of the move up is only 54% as strong as the down-move that preceded it."

    Down moves are typically steeper than up moves, because fear is a stronger emotion than greed (herd stampede survival instinct).

    There is no "deflation" and there is no "failure":

    http://investophoria.blogspot.com/2010/04/how-do-you-measure-paradigm-shift.html?showComment=1272503724645#c122292890976460060

    Instead, there is monetary inflation theft by the elite and a skyrocketing gold price:

    http://www.marketoracle.co.uk/Article16212.html
    ("How Deflation is Inflation")

    Expect that to continue, any short-term gyrations notwithstanding.

    I hope you realize this before it is too late.

    P.S. the charts you showed of M1, M2, M3 show the percentage change from a year ago, they do not show the currently monthly rate of change, nor do they show the international rate of change, nor do they show what the response of the governments will be to liquidity crisis that result. EU/Greece is showing that govts will either monetarily inflation in blocs or alone, but they will monetarily inflate. In mean time, we have a huge lag effect of the prior re-flation taking hold now. Any respites from monetary inflation theft by the paper elite (TPTB) will be short-term noise.

    -Shelby

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  2. "juxtapose broader money against the monetary base:




    The monetary base IS and will continue to grow VERTICALLY – or our
    financial system collapses. Why the monetary base can grow vertically
    while the broader measure collapses is because VELOCITY [the
    willingness of banks to lend and create credit] is non-existent
    because the FED has told them NOT TO LEND.

    The CRAP that individuals cannot qualify for loans is BOGUS – their
    balance sheets are no worse than the ELITE OWNED BANKS who have had
    money HEAPED on them"

    When will you learn that this period is about giving you illusions while the elite steal everything?

    WAKE UP FOOLS!

    -Shelby

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  3. Forecasting potential corrections is something anyone can do by merely watching the technical presentations at Big Charts - especially 'over bought/oversold, and volume indicators.

    Fluctuations are par for the course in the markets, as Baruch, and so many have passed on, without committing themselves. when asked to share their market wisdom.

    Derek,
    You are as confused, and as ignorant of the outside world (outside the US) especially Europe, as Shelby.

    Thank you for giving me good cause to leave this site. Remember it is your blurbs at another's site that brought me to yours.

    Please do not invite comments that your meanderings inspire if you can't take them on the chin when they challenge. It only indicates your insincerity, and weakness.

    It is also noticeable how you tolerate a poster who uses 'Anonymous' to pour forth his vitriolic and bigotry with foul language. You make no comment on this, which any honourable blog, or forum would jump on immediately.

    You try that on Kitco where you post and you will never post there again.. (Perhaps you are he presenting another face?)

    I leave you willingly so you can carry on misleading your faithful addicts with your prognosis.

    May I also suggest you retain Shelby.

    You see, the markets are a zero sum game. In order for me, or anyone, to continue to gain, I need as many confused and mislead opponents as possible

    Just a suggestion

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  4. just to remind you: Banco Santander (STD) is a Spanish Bank...not a Greece Bank. The largest Greek Bank has a market cap of less than USD 10bn.

    Nevertheless a good pick, a Spain has hundreds of billions of real estate which is not yet marked down. Smaller Spanish Banks will have to be rescued, and Santander (STD) will face gigantic problems.

    Regards
    Lorenz

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  5. @Lorenz,

    Yes, and they also have massive exposure to Greek debt. Even many of the German banks are going to have to take huge balance sheet hits from Greece's fiscal "genius".

    Derek Blain

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  6. The whole world's banking system is controlled at the top by the same people. Don't let names or flags flying from their tops fool you.

    The only ones who are not yet controlled by the Financial Elite are those labelled 'rogue states' and that is why they are so named. They won't yet play ball. Eventually they will, they will have to.

    But it serves the International bankers purpose also to drag things out. As yet, they 'need' one or two 'rogue states'.

    And, contracting the number of banks with 'extinctions' and
    amalgamations is all planned. And a time of self inflicted crisis' is the best time to do it.

    Everything is going well, and according to plan. It is only mass naivety that fails to grasp it.

