Sledgehead

!?!?!?

So when Putin says this move is "dangerous", does he mean in a bank-run-kinda way for member state depositors, or a Litvinenko-kinda way for those voting it through?

All I'm saying is that when most people look at a house like this: ... it looks right. That's because its window heights decrease as you go up the building according to golden mean proportions - the kind or ratios we are used to in nature. Similary, we identify certain stock charts as looking right, because they have a natural cadence. Most people would probably be happier with a chart that has certain swings that fall outside linear trendlines; they will not associate such dips as negatives. Projecting a chart that behaves this way onto a log scale or a log-log scale might therefore produce a plot that falls bewteen linear trendlines but that will not necessarily make it look more positive to the average human, any more than making all the windows of the above building the same height would make it appear more appealing. Indeed to many, windows of the same height would look completely wrong, and it may well be the case that a chart that went up in a straight line for 5 years might ingender large amounts of nervouseness, simply because, as humans, we are not used to linear behaviour.

Hi Van, Thanks for replying. Always happy to get my back slapped by you (right back at ya, right there ). Always liked the S500 as a yardstick. I see RH pointing out elsewhere that Dow/Gold only looks near completion in non-log terms (so I'm very supportive of log use in that regard). The RSI on either that or GOLD:SPX may well be one of the better tools out there for timing portfolio weightings and thus relative performance, given that diversification seems the only sensible approach in times of markets driven by political whimsy.

I take your point that log charts have a certain logical legitimacy : try bottom fishing immediately after a share price collapse and you'll both understand and more importantly "feel" that ( a share collapsed 99% will still do one immense psychological damage by moving the tiniest amount if you'd gambled a meaningful amount on a retracement ). But all the "theory" and practice I've ever come across in charting seems based, at its root, on one simple "truth" : a chart should supposedly "look" right. Looking right means conforming to the appearance of things in nature. Usually that means having proportions that adhere to Golden Mean proportions. And they certainly are not linear. So linearising a chart by looking at its log plot might turn a golden-mean looking chart into a linear one, but for most of us, that won't make it look "even better" and it certainly won't make it look right. And that's the problem with all these indicators, whether they be bollinger bands, rsi, macd or whatever new flavour some bod might have concocted from historical plot studies: they simply distract, obfuscate and add an air of specious mathematical legitimacy to what is essentially an emotive, intuitive phenomenon : natural appearance. Charts either talk to you or they don't. Bands and lines and oscillators won't help, because charts will always break the mathematical rules we try to impose on them. The bands and other constructs may appear to offer insight, but the nature of trading, even with the best money management techniques, will ensure they take as much as they give, whether we stick to them rigidly or take them only as guides. At best, they are a neat way of commenting on positions w/o being too wide of the mark. At worst they can lose you everything. Sadly, given the uselessness / corruption of administrations, regulators, auditors and management, they are as good as anything else we have. So does anyone else think gold in 2011-12 looks very much like gold in 2006? (and yes, that non-equivalence in time-frames is an acknowledgement of golden mean / log behaviour ) It put in a low of ~600 just after xmas - a rather "intuitive" fib retrace of 50% of the oct06->sep06 rise from ~550->~650. Anybody else wondering whether the low is nearly in and a decent run up could be due some way through 2013? Just wondering what might inspire that. German elections perchance? Any home grown euro threat in deutschland might be just what a savings savy electorate might need to get them flocking to the gold vending machines ... Personally, I'd be happier to see a completion of the leg down in the leg-down-consolidation-leg-down that's been running since october: Haven't looked in detail but I make that a target of ~1625. Would very much value the boards views. Oh, and before I forget : Merry Christmas.

But the policy response can only be one thing, no? An therein lies my cause for concern: Gold for collapse! Gold for bailout! Gold for all seasons! So why are we off the highs? Why has gold started to mirror equity market moves on a short to medium term basis? Recoveries must mean higher rates; hardly bullish for gold, unless inflation outpaces nominal rates in recovery: Gold for recovery! Maybe it is all margin call related? But in the back of my head all I keep hearing is that old chestnut : "When a market fails to rise on good news, it's time to sell." In recent times much of the financial blogoshpere has been given over to the inflation / deflation (and biflation) debate. But now, for gold, it seems to me an new debate is emerging: that of risk-on, risk-off. Gold, the ultimate safe haven, should be part of the risk-off long trade. However, for the past ~3 months, thanks to its inverse dollar relationship, gold has been copying the path of risk-on long assets. So what can make a risk-off asset a risk-on asset? My feeling: price. And that brings me back to that old chestnut. Anybody else worried about these aspects?

I don't speak much these days. In the past I've traded and faded a few bubbles and busts. Most went well, but some of the VIX extremes / money put/call open interest ratios we've seen in recent years defied taming even under my ultra-flexible stance. Ultimately, as a small investor, in those circumstances, commission eats you alive. So the allure of buy and hold is something I can understand. But I realise also that getting used to "what works" is the ultimate trap. For frequently reminding us of our potential complacency, we should be thankful of the Dr's input, and be grateful he can't be banned from this or any other thread on his site.

Okay, I've heard all the agruments, studied the charts, examined the fundamentals, but the clincher came on my post prandial perambulation (not my picture, but the scene was the same): What more evidence could anyone desire?

