- Ron "Paper is not money" Paul
- Jim "CIGA" Sinclair
- Eric "2011: silver is set to explode" (and not to the downside...) Sprott
- Peter "gold to 5000" Schiff
- Marc "be your own central banker" Faber
- Mike "plague of gold bears" and "I bought a basket of miners" Shedlock
- Egon "hyperinflation deluge imminent" von Greyerz
Let's face it, if you are in the investment game you ARE a market timer and a gambler whether or not you want to admit it. Why? Because there is no such thing as win-win investing. Someone must lose in order for you to gain. Because no new value is created by asset markets (only human labor, assisted by tools and energy, creates new economic value), participation in these markets, including stocks, bonds, and yes even metals and miners is pretty much all speculation when asset price appreciation is the main goal. And make no mistake:when dividends are few and far in between and when 3% is considered pretty good for a safe "investment" in an era of 2-3% CPI inflation (and much higher than that of real inflation), pretty much everyone is in it for share price appreciation.
I highlight the failures of these experts not to mock them. In fact, quite the opposite. I highly admire each of these people not only for their incredible knowledge but for their willingness to share it for free while exposing themselves to ridicule if wrong. While most of these guys are not nearly Snowden level heroes, they share a common denominator: they all risk something personal (their credibility) in order to help others. Without them we would be stuck with government propaganda outlets and state-run media. Our only exposure to economics would be clowns like econotainment star Jim Cramer.
- Note: Ron Paul is a Snowden level hero. Snowden's hero status is related to the extreme danger he put himself in for dumping so much hidden truth on us so quickly. He pissed off people (government thugs and murderers) who were willing and capable of putting a bullet in his head had he given them the chance. Paul's heroics are tied to the length of time he has worked to explain historical and economic truth to us. His life was never in danger simply because the powers that be knew that few were listening to his wisdom. If the people were going to help the con men lead them to slaughter, why meddle with success by eliminating R.P.? That would only raise questions and suspicions.
Fractional reserve banking is indeed a fraudulent practice. After it collapses I hope to see the living perpetrators behind it tried in open court for conspiracy to defraud the workers of the world. In fact, I believe that those at the top are guilty of treason and high crimes against humanity because they knew in advance that it was an historic level of fraud and they did willfully support and profit from the creation of a global debt Ponzi whose impending collapse is already causing havoc around the world. The mayhem is only getting started. The marginal players are simply getting hurt first and worst. The west ain't seen bad yet, but it's coming.
With all that said, there is one individual who has clearly been right about the direction of metals and miners. His 2002 book, "Conquer the Crash" was a seminal part of my awakening to reality. I knew back then that something was not right but I lacked the technical background and the history to understand it. While he fell short of telling the whole story in plain terms (he never summarized it as a Global Debt Ponzi), Robert Prechter explained enough of it that it allowed me to seek out others (like those in the bulleted list) who would help me fill in the gaps. But unlike others who simply rely on fundamentals (AKA "someday I will be right"), Prechter and his capable team at EWI have been using the Elliott wave principle to time the direction of metals quite nicely up to now.
While they have also been following stocks, their track record is not so good since 2009 and the sequence of bad calls beginning with an excellent call at the 2009 bottom as detailed quite nicely here. That article is well worth your time to read, especially the BLUF summary which characterizes EWI's failures as "a lack of trading discipline, particularly no use of stop losses; a consistent practice of "top picking"; a tendency to regard market analysis as an intellectual exercise rather than a profit making endeavour". Man, I wish I had written that because it is spot on.
Well, if you want to know the next mistake a person is going to make it is always useful to review the past ones because people tend to not learn from mistakes very well. If you watched the short video above which I linked above as evidence of EWI calling the downturn on metals nicely, you will notice that it calls for more of the same. This reminds me a lot of their bottom call on the stock market in 2009 only to fail to consider other alternatives given other information available at the time when calling successive tops only a few months later.
EWI currently thinks that metals are retracing the 2011 peak and is using the prior 4th wave in it's count as their target. This is about$750 as seen by the chart from their video:
Well maybe they will be right about this, but it seems like they have locked onto this like a heat seeking missile wearing blinders and it makes me wonder why they are subconsciously ignoring other evidence. EWI is just as subject to human frailties like pride as anyone else. While I think they are very smart and that Prechter is a visionary genius, I think they are making a big mistake by believing that their recent success in metals and miners means that their entire view will turn out to be correct.
After all, the level of the prior 4th is just one possible EW retracement target. The 38.2 and 50% fibs are also quite reasonable targets and they quite often do not land at the level of the prior 4th. Also, what if they got other aspects of their count up to the 2011 peak wrong? For all I know, what they count as 3 could really just be 1 and then the rise into 2011 could have been 1 of 3 with the pullback since then being 2 of 3. That would suggest that we are setting up for a historic skyrocketing of the metals and miners as 3 of 3 plays out.
While I don't know the future any better than anyone else, I do want to consider ALL of the evidence. EWI says that the current move down for M+M is just 5 of A. Check that, even worse, they think it is just 1 of 5 of A. More on this important distinction below when I discuss the length of 1 vs length of 5.
