# The tapering quest



## sylyconvalley (Apr 22, 2013)

I am sure that everyone is hearing and is paying a lot of attn to the Fed's words.
we are all waiting for September to come and hear the ruling on that which obviously can be kicked down the road.
any insights as to how the mkt has been preparing itself with the latest events in gold/silver / currencies /treasuries /bonds /stocks etc...?
please pitch in.
i am curious to hear other's opinions.
peace out:encouragement:


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## tygrus (Mar 13, 2012)

Forget the fed, its meaningless. Instead look how far and fast the DOW has run in the past 6 months with no real change in fundamentals. Employment figure unchanged, some housing resurgence, debt figures climbing, slow down warnings from bellweathers like CAT and Deere and China stats. I smell correction in about October sometime.


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## sylyconvalley (Apr 22, 2013)

why do u think the FED is meaningless?
u are seeing "the Correction".


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## tygrus (Mar 13, 2012)

Because until monetary policy trickles down to main street and joe six pack, its effect is superfluous. Wall Street and corporations hording cash will not make the economy boom. More jobs and people working and real wage gains will. So far stimulus hasn't done any of that yet.


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## sylyconvalley (Apr 22, 2013)

we all know that stimulus was not created for Joe six pack.
the influx of liquidity in the mkts created this.
If the Fed does taper what do u think will happen then?
forget about joe.
I am watching the poor man's gold rally in real time together with gold .
any particular reason ?
are we running out of jewelry ?
inflation ticked higher?
for our discussion I will add this.......

http://www.bloomberg.com/quote/USGG10YR:IND

do u see a problem with this and gold at 1400 bux?
do not forget that the dollar is in the tank also.


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## tygrus (Mar 13, 2012)

Sorry, I cannot say anything specifically about gold. I hold farmland as my ultimate hedge against whatever crisis may come.


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## sylyconvalley (Apr 22, 2013)

farmland is more precious then gold .
I posted gold because it is intrinsically associated with the tapering story.
do not bother with my comments.
i am actually on early stages of silver shorts.
ur farmland hedge plus penicillin a generator , bottled water and a lot of guns with ammo will do just fine.


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## james4beach (Nov 15, 2012)

I believe the Fed will be reducing the size of their bond purchases, probably just a little (i.e. tapering).

The Fed's QE program directly correlates with the S&P 500. There is no mystery about this (see this chart from BMO) ... the Federal Reserve has been driving the stock market to lofty valuations. The thing has rallied 20% while EPS has basically stayed constant, which is totally ridiculous, especially late in the economic cycle.

The Fed probably realizes now that they're causing a dangerous situation by inflating stocks. My guess is that a bit of tapering is on the agenda... it will cool down stocks & other assets from getting out of hand. Remember that oil is also rallying dangerously high and is really going to hurt the economy above $100.

So I think the Fed is leaning towards a bit of tapering, cooling down assets. So far they have just been pumping money into the system, causing stocks to become a bubble (and likely driving oil too) but there has been very little economic improvement... virtually no response, considering the magnitude of their program. Even corporate earnings are stagnant. So why would the Fed just push harder on it? They're getting very little bang for their buck and if they're too aggressive with QE they're still going to have no economic improvement and a ridiculously dangerous bubble in asset prices.

Additionally, tapering a bit is a good way to test the waters and see how the euphoric maximum-margin-levered market responds to a slight reduction in the DRUG level


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## sylyconvalley (Apr 22, 2013)

james.
i am sure that as an investment advisor u can see that the yields on treasuries are a strong indicator of less "fear' (for lack of better wording) to actually invest in riskier assets... equities.
correct me if i am wrong. I do not think so.
we are already watching the mkts correcting in order to receive the news of tapering.
what will not be able to co exist is what we are seeing in PMs.
therefore my lack of belief in gold as a hedge in times of low inflation that we are going to see for awhile .
on the other hand i do believe that gold has bottomed.... for the year and will find a level that is sustainable.
there is phys demand but paper trading will rule.
by the way ... nice chart.
i am a closet chartist lol.
as for oil I am completely in disagreement with ur assessment of the actual price and QE .... for now.
not saying that u are wrong .
i am saying that price atm is not reflective of QE per se.
we have seasonality and other factors affecting oil prices.
The US dollar will not stay where it is.
If u take a look at the last few weeks data from the CFTc u will see that there is quite an amassing of shorts in other currencies being built up.
those things do not happen from day to night as u may know.
The fed will not have many options as the economy is showing minimal signs of rebound.
if they surprise us and kick the can down the road till december .
u will see gold rallying even further and the us dollar falling off a cliff.
the good ole knee jerk reaction.
I am planning to maintain my shorts in silver and increment it as needed though.
this latest short covering got me really excited.
I would highly advise the bulls to turn off the lights when the party is over.
if i am wrong on the way down i will pay the piper.
have a good night.


