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The Lunatic Fringe - Trading talk.

Zed

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I am seeing a bit of a shift away from the top end of my gold stocks into the mid range quality stocks. A good sign that the bull is moving on and building a wider base.
 

Zed

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The ASX Gold Tribe turned in a solid +5% day today. Significant in that FOF (Fear Of Friday) is abating, the shift to favoring being in over the weekend rather than out, the assumption being that any weekend surprises will be gold positive. Feels like we are back in bull mode, at least for the short term. Gold looking strong, building on 1730 as I type and silver looking better. A solid finish to the week will be a good looking breakout on that flag formation posted earlier today.

So as they say down here, and yes it is one word!

AVAGOODWEEKEND!
 
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Zed

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GSR Daily - Looking like a breakdown with likely support @ 99. Given the projections the 161.8% and 261.8% Fibo projections roughly make a ~99 multiple work. The 100% projection could do it if one or the other projection isn't quite on the money. The ratio could be a good indicator as to how far we will get here. To be on trend here we are only looking @ about two weeks of action into the start of June. June is a big delivery month, this could be the rush for the exit in the face of delivery risk.

GSR-D-20200515-1.gif
 

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Zed

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It's a good point really...


... every loan on a banks books is counted as an asset, assuming a positive interest rate. If they were negative rates how on earth is that going to work? Loans become liabilities while cash on deposit is an asset? We are going to charge savers to give income to the people that loaned your money. Only the truely insane Euronutz would think that is possible.

I dunno, just boggles my mind every time I think about it.
 

Lancers32

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Go take out a mortgage with a negative interest rate. These fuckers are too smart for their good. If I have a business and I make no money how's that gonna work?
 

dpong

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@Zed Despite the clever word play, it is still an asset because of the theoretical repayment of the principle amount. Albeit not a growing or income producing asset.

[It's still nuts!]
 

dpong

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Go take out a mortgage with a negative interest rate. These fuckers are too smart for their good. If I have a business and I make no money how's that gonna work?
You forgot about the unicorns and rainbows.
 

Zed

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@Zed Despite the clever word play, it is still an asset because of the theoretical repayment of the principle amount. Albeit not a growing or income producing asset.

[It's still nuts!]
Not really. If you borrowed negative and did actually receive the interest then net over the term of the loan you return a fraction of what you receive. It's a liabilitiy.
 

Zed

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Basically it can't happen. They can only drive deposit rates negative they'd have to spread to positive to lend.
 

Strawboss

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If I have a business and I make no money how's that gonna work?
Think of all the tax writeoffs you would have...

#WINNING

kidding of course...

In other news - miners are looking good...

1589546181005.png

1589546203932.png

1589546273515.png
 

Strawboss

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Ascending Triple Top Breakout
An Ascending Triple Top Breakout is basically back-to-back Double Top Breakouts. These breakouts form three X-Columns that ascend with each breakout. Because there are three X-Columns and two O-Columns, the pattern is just as wide as a classic Triple Top Breakout. The ability to forge back-to-back higher highs shows underlying strength that is indicative of an uptrend. As with the other patterns, this Ascending Triple Top Breakout can form as a continuation or reversal pattern.

The chart for Rockwell Collins (COL) shows an Ascending Triple Top Breakout at the beginning of 2010. The red lines mark back-to-back Double Top Breakouts. Also notice that the stock established support with two equal O-Columns during the pattern formation. The combination of solid support and higher highs reinforced the strength of the pattern. A failed Spread Triple Top Breakout is shown on the far left.
 

Zed

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Go take out a mortgage with a negative interest rate. These fuckers are too smart for their good. If I have a business and I make no money how's that gonna work?
Like TSLA!
 

louky

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Someone was concerned about otc miner volume? I replied it'll be there when needed.

Here's another long term, non miner, quality otc hold of mine that's hitting big and news flow steady. 100+ million volume two days in a row and i probably won't sell anything til at least pennyland



I'm there on quality, before the money flows in. Simple as that. Watch what happens with these otc miners. Boom city if goldies is gonna perform like everyone believes.
 