Again, maybe they will be right about all of this. I am not locked onto "they must be wrong for sure". But I have to tell you that while I am still open to any outcome, the data is beginning to cause me to doubt their model. A lot. A key part of my view rests on the performance of the junior miners. Being the most volatile of the players, their sector will show trends before others will and the juniors have gotten slaughtered.
As you can see from the chart below, GDXJ peaked at $180 and is now plumbing the depths of $24. If metals are just in A of C, all juniors will either BK or trade at 5 cents before the C wave of the metals crash is over. Maybe it will happen but it doesn't pass the sniff test. Gold is already priced below the cost of production for many juniors at a time when many countries have been hoarding it including China and India + Russia. Perhaps even more important to me is the exponentially rising volume in GDXJ and the massive, massive percentage loss per unit time. This smells a lot like capitulation/wild eyed panic selling to me and it is something we should see at the end of wave C, not the end of wave A. With all this wild panic and pessimism in the juniors, what will be left for the C wave to sell off? There is hardly anything left to sell! Many juniors are now selling at $1-$2 now, down from prices in the $10-$15 range. Many investors with long term horizons will begin to treat them as low cost, non-expiring call options at this price.
I've observed on many occasions that during the crashes of these volatile ETFs which do not contain options leverage that the decline will be 90% of the peak. That implies a price target of roughly $18 for GDXJ and if it will be touched, it will play out very rapidly to bottom out within a few days. Once the herd is stampeding, it keeps going until all the fear is run out of it. It does not run, and then stop for a long time to eat and then return to the stampede again. The price movement per unit time and volume tell me that the herd is in full stampede. The smart money will wait until this stops and the go large and long the metals and miners.
If you do this, don't make the mistake of EWI. Trust your conviction but verify that you don't get screwed! Use stops! If we are in the 3rd of 3rd right now, there could be a minor sideways slowdown in the collapse as wave 4 of 5 of C plays out. The bottom will likely not be a sideways affair. It will probably be some kind of vee. So once you see a potential stopping point that begins to look like a vee, buy in and then set stops just below the vee. If you get stopped out, lather, rinse, repeat until you are not wrong. At some point your stop will hold and then you will get stinking, bloody, filthy rich on the bounce. There is a season for all things and that vee bottom, should it occur, will be a time for greed over fear.
Gold is not like other things which have a mania aspect to them. Once gold is down, it is not screwed forever like many stocks would be. Gold is eternal. Gold is not a mania. If there is a mania, it's paper money or unbacked electronic money like bitcoins. Nobody ever worked in order to obtain the initial currency stock for those forms of money and thus they do not represent labor. Since labor is the only thing that can create new value, the value created by paper money and bitcoins is not real. It simply represents claims on future labor (AKA debt). But future generations will not want to pay off debts of their parents and so these debts will be defaulted on eventually, of that I am sure. Gold never defaulted on itself and it never will because it is not debt. As JP Morgan taught us, gold is money, and everything else is credit.
So if EWI got the wave count wrong then I must have a valid alternative to back my play. And so I do as you can see below. It was the short stroke falling wedge (3 of A) which I think threw the wave counters at EWI off. They do not know about my new rule which is that wedges are 3rds or Cs. But if you view it from this angle, the count works perfectly including an a-b-c intro into wave 1 of the falling wedge which makes up wave 3 of A. This caused EWI to think that [A] was the 3rd and that the obvious 4th wave triangle which is shown in pink letters was 4 of A instead of my count which is 4 of C. Importantly (as hinted at above), it is causing EWI to think that the current 5th wave should be as long as the 1st wave in their count and thus that the current 5 waves down in progress is only 1 of 5 of A when in fact I think it will turn out to be 5 of 5 of C. This is what the blue vertical bar is trying to gauge. It measures the height of 1 of C in my count. Its clone was placed at the top of what I label as 4 of C. The implication is that 5 of C has a bit more southing to do before it bottoms. When it does bottom I expect it to be the bottom for metals and miners.
If we get the bounce higher and sooner than they expected, it should also sting them that their wave 5 will not have been about the same size as their wave 1. I suspect they will not be convinced and that they will continue holding onto their present count until there is no alternative but to change it based on EW retracement rules (just as they recently waited too long on calling the current DJIA wave to be "wave 5" and they also held to the belief that the initial October plunge was wave 1 down long after they should have suspected it was really just a 4th).
Conclusion and summary:
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I have a M+M wave count that disagrees with the conventional wisdom count. It says that GDXJ will bottom in the ~18-$20 range and that this will be the end of the 2011 M+M bear. I have a clear wave count to back it up along with trigger conditions that will tell me if and when I am wrong.
As usual, this is not investing advice. Advice is given by paid counselors and you are not paying me anything for my work. I don't even allow ads on this site because I feel that they slow down page loads, hang browsers all the time and spread viruses. I hate ads! This is therefore offered in the spirit of financial entertainment only.
May the odds be ever in your favor, fellow gamblers.
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