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## james4beach (Nov 15, 2012)

Interesting thoughts, thanks for sharing.

So you don't think these high oil prices constrain the Fed's ability to print money (QE & ZIRP)? At some point oil kills the economy, and I wonder how close we're getting to that point again.


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## james4beach (Nov 15, 2012)

You're probably right that the bond market is moving in anticipation of upcoming tapering.

Look at the US 10 year, wow, now at 2.9% ... incredible move in such a short time. I do not think the primary force is money flowing from bonds to stocks - though that is the common wisdom on this thing (everyone seems to think the economy is strong and thus people are dumping bonds to buy stocks). Reason I don't believe this is the driver, is just look back at the market ever since the Fed started its magic in 2009.

Bonds and stocks have been going up together (stocks up, bonds up, yields down). So it's not at all true that money was rotating from stocks into bonds... rather... money was flowing from the Federal Reserve into both stocks & bonds simultaneously.

So I think stocks & bonds either go up together or go down together. This is a divergence happening now, and it makes me nervous, because stocks are strong but bonds are weak. One of them is "right" and I suspect it's bonds. (Which means stocks go down next)


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## sylyconvalley (Apr 22, 2013)

james4beach said:


> Interesting thoughts, thanks for sharing.
> 
> So you don't think these high oil prices constrain the Fed's ability to print money (QE & ZIRP)? At some point oil kills the economy, and I wonder how close we're getting to that point again.


James

sorry but i am pressed for time tonite.
I think that oil prices do hurt the economy .
what i am saying is that oil will stay here till egypt is somehow sorted out .
the key word is length in oil futures.
starting to wean off though.
If oil collapses it will be hard and fast.


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## sylyconvalley (Apr 22, 2013)

james4beach said:


> You're probably right that the bond market is moving in anticipation of upcoming tapering.
> 
> Look at the US 10 year, wow, now at 2.9% ... incredible move in such a short time. I do not think the primary force is money flowing from bonds to stocks - though that is the common wisdom on this thing (everyone seems to think the economy is strong and thus people are dumping bonds to buy stocks). Reason I don't believe this is the driver, is just look back at the market ever since the Fed started its magic in 2009.
> 
> ...



Good thoughts.
i will add to that and say that the bond market is always right.
we do have a divergence.
we have many things diverging now.
nevertheless the correction in equities is happening IMO.
Of course u and i cannot pick bottoms right?
GL


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## My Own Advisor (Sep 24, 2012)

"One of them is "right" and I suspect it's bonds. (Which means stocks go down next)"

Agreed. How much of a retreat do you see coming? Down 10%, 15% before year end? 

I recall I called the Dow finishing at 13,900. TSX, around 13,100.


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## richard (Jun 20, 2013)

sylyconvalley said:


> I am sure that everyone is hearing and is paying a lot of attn to the Fed's words.
> we are all waiting for September to come and hear the ruling on that which obviously can be kicked down the road.
> any insights as to how the mkt has been preparing itself with the latest events in gold/silver / currencies /treasuries /bonds /stocks etc...?
> please pitch in.


From what little I know, I would guess the market has been doing little to prepare itself. It seems like there could be a rush for the exits at the last second. I don't think it will be in all areas though, as some will benefit from the newly-investable cash of those who aren't the last out of a falling market (and have very little cash left as a result). In those areas that are strong, the correction may happen before the announcement or change in policy which would lead them to rise after the bad news.

Personally I'm holding stocks (very diversified) for as long as it takes until they give out a good return. It's not that I don't think bonds can outperform. But if a bet on bonds pays off I don't think anyone is really winning. What do you do with your bonds when the yield reaches 0%?

That's all short-term though. Long-term (which is all I care about), corporate earnings would have to fall by a lot or bond yields would have to be a lot higher for bonds to be attractive to me compared to stock markets. Give me some bonds yielding a nice 5-6% and I'll start buying them


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## sylyconvalley (Apr 22, 2013)

MOA

I quit trying to predict these things.
the spx index is getting oversold in the DC chart right?
not quite there but it is a sign that the mkt is pricing some into it.
I am not an indexer and i am neutral atm .
Short silver though.
this paranoid ( i mean parabolic:biggrin:0) is pure short covering. 
i made some coin with one stock only.on the way up.
I just trade as i see fit.
by the way i like to read ur posts.