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dpong

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Here is my live actual histogram for all open and closed trades. Because I started this system in about December 2019 and had 20 open positions as the crash occurred I have more losers than winners so far. This should change in the long run, possibly not in the short run.

But I do have some discretionary PM trades that are starting to separate themselves from the pack, to the right.

Actual_histogram_20200515.png
 

dpong

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I would really like to see gold make a new high and take out that 100 day Donchian Channel. A close above there would also tend to verify that we have climbed up out of that box.

j6OyVVCo.png
 

louky

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So why do you think the price is down 4% this morning?
Don't see anything unusual, there was a market sell day or two ago that brought it back down here. i had 425 area marked in advance for backtesting on the charts i posted. I have bids around 37 i think also and lower but it wont be down here long. 10 cents when funding news hits, short term time frame.
 

dpong

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I would really like to see gold make a new high and take out that 100 day Donchian Channel. A close above there would also tend to verify that we have climbed up out of that box.
We marginally took out the old high and the Donchian Channel. A close up there would be very encouraging.
 

Strawboss

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Silver is starting to wake up...looking really good technically. Closed above the 200dma. Would like to get into the next higher channel.

Silver tends to outperform gold at the end of runs...which I think we MAY be beginning to see for this move from the virus lows...

It is just so ridiculously undervalued...

And notice the decrease in volume...

I think it is one (or a combination) of 2 things...

1. Buyers are leaving the COMEX because of the uncertainty regarding the physical backing.
2. The commercial shorts (banksters/PTB) have exited the market and are no longer absorbing the bid stack.

Considering the fact that the COMEX is mostly settled in cash tends to diminish the likelihood of the 1st option being the driving force behind the collapse in volume. What seems more likely is that the banksters covered their shorts on the collapse - and are letting price rise before they begin adding shorts...

Who knows...we are in uncharted territory in many different areas.

What I do know is that silver is looking very, very attractive technically...

1589590040698.png
 

JayDubya

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From Doug Casey's International Man

The Importance of Dollar Swap Lines and What it Means for Your Gold Positions
by Marin Katusa

"Hoping for the best, prepared for the worst, and unsurprised by anything in between."

Maya Angelou, from I Know Why the Caged Bird Sings

An engineer is trained through university and in the workforce to apply failure modes and safety factors into their designs. It doesn’t matter if it’s a structure, a circuit, a chemical, or even mechanical equipment.

Running a business is no different.

Restaurants that only offered dine-in service quickly learned that revenue stream was dust during this shutdown post-virus quarantine.

Only those who were ready with online takeout and delivery options continued earning revenue.

The stoic philosopher Seneca wrote, "What catches us by surprise hurts us double."

If your favorite mining stock has significant production in what I call "negative swap nations," it could be at serious risk.

I’ve talked to several gold company CEOs and gold fund managers.

Not one knew what a swap line was, nor the difference between a positive swap line nation and a negative swap line nation. As I walked them through my concept, all agreed that the risk factors would soon become impossible to ignore.

Are there built-in risk premiums to the prices of certain stocks?

Yes. But not at the cost of creeping government ownership and eventual nationalization.

The Latin phrase Premeditatio Malorum tells you to prepare for all evils.

And today, I’m going to get you up to speed on the overlooked risks to some of your biggest gold holdings.

I’m not making any friends with this theory, but I must prepare my portfolio for the risks.

If you have a producing asset in a negative swap line (–swap) country, you must prepare for potential setbacks.

It’s about properly understanding and pricing in risk, something that has become overlooked in the resource sector.

The Importance of Dollar Swap Lines

A swap line provides temporary U.S. dollar relief to the central banks of certain nations (pre-approved by the U.S.) who need these financial lifelines to ease the stress caused by a lack of U.S. dollars in their own nation.

Swap lines are increasing weekly, and more nations will be added.

They will be added only if the nation needing the swap line agrees to the terms of the U.S. government—both financially and geopolitically.

Make no mistake, and don’t listen to the dollar demise crowd. The world still needs more U.S. dollars right now.

We’ll see countries declare bankruptcies, and we’ll see nationalization of assets.

  • The International Monetary Fund (IMF) said in March that the global US dollar shortage could cripple many emerging markets.
  • The IMF will be giving unsecured loans (in US dollars) to their most reliable members.

