Daily Archives: July 28, 2010

Gold – The Battle is Already Won

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Warning Slopers… GOLD BUG ALERT!!  😉

This morning's email from gold general Jim Sinclair – under siege yet
again from the troops in the "community" – prompts this morning's post.

Mr. Sinclair often writes with a war mentality pitting the gold
community against the evil bullion banks – and a good chunk of the rest
of the financial world.  Don't get me wrong, I think there is plenty of
evil out there (it seems that on Mondays following a meeting or
conspiracy of the assembled dignitaries in the G20 my investment
accounts take the hit) but apparently a good chunk of the "community"
gets its panties all in a bunch every time gold takes the hard hit.

 That is because nearly 10 years into the secular bull market in the
rebellion against dishonest monetary systems a casino mentality – so
well formed through the previous 20 year secular bull market in paper
assets (stock certificates, bonds, derivatives, etc.) – remains intact. 
This includes a great number of self-described gold bugs in my
opinion.  In other words, the "community" does not tend to believe its
own bullshit on balance.  If they did, they would see opportunity or at
least sit tight during these phases that have been all too common all
the way up since 2001.

There is an opportunity to own value shaping up and I suspect the usual
casino players will fail to capitalize while the minority capitalize
once again.  Missed the last buying opportunity this space identified in euros?  Well, another opportunity is on the way
Who will capitalize and who will be immobilized by fear?  Gold in USD
is also presenting an opportunity.  In fact, name me a major developed
society that is not tramping out its currency for the purpose of
manufacturing politically expedient economic growth and I will show you a
society of relative value from an investment standpoint.  There are
those in ascension and it is no coincidence that those are targets for
my investment dollars in the big picture.

For now, gold is a monetary value anchor and in a world of eroding
confidence in politicians and policy makers who use official paper and
digital money, gold represents value; nothing more, nothing less. 
Still, it is always great to exchange confidence paper for value when
value goes on sale.  You do not buy gold when everybody loves
it.  You understand who you are and if you perceive that your personal
situation is in need of this value anchor you buy gold when the public
hates it, when the speculators (ultimate casino patrons) are dumping and
you-know-who is buying or buying to cover.

The battle was won in 2008 when an uber-opportunity presented, most
failed to capitalize (thank you deflation proponents) and then snapped
back faster and better than most other assets and asset classes.  Is a
drop to 950 (on radar for many months in NFTRH) out of the question? 
No, nor is the long term battle line at around 870 for that matter.  Do
you think anyone who has understood what is and is not monetary value
since 2001 is pained by these numbers?  They are just numbers and they
are 150-200% above cost basis in many cases.  And by no means are these
downside targets shoe-ins in my opinion.

So whatever you do, sit tight and realize that what is happening now is
all part of the game and for some it is a time of opportunity as value
goes on sale.  It is really no more complicated than that.

Gold

The Value of Thin Bets

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Each morning, before the market opens, I fire up my trading platform to see what's happening. Invariably, I'll see some positions with gigantic "losses", because the bid/ask data is just plain silly (e.g. for a $15 stock, it might show a $10 bid and a $20 ask, until such time as the market is actually open). So most of these are false scares.

One of them this morning – APL – was not. This was a short of mine, and it was getting bought for a 35% premium. Not a great way to start the day!

However, this position represented 0.34% of my portfolio, so it was hardly devastating news. Was it good news? Of course not. Would it wreck my portfolio? No. I spread my positions thin. Of course, if the stock dropped 35%, it would also mean that my short wouldn't make a meaningful positive difference either, but everything is a two-edged sword, isn't it?

0728-apl

Mexican Disappointments (by Nathaniel Goodwin)

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I’m back from my journey to Mexico and successfully brought Ted’s new car back safely. I’ve never been arrested in my life here in the USA, but down there they seem to have a much stricter penal code. My ignorance of Mexican laws did get me in a bit of trouble, and I was arrested over 14 times. A couple of my crimes included walking down the wrong way of a one way street, speaking English outside of a church during mass, wearing shorts on a Tuesday and riding a bike without knee and elbow pads.

The funny thing was that each time I was arrested by the policiales, my fine was the exact amount I had in my wallet at the time. One other odd thing in Mexico is that the used car salesmen carry AK-47’s.

A real bummer for me was coming home and watching “Master Chef” on Fox. I have been pitching the most awesome reality cooking show ever created to all of the major networks, and I see that Fox has picked it up…. Unfortunately, they took my idea and I don’t seem to be included in the production. They did get Gordon Ramsey though which is pretty cool though.

Well I’m glad I shorted Fox broadcasting via NWS on Tuesday, which makes me feel a little better. I hope it crashes and burns; however, some of my breadth indicators are still looking bullish and the show is awesome which could propel NWS to new highs. Still good risk reward in my eyes though.

NWS