I have stated this for many years now and I’ll continue to stand by this statement: Technical and fundamental analysis are of limited utility in predicting short-term trends in manipulated markets when analyzed in a vacuum absent of the context of government and bank manipulation. This not only applies to US stock markets but also to two of the most manipulated markets of all, the gold and silver futures markets. Often, with technical analysis, two analysts with multi-years of experience may offer widely diverging analyses when interpreting the exact same chart. However, if an analyst refuses or fails to take into account the massive amount of fraud and manipulation when interpreting charts of the S&P 500 or the Gold & Silver Continuous Contracts, then I would fathom that analyst would be off the mark at a much higher clip than he or she would be on the mark. For the past decade, it has been foolish to deny that massive fraud and manipulation existed in these aforementioned markets. Refusing to account for the “x factor” of fraud and manipulation, as it is frequently the single most important factor that moves these markets in the short-term, is what ultimately turns some gold/silver analysts into nothing more than weather forecasters.
During sharp corrections and/or consolidation periods in gold and silver, I inevitably stumble upon comments posted by gold/silver investors online that become greatly worried by some article posted by some analyst online that states that the silver and gold bull run has ended and that silver and gold prices are now going to crash. When this happens, gold/silver investors need to keep their focus on the big picture to avoid being led astray by the white noise that will constantly surround them during every single gold and silver pull back. As for the subset of gold and silver investors who, by nature, are worrisome creatures, they will always find analysts in the mainstream media that will gladly fuel their anxiety during every gold and silver correction or consolidation period. For ten years in a row now, gold and silver analysts come out of the woodwork to state that gold and silver are going to crash every single time these particular assets suffer a decent, rapid short-term correction or consolidation period.
To begin, it is quite easy to dismiss many of the analysts that call for a crash in gold and silver simply by conducting an internet search of their past predictions. Doing so will reveal that some of theses analysts have called for a crash of gold and silver every single year since the gold and silver bull run began. Other searches will reveal that many of these analysts are just flat-out terrible and that they have made many other severe warnings about commodity crashes just about at the exact time they bottomed and then proceeded to soar higher. Why waste energy worrying about an analyst’s calls when that analyst has proven himself or herself to be massively wrong multiple times year in and year out?
But what about analysts whose calls have been fairly accurate in the past and whose current calls create a level of concern for you? Then use this second process of separating the wheat from the chaff. Search the internet, find this analyst’s blog, and read about this analyst’s calls in the same asset class over a multiple numbers of years. If you can’t find any public record of past calls for this analyst regarding the specific asset class he or she is speaking of, then dismiss this analyst. Sure, a lot of analysts will want to reserve their most detailed and best analysis for their paying clients only and perhaps this is why they lack any kind of past track record. I reserve my best and most detailed calls and strategies for my paying clients only as this makes good business sense. If an analyst posted his best calls online all the time, why would anyone every pay the analyst for information they can receive for free?
However, if any analyst ever wants to develop his or her business, he or she needs to establish a track record in the public arena as well to prove he or she indeed is worthy of a following. After establishing a track record for at least two or three years, then such an analyst can begin to pull back his public predictions and reserve them more exclusively for the privacy of his or her clients only. Thus, I believe that any analyst worth his or her salt will have a decent public track record.
Given the rise of gold/silver in the public consciousness for the past several years, there are now a plethora of self-proclaimed gold and silver analysts online now that have no discernible track record of accurate past predictions regarding past movements in the gold and silver markets nor had made a single comment about gold or silver markets until two or three years ago. First of all, if such a person was truly an expert in gold and silver, realizing that we are in the midst of one of the largest gold and silver bulls of our lifetime only after gold had risen from $250 an ounce to $1000 an ounce and silver from $4 to $16 an ounce should automatically disqualify that person from ever being able to proclaim they are an “expert”. Furthermore, if an analyst has discussed gold and silver markets before but never once discussed fraud and manipulation in gold and silver futures markets until the past couple of years when it became “chic” and mainstream to do so, then his or her credibility should be highly questionable. The job of an analyst is to dig deeper than the level of public understanding and to not be afraid of taking a stance that he or she knows to be true even if the rest of the world disagrees with him or her at the time. How could a gold/silver analyst refuse to acknowledge the single most important factor – fraud and manipulation — that frequently moves these markets in the short-term, for years and call him or herself a gold/silver analyst? The equivalent scenario would be a US stock market analyst that refuses to acknowledge the massive effect of US Federal Reserve POMO schemes on the current short-term market behavior of the S&P 500, the DJIA and NASDAQ.