Below is a list of countries where US Federal Reserve swap lines exist—think of them as the US Federal Reserve’s lifelines. I call these positive swap line nations (+swap).



Is it just coincidence that these are allies of the United States?

No.

Which Countries Do Not Have Swap Lines?

Countries not listed above do not have swap lines.

So, why am I focusing on swap lines?

It’s because I believe that nations with existing swap lines won’t screw with foreign operating entities (American companies) the way countries without swap lines do.

I still expect higher taxes in all countries as these are the only thing politicians across the world have executed effectively throughout time.

This means mining assets in positive swap line nations won’t nationalize their gold mines, copper mines, etc. Those nations won’t screw with America.

Nations with existing US swap lines won’t put Forex (FX) restrictions on the foreign (American) companies operating there. negative swap line nations may do so, and many already have.

This will cause less of, and in some cases prevent, those U.S. dollars in swap lines from being sent back home as dividends to the owners of the company.

Basically, the swap lines are monetary lifelines to ease the need for U.S. dollars in their own economies.

So, they won’t mess with Uncle Sam by screwing around and nationalizing foreign (American) companies’ assets on their soil.

The swap lines have worked in alleviating the "near term" desperation for U.S. dollars.

Fundamentally, nothing has changed. Eventually, the swap lines will have to be paid back.
Barrick Gold Just Got the First Threat

Barrick Gold is one of the world’s largest gold companies and produces just over 5 million ounces of gold per year.

Recently, Papua New Guinea threatened to nationalize Barrick Gold’s Porgera gold mine.

Approximately 50% of Barrick’s gold production is in countries that do not have access to U.S. dollar swap lines. Hence, they are in negative swap line nations.

I want us all to be prepared for anything that may happen over the next few months.

I expect over the next 12 months in negative swap line nations that governments will:

  • Increase taxes,
  • Increase royalties,
  • Increase government ownership of the mine and/or
  • Slap on FX controls on the foreign gold, silver and base metal producers.

These are big negatives. It has already started in some negative swap line nations, and I expect a lot more to follow. This is something we have front and center on our watchlists.

I think many investors in negative swap line nations will find this to be the case, even with precious metal and base metal producers.

The American government will use swap lines as geopolitical leverage. Expect the unexpected in this new normal we now live in.

That means the whole "benefit" of a weakening foreign currency that attracts investors to mines in emerging market nations may be negated by the government’s need to increase their take of a foreign-owned and operated asset on their soil.
The Most Important Gold M&A Chart in the World

Earlier in this article, I mentioned countries in terms of

  • Existing US swap lines (+swap) and
  • No US swap lines (–swap).

Let me explain why this is important.

The US government will only give swap lines to countries that are allies. That’s countries the US government trusts and works closely with and, most importantly, countries that accept and obey the terms and conditions set by the US.

When Russia and China get US swap lines, I’ll change my tune.

Until then, I’m pretty sure I’m spot-on with this framework and its implications.

Let me give you a real-world gold producer example.

I’ve shared this with some of the bigger fund managers in the business, and they had no idea about it. This is not a well-known concept.

It doesn’t matter whether we use places like Argentina or Turkey as our example—this will become the norm over the next few years in all negative swap nations.

A negative swap country like Turkey doesn’t allow you (as a company) to easily sell the gold you’ve produced to international markets (foreign-owned smelters, for example).

This would allow the USDs to go back home to their owners without any meddling of the Turkish government.

Here’s what actually happens:

  1. The company sells their gold to the government in local currency (Turkish lira, in this case) at the government’s exchange rate (not the real-world rate). This means the foreign company gets screwed on the exchange rate.
  2. The government takes the gold, which is globally valued in USD.
  3. The company converts that Turkish lira into USD at the government’s conversion rate. Again, the company gets screwed financially by the government.
  4. It is very difficult for the company to take those USDs out of the country, and they will most likely have to pay a higher tax to do so. It also takes time to move the money out of the country. You cannot just move gold doré bars out of the country.

The government of Turkey will clip both sides of that sale (steps 1 and 3).

You can see that it is not a good deal for the foreign producer, but what else can they do?

