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EJ
08-13-08, 03:37 PM
http://www.itulip.com/images/digging.jpgPeople are sentimental, markets are not. Measure your thesis not your pulse or the behavior of the crowd

Market composition determines market sentiment

In any bull market, the early adopters who bought in when the asset in question was cheap and unpopular comprise a very small percentage of the total population of investors as the top of a market approaches. This explains the volatility before major turning points in markets as the full range of investors, from early adopters to late comers, all get anxious at the same time.

As a secular market top approaches, the universal 80/20 rule applies because 80% of investors are "brand name" investors who go for the branded financial product sold by Wall Street, a representative few listed here after the tag line: the buy-and-hold mutual funds more numerous than the stocks they are comprised of, the hot "New Era" tech stock as rare as a weekend shopping flier, or the American Dream of Home Ownership as a bloated 5,000 square foot house made out of two-by-fours and wall board thrown up in a few week's time, to name three.

Meanwhile the ornery 20% of investors remaining are either non-brand or, like iTulip, anti-brand. We figure whatever Wall Street and its trade press are selling is probably crap. Not surprisingly we don't get a lot of play in the Wall Street trade media. Thank the Internet for giving readers a choice. Still, most of the anti-brand independent thinkers crumble long before the foundation of their thesis does.

Take gold, for instance. We decided gold was cheap and hated for bad reasons in 2001 and piled into it – and silver and platinum, too. They laughed at us then, those precious metals nay sayers – laughed! – for the first years as the Fed fretted about deflation as if money with no intrinsic value could suddenly become scarce. How to make dollar, junk mail or spam or bad screenplays in Hollywood, appear valuable, that is the trick. The answer is to offer less of them than is demanded. But you can bet that while demand is partly a market and partly a government phenomena, dollar supply is assured.

Who's laughing now! Hah! Well, they are, again, now that gold, silver, platinum, and oil have plunged like shares in toys.com after the dot com bust.

They have once a year since 2001. Some day we'll miss their heckling at the top, when the price finally plunges and they are eager buyers. Maybe we'll get the last laugh, but only if we are smart enough to figure out when that top is in.

Was $1011 gold price March 17, 2008 the top?

At this time with gold a bit less than half way to the peak gold price we forecast in 2001, the market composition is as we estimate below. The sentiment breakdown is a follows.

The charts below show a buy price paid by an investor, a quantity of 100 ounces for the sake of simplicity, the total buy cost for 100 ounces at the price shown, a real sell price not spot price, a total sale value, gain or loss from the sale, the spread that the investor is paying to sell then buy back in in the future, the standard awful 28% "collectibles" tax charged because, unlike 0% capital gains on a primary residence owned for two years that the government wants you to buy and sell, gold is "short government" so is taxed at 28%. Finally the chart shows the net gain or loss net of transactions costs – the spread and the taxes – and the percentage net gain or loss. The spread is estimated at 2.5% in each direction and we ignore de minimis costs such as shipping, often free, and storage, usually less than $100 a year.

Anyone still in the market who bought in 2001 represents about 6% of the total market. I'm in that 6% group, trying not to be Fearless, as are long time iTulip readers. We characterize this investor group's market sentiment as Fearless as shown below with data highlighted in green. They bought into the market early between $270 and $300 in 2001 and 2002. We are dangerously self-assured because we are up over 100%. Fearless is a dangerous mindset, and to those of our readers in this group we advise extra diligence to avoid confirmation bias leading you to make overly optimistic interpretations of data.

Next into the bull market we have the Ambivalent group who bought into the next period of price increases, shown in the chart highlighted in yellow. On this correction they are flat to up 94% over a relatively short period of time. The gold ETF was introduced in November 2006 when gold was trading around $625. Anyone buying before that had little choice but to buy physical gold or, that bane of gold investors, the gold mining stock. We have been 100% against buying gold stocks since 2001, initially arguing that most gold companies are run very badly so unless you have access to management and the skills to assess them over time, like Warren Buffet, forget it. Next came inflation that ramped input costs faster than miners could raise prices. Double whammy of death for mining stocks, we said, but what do we know? We're just a little web site that argues for sticking to a well developed investment thesis and against trading.

Finally we have the Fearful group highlighted in orange. These guys always jump in late and are shaken by each correction. The Fearless early adopters are inured, and that is their cross to bear. The Fearful group are like rabid rabbits, scared by every change in the market, brand driven so not really comfortable buying something the Wall Street hasn't blessed.

