The past week or two I have been forced to lighten my precious metals load due to the pricing slope- straight up. I made it through the summer and fall fully loaded with (never to be recommended) well over 50% of my net worth in the form of physical platinum, gold, silver, miners of such as well as GLD and SLV positions. This summer as we approached the $1000 gold level the psychological fatigue of riding the bull so long began to set in. I had a full position last year and kept it through the plunge and was fortunate to buy a decent amount near the lows. It was not easy to see my way through that summer fear fatigue fully loaded. I simply became worn out from worrying and decided it would be best not to care about a potential 10-20% pullback. I have sent unnecessary put premiums to heaven during this time.
From September until the present time it was much easier to have such a large position psychologically as I was being validated by price almost daily. The past two weeks I have sold roughly 20% of my paper metal positions and miners. I will not be selling any physical until the populace at large has fully embraced the idea. I do not believe that to be the case at this time. Today was a pivotal day for me as I sold a nice chunk of my GSS and other miners and ETF's. It did not feel good and was done with regret and a sense of caution. I was watching GS (for several days), BAC, DXY and metal and keeping the recent vertical metal price action in my mind as I finally pushed the sell button, and then actually bought some ZSL and some GLL puts. I have been short precious metals only two or three times for very brief periods the past nine years. I did not wish to sell any more metals but wanted some more short term protection as I sense intense pressure in all markets that will likely be relieved via risk reduction if only temporarily. We all need a rest and selling tends to put one's mind at ease.
The recent action in AAPL,GS and the financial sectors recent under performance will pressure stocks and funds may want to lock some gains in for the year. I also believe that sovereign risk is not priced into markets and the dollar may get a stealth bid from that unknown fear. I am positioned for a non-seasonal dollar rally over the next several weeks with UUP Dec and JAN 22 and 23 calls. This idea has yet to work. I am long puts on SPY, IWM, retailers, EWW and a smattering across various sectors that have not yet shown any promise.
There appears to be some regrets these days about not having enough metal or miners. Slowly scaling into positions has worked well for me and the more patience that I have the more it seems that I am rewarded. This is particularly true at the point of purchase. If you like gold at $1100 you should love it at $1000, be enamored about it at $800 and absolutely captivated with a 6 handle. As unlikely as that may seem I want to be prepared for those prices as I did not expect them last year and anything can happen. Use price to your advantage if you plan on buying weakness and leave plenty of room to buy if unexpected lower prices materialize.
The gold miners always dilute shareholders and tonight was GSS's turn. It would have been nice to have liquidated my position today and buy back in the morning. If I knew all of these events it would not be trading or risk management it would be called Goldman Sachs. I plan to buy back my positions if prices break and actually move into larger positions in juniors that have not yet had big moves. I will be cautious and see how things unfold. It is 1 a.m. on the east coast as I write this and DXY is at 74.83 and gold trying to hold $1200. My sales may not be good sales or they may not have been enough, but my perceptions caused me to take action and reduce position size. The GSS sale was luck with the secondary and I will likely wish that I sold more in the morning.
After last winter, a 20% pullback in gold to $1000 area would be the previously discussed "flesh wound" but I now have room to buy lower and it is possible I may get paid for some of my bearish positions. As you know all too well I am only saying it MIGHT be possible. 🙂 Hopefully a healthy pullback will present itself. Even though I have a large position I hate the straight up moves as it forces me to sell even though I may not wish to do so due to the backdrop – worldwide money printing.
In an earlier post I wrote about some of the unprecedented events we have seen the past few years and another poster referenced a historical book about history. I am in agreement but I meant to highlight more recent times rather than comparing us to the fall of the Roman Empire, or discuss how things are much better now than during the Civil War. An example of what I meant about "unprecedented times" is Sun Trust (STI). Last year they announced they were selling 40 million shares of Coke. They brought Coke public and have held the shares since 1919. They held them through the Great Depression but suddenly found it necessary to dispose of them during the "subprime is contained" crisis. There are many examples in our financial landscape of events and debt levels that have been unprecedented in most living Americans lifetimes and certainly in the past 100 years. People were not told at the time that they were experiencing the Great Depression. I am not saying that we are going to have a Greater Depression. I am saying that we are seeing many things that have exceeded those levels. It would be prudent to take note and try and protect oneself from the fallout of such circumstances.