    Germany is a born leader, and will lead Europe. TPTB are well entrenched in Germany, it was they who ensured Germany's unity (East/West). Something thought at the time impossible and would collapse the then fragile German economy

    The EU will not only survive, it will become even stronger, and more tight knit. The euro and the dollar will maintain a near parity link as was originally intended.

    It could only be done from Germany, because even her former enemies, and the Asians, and South Americans, and all points East and West respect German resolve and discipline.

    And I say that as an Englishman - after all, we are Anglo Saxon.

    ReplyDelete
  7. RN... LEAVE ALREADY!

    And thank you Derek for the Anon posting ability :)

    ReplyDelete
  8. Yes thank you Derek for the Anon posting facility

    PLEASE STAY RAY

    ReplyDelete
  9. At first without knowing what the bank acronym STD stood for, I thought you were comparing the bank to a sexually transmitted disease LOL.

    Derek, you're some nice eye candy I might add :-)

    ReplyDelete
  10. Folks this incompetent snake-oil salesman WILL get you BUSHWHACKED if you follow any of his advice. Please do not swallow Blain's rhetoric nor his convoluted and disingenuous conclusions nor waste your time examining his grotesquely distorted interpretations of price action.

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  11. And just whose opinion do you respect and suggest folks consider? I just as Ray did, read Dereks work on other sites and it was in such stark opposition to my own thinking of where we are and where we are headed, that I was intrigued to see another perspective. I am not as Derek says Those who think gold and silver are going to the moon only read that which reinforces the decision they have already made. In fact I have been wrong on stocks so much (Negative) maybe an effective strategy would be "to do the opposite of what makes sense to me - make sense? No I'm not confused.

    Since Derek proclaimed the opposite of where I thought metals were headed, I want to consider all perspectives. Let's face it Derek talks like he knows trading. I don't feel I have given him enough time yet to lose my interest or confidence. Interesting that Ray is bailing so quickly, although I don't know how long he has been here. Ray where are you going? I like reading your cathartic posts. Since we seem to be in tight range now, I am giving Derek some time and hope he may be onto something

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  12. Derek, You're fighting the tide, Bro.

    Gold ain't goin' nowhere.

    I've watched guys like you fight this bull market for 6 years.

    I can barely trade my way out of a wet paper bag but I know a long term bull market when I see one.

    You deserve credit for making your calls publicly, but you're swimming upstream against a force of nature.

    Good luck.

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  13. Um...Derek you really have a thing for gold collapsing. It's been the theme for some time now! Still see $650 in the coming months?

    --DK

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  14. There is absolutely NO WAY this 'organised' economic world wide crisis is going to go away any time soon. Even a certified idiot should figure that out.

    There are many little horrors waiting in the wings to be reheated. as and when required' They don's (spelled daren't) sock it to you all at once.

    To short gold in this climate is sheer madness. They are holding it down as best they can liked a coiled spring.

    There will be minor corrections, but to play it down unless you have lots of money, can watch the market like a hawk, take small gains, have a fast trigger finger, and have nerves of steel, is asking for trouble.

    You have got to be in if you want to make money. If you must set a stop, set it way down, and ride the bull.

    Hold on when it tries to throw you off,
    You are in a trend, that trend is UP, so even if you wrong foot your entry, it will pick you up soon enough.

    You should not need anyone to tell you this, you have eyes.

    Gold goes higher, and the TV adverts still want to buy your gold.

    The 'mad masses' have not yet dipped their toe in yet. They have.not even come to the water's edge.
    Watch out when they do.

    What is helping to push it up are the idiots listening to those analysts who focus on the corrections instead of the
    long term strong trend UP!

    They encourage the shorts, and the bears oblige by slowly squeezing every dollar out of them.

    ReplyDelete
  15. I apologise for the few typing errors in the above, but you should be able to figure out the word.

    My new glasses have not arrived yet, and I find it hard to spot the errors in the small window provided.

    ReplyDelete
  16. Ray wrote:
    "The EU will not only survive, it will become even stronger, and more tight knit."