by the way.... exceptional blog ... kudos


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## sylyconvalley (Apr 22, 2013)

richard said:


> From what little I know, I would guess the market has been doing little to prepare itself. It seems like there could be a rush for the exits at the last second. I don't think it will be in all areas though, as some will benefit from the newly-investable cash of those who aren't the last out of a falling market (and have very little cash left as a result). In those areas that are strong, the correction may happen before the announcement or change in policy which would lead them to rise after the bad news.
> 
> Personally I'm holding stocks (very diversified) for as long as it takes until they give out a good return. It's not that I don't think bonds can outperform. But if a bet on bonds pays off I don't think anyone is really winning. What do you do with your bonds when the yield reaches 0%?
> 
> That's all short-term though. Long-term (which is all I care about), corporate earnings would have to fall by a lot or bond yields would have to be a lot higher for bonds to be attractive to me compared to stock markets. Give me some bonds yielding a nice 5-6% and I'll start buying them


If u feel that the mkt is collapsing buy defensive stocks.
if ur a long term investor 10-20 years ahead then...
i am an old man .
i gotta enjoy life a bit right?
take care


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## dogcom (May 23, 2009)

On PM's I think a September takedown is quite possible as the Fed desperately tries to keep the mirage alive. The Fed will do this as part of its plan to stop a stock market collapse in the fall. The bond market though is the whale in the room and the Fed simply cannot let the bond market fall very far, so the tapering talk is meant for the bond market. The Fed of course will not be able to actually taper very much and will most likely have to seriously add to it.

Economy, growth, jobs and earning have nothing to do with what will come and tricks, games, sentiment and massaged numbers through the media will still rule the day until the bond market says no more.


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## andrewf (Mar 1, 2010)

Expectations matter. I don't understand why people are so down on QE--would a depression have been a preferable outcome?


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## Toronto.gal (Jan 8, 2010)

sylyconvalley said:


> i am curious to hear other's opinions.


I'm more curious about who will be the next chairman of the FR. 

No change/Ferguson/Geithner/Summers/Yellen, any other?

Lots of talk about Yellen.

*'The Secretary of the Treasury, the Chairman of the Federal Reserve Board, and the two big bank regulators -- the New York Federal Reserve Bank and the Office of the Comptroller of the Currency -- have never had females at their helms.'*

So time to break that glass ceiling now & in 2016?

http://finance.fortune.cnn.com/2013/07/22/janet-yellen-federal-reserve/


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## HaroldCrump (Jun 10, 2009)

Personally, I don't think the Fed Chairman matters that much.
It's a difference of quantity vs. quality (i.e. volume of Q/E rather than the question of Q/E).

Unless we are talking of nominating Ron Paul as Fed Chairman, it doesn't matter :rolleyes2:

Anyhow, my guess would be Yellen.
Summers would be too divisive and controversial (although with Obama one never knows).

Speaking of glass ceiling, yes, nominating Yellen would be a step in the right direction.
But, let's break the ultimate glass ceiling of all - the position of Commander-in-Chief - by electing Ms. Hillary Clinton as President in 2016 :biggrin:


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> 1. Personally, I don't think the Fed Chairman matters that much.
> 2. Unless we are talking of nominating Ron Paul as Fed Chairman, it doesn't matter :rolleyes2:
> 3. Summers would be too divisive and controversial.
> 4. But, let's break the ultimate glass ceiling of all - the position of Commander-in-Chief - by electing Ms. Hillary Clinton as President in 2016 :biggrin:


*1.* I agree! 
*2.* Argonaut would approve. :02.47-tranquillity: I can think of few others also, when it would definitely matter.
*3.* Never say never.
*4.* :rolleyes2:


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## andrewf (Mar 1, 2010)

I liked Felix Salmon's blog on the fed chairman speculation. Yellen seems like a good choice, and I agree with his position that it doesn't matter whether Summers is chairman 'in case there's a crisis'. If there's a crisis, Summers will be there to offer his advice, chairman or not.


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## dogcom (May 23, 2009)

The next Fed chairman will need to be an expert on politics, sentiment, strategy, manipulation and plans to stick handle around the bond market. Simply knowing the numbers and being an expert on the economy and all that would make a great chairman will not help in the world of ponzi schemes and illusions.


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## HaroldCrump (Jun 10, 2009)

There will be a plethora of challenges facing the next Fed Chairman.
But my top 5 challenges for him/her would be:

- How to "fight" the bond market to keep rates low to ensure the housing bubble (I mean, "recovery") picks up

- How much Q/E to do to ensure the US govt. can continue to borrow trillions of $$ in debt and continue servicing existing debt, without getting downgraded again (and again).

- How to keep gold and silver prices "controlled" to make sure the USD does not go into a free-fall

- Deal with the increasing popularity of Bitcoins. For now, the popularity of Bitcoins is far more in Europe than in the US, but it is increasing steadily

- Last, but not least, deal with a Congress and a President with various political motives, not entirely consistent with sound economic policy.


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## sylyconvalley (Apr 22, 2013)

female or male T.gal ... old money will run it right?
not sure if u do agree but that is how it has been... till now.
whoever it is it is .
i will keep stumbling in stuff here and there.


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## sylyconvalley (Apr 22, 2013)

Toronto.gal said:


> *1.* I agree!
> *2.* Argonaut would approve. :02.47-tranquillity: I can think of few others also, when it would definitely matter.
> *3.* Never say never.
> *4.* :rolleyes2:


U would be a hell of a chairwoman:encouragement:
and to add to it ... u get to make more money right?
i am voting u .... lol take care:encouragement:


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## sylyconvalley (Apr 22, 2013)

well .
the world did not end.
i did not have to cover my shorts.
will catch up with the 'speech" later.
be careful boys and gals.
do not get hurt out there.:encouragement:

by the way ... some important news coming out from the East... today ? ? tomorrow?
stay tuned.


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## sylyconvalley (Apr 22, 2013)

that was it?
all the hype for this statements?
Oh my.....
kick the can down the road.
September he has to go to congress If am not wrong.
no printing a statement.
he has to open his mouth wide and say ... by the way we are starting tapering.... yesterday....
http://www.bloomberg.com/video/fomc...or-taper-timeline-iSBZfDKjQF21EddI3gYmBQ.html


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## Synergy (Mar 18, 2013)

sylyconvalley said:


> kick the can down the road.
> ]


Indeed, let the volatility continue! Honestly I didn't expect much clarity from the minutes...


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## sylyconvalley (Apr 22, 2013)

HaroldCrump said:


> Personally, I don't think the Fed Chairman matters that much.
> It's a difference of quantity vs. quality (i.e. volume of Q/E rather than the question of Q/E).
> 
> Unless we are talking of nominating Ron Paul as Fed Chairman, it doesn't matter :rolleyes2:
> ...


what is wrong with Ron Paul Harold?
here is an interesting insight........


http://www.cnbc.com/id/100978321


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## HaroldCrump (Jun 10, 2009)

sylyconvalley said:


> what is wrong with Ron Paul Harold?


Nothing wrong with him whatsoever.
Quite the contrary - if you ask me, he was the most genuine and honest presidential candidate in the 2012 challenge to Obama.

What I meant by that post above is that it doesn't matter who Obama nominates as the next Fed Chairman - they are all, more or less, the same - tomatoes vs. toe-ma-toe-s.
_Unless_ it is Ron Paul, there is nothing to talk about.

Why? Because -










An excellent, must-read for anyone interested in alternative macro economics - Austrian or Marxian.


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## sylyconvalley (Apr 22, 2013)

HaroldCrump said:


> Nothing wrong with him whatsoever.
> Quite the contrary - if you ask me, he was the most genuine and honest presidential candidate in the 2012 challenge to Obama.
> 
> What I meant by that post above is that it doesn't matter who Obama nominates as the next Fed Chairman - they are all, more or less, the same - tomatoes vs. toe-ma-toe-s.
> ...


i see.
gotcha.
now that the Fed presented absolutely nothing today aside from a media show , let us see who has enough deep pockets to maintain gold and silver prices at these levels.
I have a lil feeling that i may have to cover my shorts... tomorrow.
which i was prepared for.
take it easy.

will take a look at the book.


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## dogcom (May 23, 2009)

PM's could easily head down because of the manipulation but I am afraid the deep pockets are needed to keep the price down instead of up. Paper to gold is running somewhere around 100:1 from what I hear and since the price take down last spring tons and tons of gold has been transferred to strong hands from weak hands. Then there is the problem of mines being economical and if prices stay down, mines will shut down and supplies will be even tighter in the face of huge physical demand.

Harold on the Fed chairman as I said it is not what he or she knows about the economy or whatever it is how to deliver the illusion of sound money and so on that will matter. So it is very important to have the right person for those who want to keep the system in place for as long as possible.


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> An excellent, must-read for anyone interested in alternative macro economics - Austrian or Marxian.


I find the man interesting with very good ideas, and honest for sure [or open if you will], but at the same time, his ideology is....well, let's just say a bit unrealistic; and his interpretation of many laws, is downright disheartening, if not absurd. He has the youth vote for a reason, but I mean no disrespect with this comment. 

http://www.forbes.com/sites/stephenricher/2012/01/11/ron-paul-takes-the-youth-vote-again/

Will put the book on my winter reading list. Thanks Harold.


