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Save Gold and Buy the DollarStewart Thomson 1. Each crash and economic downturn has been followed by another freedom-elimination, another axe-chop into the constitution, another new law courtesy of the Gman. So it all "never happens again". 2. Risk isn't going away regardless of the promises made to you by the Gman, the banksters, the golf ball advisors, and self-appointed master traders. Which is why the foundational gold pyramid generator that I use extends to zero. Many of you still don't really understand risk properly. I keep telling you to get "out there," to go visit at least one factory owner, preferably several of these risk/reward experts. 3. The business owner has an understanding of risk that the average market analyst does not have. The market analyst thinks about gold in terms of PRICE in dollars. The business owners may do that, but they also focus on the concept of what gold IS as an ASSET. 4. Manage risk first, and reward will look after itself. Guessing where price is going is not risk management. It is gambling. 5. I get a lot of letters agreeing that gold is low risk investment... now. 6. Wrong. Gold is a low risk investment all the time, if you use the right tactics to manage your position. The idea that gold is a low risk investment because price is I or you think price is headed higher, is a nonsensical statement. It demonstrates a horrific understanding of risk and reward. 7. Welcome to new subscriber, "Golden Tyranosaurus", GT. I went to visit you yesterday. GT has an art and artifact collection I estimated at $50 million, including a 200 POUND gold coin, 24carat. We both agreed the coin was the best part of the collection. For a whole lot of reasons. GT also agreed that all the major banks of the WORLD were within hours of closing when the Dow tanked into 6500 with Lehman on fire. Attention all gold bear deflationists: If YOU believe the Dow is going to blow out the lows, of course you have already gone to the bank and taken out all your money. Right? You have moved to a bunker and are armed with a large gang of family members who are also armed. You know that if you are correct, the whole show shuts down. What's that? You think you can have Dow 300 and Gold 200 and collect on your bullcrap SP500 put options and bank stock shorts while the world lights on fire? Get real. Forget the nonsense that your magical predictions can work so you get rich while the world blows up. If your scenario plays out, you'll be ripped to pieces and literally eaten by cannibal street gangs long before you collect on your options. If prices go into a deflationary spiral, everything shuts down. It's all finished and so are you. You'll be starving to death along with everyone else. Dow 300? Gold 200? The last thing the Gman will do at that point is honour your toilet paper t-bills. However, common sense dictates that there is no way Ben "Printing Press" Bernanke is going to stand there and watch the deflationist price scenarios play out. Not in a BILLION YEARS. He's going turn his USD toilet paper photocopier onto hyperdrive if the deflationist scenario begins to dominate, and he's been very very clear about that. 8. GT also believes the crop reports are faked by the Gman, and production is much less than we're told. GT is a gargantuan farmland owner, one of the world's largest, so I wouldn't be too quick to laugh... 9. GT has also been moving heavily into gold juniors over the past 12 months, having been big on bullion from the time he called the top in the stock market in 2000, including the Nasdaq. The bottom line for GT, who thinks big, very big, is that he sees the average junior as about nine times as undervalued as the seniors and intermediates. I mentioned my view that it's possible that the GDXJ hits $200 and he thought that was easily possible. 10. If you are an average gold sector investor, you are probably being swayed by those telling you that now is the time to move to bullion from stock. Let me ask you this: Is that an informed decision, or simply a reaction to the terror of 2008? Monster Players like King Kong and GT are moving in to gold stock, including gold juniors, while the Pipsqueak Patrol moves out. Hmmm... 11. Let me very strongly again remind you that just because you or your analyst says the price of gold could fall, does not mean you should sell your gold or gold stock. If you sold zero into 1225, the amount you should sell now is less than zero, literally, regardless of where you think the market is going, regardless of where it is going. Leave the analyst mindset behind, and embrace the tactics mindset. Gold is the last asset that should be liquidated, the very last. GT told me, "I don't know technical analysis". He's a made a fortune in gold without a single chart and the last thing on the planet he is doing right now is selling his gold. He's buying gold stock and he wants more. If your charts say gold is going down, burn them, throw them away. If your charts say the USDollar is going up, buy the dollar. Do not sell your gold. 12. When I beat on the dollar bugs it is not because I'm saying the dollar can't rally. The reality was a buyer of the dollar into the recent exact lows with my pgen. Did I enjoy that as gold went into 1225 and the dollar looked hopeless? No. I didn't enjoy feeling light on gold into 1225 as I sold. Those are feelings a professional has when they operate in the market. You feel uncomfortably light and greedy as you sell into strength, and nervous and uncomfortable as price falls. Buying significant weakness is not enjoyable. Selling significant strength is enjoyable until price goes beyond where you thought it would go, and you start feeling light. No work is enjoyable. But you can't play if you don't work. You'll just be miserable. I beat