Let's start by looking at gold market sentiment composition at the recent top March 17 when gold traded at $1011. Note the market only has a small 11% Fearful composition, with 74% Ambivalent, and 15% fearless at that gold price. Needless to say, this is a bullish crowd: mostly green and yellow Ambivalent and Fearless investors.


http://www.itulip.com/images/goldmarketcomprecenttop.gif


Fast forward to today. At this time we figure the market now is composed roughly of 47% Fearful group who bought because the price was going up and is anxious because the price fell below their purchase price. How dare it!. Another the 47% comprise the Ambivalent group who bought below the current price but is now only even or no quite up doubt what they paid. That's a lot of orange and yellow highlights. The Fearless group that bought early and never sold is mere 6% of the market.


http://www.itulip.com/images/goldmarketcompcurrentcase.gif


No wonder the market is anxious! Something like 94% of gold investors in the market today are either Fearful or Ambivalent. That's the good news. The bad news is that it's probably going to get worse before it gets better. Here's our correction case based on our precious update in March were we explained that a $200 correction from $974 was expected. That takes us to call it $780 in this correction, more or less.


http://www.itulip.com/images/goldmarketcompcorrection.gif


In this scenario fully 52% of investors are Fearful, 40% are wondering if they've done the right thing, and only 5% make up the Fearless lunatic fringe.

But what if the 2001 iTulip investor thesis continues to hold up, that the dollar is down for the geopolitical and financial market count due to Risk Pollution and Debt Deflation as the FIRE Economy unwinds?

Before that, a nod to the gold price forecasting master Jim Sinclair (http://www.jsmineset.com/) at who has postulated a $1630 gold price for years. Years ago he put forward an intermediate dollar bottom price for gold that at time appeared as outlandish as the iTulip $2500 dollar bottom and gold peak price. Market sentiment of the current group of investors might look like this if Jim is right: lots of green and yellow Ambivalent and Fearless investors.


http://www.itulip.com/images/goldmarketcompintbottom.gif


Today's gold holders, even if they waited and bought at $1,000 will at last be rewarded with a 45% gain net of taxes and other transaction costs. And if the iTulip long term case come to pass?


http://www.itulip.com/images/goldmarketcompitulipcase.gif


Of course, every gold investor I'm talking to here today is a Fearless winner in that case.

Gold Trading Genius vs iTulip Gold Buy and Holder

Hard to make money trading. Trading on net can lose you your money and waste your time compared to buying and holding, depending on what you are buying and selling and whether the asset in question is in a bear or bull market. The key issues are transaction costs and the long term market trend.

Transaction costs are fees you pay on trades and taxes on capital gains. If they are high, as in the case of gold, then you want to spend your time developing a thesis for a long term multi-year trade, take a position, and hold it. ETFs and stocks on a discount brokerage account are examples of low transaction cost assets that you may want to trade, but not necessarily.

If transaction costs are low, then you may want to trade an asset if you have special information that gives you an advantage over investors on the other side of the trade. Special information that can be used to make short term trades if transaction costs are low includes:


A unique investment thesis that you believe works and is not widely known and used so that the advantage is not already arbitraged away. For example, the iTulip "Small trade within big trade" thesis is that short term speculative gold price movements are range bound within a long term dollar depreciation trend ongoing since 2001. (The article that follows offers a theory of the "Small trade within the big trade.")
A Unique Systemic Thesis. For example, the iTulip 1999 thesis that explains how stock bubbles work that led to our March 2000 sell call and our theory of how housing bubbles work, allowing us to call a housing bubble top in 2006.
Legally obtained and usable inside information. For example, we learned in June 2007 from a call with an investment bank that the Fed planned to do creative things at the discount window instead of lowering rates drastically to zero post housing bubble crash as they did following the tech stock bubble crash – useful information if you were otherwise planning to bet on 1% interest rates in 2007.

Trading versus Holding: Nine Genius Gold Trades versus The Buy and Hold Gold Thesis

Let's say you're me or an early iTulip reader with an interest in gold. You bought gold in 2001 for around $270. You don't watch Jim Cramer and get infected with the TV and Internet trading virus. You stay focused on a long term investment thesis. You watch don't the markets obsessively, like a rabbit for hawks, reacting to ever rustle in the trees, selling when you think the price is about to fall and buying when your research and intuition tells you prices are headed up again. You are armed with a thesis, and your energy goes into testing it on occasion, but you don't sell until the assumptions that underlie the thesis appears to no longer hold. Here's how you stack up against me and iTulip readers who never trade within an investment thesis.

