Gold, Oil, & Dow: Death Spiral Update!

Stewart Thomson
email: stewart@gracelandupdates.com
email: stewart@gracelandjuniors.com
Mar 1, 2011

1. “There’s a secret oil making machine in the middle of the earth. I saw it! Instead of Lava and Iron, the centre of the Earth is…oil! There’s a little man inside, and whenever I need to fill up my car and burn more oil, I phone him down there, and he makes more, then he pumps it out for me, like a volcano! The great news is we can burn oil and drive Model T cars forever! I love pretending the air doesn’t stink in the world’s major cities. I don’t think cars are contributing any pollution in China. What comes out of exhaust pipes is probably healthy! Volcanoes pollute, so we should too! We can build laptops, iPhones, supercomputers, and later travel through time, but we can never build an electric car; it’s technically 100% impossible! Tesla Motors is a lie; I think they have a gas engine hidden under the hood! The man operating the oil-making lake says so!”
– Cro Magnon analyst, arguing that peak oil is a myth?

2. “The world is running out of known reserves of oil. Saudi Arabia has been lying about their production. They can’t increase production.” - Jim “Mighty Man” Rogers, world’s greatest energy investor, Feb 26, 2011.

3. Even if the fantasies of the peak oil theory bashers are true, my question to them is, “where are the new fields?” The fact is that long term demand from Asia overwhelms any supplies being added with recent discoveries, while the supergiant fields are in terminal decline.

4. Ben Bernanke’s electronic printing press, coupled with trillions in marked to model OTC derivatives, ensures the peak oil bashers will continue to fail in their bear oil price forecasts, even if they were fundamentally correct, which they are not.

5. The “Death Spiral” is: Falling Stock Market, falling Bonds, falling US Dollar. Could it happen? Well, Mighty Man has announced he is now shorting the Nasdaq. Bill Gross issued what amounts to a sell signal for his own bond funds, and Marc Faber says he no longer views the US dollar as a unit of account.

6. The bottom line: I wouldn’t be too quick to claim you know the Death Spiral can’t happen. All is possible. The professional speaks of what is possible. The idiot speaks of what he knows can’t happen. All is possible, including the Death Spiral. The current events of the Mid East have made the Death Spiral more possible than at any previous point in the crisis. Exponentially more possible.

7. Institutional money managers recently issued parameters (limits) on what they viewed could be limits on QE, Quantitative Easing, but that was against a general background with the T-bond as the main target of the QE programs. If the Death Spiral came into play, fuelled by oil racing to $200, the Stock Market would likely take centre stage as the main recipient of QE programs. How much cash would need to be printed by Dr. Pinocchio to reverse a Stock Market Death Spiral? What are the repercussions of such dilution of the currency?

8. The answer would depend on how bad things spun out of control in the Mid East, and the effect on oil prices. The Natural Gas Glut Fan Club might want to consider writing their last “financial rites” now, because NatGas is ultimately poised to outperform oil, and the banksters are now holding an almost “out of this world” amount of NatGas long positions. They are long and strong. Are you? The banksters have spent five years building ever larger long positions in NatGas, while the fundsters are holding the naked shorty pants bag. Get ready for the short covering surprise of your life. If the Mid East powder keg blows, so does team NatGas Shorty Pants. There is no way in a billion years the banksters are going to take the NatGas short positions from team shorty pants, at anything remotely near current prices. Shorty Pants should be terrified right now, instead of adding to his insane positions.

9. My long term target for NatGas is $20, but $50 or $100 are possible, if oil blows to $300 or higher. In my professional opinion, naked shorting NatGas now is the single most dangerous market action an investor could engage in, in any market. The only stupider action would be to be long natgas in a monster price plop at higher prices, and demand the Mid East blows now, because you are impatient waiting for the glut to end so your gas rises against the dollar. Patience, not demand-making, is the prime key to wealth building. If you can’t think in the ultra long term with at least a portion of your market actions, you are doomed, as the coming volatility will put “short term only” traders in a meat grinder.