Turkey is a pro-mining nation, but that does not mean that they will not increase taxes on foreign-owned mining and energy assets.

Expect Turkey to do so until they are forced to choose between accepting the US’s terms and conditions to be a positive swap line nation. If they refuse, they will go with the emerging market super powers (EMSP) led by China and Russia.

In places like Argentina, the country has strict foreign controls on money. It is very difficult to move USDs outside of Argentina without getting clipped by unreasonable government exchange rates.

Shockingly, I have spoken to many CEOs of gold-producing companies and not one knew what a swap line was.

When I walked them through my framework, they were all shocked and gained a new perspective on M&A over the next 12 months.

Now, this next chart below is the FIRST of its kind EVER produced.

The chart shows the top 10 gold producers and what percentage of each of their gold is produced in US-positive swap line nations (green) and US-negative swap line nations (red).

Green is good. Red is bad, as it implies higher risk.

The black box is the percentage of the company’s gold production in US-positive swap nations.

The higher the percentage of exposure of their gold production to US-positive swap line nations, the better.

Major gold producers by exposure graph



This chart will eventually be the driving force of the coming M&A rush I see happening in the gold sector.

Right now, many analysts in almost every research outfit give the same financial discounts to gold producers regardless of location.

Most analysts do not account for whether the project is in a US-positive swap or negative swap nation when they create the NPV5 (net present value at a 5% discount) financial models.

This is just wrong.

Not all jurisdictions are the same. And the discount rates do not have to be the same.

I think we’re going to see a major change much faster than anyone expects with regard to gold majors building assets in negative swap nations.
Indiana Jones Speculation: Now You Know the Risks

I’ve been to over 100 countries so far in my career.

Between 2004 and 2010, I literally wore bulletproof vests to visit some projects.

I drove across Iraq with former French Foreign Legion soldiers as our escorts and bodyguards to appraise the potential of an oil well.

Back in 2007, I spent a week in the ICU due to bat dung exposure because I went into an underground mine.

In the rush to be the first to see the potential of a massive silver deposit in Mexico, I went underground unprepared. In this case, I turned out to be right and was the first to publish and finance the 300M+ ounce silver deposit—our subscribers made a killing—but the move was really stupid on my part.

I’ve done some exciting, stupid, and dangerous things and traveled to some crazy places to find the next "big score."

I became one of the few in the industry who can say that they have "been there, done that," but I learned a major lesson that I want to share.

Yes, it’s true some big scores are waiting for those who are first to an exotic or war-torn place with a massive tier-one mining deposit.

It makes for a sexy story that sells newsletters, and people love to read about it. Indiana Jones Speculation, I like to call it.

But those success stories are so rare.

The reality is, just as big of a score (and in many cases even bigger scores) can be made when you are patient in major sell-offs in politically stable jurisdictions like the U.S.

Yes, it’s not as sexy.

Yes, it doesn’t sell newsletters.

But we should only care about making the most amount of money with the least possible amount of risk.

Maximum upside with minimal downside risk — that’s my strategy in this market. I’ve talked about it for years now.

And for that reason, I want to prepare everyone for this potential scenario in the gold market.

Know the plan.

Read the playbook and be prepared.

Be prepared both mentally and financially for what to do if gold prices take a big hit.

Luck is being prepared when the opportunity arises.
 

Strawboss

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Confucius was once famous for saying:

"Never take a stock tip from a guy who makes his money shorting stocks".
 

Zed

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Zed

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May Deliveries...

Gold 9372 delivered with 1335 contracts still open. So we have an inactive or 'non delivery' month exceeding the delivery month of Feb by 1000 contracts or so!

Silver 8861 delivered with 29 contracts still open. Double + last December and almost double March the two previous active months.

Two weeks or so left for the naked shorts to bail out of June before going into the delivery window for the contract. June should really up the ante if this delivery trend continues. Interesting times... what is best is that almost no one is screaming about breaking the Comex, yet here we are with the highest pressure that I have ever seen in physical demand on the exchange.
 

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dpong

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Druckenmiller was good! Now add what he said about cost/benefit analysis to this, which is also very good. Especially the first part: