Solvency and Sovereignty

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Hello Slopers. I am cccactii  a new and very occasional poster here and I was quite surprised that Tim gave me a chance to post, and I imagine you will be astonished that he did so. He may have had a momentary lapse in judgement if you are reading this or he is giving you all some fresh meat to fade.

I am a 47 year old airline pilot that became aware of the futility and danger in leaving my money with mutual fund managers and similar CFP types near the end of the tech bubble. I believed then that I had to learn this myself or I would be fleeced. I am a native of Minnesota and will never be looking at charts on my laptop while flying. Most of you slopers likely spend more in commissions than my net worth so this post may be for those of us who are trying to get to your realm. As such I am a Slo – Ho, or a Slop – Hopper, but I will get there!

In order to manage my own money I read a great deal including Jimmy Rogers, Reminiscences of a Stock Operator, Prechter's Tidal Wave, and even Edwards and Magee's Technical Analysis of Stock Trends to name a few. I have rarely been using charts and it certainly would have been helpful. In 2001-2002 I was convinced Greenspan would destroy the dollar and bail out any and everything he could.

I began to look at alternative investments as I perceived Wall Street to be toxic. I realized that gold and silver had been in a 20 year bear market while paper (stocks and bonds) had the opposite results during this period. I pulled up a chart of silver and Jimmy Rogers quote "I just
wait until there is money lying in the corner, and all I have to do is
go over there and pick it up. I do nothing in the meantime.
"hit me like a 100oz silver bar. It was the first time in my life where I believed I could have little to no downside risk as the zero rate policy was in full force.

Silver had been forgotten and it was laying there waiting to be picked up. We sold our house in Phoenix as I perceived a housing and credit bubble in 2002, and I put all of the money in physical silver and some gold. This 10-15 year base between roughly $4.50 -$5.50 had me believing the upside from such a long base would be spectacular, and my downside nil, except time value of money at less than 1%. It was to me a very bearish expression of my views, and in my mind allowed me to opt out the madness that was going on at the time.

!cid_sc

Soon after my large purchase silver moved up from $4.50 and I kept buying until the $8 area, and gold up to $480 before I decided I had enough and would just sit tight. I began reading Bill Fleckenstein daily and that only added to the confidence of my metal position. The crash in precious metals last winter was rough on me at the time, as I am heavily exposed. Instead of brooding about my metal positions tanking I thought long and hard about my thesis of the Fed printing until they cant, and gold being a very good place to be. I decided it had to be forced liquidation as all of my reasons for owning gold were completely intact. I surmised the best course of action would be to buy more. I bought more physical and some miners.I like the idea of being my own central bank and having individual sovereignty through metal. A sovereign piggy bank to you slopers.

I am trying to emulate the old man in Reminiscences of a Stock Operator who said very little except "you know it's a bull market" when asked his opinion. This dovetails Jesse in my mind when he talks about his sitting that made him the most money, not his thinking. Until I can trade like you Slopers I need to sit on the only bull market I have been fully invested in.

This bull market to me is cash. Gold is the highest form of cash and it fit perfectly in my still ongoing 10 year bearish thesis. Gold pays no dividend so in my mind I need an appreciation commensurate with interest bearing instruments. Roughly I need more than .5%/yr, .9% for 2 year according to yesterdays auction and 3.5% for 10 years. Lets compare this stealth gold bull market that a certified bear has embraced, yet the public seemingly has yet to discover. I was surprised that most slopers seemed to want to short gold, rather than own it. That may prove to be prescient and my posting this view may mark the top.

This looks like a 10 year bull market to me. Major precious metal crash like pullback to retest the 700 area last fall. I am guessing we will challenge the $1000 level soon and possibly a $950 flush. It is not out of the realm of probabilities that we retest $700 area once more, but I am not expecting it.

Gold

Gold vs SPX on a ten year view we can see the stock market rally was largely a falling dollar phenomenon and gold traded up with the market but diverged with the plunge. Gold has made a new high and SPX – Not so Much!

Goldspx 

Gold is technically a commodity but perhaps is starting to be seen as money, which is ultimately what I would expect in this environment. Gold vs CRB index. below.

Goldcrb

Finally a ten year view of the dollar with price performance of Silver,Gold, and a miner of each, as well as our beloved GS. I was surprised to see GS with all the intellectual firepower and unlimited access to funding has underperformed. Is this a bullish picture?

Perf 

I believe that everyone needs to think hard about the dollar and what that ten year chart is telling us. We know that the economic activity since March is all government induced. It is failing now and I believe they will stimulate much more. Last night it appears that the home buyer tax credit will be extended and moved up the income strata as that is where the new supply lurks. More job losses this week including the airlines which are a very good indicator of the economy along with the shipping stocks.

I read a great deal, and you may find this gal useful for macro data. Plus I think this Fleck article is mandatory.

I currently own puts on many stocks and indices and I feel that this will help mitigate any damage my large gold position may incur. I do not believe gold will go down without the stock market going with it. I believe that gold may go up even if the stock market tanks. Others before me have done a much better job on gold than I have done, but I hope it makes you think and you find something useful in the post. Good Luck to us all! 

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