    Agreed, but 'stronger' only in the sense that it will be more socialized (the producers paying for the parasites). I think the more 'integrated' is better description than 'stronger'. It will actually become weaker relative to any pure capitalism (opposite of socialism, big govt, and taxes), but the whole world is moving towards increased socialism, so thus one can think of it as 'stronger' in the sense that it will be harmony towards a trend towards a one world govt where the producers are controlled by the parasites. An example of this type of world, is for example in Belgium and some other Germanic EU countries, one is not allowed to be seen working at any location where that person is not registered with the govt to work. There are more govt inspectors to enforce this, than there are workers producing something. Thus everything is incredibly expensive, and individual freedom is curtailed.

    Ray wrote:
    "The euro and the dollar will maintain a near parity link as was originally intended."

    And their value relative to gold will decline precipitously. But gold will become extremely dangerous asset to hold (agree with Ray "when the masses dip their toes in gold, watch out"), here is my post about that:

    http://investophoria.blogspot.com/2010/04/how-do-you-measure-paradigm-shift.html?showComment=1272508970948#c9176828296987190184

    Ray wrote:
    "It could only be done from Germany, because even her former enemies, and the Asians, and South Americans, and all points East and West respect German resolve and discipline."

    Germans are perfectionists and think they are superior to others. They have the world's best engineering. This is perhaps the optimum culture/attitude for world domination. I am roughly 32% German ("Hartwick"), 32% English/Irish ("Shelby and Moore" are both last names), 32% Southern French/Italian ("Primo"), and Cherokee native American ("Deason"). I explained in previous post how the Germans' lust over their perfection caused the genocide:

    http://investophoria.blogspot.com/2010/04/how-do-you-measure-paradigm-shift.html?showComment=1272503724645#c122292890976460060

    Ray wrote:
    "And I say that as an Englishman - after all, we are Anglo Saxon."

    What has the UK produced since 1900? Their cars suck. Their software is non-existent.

    -Shelby

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  17. Title of prior post above:

    ========================================
    The failure will be increased socialism (integration), aka forcing producers to pay for parasites.
    ========================================

    ReplyDelete
  18. Ray wrote:
    "It is also noticeable how you tolerate a poster who uses 'Anonymous' to pour forth his vitriolic and bigotry with foul language. You make no comment on this, which any honourable blog, or forum would jump on immediately."

    Ray you are apparently a socialist. You are dyed and bred into the Great Harlot trend we are in now. I strongly disagree with your request! Let everyone be free to speak! "Sticks and stones can break my bones, but words can never hurt me". You want a govt police controlling what we can say? Come on Ray! Please grow up... I know the people in UK are really big on the concept of prosecuting people (in civil or criminal court) for what they say and they even get into huge brawls at soccer matches. They think they speak a superior form of english. Egoist parasites.

    Apparently Derek is a libertarian, and thus doesn't believe in censorship (as this has blowback effects) but he also believes in property rights and has stated he wants us to respect that he owns the domain name investophoria.com. I will try to respect his property rights, but I also may feel compelled at times to post.

    Ray wrote:
    "TPTB are well entrenched in Germany, it was they who ensured Germany's unity (East/West). Something thought at the time impossible and would collapse the then fragile German economy"

    At big tax cost to the German producers. This has worked to Germany's advantage because it is a small population and having many debt dependent consumer countries, gives Germany a big export market for its well engineered products. But this has created a weak system of multitudes of "useless eaters" and a small core of producers. This is the model of the new world order. The problem is that the small producers get squeezed by the big govt result. The big corporations win.

    Ray wrote:
    "To short gold in this climate is sheer madness. They are holding it down as best they can liked a coiled spring."

    Correct.

    -Shelby

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  19. Ray wrote:
    "The only ones who are not yet controlled by the Financial Elite are those labelled 'rogue states' and that is why they are so named. They won't yet play ball. Eventually they will, they will have to.

    But it serves the International bankers purpose also to drag things out. As yet, they 'need' one or two 'rogue states'.

    And, contracting the number of banks with 'extinctions' and
    amalgamations is all planned. And a time of self inflicted crisis' is the best time to do it.

    Everything is going well, and according to plan. It is only mass naivety that fails to grasp it."

    Agreed!

    And the survival of this increasing socialism depends on its ability to prevent any pure capitalism (aka "free market") competition.