On January 25th, in this article I posted an article titled “Will Junior Mining Stocks be THE Investment of 2011?” on my online investment blog, the Underground Investor.
I iterated that my outlook for gold’s ongoing correction would be for a short-term bottom to form “somewhere around the $1,300 an ounce mark…and not with a further $250 an ounce correction and the $1,090 an ounce mark called for by Seabreeze Partners Management’s GP Doug Kass.” I further stated, “I’m going to directly contradict Kass and predict a pop higher of at least $40 to $50 an ounce in gold sometime during the 10 trading days between January 28th and February 11th.”
To my subscribing Platinum Members, to whom I provide much more detailed analysis than anything I publish in the public arena, I granted them even tighter timeframes for the turnaround on January 25th –
“I believe that this correction will end by Friday of this week [January 28th] if not sooner and that we are very close to a strong reversal now. Look for a bottom to form, and a rebound from gold at about $1,300 and the HUI at about 495.”.
In regard to these predictions, I provided subsequent actionable strategies regarding gold/silver mining stocks as well. For the time being, gold bottomed at about $1,308 an ounce on January 28th in Asia, and the HUI bottomed in New York at 492.04 later on the same day (I issued my bulletin to my members before market open in New York that day). Between January 28th in Asia and February 4th in New York, gold popped higher by $51.70 an ounce, meeting my call for a $40 to $50 bounce between January 28th and February 11th.
I based these short-term predictions and dates of short-term reversals not by blindly picking numbers out of a hat, but by studying the behavior of the bullion bank manipulators that continuously manipulate gold (and silver) markets and by combining this information with technical chart analysis. Of course, we’re not completely out of the woods yet with gold and silver, and I’ll have to track and interpret both technical charts and the movements of bullion bank manipulators on a daily basis to understand whether this reversal in gold/silver markets will now stand its ground or not. Below, I’ll provide further examples of how I’ve been incorporating fraud and manipulation analysis into my technical analysis to accurately foresee both the short-term and long-term direction of gold and silver markets for years.
With gold and silver futures markets, one must understand the mechanisms of the likely fraudulent paper gold and silver ETFs, the GLD and SLV, and the fraudulent paper gold and silver futures markets and how both of these paper markets influence gold/silver prices independent of free market supply and demand mechanisms. Of course, this is just the tip of the iceberg when it comes to understanding the difference between the mechanisms of how markets truly operate and the false mechanisms that business schools worldwide teach to the future analysts of the world. An analyst must always keep in mind fraud and manipulation whenever using technical charts to predict future behavior in manipulated markets or that analyst’s technical analysis will ALWAYS be distorted and inaccurate. Whether it’s by design, sheer arrogance or plain ignorance, this is why a five-year-old child’s predictions about future US market behavior during the last five years would have stacked up very well against the predictions made by supposedly very learned men like US Fed Reserve Chairman Ben Bernanke.
On September 16, 2006, in my article “Has the Commodities Bubble Burst? No, No, No!”, I stated:
“Everywhere in the media, you have pundits saying that the commodities Bull Run is over – including even chief global economists of major investment firms like Steven Roach of Morgan Stanley. THEY’RE ALL WRONG…I’ve dug deep enough down into the rabbit hole to know that gold will rise much much higher in the future.. Yes, oil has slipped to below $60 a barrel but again, this doesn’t mean that oil is done either.”
At the time I made the above prediction, gold had tumbled nearly 14% in the previous two months to $573 an ounce, oil had tumbled 25% from $80 a barrel to $60 a barrel and many global commodity analysts had called for people to sell out of all commodity based stocks across the board. In particular, a few precious metals analysts used this steep correction to foment fear among gold investors and called for gold to retrace all the way back down to its initial starting point in this gold bull run at $250 an ounce. So what happened? Gold, by the end of 2007, soared from its September 2006 correction that was supposed to usher in a collapse, by more than 45%, to $833 an ounce!