For our comparison, it's not fair to compare the average gold trader to the iTulip gold long term holder. Let's say our trader is not just any trader. No, he is an ultimate genius trader. Like a character from an on old Twilight Zone episode, he has tomorrow's newspaper in hand to guide his gold trades. And he isn't neurotic about it. Every year there is one big trade and he makes it, but no more often than that, perfectly every time. He catches the exact top and bottom of each major move. His transaction costs are limited to the spread between the buy and sell prices of gold and the horrific "collectibles" tax charged by the IRS; the government wants you to own property so the capital gains tax rate on the sale of a primary residence owned for two years is 0% but does not want you to own gold so taxes capital gains at 28%. Our genius trader minimizes this transaction cost by trading only once per year.

The charts below show the buy price paid by the gold trader, a quantity of 100 ounces, the total buy cost for 100 ounces at the price shown, the sell price not spot price, a total sale value, gain from the sale (the genius trader never takes a loss!), the 2.5% spread that the trader is paying twice to sell then buy back in again the future, and the aforementioned awful taxes. Finally the chart shows the net gain of transactions costs, the percentage net gain, and the cumulative gain after each genius trade.

Here are the Nine Genius Gold Trades compared to the Buy and Holder since 2001.


http://www.itulip.com/images/goldtradedNoETF.gif


For all his hard work the gold trading genius made 86% versus the buy and holder who did nothing but check the thesis once in a while and cleared 155% after taxes if selling today.

But the spread doesn't count if you aren't buying bullion, you may object. Fine. Noting gold ETFs were not available until November 2004 when gold was already trading over $420, let's assume the trader genius sold gold bullion at the peak price in 2004 then and bought GLD at the low.


http://www.itulip.com/images/goldtradedWithETF.gif


Better, but still not that great: 104% net gain versus 155%. This does not take into account the money our genius spent on newsletters, or hundreds of hours reading and pondering conflicting opinions on Internet sites, and executing trades. Trading a high transaction cost asset like gold doesn't stack up to sticking to a solid investment thesis.

In reality, no one can trade like the genius trader, with perfect timing and execution, so the comparison between a real world trader and our long term holder will likely show break-even or even a net loss – over the course of a seven year bull market.

If you are like the trader in our example, don't fell bad. I had lunch a few months ago with a rarefied class of investment manager, a manager of wealth managers. His clients are so high net worth that they do not entrust their wealth to a single wealth manager or multi-family practice but several for management diversification on top of portfolio diversification.

We get to talking about my track record and he's impressed but by way of due diligence asks what I got wrong. I explained that my errors have been a tendency to under-estimate the willingness of governments to intercede in markets to prevent a self-reinforcing cycle of credit contraction, default, and asset price deflation from spilling over into the real economy and producing deflation.

He asked when I got into gold and I told him 2001. He commented that was good timing then asked me how many times I sold and bought in again, "Everyone I know who purchased that long ago sold out their position at least once by now."

I replied by asking "Why? If an investment thesis holds, why give it up? Mine in 2001 was that the dollar was going to get thrown under the bus to save the indebted US from deflation. I still think that's true."

We sat there in an uncomfortable silence until I change the subject.

Moral of the story: In a bull market, buy and hold an asset with high transaction costs. Instead of trading, spend your time trying to figure out if you bull market is over.

Is the gold bull market over?

What we are really asking is whether the factors driving gold and commodities prices since 2001 are no longer in force. Next, for our subscribers, we dissect our now seven year old bull market in commodities to decide if the trend we identified in 2001 is over or if this is just another correction.
The FIRE Economy and the Dollar Ratchet ($ubscription) (http://itulip.com/forums/showthread.php?p=43523#post43523)

If the US was Argentina the dollar would already have crashed. But the US is not Argentina. The dollar declines, as the FIRE Economy unwinds, buffered by the support of foreign governments, by the process of the Dollar Ratchet.
iTulip Select (http://www.itulip.com/forums/showthread.php?t=1032): The Investment Thesis for the Next Cycle™
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jk
08-13-08, 03:52 PM
The gold ETF was introduced in November 2006 when gold was trading around $625. Anyone buying before that had little choice but to buy physical gold or, that bane of gold investors, the gold mining stock.
cef has been around since 1983 for those who wanted to buy pm's without getting into physical.

edit - and btw, by virtue of being a managed, closed end fund, not just a commodity tracker, cef is eligible for capital gains treatment. this is what explains its persistent premium to nav.

icm63
08-13-08, 05:56 PM
Here is a possible re entry, (maybe). Remember commodities over correct and over extend !
499

Jim Nickerson
08-13-08, 06:16 PM
So who is your wave counter? or are you the counter?

icm63
08-13-08, 06:34 PM
I conceed wave counting is a joke, it just looks pretty.

I personally use very long term moving averages and higher and highs, and lower lows.

