PM Daily Market Commentary - 1/10/2017

davefairtex
By davefairtex on Wed, Jan 11, 2017 - 6:35am

Gold rose +6.40 to 1187.60 on moderate volume, while silver climbed +0.22 to 16.60 on heavy volume.  PM continued to move higher today, even though the dollar showed a bit of strength; possibly the strength in PM was due to strength in industrial metals and especially copper.  Copper had a massive rally today, up +3.08% to 2.61.

Gold moved higher, at one point making a new high to 1190.60, and then more or less moved sideways into the close. Today's candle print: opening white marubozu, which is a 16% chance of a high. Gold is moving up slowly and surely to its date with destiny at 1200/the 50 MA.

Open interest at COMEX for GC rose by 10,058 contracts. It sure felt to me as though the commercials jumped in short as gold approached 1190. I expect to see more of this in the next few days, as gold approaches the 50.

Rate rise chances (May 2017) remains at 34%.

Silver rallied much more strongly today, momentarily popping over the 50 MA before retreating into the close. Candle print was a long white candle, which probably will not mark a high. Today's volume was solid, which is a positive sign as silver approaches the 50. Silver is not yet overbought, so it still may have some more room to run. If it can get through the 50, the next resistance line is at 17.30. Today silver strongly outperformed gold, sending the gold/silver ratio down -0.57 to 70.59. That's bullish. Perhaps silver's out-performance was tied to the big move in copper.

GDX moved up +0.71% on moderate volume, while GDXJ rallied +2.36% on moderately heavy volume. GDX printed a high wave/long-legged doji, which has a 19% chance of marking a high. GDXJ printed a high wave candle too, which the code says is a 48% chance of a high. That's not great. Intraday, the miners didn't look all that strong, with an early rally stuffed within the first 30 minutes of trading by a wave of selling. Over the last few days, there has been a fair amount of distribution in the mining shares, and that's a negative for PM.

Platinum rallied +0.17%, palladium climbed +0.99%, and copper shot up a huge +3.08.  Over the past week, copper found support on its 50 MA and has climbed back up to 2.60, and now appears to be headed for a re-test of the 2.75 high set back in November.  Go copper!

USD rallied just +0.08 to 101.97, first selling off then recovering to move higher. Candle print was just a spinning top, which does not mark a low.  The buck is still trying to figure out if its in a downtrend; it remains below its 9 EMA, but it is trying really hard not to decline.

Crude fell hard for a second day, dropping -0.97 to 51.22.  Volume is accelerating, which is bearish. Candle print was a closing black marubozu, which tells us that crude closed at the lows of the day, and intraday, there just weren't any buyers. Candle code says today's print has a 19% chance of marking the low. Crude is just starting to become oversold – we could have another couple days of selling ahead of us before crude finds support – possibly at the 50 MA and/or round number 50. The API report after market close indicated a 1.5 million barrel build, which is nominally bearish, but was more or less ignored by the market.  That could be positive.  The EIA petroleum status report is tomorrow at 10:30. If this report is more bearish than the API report, we could see further declines through Friday.

SPX was unchanged, at 2268.90, printing a “doji” candle for the day. Doji candles typically don't tell us very much; this one is slightly bullish. Industrials led (XLI:+0.42%) while energy fell (XLE:-0.91%). SPX remains just above its 9 EMA.  VIX fell -0.07 to 11.49.  Puts remain cheap.

TLT fell -0.07%, but still managed to close above the 50 MA. I think the 50 is falling faster than TLT at this point, which accounts for the crossing on a day TLT actually dropped.

JNK rose +0.05%, basically unchanged on the day, printing a high wave/northern doji – almost a gravestone doji - which the candle code found very disagreeable: a 49% chance of marking a top. JNK remains in a strong uptrend, above all 3 moving averages, but the failed rally today is bearish.

CRB rose +0.28%, torn between a strong rally in livestock and industrial metals, and the medium-sized drop in energy.  CRB will struggle as long as oil prices continue to decline.

The strong move today in silver was a distinctly positive note, as was the relative strength in PM even though the dollar came back from negative territory. The only bearish part continues to be the mining shares, which are enduring some selling pressure; the GDX:$GOLD ratio has been (more or less) declining since the highs made last Thursday. Are the miners just taking a rest, or is this the signal of a top?