And for those of you that believe I am always positive on gold and silver because many of my public postings happen to be posted near interim bottoms when gold and silver are set to rebound, this is hardly the case. In my last 2010 Crisis Investment Opportunities newsletter issue, I warned of an impending gold/silver correction to begin 2011:
“The likely time frame for the likelihood of a Central Bank engineered attack against gold and silver prices has now been pushed out until January or February 2011.”
Interpretation of fraud and manipulation can help one identify warnings about short-term pullbacks in the price of certain assets as well as identify short-term bottoms.
On December 6, 2007, subscribers to my free online investment newsletter received this warning:
“Over the past six months, soaring oil prices are much more directly connected to a devaluing dollar than decreasing oil supply or peak oil. Had the Gulf Nations declared this week that they were going to unpeg their currencies from the U.S. dollar, I guarantee you that oil would have shot up beyond $100 to $120 a barrel within a matter of weeks [oil was trading at $88 a barrel at this time]. And that would have had nothing to do with supply and demand and everything to do with feared U.S. dollar weakness.”
Again, my statement above had nothing to do with fundamentals or technical charts but everything to do with the fraudulent nature of the US dollar and my understanding of the fraudulent nature of currency and oil markets. Sure enough, several Gulf Nations unofficially and quietly temporarily unpegged their currencies from the US dollar over the next few months, following Saudi Arabia’s lead of temporarily unpegging the Riyal from the US dollar at the end of 2007. During the next six months that followed my above statement, oil rose from just $88.40 a barrel to more than $120 a barrel. In mid-2008, oil peaked out at more than $140 a barrel, though a certain Wall Street firm’s opportunistic positioning in the oil futures markets based upon their knowledge of a single U.S. hedge fund that was short 260 million barrels of oil was largely responsible for the final spike in prices (again, just another example of how short-term price behavior was driven by manipulation of the banks and not supply-demand based).
Today, I’ve read in newspapers from the Americas to Europe to Asia, the attempt of many country’s finance ministers once again to deflect blame away from their Central Banks’ fiat currency devaluation policies as the root cause of rising commodity and oil prices. Today finance ministers worldwide have colluded to keep the people in the dark about reality by stating unilaterally that rising commodity prices are responsible for inflation versus stating the reality that currency manipulation is the main culprit of massive inflation.
This same type of “fraud and manipulation” analysis can be extended to another massively manipulated market, the US stock market. When predicting the future behavior of US stock markets, an analyst must always incorporate the fraud of Federal Reserve POMO schemes and the artificial propping up of a handful of core index stocks that keep entire indexes afloat into one’s technical analysis.
On March 21, 2007, on my investment blog, I pricked quite a few investors’ nerves when I wrote the article “The Short-Term May be Rosy, But Beware the Financial Crisis that is Building Steam”. In fact, back then, the rise of US stock markets on the back of massive fraud and manipulation was remarkably comparable to today’s current state of US stock markets four years later. In that article, I stated:
“Everywhere global stock markets have rebounded whether in China, Australia, Europe, or the US , short positions have decreased dramatically, and the bulls are back in full force. However, there are still two scenarios that every investor should be wary of, one that is very likely, and one that is near inevitable…I know that a lot of people will think that any talk of a future global economic crisis is ludicrous but that is why so few people actually build wealth through investing. Only the handful of people that take the time to really understand the economics that brew well below the surface of the Bloomberg reports and CNBC and the Wall Street Journal will readily prepare their investment portfolios for this crisis.”
“And this crisis that seems inevitable to me will be much bigger than the U.S. Great Depression of the 1930’s and much larger than the Asian Financial Crisis of 1997 because the conditions that are creating this crisis will have a much wider and more significant global impact than either of these two previous crises. Before those two crises hit, the overwhelming majority of investors believed that those people that believed a crisis was imminent were crazy. And during those times, salesmen and women in the financial industry were able to leverage the naivete of the thundering sheep herd to get them to do things that led to certain financial ruin.”