    This is a fascism (big corporations and banks the winners, everyone else losers).

    But technology is the wildcard. The internet is far from being under control.

    Let's watch and see how this plays out. I already listed numerous recent failures for the TPTB:

    http://investophoria.blogspot.com/2010/04/how-do-you-measure-paradigm-shift.html?showComment=1272270549692#c1200734758719685089

    * Global warming is a scam as proven by climate-gate hackers
    * H1N1 scam failed, Poland even refused the vaccine
    * NAU target date keeps getting pushed back
    * Rise of alternative information on internet
    * Most people realize 9/11 was a false-flag scam
    * Major resistance to socialized health care in USA.

    Of course the overall trend will continue to be towards the one world order, irregardless of setbacks.

    But I am also saying that as the cancer of socialism (big govt+fascism) everywhere spreads, there will be zillion small beacons of light of free market activities that TPTB can not stomp on. If they succeed in total domination, they will suffocate the economy and everything will implode. So they have no choice but to allow these.

    Ray you need to spend some time understanding the balancing forces that TPTB must allow and contend with. Nature will not allow them total domination. Nevertheless, more than 50% of the population is socialist, so the danger from TPTB is real.

    -Shelby

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  20. Germany is playing a similar brinkmanship as China (loan money at too low of interest rates so consumers can go deep in debt to buy your products):

    http://finance.yahoo.com/tech-ticker/blame-germany-for-greek-drama,-galbraith-says:-%22extreme-brinkmanship%22-cripples-europe-476698.html?tickers=EUO,VGK,^DJI,^GSPC,UUP,GLD,XLF

    Remember Ray I told you that this is the death of the industrial revolution. There is too much automation and there can never again be full employment in industry. We need a new paradigm for employment.

    Hint: the internet

    -Shelby

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  21. The industrial revolution is dying, that is what this socialism is. It is the death of an era. What will replace it?

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  22. You are too confusing.as in mixed up thought and delivery, with hints of patronising bigotry for a reasoned, meaningful, response.
    I hope R N will see it that way too.

    I am not British but I know of a lot of remarkable inventions they have produced since 1900, the date you mention,.such as the first tank (WW1) Radar,The Spitfire, Rolls Royce engines, Hovercraft, The Harrier Jump Jet (vertical take off) Angled flight deck for carriers, The first effective radio telescope (at Cambridge). and World Wide Web, - that's just a few.

    Bill Gates rates Cambridge University (the one I attended) tops. The first electronic computer invented by a Cambridge man - Alan Turing (a Brit) which was used to break the German Enigma machine codes WW2

    CM

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  23. If we want to make money, I think we should keep our thoughts firmly focused on the markets.

    Gold is getting ready to really take off. If it doesn't show a very good return within the next twelve months, I fear it never will.

    Then I, for one, will shift my attention elsewhere.

    CM

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  24. About China, now they further block information flow:

    http://www.theregister.co.uk/2010/04/29/china_security_know_how_rules/

    Cambridge did not invent the WWW.

    Rolls Royce engines yes, a top research institution yes, but major commercial impacts? Google, facebook, cars? Okay the Triumph motorcycles are good, but not any where near commercial impact of the Japanese bikes. What was the last major export, the Beatles?

    If you want to make money, you need to produce something. You don't make money by buying gold, you preserve money, because only gold is money, as we will soon discover that hard way in the coming years.

    The bigotry is an just being annoyed with British culture of getting easily offended by freedom of speech. It is (was?!) an american culture thing, we prefer to be loud and obnoxious and FREE!!

    -Shelby

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  25. I don't know what happen to Americans now. I don't even recognize my country. But we will soon see if enough Americans still have the "cowbody" and "you can take my gun from my cold dead hands" and "give me liberty or death". Will we see it in terms of gold purchases? I doubt it. However, I saw that Americans are buying 40 million oz of Silver Eagles per year, that is the entire silver mined in the USA annually!

    So the USA is not yet finished, but it is highly weakened and provided divided now, maybe even to the point of civil war.

    -Shelby

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  26. "You are too confusing.as in mixed up thought and delivery"

    Maybe the delivery is confusing, because the subject matter is not easy for most people to understand (and also because I am not investing the time to think about how I would optimally explain it all). But I am not at all confused. If you clarify what is confusing to you, then I can try to explain and help you understand.