I'm torn. Miners do tend to lead, and while they haven't actually dropped yet, the candle code is nervous. On the other hand, silver is now looking good, the buck is relatively weak, and that gold COT report remains strong. Support from industrial metals looks good too.

Also, that 50 MA is approaching quickly.

At the end of the day, current PM (short term) uptrend remains in place. A close for silver above the 50 would be awfully nice.

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20 Comments

davefairtex's picture
davefairtex
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big dollar rally: +0.81 to 102.77

Gold is doing poorly [-0.63%], silver much worse [-1.53%], and the miners arent happy either [-2.52%].

Buck isn't showing any signs of slowing down.

cmartenson's picture
cmartenson
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Big dollar and ""market"" reversal

davefairtex wrote:

Gold is doing poorly [-0.63%], silver much worse [-1.53%], and the miners arent happy either [-2.52%].

Buck isn't showing any signs of slowing down.

Not sure what the "reason" is, should there even be one, but all the markets reversed there in unison, starting at 11:22 a.m. EST.

Strange.

Cold Rain's picture
Cold Rain
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Reversals

Chris,

It seemed to be related to Trump's press conference today, but at the time, he was talking about the Russia allegations, not anything economy-related.  I dunno.  But that was the only "event" going on at that time.

Cold Rain's picture
Cold Rain
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Rolling Uphill

PMs rolling now.  Bo Polny got one right.  Gold up $10, Silver back to flat, and the mining shares are turning around as the market loses steam.  I'd like to see the Dow go ahead and hit 20K to get that over with, though.  I suspect we'll see that pretty soon.

davefairtex's picture
davefairtex
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well that didn't last long

Well boy.  I don't pretend to understand what that was all about.  Buck rockets higher to +0.91, then reverses, now down -0.49. 

Gold of course reversed too - got up to 1198 before fading a bit.  Better than a poke in the eye for sure.

But the real story: oil had a bit of trouble following a bearish-looking petroleum status report at 10:30; inventory build was 4.1 million barrels, substantially higher than API had estimated.  The instant spike down was about 60 cents, and then oil chopped sideways for about 10 minutes, and then, unaccountably, oil simply ripped higher.  Anyone who went short off that report was blown out of their positions, the rebound was just that intense - the up-spike was 50 cents in just one minute, 75 cents in two minutes, about 20k contracts traded.  Oil now up +1.80 to 52.63.  Amazing.

Upside manipulation?  Who knows.  But if you were short oil, it was ugly.

I wasn't short.  Clean living, good fortune - something.

Jim H's picture
Jim H
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Why I don't bother with Gold commentary here anymore...

Because while CHS would NEVER write a speculative piece about the way Gold and Silver are manipulated and might have shocking price increases in the future.. he does write this today;

http://www.oftwominds.com/blogjan17/bitcoin10K1-17.html

The Path to $10,000 Bitcoin

I agree that Bitcoin could easily go to $10K and beyond.. but to disparage the opportunity for Gold and Silver at the same time by saying this is a disservice;

Gold and silver are time-honored safe havens, but it's not too difficult to foresee the potential for limits or bans on gold, or supply constraints. Some percentage of investors will consider alternatives.

Say what?  CHS has been listening to DaveF way too much.. he seems incapable of critical thinking as it relates to Gold and Silver.  Dave and CHS might as well just take their places in the pantheon of central bankers and deep state players whose job it is to keep the dollar afloat and scare people away from Gold and Silver.   

Some percentage of investors will consider alternatives to Gold and Silver?  Almost nobody owns Gold and Silver today. 

Everyone is entitled to their opinion.    

In case people don't understand the relationship between CHS and DaveF.. CHS mentions Dave by name in his piece;

As my colleague Davefairtex observed recently, the paint isn't quite dry on bitcoin and the expanding host of other cryptocurrencies. Initial enthusiasm for the latest cryptocurrency that's going to eat bitcoin's lunch generates outsized returns for early investors, but as glitches in the vision arise, the bubble of initial euphoria pops.

In fact, DaveF was given the Gold and Silver pulpit here based on his pre-exsting relationship with CHS...

