Meanwhile, aboard The Errol Flynn–where I am just as connected as I am when I am back at The Factory–Flash and I are entertaining Cary, Pinky, Holly and Amanda. Flash is in an apprenticeship program, and I have just given him a new incentive: his own Bloomberg terminal. You’ll get to know Flash in time. He’s someone everyone needs to know at some point. Like the rest of the cast here at the set of the richest man on the planet, Flash adds an immense amount of value.

“WHAT?” Flash asked, “You think gold might pull back?”

“Yeah, I think so,” I admitted, “That’s why I sold the majority of it.”

“You said you wouldn’t sell it till it hit $10,000 per oz. Why the switch?”

“I still think it’s going to $10,000 an ounce,” I smirked, “but I am cautious in the short term. I think we could see a pullback more severe than I want to sit through. Besides that, there are so many things that I want to buy now. And I can always get right back into gold whenever I choose.

Gold is crowded here–is there a gold bear anywhere? I haven’t met one in weeks.” I continued. “What’s more, I haven’t seen or heard from a bull in stocks in what seems like months. There are too many bulls in gold and too many bears in stocks.”

“So what are you buying?”

“Calls in everything–especially financials like Goldie (GS). I haven’t been this bullish in a while. You know I love the bull side–particularly when there are too many bears.”

Then Pinky called and said to meet her in the lounge, where we sang with Cary Okie.

Flash didn’t even show up to the party in the sky; he stayed back in the office lost in his new Bloomberg. Flash is one of the greatest traders I’ve known. And he is just getting started.

And the beat goes on.

Dedication: My yoga pals I spent time with in Ubud.
“Two men look out through the same bars: One sees the mud and one the stars.”
–Frederick Langbridge (1849-1933)

Meanwhile, back at the factory, the accounts are repositioned and the only stocks we own are gold and silver names. We also own various calls on gold and silver and a fair amount of puts on the euro.

I previously wrote of the S&P 500 holding to it’s pattern of higher lows. Stocks have recovered off their lows, but have come upon resistance, which at one time was support. Given this picture, I am looking to short the S&P rather than be long it.

Trader Art - Support Becomes Resistance Oil on Canvas

Greece

Remember this about Greece: they cannot be bailed out by borrowing more. You cannot borrow your way out of too much borrowing. It does not work. Once debt levels reach a tipping point, there is no way out except default. Which is what Greece will be forced to do through a forced restructuring.

Big Trade

Given the crosscurrents, we are looking at a trade that could be bigger than the crash of 2008.

Hold on. The big trades are always full of twists and turns.

There is always a bull market somewhere and the bull market in gold continues to be in its infancy. Have you seen this movie before? The markets don’t change, just the players. The cycles play out the same every time.

Trader Art - Gold Bull Market: Oil on Canvas

Greek CDS move above 400 bps, GGBs spread over Bunds moves to new highs. The move in gold continues to be in it’s infancy. I have seen this movie before.

Gold - oil on canvas

Why not? Money is a good thing to have in these twisted times. Even Richard Nixon is hungry for it. Only a few days before the Derby he said, “If I had any money I’d invest it in the stock market.” And the market, meanwhile, continued its grim slide.
-Hunter S. Thompson
The Kentucky Derby is Decadent and Depraved

In Russia, talks of the reserve currency–gold–lurk in the background. Talks are focused on worldwide reserves in the wake of last week’s talks of the IMF buying more physical gold. Russian central banker Ulyukayev commented that Russia would increase the proportion of gold in it’s reserves. Records show that gold makes up 5.3% of Russia’s reserves, up from 4.3% seen back in late November.

Higher and Higher, Baby