    -Shelby

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  27. I wrote above:

    http://investophoria.blogspot.com/2010/04/minor-top-is-nigh.html?showComment=1272654256443#c6601959047930721738

    "but the whole world is moving towards increased socialism, so thus one can think of it as 'stronger' in the sense that it will be harmony towards a trend towards a one world govt where the producers are controlled by the parasites. An example of this type of world, is for example in Belgium and some other Germanic EU countries, one is not allowed to be seen working at any location where that person is not registered with the govt to work. There are more govt inspectors to enforce this, than there are workers producing something. Thus everything is incredibly expensive, and individual freedom is curtailed."

    Didn't take long to be proven true:

    http://thehill.com/homenews/senate/95235-democrats-spark-alarm-with-call-for-national-id-card

    “Creating a biometric national ID will not only be astronomically expensive, it will usher government into the very center of our lives. Every worker in America will need a government permission slip in order to work.”

    -Shelby

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  28. Ray,

    Don't know if you are still reading, but I try to always keep learning, and I am not afraid to present new data that might disagree with something I have written.

    I see that Buffet has invested in BYD, and their CEO says that they think they may be able to compete with the world in electric cars:

    http://www.youtube.com/watch?v=Qs-tjjIQhT4&NR=1 (list near end)
    http://www.youtube.com/watch?v=rZ9AooeFe9E
    http://en.wikipedia.org/wiki/BYD_Auto

    Also he said their profits doubled during the economic crisis.

    My perspective on this data, is that indeed (as I wrote in prior post above) that China will learn how to compete on quality, but this was not the larger aggregate focus up to now (and for the forseeable term), and I assert this is true in BYD's case. Their growth up to now, has basically been an exact copy of a Toyota Corolla.

    Domestic car sales exploding are not surprising given China's massive (12.8% of GDP) stimulost spending much of it on infrastructure (i.e. roads). Thus BYD is a leveraged derivative of that stimulost. However, when the negative effects of the stimulost play out, the roads will still be there, supportive of huge car sales. However, one thing southern California learned was that after about 2 - 3 lanes, adding more lanes doesn't really support much growth. 2 lanes are 100% more than 1 lane, but 4 lanes are only 33% more than 3 lanes. 5 lanes only 25% more then 4 lanes, and so you don't see any 6 lane highways which would only be +20%.

    -Shelby

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  29. If you make an argument for suburbia, the USA has already shown that this is a very inefficient use of resources. And it leaves a huge maintenance liability.

    -Shelby

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  30. And another interesting datum, was they use 300 workers to produce 400 cars per day. Given they probably pay < $50 per day per worker, this gives a firm example of my assertion that automation is driving the (labor component of) manufacturing costs to near 0. IN other words, labor is only capturing about $50 / $10,000 = 0.5% of the GDP of making cars (well that is not factoring in the labor of the parts suppliers, but I my point still holds even if labor is 1 - 2%).

    Manufacturing jobs will not support full employment for 7 billion people (as all manufacturing is increasingly automated as much as car manufacture). Eventually not even for 0.5% - 2% of the 7 billion.

    -Shelby

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  31. Just to clarify Dereks latest commentary on the markets. Regarding Silver his quote below.

    "The non-confirmation between gold and silver should rectify itself with silver pushing to another final high. The minimum corrective target at this point is $18.18 with further potential up to $19.00 and slightly above. If this scenario plays out silver should immediately reverse and rapidly approach a new low for the move below $14.50 / oz"

    If the above expectation is to pan out then silver better start dropping pronto. Looks a lot like a break-out move although a pull back is not unreasonable first down to the $18.80 range or even back to $17.80 before another potential advance. Silver needs to hold about $18.80 near term or $17.80 on bigger correction to maintain this up-move from early February. IMHO.

    As far as the question of "is this it?" regarding silver breaking out to new highs. I have no clue but we should know soon enough. Deflation/Inflation a battle that won't be remedied in short order. Money printing and bad debt are in an epic battle. It's sick.

    Gerry

    Gerry

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