on the dollar bug timers because of one reason: they are failed traders trying to make you [?] into them, without realizing what they are doing. They are thinking about gold and the dollar. Not about Your Money that is in gold or the dollar. They don't care about you. All they care about is blowing a trumpet that they called a turn in the market. Write this down and nail it to your forehead: The greatest investors don't make money calling turns. They make money buying weakness and selling strength. The dollar will rally at some point and when it does I'll book profit on my dollar positions. Maybe that day is a month from now. Maybe it is today. Maybe it is 30 years from now. Who cares, I don't. Gold will fall at some point so hard you'll be on your knees begging it to stop, while you buy. Today is neither of those days. 13. Let's now review the recent action in Gold's price. The mood of the gold community from 905 to 1000 was fear. From 1033 to 1225 was complacency. At 1075 there was fear. At 1160, complacency. That complacency is transitioning to: fear. The worst investors are becoming more active in the market, and the best investors are becoming less active, thinking bigger. Think about that. The result of those two actions is going to be that the worst investors lose exponentially more money than they have already been losing, and the best will make exponentially more. 14. GT also wondered if the banksters might turn the comex into a cash market. I believe the odds are probably at least 50% of such an event. It would crush the leveraged fundsters and put all the physical bullion in the comex warehouses in the hands of the banksters. There really isn't that much gold in the world. The average comex gold contract only survives about a $15 price hit before being liquidated. GT laughed his head off at the idea of operating at those kind of leverage levels. GT didn't get rich on leverage. He got rich buying weakness and selling strength. You've been told. Again. 15. Let's assume for a second that there is a major dollar rally at hand. Again, put your gold in the closet. Keep the two assets separate. I want you to have a picture of a boat rocking back and forth. All the people on the boat are tossed from one side to the other. Don't guess which way the Ocean (the banksters) is going to move the boat. 16. Rather, respond to the direction as it occurs. Here's the US dollar chart. USD daily chart. 17. It's looking better and better to me, on the daily chart. When I bought, the chart didn't look good, it looked horrific. Now it looks positive, and I'm positioned to take profit should price follow the indications on the chart. Relative Strength (RSI) looks positive, Williams looks positive, and short term Stochastics, MACD, and TRIX series are all flashing crossover buy signals. 18. The monthly chart on the USD is also starting to look positive. USD monthly chart. 19. Initial crossover sell signals are fading and the chart is getting a positive look to it. Some of my subs have built substantial dollar positions in the USD and things look positive that Kachingo time is on its way. Notice in particular the positive action on the short term 14,3 Stochastics series and the 4,8,9 MACD series. They are hinting at a possible turn up in the dollar. There is a huge bull non-confirmation in the RSI that is a powerful argument for a coming rise in the dollar. 20. Regardless, in the larger picture, Gold remains in total control of the dollar not the other way round, and I believe 2010 is the year Gold gets aggressive in its punishment of dollar bugs and punishment of both gold and dollar flip floppers. 21. To the dollarbug micro-minds, I suggest they enjoy their rally, should it occur. It will likely be their last party for a long long time. As a group, my subscribers stand to make a lot of money in any dollar rally, and yet this is chimp money compared to the gold positions sitting in launch mode. 22. Mentally, when you are all-in or all-out of an asset class, you can become "broken" when price goes against your analysis. This will happen to the dollar bugs to the point that many become suicidal, and many will actually kill themselves, or so I believe, unfortunately for them. When you hold a contrary asset class position, you may be surprised how little a position is needed to take your mind off any decline in your larger gold positions. 23. I want to close this off with the note that while the dollar is rallying this morning against the other paper currencies very strongly, it is not rallying against gold. Don't bet against gold with the dollar. You might book some wins, but overall you will lose, as you have lost for 100 years if you tried it. Bet against other paper with USD paper. 24. I believe today is a litmus test day for most of the gold community. A dollar rally has a high chance of being near at hand, perhaps even being here and now. The question is whether you once again start running to the garbage can and throwing your gold in there. That's exactly what the banksters want you to do. Because as soon as you all start dumping on weakness, you create a wave of downpricing, and the banksters buy all you fail and bail on. If you leave gold now, gold will leave you in the dust. All you are doing is selling a small amount of gold to "test the waters" but crushing the majority of your gold if you do that. Let's see who has wisdom and who wants to put another notch of failure in their investment gun, who wants to put on a gold clown mask and dance in front of the banksters to entertain them. Buy the dollar, yes. Sell your gold, no. Or you will crush yourself. ### Jan 19, 2010
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Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time. Risks, Disclaimers,
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