Juggling Dynamite

The people who are passionate about gold (most of whom make their money selling gold and financial products based on it to others) are not going gently into the night of 40% declines to date.  They remain bound and determined to sell us all on the promise of a big recovery coming any day now.  Well, could be.

Or it could be that gold will spend many more years in a secular bear that began in 2011 and may drive prices back into the $300 to $500 range (red box in middle) where it labored for 20 years during the 1980 t0 2000 secular decline.  That previous down cycle also followed a massive global leveraging decade from 1970 to 1980 (green box on left) as the boomers and the banks piled on consumer debt and gold rose with inflation.

The latest debt bonanza from 2001-2012 (green box on right) coincided with a similar boom in gold prices. Once we recognize though that the debt added in the most recent cycle has been many multiples more than during the 1970-1980 boom, we might also expect that the deflationary effects during the current pay back period may be deeper and even longer than the 1980-2000 period. If that is the case, then gold bulls and their products could be in for a grueling slog yet to come. It would also be a pretty typical end to yet another commodities mania bust up.

As shown below since 1985, oil may suffer a similar fate in the process.  Not only does the commodity price face potentially years of deflationary pressures during this next global debt payback period, but it is also being battered by a relentless tsunami of innovations that are enabling the world to use less and less fossil fuels from here on out.

Jon Stewart is retiring. Unfortunately the banking sector criminals remain at large. This clip would be a whole lot funnier if we were not still stuck in an ongoing nightmare continuing to siphon trillions of our tax dollars into the pockets of a few unworthy actors and activities.

A look back on some of the most scathing jabs Jon Stewart, the late night comedian, has taken at the world of finance. Stewart has had no problem letting bankers and regulators alike know exactly how he feels about their misdoings.  Here is a direct video link.

Fleckenstein was one of the very few of us who saw the 2007-09 financial crisis coming and prepared client capital not to lose with the masses, but to profit from it.  Shorting has intense capital risk and is not recommended for the savings one can’t afford to lose, but his comments in this clip are interesting given that he sees similar downside today as at the 2007 cycle peak. Our own analysis concurs.  That said, shorting is not the only way to benefit from extreme financial conditions.  Positioning to avoid the losses and be liquid for the aftermath is also an incredibly valuable strategy.  Of course, the long always financial crowd insists it isn’t possible, since most make their fees by keeping others thoughtlessly buying and holding no matter how horrific the odds of lasting success.

Noted short seller Bill Fleckenstein, who correctly predicted the financial crisis in 2007, says he is one step closer to opening up a short-focused fund for the first time since 2009. In the meantime, Fleckenstein says the entire market could be heading for calamity in the coming months.

“The market is uniquely crash-prone,” Fleckenstein told CNBC’s “Fast Money” this week. “I think the market is very brittle because of high-frequency trading, ETFs, a lot of momentum investors. I don’t think there’s going to be any painless back door.”  Here is a direct video link