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## HaroldCrump (Jun 10, 2009)

Toronto.gal said:


> I find the man interesting with very good ideas, and honest for sure [or open if you will], but at the same time, his ideology is....well, let's just say a bit unrealistic; and his interpretation of many laws, is downright disheartening, if not absurd.


I don't disagree with that. He is, after all, from the Austrian school of thought so it is expected he'd be radically opposite the current neo-classical economic policies and interpretation.
His prodigy is Paul Ryan - Republican running mate from the 2012 presidential election campaign.

But don't judge Ron Paul based on your perception of Paul Ryan - the latter is more politically savvy, acceptable, and less radical (for obvious reasons).
Someone like Ron Paul can never win the nomination for a presidential run from any of the major parties, let alone ever actually get elected.
He represents what would have happened if Ted Grant or Leon Trotsky ever got elected into public office.

He doesn't campaign every 4 years because he thinks he can win - he does so to get an alternative voice out there.
After a while, both the major political parties sort of blend into each other and the voter can't tell the difference any more.
Like the _drinking sand_ analogy by Pres. Andrew Shepard from the movie _The American President_.

Anyhow, Ron Paul will never be Fed Chairman because, well, he wants to end the Fed :biggrin:

In addition to the book, there is also a famous debate between Ron Paul and the lunatic neo-classical "economist" Paul Krugman.
There is also an exchange between Ron Paul and Ben Bernanke during a Congressional hearing, where Ben Bernanke states the now famous statement that the US Fed stores physical gold only because it is "_tradition_".
Gold bugs love that video and probably have it on their list of shortcuts.

You should be able to find both the Krugman and the Bernanke video on You Tube.
No, I don't have it in my shortcuts ;o)


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## Toronto.gal (Jan 8, 2010)

HaroldCrump said:


> 1. Anyhow, Ron Paul will never be Fed Chairman because, well, he wants to end the Fed :biggrin:
> 2. the lunatic neo-classical "economist" Paul Krugman.
> 3. There is also an exchange between Ron Paul and Ben Bernanke during a Congressional hearing...


*1.* I would also add, because he's not brilliant enough [or as dogcom would say, not a golden illusion messenger]. Just teasing dogcom. 
*2.* Just goes to show that Nobel Prize winners [like Obama] are not always, hmmm, let's say brilliant? 
*3.* I posted that video here once. :02.47-tranquillity:


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## andrewf (Mar 1, 2010)

I can sort of respect Ron Paul. He contributes to a diversity of viewpoints. 

Paul Ryan ion the other hand s a bit of a mental midget, who for some reason is an acolyte of Ayn Rand (contender for all-time awfullest human being award), except for the pesky atheism bits. He subscribes to an ideology where it is good and right to not give water to a person dying of thirst. I'm sorry, that is a poisonous ideology that should not be fostered in society. That kind of batshit crazy should not be allowed anywhere near the levers of power.


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## dogcom (May 23, 2009)

Here is an interview from Michael Pento on the Fed bonds and long rate manipulation and where we go from here. Also of note Michael Pento is not one of your fringe guys because you see him regularly on CNBC and Bloomberg and as we all know most people believe you can't have credibility unless your a regular on these programs. 

http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/8/22_Michael_Pento.html


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## sylyconvalley (Apr 22, 2013)

dogcom said:


> PM's could easily head down because of the manipulation but I am afraid the deep pockets are needed to keep the price down instead of up. Paper to gold is running somewhere around 100:1 from what I hear and since the price take down last spring tons and tons of gold has been transferred to strong hands from weak hands. Then there is the problem of mines being economical and if prices stay down, mines will shut down and supplies will be even tighter in the face of huge physical demand.
> 
> Harold on the Fed chairman as I said it is not what he or she knows about the economy or whatever it is how to deliver the illusion of sound money and so on that will matter. So it is very important to have the right person for those who want to keep the system in place for as long as possible.


china placed a temporary floor on PM'S.
still short silver.. oh my .


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## sylyconvalley (Apr 22, 2013)

dogcom said:


> Here is an interview from Michael Pento on the Fed bonds and long rate manipulation and where we go from here. Also of note Michael Pento is not one of your fringe guys because you see him regularly on CNBC and Bloomberg and as we all know most people believe you can't have credibility unless your a regular on these programs.
> 
> http://kingworldnews.com/kingworldnews/Broadcast/Entries/2013/8/22_Michael_Pento.html


was up ma man?
ur back.
take care and beware brother.


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