Dave's military background and his possible security clearance(s) past or present was never looked into by the PP.com website owners.. and to this day I will continue to state my concerns that Dave is not a sincere actor relative to his Gold and Silver commentary.  As always, it's not my website.  End of rant.        

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MJB
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Nice rant..

Definitely worthy of a golf clap Jim H!

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lambertad
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Predicting the future

Jim, 

I'm not sure if you have a RealVision subscription or not, but maybe someone reading this thread does and they may benefit from Grant's recent interview with Simon Mikhailovich. Simon makes that point that at 7:59 PM on the day that Modi outlawed the 500 and 1000 note in India, the perception that such a thing could take place by the common Indian was almost nil. However, at 8:00 PM when he stepped to the podium the percentage went to 100%. The same thing happened with Clinton as he points out in the interview. At 7 PM EST on election night the odds of Clinton winning were about 99%, until they were not. As evidence of this idiotic self absorbed assuredness that she would win, google the newsweek cover that shows Clinton with the title, Madam President, and up above it says "special commemorative edition". Think that one went to print a little too early?

To claim that gold and silver will not suffer some sort of confiscatory effort or huge tax increase or something else is simply hubris (unless you've been the future). In fact, while I think the people who run the CBs are utter morons, they know gold is a way out of their trap. In fact, I know that you know that gold is a way out of their trap. So if you and I know, what's to think others don't know and that they won't come after one of the few escape routes left? I'm not arguing not to buy gold or silver, I'm just saying, I'd be prepared for them to try to come after it in one manner or another and if an investor is a pushover, maybe gold isn't the place for them, maybe real estate would be a better investment (not at these prices though). 

Jim H's picture
Jim H
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Everything has risk...

Property taxes can go up on that real estate, and it can be costly just to maintain unless it's just land.. 

Bitcoin has it's own risk profile.. so I still ask, why can CHS talk about the explosive potential of Bitcoin, and not that of Gold and Silver?  Of course Gold and Silver have their own risks.. which is why I own a lot of it, overseas, outside the banking system.  

If we are discussing Gold and Silver vs. Bitcoin, we can easily make the argument that Bitcoin is fairly priced NOW since it is a primary market.. price is discovered via buying and selling of the real, actual thing.  Gold and Silver price discovery tales place in the paper futures market... in a derivatives market where more, "supply" can be conjured by banks.. by BANKS that don't even have the Gold and Silver to back the contracts that they create on an as needed/when needed basis.  There is no discernible manipulation arb for Bitcoin.. there sure as hell is for Gold and Silver.  

Whatever.   Hey.. why would (non-Western) central bankers, knowing all that they know.. buy Gold?  What's up with that?  Must be nothing, right?    

280094-14824509222785554_origin.png

davefairtex's picture
davefairtex
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bitcoin vs gold/silver

Ah Jim, its so nice to hear from you again!

I am confused by your rant though.  Were you ranting about me, or about Charles?  And if Charles - why not rant directly at him in his Bitcoin thread?  I'm not sure how or why I got looped in here.

Now, confession time.  Yes, Charles and I are definitely friends.  (Oh, the shame!)  I've even stayed at his home in Berkeley several times.  But no, I wasn't in the military - not this lifetime anyway.  Although I do have short hair, I like Thai boxing, and I did study a surprising amount of military history, its not a substitute for actually serving your country.

For what its worth, I agree with you - I think gold and silver are much better bets than bitcoin.  Your head is probably exploding with cognitive dissonance right now.  Bitcoin can be much more easily "confiscated" (i.e. made illegal by a central authority) than the widely spread out gold and silver molecules.  Bitcoin can also be superceded by a subsequent and/or more capable follow-on product.  "A" bitcoin may well be the future, but the chances that it is "this" bitcoin and that these specific coins will be your key to riches?  We'd all be running OS/360 if that were the case.

We may go through a phase where gold & silver are made illegal - gold more likely than silver - but I think that would just be a phase that would eventually come to an end.  Likewise, I think large property tax increases and IRA confiscations are more likely, since that's where the money is these days.

Hope that helps.

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Mark Cochrane
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FYI

Hello Jim,

Being unexpectedly marooned in a hotel in Jakarta today I got the chance to check out PP and was surprised to see your rant get directed towards DaveF.