If all this short termism is getting you down, try viewing tonight's installment of "A History of Celtic Britain" from 17 minutes in. You'll see Neil Oliver handling a Roman silver denarius from the second century AD. He says at the time it would have been worth £100 in today's money. Before it became debased by addition of base metal, it contained just 4.5 grams of silver. You'd need about 7.3 of these to make a troy ounce of silver. That means the Romans would have valued an ounce of silver at about £730. At the time there were about 3 million people in Britain. Today there are 61 million. Doubtless there is more silver above ground today, but then again, there are many, many more people. Another way to look at this. That coin is a little larger than a gold half sovereign (3.7g). Today a gold half sovereign sells for about £112 - roughly the value the romans would have ascribed to the same weight of silver. Yet gold is today valued at 30 times silver. If Romans attributed a similar multiple, half sovereigns would be worth £3000 a piece to a Roman form the second century.

yep, 1625 looks like the consolidation move - if you like TA - Maloney certainly does, though his ideas of H&S are a step or two removed from anything I've read / witnessed. More on the paper / physical issue that the Texas Endowment Fund produced much publicity for: [FSB chairman] Mario Draghi also used the IMF meeting to restate concerns about exchange traded funds (ETFs) - stand-alone investment vehicles that typically track the performance of a single asset class such as gold or copper. Retail investors as well as institutions have used ETFs as a proxy for the commodities they back and have invested $1.4 trillion in them, according to BlackRock. However, many are highly leveraged. In some of his strongest words yet about ETFs, Mr Draghi likened them to the derivatives that triggered the financial crisis. He said: "It is reminiscent of what happened in the securitisation market before the crisis." - Telegraph ... drawing more parallels with sub-prime / CDOs etc: Many ETFs have “physical” traits meaning they buy the securities underlying the index. The FSB said this type was prevalent in the US and in offerings by large independent asset managers. But almost half the ETFs in Europe are ”synthetic,” meaning they use derivatives and swaps instead of actually buying the constituents of the index for which it is a proxy. According to the FSB, they are generally provided by asset management arms of banks, and one reason they may be growing is that they create synergies by serving as a counterparty to derivatives trading desks at the parent banks. Remember securitised subprime mortgages? Those AAA bonds were available in thousands of types, unlike the mini-menu of similarly-rated US Treasuries, which varied only by maturity duration. As later became evident, the sheer diversity boosted their opacity, as did complicated collateral schemes that ultimately depended on cheap short-term liquidity for support. Could the proliferation of ETFs—the FSB noted you can now buy “leveraged ETFs, inverse ETFs, and leveraged-inverse ETFs”—be a sign of something similarly untoward? Investors in ETFs may like the asset their fund proxies, but if what they really own are a set of swaps with a bank and that bank defaults, their savvy will be for naught. The FSB even notes that synthetic ETFs may belie incentives that are not properly aligned, and that “conflicts of interest can arise from the dual role of some banks as ETF provider and derivative counterparty.” Now that would be shocking… - WSJ

Well, I'm not sure about not trusting deflationists per se, but you'd be wise to wonder about these Automatic Earth guys judging by the quote: Ilargi: ... Markets, according to him [Maloney], and it's a great metaphor, are a voting machine in the short term (the whole crowd rushes in to one side, they all want paper assets), but they're a weighing machine in the long term If these guys really do think they are "clued up", as you put it, they ought to be able to spot a Benjamin Graham metaphor, especially on ethat famous, when the see it. I'm also amazed at the idea of a guy lecturing bankers on such widely understood concepts as Fed open market operations, fractional resrve banking, money supply figures and (gawd help us) PE ratios and head and shoulders formations. The Maloney acolytes who lap that stuff up must be thinking Rocky is this season's block-buster movie. That's fine by me, but bear in mind this is a discussion forum, not a poll.

And just to counter that, in a worldwide fiat system collapse, I see no hurry in off-loading. In that scenario I see no shortage of buyers. I'm also curious how this queue jumping might work. If you phone up, don't they just quote you a sell price like any broker? I can't imagine them phoning prefered clients up asking them whether they would care to deal ahead of a "stranger". How long would the list be they'd have to phone every time a stranger called to sell? Aren't people selling currently anyhow? Do you get calls asking whether you'd like to put in a sell before these strangers do?

Well, that cuts both ways. If I take physical delivery of a couple of kilos from one dealer, that dealer knows I have something worth turning up for at 4am. If I buy small quantities from separate dealers, they might be wondering whether it's worth it. Besides, we weren't talking about quantity of dealers, we were talking about price. Given the propensity of big city banks to expose their clients to total wipeout, can you hand on heart say that big commissions mean big integrity? So why trust a dealer that charges you a bigger spread?

with respect Errol, that is clearly rubbish. If you were big on trusting a man's word, you wouldn't feel the need to take physical delivery. You know as well as I do: gold is not about fiduciary obligations. It's about gold. As for the customer service, well, they can call me a dumbass as long as they deliver the stuff for the right price.

Even so, I fail to comprehend why one would want to put money in the pockets of brokers. If you consider the knowledge deployed by a bullion dealer, one would be hard pressed to say a 3% spread represents value for money. They make a big deal about their expertise, yet the chemistry they deploy is sub o-level. It's gold for heaven's sake. We aren't asking them to identify the steric hindrances in RNA!