10. You’ve watched me buy the Dow into 6500, the single greatest fear point in this crisis to date (which will be dwarfed by a similar coming point in the bond mkt), while most in the Gold Community shorted it maniacally. I won, while most of you failed, bigtime. At Dow 9000, I put on a Dow 9000 to Dow 11,500 shorting program. The Dow went to about 11,450, killed the top callers, then tanked, and I covered out at a profit. I win because I’m a professional. I don’t play the market with top calls. I go to war on it, and only victory will be had, as I operate my buy and sell programs, covering the entire Dow grid.

11. I always trade smaller than I know is rational. You can’t do otherwise and expect to take on the Dow and Ben Bernanke and win, after losing a fortune already.

12. You can join me as I take on the stock market now, in my next shortside winning play. Remember this mantra: Rather than making calls, you need to fight.

13. Click here to view the Dow Now Chart. Note the Dow mauling the current crop of top callers, like a napalm drop mauls a crew of ants holding miniature “I got you now” popguns. Note where I am beginning my first short position, near Dow 12,300.

14. That price is near the top of the 11,900 to 12,400 range. Notice, very importantly, that I use a point well below the low of 11,950 to define the range. Stoplosses for longs and new short position entry orders will sit below that low, and the pros will buy all that is sold.

15. Likewise, if price bursts to 12,400, the shorts will be mortified, and loss-booking failure will be their mass theme. If we “break out” upside above 12,400, I’ll be laying in my next set of short position soldiers, taking them from team failed top caller. Think bigger. It’s a war, not a roulette wheel.

16. My shorting program covers the grid from Dow 10,000 to Dow 15,000. So I’m adding shorts all the way to 15,000. What if the Dow rallies to August? Are you prepared? Get out of the casino, and onto the battlefield, before the banksters bomb the casino with you in there.

17. Click here to view the Silver Monster Uptrend Chart. When a market item enters a parallel channel like you see here, it tends to indicate a market underpinned with phenomenal buying power. The channel is usually broken, yes, but to the upside!

18. Notice the key flag-like pattern I’ve highlighted. That flag-like entity could be the trigger on the silver cannon that blows the price ball thru the red supply line, and ushers in a near vertical superblast higher!

19. At the same time, remember that is the likely probability, but not a guarantee. Here’s the Alternative Scenario Chart. Now we see the possibility that Silver fails back to the blue demand line. Write this down and paste it to your forehead: It is currencies that tend to display the most perfect parallel long term channels on charts.

20. The possibility is here and now that Silver is beginning to join Oil, and of course, Mother Gold, as…currency. If Silver does fail away, from a point near or even about the red supply line, are you prepared to buy as it fails to lower prices? Or will you rush to join the “what’s wrong?” throng, and bail on what you are buying today, that should have been bought on the last fall?

21. We are at an ideal point for options gamblers with Silver. Buying 70% calls and 30% puts seems like a winning call, right here, right now. If we fail away, add to the calls while covering puts.

22. Silver is confirming Gold’s move to $1400 from 887, here and now. The confirmation target for Silver, if it also rises at least 56% above it’s $52 area high, is: $80. The question is:
Are you prepared?

23. Here’s the Oil Chart. This is very short term, just two days of trading. Notice the big head and top pattern that sits astride the $100 a barrel “breakout” point. Do we blast higher as the Mid East crisis accelerates? Or…fall away! I would not recommend trying to top call Oil. Most of you got bored of as I tried to keep your attention on it, but gave up. Don’t make the same mistake with NatGas you made with Oil. Oil needs to be bought if it falls on weakness here, not top called here by a “Mid East Crisis Expert In Their Own Mind”. It may not fall. If the crisis accelerates, it could blast to $200 and send Gold skywards, and send Gold stocks… to Pluto.

24. Here is the Gold Blastoff Chart. This is a one month chart and you can see a very steady “currency style” parallel uptrend. We have enough of a sideways chop at the top of the channel to fuel a supersurge to new all-time gold highs, today! Remember that Friday is jobs report day. Remember that the banksters want to be the ones holding your gold at high noon on Friday after terrifying you out of it, between today and high noon Friday. Buy any and all weakness between now and then, regardless of any bear analysis you read, so you are standing with your Golden Gun in hand at high noon on Friday, as the market victor!

March 1, 2011
Stewart Thomson
Graceland Updates