OASIS FORUM Post by the Golden Rule. GoldTent Oasis is not responsible for content or accuracy of posts. DYODD.

“Can someone explain to me in a few sentences the importance (or unimportance) of todays midterm elections ?  ‘Specially if any impact on the USD or Markets ?…”

The purpose is to keep the sheep lulled into thinking their votes matter.

Despite already being monstrously oversold relative to bullion, gold stocks were “taken to the woodshed” yet again last week as a result of gold and silver breaking lower, and suffered further heavy losses, as we can see on the 5-year chart for the HUI index shown below. They are now in freefall, and clearly, if gold now drops to its big support in the $1,000 area, they can be expected to continue to plummet, and it is reasonable to expect to see a downleg of similar magnitude to the one that lead into the big consolidation pattern of the past 15-months.

Although the immediate outlook is awful, we should keep in mind that the all-pervasive negativity towards the sector is a sign that a major bottom is not too far over the horizon. Firm evidence of that is provided by the 7-year chart for the Gold Miner’s Bullish Percent Index. This shows a truly extraordinary situation where, already, no-one is bullish in the sector. This is the “dry tinder” for an explosive rebound immediately the market senses that the bottom is in. The prolonged rotten performance of stocks relative to bullion is a reminder that we can expect stocks to front run the bottom in the metals. On only two occasions in the life of this chart have we seen such an abysmally low reading in this index. One was the 2008 general market panic low, which was followed by a huge rally in the Precious Metals sector lasting several years into the 2011 top, and the other, in the Summer of last year, was followed by a bounce and then the development of the long trading range that preceded last week’s breakdown.

Just how horribly oversold stocks are relative to bullion is made plain by the following two charts, which show first the HUI index over gold, and then the large stock XAU index over gold, which is even worse. To understand what this means, you have to realize that when investors are fearful towards this sector they favor bullion over stocks, because while companies can and do go bust, gold bullion always survives, whatever its price in fiat. The more fearful they are towards the sector, the lower these ratios go, and as we can see, they are considerably more fearful towards the sector than they were at the 2008 crash low, and with respect to the HUI Index over gold ratio, they are as fearful towards the sector as they were in late 2000, before the great bull market in gold and silver began, and much more so with respect to large cap stocks, as shown by the XAU index over gold ratio, whose reading is much lower than in late 2000. These are clearly extremes of fear that have major bullish implications. What it means is that once the dollar’s swan song deflation rally is done, we are likely to see a humongous recovery in gold and silver stocks, magnified by the fact that many companies will have already “gone to the wall” by the time it happens.

 
In conclusion it appears what we are about to witness is the sector collapse into the final low, before a recovery that promises to be amazingly robust. This collapse will trigger an industry wide cull and cleanout. It will be like the Black Death with bodies being taken away by the cartload, but the companies that pull through this terrible time can look forward to the prospect of an extraordinary resurgence in fortunes, and a correspondingly big increase in their share prices. Those of you who have any capital left should make sure you don’t miss out on this.

Signs and Wonders

the Potemkin stock market, a fragile, one-dimensional edifice concealing the post-industrial slum that the on-the-ground economy has become behind it.

“Holy smokes,” Janet Yellen must have barked last week when Japan stepped up to plug the liquidity hole left by the US Federal Reserve’s final taper trot to the zero finish line of Quantitative Easing 3. The gallant samurai Haruhiko Kuroda of Japan’s central bank announced that his grateful nation had accepted the gift of inflation from the generous American people, which will allow the island nation to fall on its wakizashi and exit the dream-world of industrial modernity it has struggled through for a scant 200 years.

Money-printing turns out to be the grift that keeps on giving. The US stock markets retraced all their October jitter lines, and bonds plumped up nicely in anticipation of hot so-called “money” wending its digital way from other lands to American banks. Euroland, too, accepted some gift inflation as its currency weakened. The world seems to have forgotten for a long moment that all this was rather the opposite of what America’s central bank has been purported to seek lo these several years of QE heroics — namely, a little domestic inflation of its own to simulate if not stimulate the holy grail of economic growth. Of course all that has gotten is the Potemkin stock market, a fragile, one-dimensional edifice concealing the post-industrial slum that the on-the-ground economy has become behind it.

Then, as if cued by some Satanic invocation, who marched onstage but the old Maestro himself, Alan Greenspan, Fed chief from 1987 to 2007, who had seen many a sign and wonder himself during that hectic tenure, and he just flat-out called QE a flop. He stuck a cherry on top by adding that the current Fed couldn’t possibly end its ZIRP policy, either. All of which rather left America’s central bank in a black box wrapped in an enigma, shrouded by a conundrum, off-gassing hydrogen sulfide like a roadkill ‘possum. Incidentally, Greenspan told everybody to go out and buy gold — which naturally sent the price of gold spiraling down through its previous bottom into the uncharted territory of worthlessness. Gold is now the most unloved substance in the history of trade, made even uglier by the overtures of Mr. Greenspan. Personally, I think the more violently gold devalues for the moment, the more extreme the reaction will be when the first glimpses of reality pierce the twilight’s last gleaming of official US market intervention shenanigans.

All this goes on, by the way, because an essential problem remains: the world cannot pay back its accumulated debt and the money maestros of world finance don’t dare even try to unwind it in an orderly manner, fearing they will open up an international monetary sucking chest wound of deflationary doom. And this does nothing to brighten the prospect that evermore new debt can ever be repaid. All that remains are various three card monte maneuvers, hot potato games, and musical chair tournaments using the last kinetic rocket thrusts of global credulity to pretend that contraction is not already here, walking amongst us, like the ancient Harvestman of yore, swinging his scythe.

Of course, few doubt the reality of Ebola. And ISIS (or whatever it’s called) also works its ghastly hoodoo in the gummiest region of the world, and they both share an interesting feature these days: reporters are discouraged from going into either hot zone where the threat is that they will bleed out through all the orifices from Ebola or have their heads hacked off on video by ISIS. So we are not getting the best information out of Ebola West Africa and those parts of the Middle East where ISIS is at large. The situation is apt to be rather worse than we are being told. The financial markets shrugged off both these threats by the time Halloween rolled around, but I wouldn’t be so confident that story is over for either of these two ugly influences. If the world had a face, it would have fragility written all over it.

For investors gold no longer holds any “emotional charge”.

Gold is just an ordinary object like an ironing board or a box of paper clips.

Winedoc

Can someone explain to me in a few sentences the importance (or unimportance) of todays midterm elections ?  ‘Specially if any impact on the USD or Markets ?

See Y’all at happy hour …….

Winedoc

Deflation,  oversupply,  commodity and currency wars ??

Morning Friends

Winedoc

I don’t mind what you do with your post it’s your post as long as you don’t confuse me.

Just a word about Karma,  I’ve seen the words like never so many times over the years then something happens. Like a sudden cold front that hasn’t been seen in a hundred years. So beware my saltin friend. Lol  Things like that never happen around here. Yep heard that one before too.