He and I don't always agree but I have met the man in person and he's a damned decent person from my experience. I don't believe that he's doing anything other than providing us with insights to the best of his ability and we are lucky to have them. He just calls things as he sees them with a lot less of the personal bias for PMs than many of us have. He also is more of a short term trader of gold than a hoarder for the long term. He can pivot a lot faster than most of us if things change. I am still trying to learn from him so that I can balance some short term perspectives with my longer term predilection.

Mark

P.S. Dave doesn't have a military background, though I do. Not sure what that has to do with the discussion though.

reflector's picture
reflector
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myth

davefairtex wrote:

Although I do have short hair, I like Thai boxing, and I did study a surprising amount of military history, its not a substitute for actually serving your country.

not sure why you equate joining a violent gang with "serving your country".

the people who are actually serving their country are in the private sector, providing useful goods and services to others on a voluntary basis.

exporting violence because of some claims made by liars in washington (whether it's WMD, or assad gassed his own people, or the russians did it, etc, etc) is no service at all, and endangers all americans. i wish they would stop providing this "service", and most of the world wishes that, too.

davefairtex wrote:

Bitcoin can be much more easily "confiscated" (i.e. made illegal by a central authority) than the widely spread out gold and silver molecules. 

it's clear that you dont understand bitcoin - there is no such thing as a "central authority", this is a central tenet of bitcoin. YOU are the central authority when you own and use bitcoin!

it's the responsibility of each of us to stand up and be a man (or woman), and not be slaves kowtowing to some thugs and usurpers who claim the mantle of "authority".

you're a fairly smart guy, dave, it baffles me how you frequently seem to fall for (and promote) the myth of authority. it's almost as if you want independent thinkers and free people to fail.

davefairtex's picture
davefairtex
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understanding what's possible

Ok, I'll skip the libertarian philosophy lecture and head right to my alleged lack of understanding of bitcoin.

If I start out with the philosophy that I run the central bank, and bitcoin is my enemy, I just need to enlist the NSA and the Secret Service, I label bitcoin as a source for money laundering and terrorism, and get laws passed that say any participant gets 10 years in prison for:

  1. connecting a bitcoin client to a p2p network (engaging in money laundering)
  2. running a bitcoin miner (facilitating money laundering)

Then I get the NSA to locate all the clients by running "trojan horse" bitcoin p2p clients as well as a number of "honeypot" bitcoin full node/miners whose job it is to collect all the IP addresses of all the clients out there.  Once they do that, they go and translate all the IP addresses into home addresses, and then I would send the Secret Service out to start kicking down doors.  10-20 should do it.  Perp walks, orange jumpsuits, and pretty soon nobody is using bitcoin in the US any longer.

Make sure they keep enough honey pot miners out there so that the bitcoin population doesn't grow back.

Some users who use VPNs might escape my initial wrath, but there are ways even around that.  I'd be willing to bet that the NSA can use traffic analysis techniques to identify remote VPN endpoints if they can control the frequency and size of the packets passing through a given VPN connection, which they would be able to do if you were connected to their "honeypot" via a bitcoin client using a VPN.

Lest you think that connecting to a node in a remote country fixes the problem: realize the NSA has server boxes around the world on which they can run their honeypots.

After a three month campaign, virtually nobody would be using bitcoin within my domain.

Mine is a technical argument, not a moral one.  I'm quite clear on how I'd make this happen.  I don't really see a good defense against it.  P2P/torrent systems only exist because nobody cares enough to spend the effort to shut them down, not because they are invulnerable to detection and interdiction.

you're a fairly smart guy, dave, it baffles me how you frequently seem to fall for (and promote) the myth of authority. it's almost as if you want independent thinkers and free people to fail.

You're a fairly smart guy too.  That's why it surprises me that you mistake my understanding of how to implement repression as some sort of vote for oppression.  That's not what I'm doing.  I just don't want to engage in wishful thinking that bitcoin is this undetectable, hose-the-central-bankers technology that nobody can stop "because its distributed."  It only works because they are allowing it to work.  As soon as they want to pull the plug, they can.

As Chris always likes to say, "that's how I'd do it if I were them."

