JWU OCT 8 SYDNEY TIME

Oct 8, 2014 Sydney Time

 

      JWU UPDATE

 

1.           BEIJING - China's State Council, or the cabinet, on Thursday published rules to strengthen the supervision and management of debts incurred by local governments. It is the first document by the State Council aiming to manage and control risks posed by trillions of yuan in local government debts. Auditing results indicated that risks from government debts are generally controllable, according to a brief statement posted on the official website of the Chinese central government. –Oct 3,2014, China Daily News.

2.           I join 3 other fund other managers yesterday at 4 pm, including James “gold is money” Turk, and addressed a bunch of Sydney mine builders and money managers.

3.           Here’s the bottom line: Most were bitter about gold stock prices, and blamed company management for those prices.  Some were demanding that companies commit to pay all shareholders some sort of production royalty.

4.           There’s no question that stocks like Franco have performed better than most.  But, if everybody wants to become a royalty company, that means exploration for lower grade ore and expansion of existing mines could take a hit.

5.           The bottom line is the Australian mining industry is perhaps not as depressed as some US investors in the general Western gold community, but they are extremely frustrated, angry, bitter, and demoralized. 

6.           Unfortunately, the solution, which is to carry some short positions and use the pgen, wasn’t forthcoming.  All the other speakers were 100{7d2759035a2769ee7a6afa7c646e6642b67314b0cd0e17ac0c6ae4f965ff87d9} fear trade focused, and even those who mentioned China were focused on some version of the fear trade there.

7.           I was horrified at the lack of fundamentals understanding, even by the top speakers.  Any B grade bank econ would have wiped the floor with all of them.  All agreed the system would blow, and gold would go vertical.

8.           Except me.

9.           I talked about the fall in oil prices and that gold help gold stock prices even while gold goes sideways.

10.        Nobody knew anything about Kashmir.  Nobody cared about geopolitics, but they all wanted a parabolic event.  You can’t replace $300 trillion in blown OTC derivatives that almost sent gold parabolic, with a demand for a parabolic event, fuelled by nothing but that demand.

11.        The growth of Western government debt or excessive money printing does lead to a decline in the currency, as is evident in Japan right now.

12.        That government debt growth is why central bank policy is becoming less and less effective since it began in 2013, and has arguably reached the point where a loss of confidence event in central banks, by money managers, is very possible.

13.        That doesn’t mean the system “is about to blow”.  It does mean everyone, except the banksters, can get a lot poorer, while governments write off their own debts.

14.        Gold revaluation, particularly if it is conducted by China or India, would reduce America’s trade deficit for a long period of time, and it would reduce the real debt payable by the US government.

15.        Chinese gold reval does not end the status of the dollar as the number one reserve currency in the world, in terms of size, but it would reduce the price of the dollar significantly, and increase yuan-dollar rate significantly.

16.        When central bank policy can no longer produce growth because of government debt offsets QE and rates to zero, the next central bank action is to reduce the debt payable by governments.

17.        The tool to do that is gold and/or commodity index revaluation.  The tool is not a default on T-bonds.  It’s gold revaluation.

18.        Please click here now: http://www.gracelandjuniors.com/images/stories/14oct/2014oct8bit1.PNG   That’s the daily bitcoin chart.  After threading the $300 buy-side HSR needle, Sir Bit is attempting to make it to $360, a 20{7d2759035a2769ee7a6afa7c646e6642b67314b0cd0e17ac0c6ae4f965ff87d9} price pop.

19.        Remember that bitcoin has similarities to gold, but it not part of the Hindhu religion.  It’s not a competitor to gold.  It’s a junior site component, and I own it and trade it as such. 

20.        Bitcoin, or something like it is likely to ultimately replace gold as the main central bank reserve holding, as gold-starved Indians swarm central banks, demanding their gold.  That’s in the future, but not as far off as you might think…

21.        Please click here now: http://www.gracelandjuniors.com/images/stories/14oct/2014oct8u1.png  Double-click to enlarge this daily chart of UEX, a component in the Graceland Uranium portfolio. It’s up 10{7d2759035a2769ee7a6afa7c646e6642b67314b0cd0e17ac0c6ae4f965ff87d9} today, and looking ready to run towards

22.        Please click here now: http://www.gracelandjuniors.com/images/stories/14oct/2014oct8u2.png  That’s uranium itself.  Only if price goes, impossibly, under the $4.70 area lows should investors cover short positions, to make themselves more net long the yellowcake stocks asset class.

23.        A move above $5.56 could rejuvenate the whole sector.

24.        Please click here now: http://www.gracelandjuniors.com/images/stories/14oct/2014oct8j1.PNG Note my green swingograms on this daily chart. There’s no movement above the zero line, and so all turn callers need to cool their golden heels for a bit, despite the fact that a billion Indians, after screaming for 190 tons from your mines in September, are already screaming for more.

25.        Gridtime!  The Dow is down only 180 today, and that’s an excuse for some gold stock naked shorting from the “good ole days”, but oil is also down, and threatening to blow out the $87 area lows, which could bring addition pressure on the oil frackers, and in turn on the Dow.  If the Fed raises interest rates, that will almost certainly be the end of the free ride for money managers who buy T-bonds every time the Dow nosedives.  That’s when they’ll likely move towards your gold stocks in a bigger way, especially if oil is lower making mining costs lower.  In the meantime, cool it on trying to be “beyond net long” in junior gold stocks.  Using GDXJ for shorting against your individual situations, rather than to create a “junior gold stocks on steroids” portfolio.   Let’s hit the grid, looking for a potential rally in the yen that shoots gold and gold stocks higher, but not demanding it.  See you there!

 

Kirk Jr. on the gold explorers bridge, out!

Thanks!

           Cheers

           St

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