The “economics that brew well below the surface of the Bloomberg reports and CNBC and the Wall Street Journal” that I referenced in my above prediction was, of course, the real levels of key economic indicators versus the fraudulent, “official” government-reported economic statists that governments disseminate to the public via mainstream media distribution channels. Because I have always focused my analysis on government and banker levied fraud and manipulation of capital markets, even in March of 2007, at a time when many commercial investment advisors were taking advantage of the steady 9-month advance in US stock markets to tout their usual “get on board [the US market bull] or get left behind” propaganda, the precarious nature of the situation at that time was crystal clear to me.
So what happened after I made this prediction? US markets continued to be rosy in the short-term as the title of my article indicated before eventually topping out in October of that year and falling by more than 20% by March of the next year. As far as the remainder of 2008, we all know the disastrous year that 2008 ended up being worldwide. How did we do in 2008? Our Crisis Investment Opportunities investment newsletter portfolio still ended up positive for the year (barely positive, but still positive). Due to my prediction that a crisis would unfold, we avoided the 40% haircuts that almost all commercial investment firm clients suffered that year. Furthermore, just a few weeks ago, Reuters reported that “home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump” and that “home values have fallen 26 percent since their peak in June 2006, worse than the 25.9-percent decline seen during the Depression years between 1928 and 1933”. But what about my prediction that this unfolding crisis would be “much bigger than the US Great Depression”? I still believe that the prediction I made on March 21 of 2007 will come to fruition over the course of the next several years and this global crisis will become much bigger than the US Great Depression as at some point this year, we will move from the eye of the economic hurricane back into the turmoil of the hurricane. In fact, we may already be witnessing the first signs of my prediction above that this current crisis would “have a much wider and more significant global impact than either [the Great Depression or the 1997 Asian Financial Crisis]” in the food and unemployment riots that have already started this year in Egypt, Tunisia, Algieria and India.
By April 23, 2008 as the signs of an imminent US stock market crash were becoming clearer, I posted another warning shot on my investment blog titled “Will US Markets Crash Now or Later?”
In that article, I stated: “Should an extended rally of the Dow above 13,000 occur, it will serve no purpose other than to create the illusion of wealth, as opposed to the creation of real tangible wealth. The higher U.S. markets rise in today’s environment, the more likely it is that they will fall even harder in the future. Here’s why. Currently, the U.S. Federal Reserve is playing the same shell game that it has for decades, one in which they alternately inflate stock markets and real estate markets. If stock markets are crashing, then they inflate real estate markets, and vice versa. It’s a vicious circle that eventually will collapse under the weight of its own foolishness. In the late 1920s, in very simple terms, the U.S. Federal Reserve’s solution to forestall a mild U.S. economic contraction and to stop England’s gold losses was to print more money.”
What happened? The U.S. Market started a steep decline just one month later, shedding almost 5,000 points between May and October of 2008!
In conclusion, I’m not stating that by studying fraud and manipulation, one’s predictions will be spot on year in and year out. There is no analyst, including myself, that has not made, or will not make a prediction or two at some point, that will appear silly in hindsight. No one is infallible, though some may infer as much. But I can guarantee you this. If an analyst incorporates an understanding of how bullion banks and governments operate fraud and manipulation schemes into his or her technical analysis of capital markets, his or her chances of making uncannily accurate calls in the behavior of capital markets year in and year out become exponentially better than if he or she were to attempt to predict future market behavior based on technical analysis alone.
At a time when everyone but the most naïve of the naïve understand how grossly distorted capital prices are both to the upside (in global stock markets) and to the downside (in gold and silver markets) due to massive manipulation schemes executed through collusive bullion-bank and government efforts, it makes zero sense to continue to put faith in technical analysis alone. Though fundamentals may drive behavior in the long-term, fundamentals have had, at times, zero effect on the price discovery of assets in the short-term. Furthermore, with certain sectors such as the banking sector where insolvent bankrupt banks have been magically transformed into solvent profitable banks by corrupt regulatory agencies that have allowed banks to cook their books, the fundamentals of many sectors are not fundamentally sound! Fraud and manipulation analysis today is more than ever, more critical than either fundamental or technical analysis.
About the Author: JS Kim is the Founder and Managing Director of maalamalama, a fiercely independent investment research, education, and consulting firm with a mission of protecting the interests of Main Street from the fraud of Wall Street.
Republishing rights: The above article may be reprinted on other sites as long as all links and text, including the author acknowledgment, remain unchanged.