I feel the same thing about the NSA.  If they really want to own my box, they will.  Doesn't mean I like it or I approve, but neither do I labor under the delusion that I have actual security if push comes to shove.

davefairtex's picture
davefairtex
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thanks mark

I remember Mark's visit quite fondly.  He gave me a personal 60 minute executive briefing on climate change over a bowl of noodles.  My takeaway: its about sea levels.  They are going higher.  How fast, nobody is certain.  It depends on which ice melts and when. 

(Oops.  This just became a climate change thread.)

He also asked me a bunch of really good questions about my machine learning research.  In fact, all his questions make me think.  There aren't many people I can talk to about it and he's one of them.

I have to say, I've known a number of people who went to MIT, and every single one of them has been really sharp, and he's no exception.

And the sea stories.  My life has been a tame, placid affair by comparison.

Anyhow!

sand_puppy's picture
sand_puppy
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I have learned a lot from DaveF

I appreciate the way that DaveF articulates his viewpoints with great skill.  I also appreciate the tremendous intelligence and long term level of experience that he brings to financial topics.

It is certainly true, that each person comes from their own viewpoint.  And that viewpoint was built over decades of life experience, reading, weighing, judging, shuffling and reorganizing in the cognitive-emotional world.

Lapsing into philosophical generalities here, I believe that human viewpoints are complex structures built upon things that remain mostly out of sight.  They grow and evolve like coral reefs.  Though occasionally, a whole section of the reef may break off.

One example from my own life was that I was attacked and beaten up on the street one night by a gang of teenagers who were "having fun" by hurting others.  The emotional trauma and my struggles to understand this event has affected what I read, think and do.  (Spiral Dynamics saves the day.)

So when I post something here on pp, it is not obvious where my viewpoint came from nor the path its evolution followed. 

Intelligent people look at the same thing and "see" it very differently.  And there is nothing "wrong" with them!

A place to talk and learn (like pp) lets us question and mature our world views.  Some viewpoints are more accurate, flexible and informed.  So we learn, question and consider alternative organizations.

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Jim H
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Viewpoints are cool as long as they are sincere..

I am unable to square Dave's obvious intelligence with his moronic denial of manipulation and the structure of the market (derivatives used in price discovery).  It's that simple.  Something is wrong.      

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locksmithuk
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Tone and bait

Jim H wrote:

I am unable to square Dave's obvious intelligence with his moronic denial of manipulation and the structure of the market (derivatives used in price discovery).  It's that simple.  Something is wrong.      

I too was surprised by the rant, but having been on the sidelines with popcorn for a while I think I understand [some of] the underlying emotion.

Articulating an argument is fine, as are opposing viewpoints. On an electronic forum though, tone is very important, since few us ever meet face to face. Way back in time on this site an argument flared up about Dave’s approach to argumentative discussion. I remember the observation being made that it was Dave’s unnecessary baiting and/or barbs which were not quite in keeping with the desired intent of truly respectful debate on here. Judging from one of Dave’s posts above towards you it seems that little has been learned from that observation. I hasten to add that it is more an exception than the rule. Maybe he reserves it just for you. I don’t know. No matter, it is still an undesirable – and unnecessary – trait. 

davefairtex's picture
davefairtex
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game theory; tit for tat

locksmith-

Judging from one of Dave’s posts above towards you it seems that little has been learned from that observation. I hasten to add that it is more an exception than the rule. Maybe he reserves it just for you. I don’t know. No matter, it is still an undesirable – and unnecessary – trait.

Yes, I reserve a special "short leash" treatment for Jim.  In the parlance of game theory, its a tit-for-tat strategy.  With most people, I try to employ "forgiving tit for tat", but Jim has "cheated" in this dialog game so often, it just doesn't make sense for me to employ forgiveness.

Watch the video below to understand more how all that works.  Awesome explanation of how humans (and many other creatures) engage in cooperation, while also deterring cheating behavior.  Its programmed into our biology.

Over four years, Jim's pattern has been to construct belief systems for me out of whole cloth, and then call me names for believing in these Jim-constructed belief systems.   Dozens and dozens of times he insulted me for saying something that I never in fact said.  When it comes to engaging in reasonable dialog, that's what I consider to be "cheating behavior."

