Hi Bujjai!

Remember also that some very hot money has been deployed to the short side to create this downdraft. That strategy is in place specifically to flush the spec longs and it appears that objective has been accomplished. The shorts must now cover into the vacuum of a soldout market and in doing so they will run the metals and the stocks up just as quickly. There are spec shorts involved too, that are reacting to the bubble chatter on TV and likely to get squashed as fast as the weak spec longs were in this trade.

Suffice to say the fireworks can explode to the upside as quickly as the wheels have fallen off to the downside this week. I have covered my shorts and rolled back into new longs in some of my holdings today. Maybe more downside ahead and I tend to close my shorts and do my buying too early in these big moves, but I still end up with a profit. I have no reason to believe that things are different this time around.

There are some big egos on the line here, on both the short and long side. However this breaks some people are going to be looking very stupid. For those that compare gold to the Naz bubble, just consider one point: the exposure of spec shorts vs. spec longs on the Naz was probably 1:100 or even less. Most of the risky money was gambling on forever price gains. In the metals, there is a short for every long, and the vast majority of the shorts are held by a handful of firms. IF push comes to shove, and the shorts must deliver, there is not enough gold or silver controleld by these shorts to meet those demands. Which way must the market break?

When the Naz blew up in 2000, there was nothing backing it but hot air and bad leverage. In the metals it is the shorts that are leveraged up and without backing. And there are 2 billion people in China and India that are scrambling to buy physical, not one of whom can care less what the idiots on CNBC have to say about the precious metals.

cheers!

mike