I am unable to square Dave's obvious intelligence with his moronic denial of manipulation and the structure of the market (derivatives used in price discovery).  It's that simple.  Something is wrong.

Perfect example.  Did he include a quote of something I said, and then get upset about it?  He did not.   Quoting something I said, and then getting upset about it, would be both fair and intellectually honest, and that's just not Jim's way.  He prefers to make up a position for me, and then belittle me for having this alleged position.  In short, he cheats.

He has of course forgotten that I wrote an entire front-page post on manipulation a year or so ago.  I write about it if not daily, then at least weekly.  But Jim pretends not to notice.  He prefers to makes stuff up that I never said, and that I don't believe, and that furthermore I've denied believing innumerable times, and then proceed to call me a moron for believing this stuff that in fact isn't what I think at all.

Notice what I did here.  I quoted something Jim actually said, and then I complained about it.

reflector's picture
reflector
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slide

davefairtex wrote:

After a three month campaign, virtually nobody would be using bitcoin within my domain.

ok, dave, you enjoy your dystopian fantasy scenario.

meanwhile, in the real world, bitcoin continues to prosper and gain acceptance.

i'll continue traveling across borders, with bitcoins that i won't be declaring to anyone. if it ever gets to be a problem to use bitcoin inside the usa, then i'll just use them outside the usa, no big deal.

and i'll continue to challenge you on your archaic notion that there is a "central authority", someone outside of ourselves, that has the right to rule over us.

Quote:

That's why it surprises me that you mistake my understanding of how to implement repression as some sort of vote for oppression. 

i very well understand that is your claim, and you've said that before.

however, the language you have been using continues to give me the impression that deep down, you believe the oppression of the state towards its people, is normal and acceptable.

davefairtex's picture
davefairtex
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different perspectives

ok, dave, you enjoy your dystopian fantasy scenario.

By training, I'm an engineer.  Mediocre engineers design packages for normal conditions.  The better engineers prepare for disaster - and they do this by imagining the largest number of terrible (yet possible) things might occur.    Checking for problem scenarios is just how we think.

If I am trying to design a secure system, part of the job is poking the system for vulnerabilities.  To do this, I mentally pretend I'm an attacker, and try to construct various scenarios where I could take it down.  Perhaps you haven't engaged in this sort of process in your line of work.  It was fairly routine in ours.  Nobody I worked with would ever think of this process as constructing "dystopian fantasy scenarios."

If my scenario is reasonably possible - not difficult to execute with resources currently in place - a strictly rational planner would be ill-advised to simply dismiss it.  If I thought of it, you can be sure others (with increased motivation) will have thought of it too.

i'll continue traveling across borders, with bitcoins that i won't be declaring to anyone. if it ever gets to be a problem to use bitcoin inside the usa, then i'll just use them outside the usa, no big deal.

Hey, no skin off my nose, best of luck, etc.  I look at system design, not at individuals.   You seem to think I'm after you.  I'm just a systems guy running a (hypothetical) vulnerability test, that's all.  You just keep doing what you're doing.

and i'll continue to challenge you on your archaic notion that there is a "central authority", someone outside of ourselves, that has the right to rule over us.

Challenging me?  Perhaps you could challenge gravity while you're at it.  Its not about "right", its about existence.  Until our central authority vanishes, I'm going to keep on including them in my calculations and system effects descriptions because they continue to exist, and because of that, they continue to have the capacity to affect us all.  Again, you have the luxury of imagining major elements away, but engineers must deal with reality as it is on the ground today.  Or to quote Don Rumsfeld - replace Army with Situation:

You go to war with the Army you have.  They're not the Army you might want or wish to have at a later time.
But back to you:

however, the language you have been using continues to give me the impression that deep down, you believe the oppression of the state towards its people, is normal and acceptable.

I can't control the filters you place between what I say and what you receive.  In your mind, I'm some dystopian trying to take away one of your favorite toys and convince everyone to stay in slavery, and I see myself as coming up with a real-world vulnerability test of a system currently in operation that people are considering placing real money on - all the while imagining it is invulnerable to attack.

We are each the hero of our own story.

I get now that I'm goring one of your sacred cows, to mix a metaphor.  Sorry about that.  Its what I do best.  It made me ever so popular in architecture discussions.  And its made me equally popular with you, here and now.

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