Jim Nickerson
08-13-08, 06:43 PM
I conceed wave counting is a joke, it just looks pretty.

I personally use very long term moving averages and higher and highs, and lower lows.

You didn't answer the question, is it your count, or someone else's?

icm63
08-13-08, 06:55 PM
Since you insist, its my count, but its very obvious isnt it.

Note: If price breaks the previous high of 3, bull market strength is in doubt, and I would wait for strong price action to confirm that bull market is back on, before re entry.

Jim Nickerson
08-13-08, 07:07 PM
Since you insist, its my count, but its very obvious isnt it.

Note: If price breaks the previous high of 3, bull market strength is in doubt, and I would wait for strong price action to confirm that bull market is back on, before re entry.

I didn't insist in either instance; I just asked the question. Had it been obvious, I hope I wouldn't have asked the question.

Jim Nickerson
08-13-08, 07:19 PM
I conceed wave counting is a joke, it just looks pretty.

I personally use very long term moving averages and higher and highs, and lower lows.

Thanks for answering the question. You don't seem to have much confidence in Elliot wave, or I surmise you do and are just unwilling to take a stand. For all I know you could be Robert PreCHTER masquerading here.

If you really think wave counting is a joke, why go to the trouble to construct what is a very decent chart? Surely there must be more productive ways to spend one's time, unless there is something I am missing here.

icm63
08-13-08, 07:51 PM
Wave counting has not made me any money but wave counting looks good when the chart structure supports it. Maybe I should have used roman numbers.

Change of subject, consider the last massive bull run of gold from 1970 to 1980. Gold ralied from $50 to $200 or 3x (compared to $250 to $1000 today), then it retraced 66% to $100 (approx), then $100 to $950 8x.

So gold can retrace a full 66% easily and still be in a bull run, so in the current trend gold could print $500 (thats 66% from $1000 to $250), so be careful out there !
501

Chart sourced from : http://www.chartsrus.com

santafe2
08-13-08, 10:48 PM
Here is a possible re entry, (maybe). Remember commodities over correct and over extend!

Let me say first, that I found the post a bit off-topic based on EJs thread starter. And, I agree with Jim's critique, it's much better to publish a chart that you're ready to defend. I'm also not a fan of Wave theory although I find some of Prechter's non-Wave Theory work useful. His EWT position in the early years of the metal bull market were basically garbage.

Also, if Wave is not defensible, the Fib numbers are not too useful either. That said, I don't disagree that this is a good time to open or start adding to positions, if you traded some of your positions out at the top. Although EJs point is well taken, that trading can be a vicious mistress, done well it adds to your bottom line, it does not subtract as he indicates. My metals trades in 2006 are well documented as are my sales in late February and early March 2008 as well as my restocking early this week. I'm a silver investor primarily and I fail to see how I can sell at over $20 and start buying under $15 and lose money unless the bull market is over. I think we all agree, it's not over, it's just reloading and so am I.

We may move down another 2% or another 20%, or the market may start moving up again from here. I don't care, I will own more metals than I did this last February and I won't have any more invested than I did at that time. And, I take little credit for these trades. This gets back to my comment about Prechter earlier. I learned from him that social indicators are as important as any other in spotting a top or a bottom. When your friends who care nothing about metals are asking you if they should buy - you need to consider selling. When Time, Newsweek or USA Today are running articles on the stuff, it's time to check your technical indicators.

As EJ noted, when the main stream media is pointing its collective finger at those of us who don't question metals, it's time to start buying again. If metals reverse lower after this counter-move, watch for this headline in USA Today; "Is Gold's Run Over?" Oversized type would be nice. That's a key indicator that metals are about to turn higher.

akrowne
08-14-08, 09:24 AM
If gold gets to $780, that will be something else... because $780 is just about the marginal cost of production at this point. Spot silver is arguably under
its marginal cost of production (in the $17s).

I am buying!

metalman
08-14-08, 11:11 AM
If gold gets to $780, that will be something else... because $780 is just about the marginal cost of production at this point. Spot silver is arguably under
its marginal cost of production (in the $17s).

I am buying!

i'm going to try to use "the small trade in the big trade" theory this time... use etf gld. i'll wait until $810, don't know if i have the guts to wait for gold to go under $800, and as you say there's a good chance it won't.

santafe2
08-14-08, 01:42 PM
i'm going to try to use "the small trade in the big trade" theory this time... use etf gld. i'll wait until $810, don't know if i have the guts to wait for gold to go under $800, and as you say there's a good chance it won't.

For me it always makes the most sense to scale in and out of positions. While I do pick top end entry points, the place I will start buying, I don't wait until my idea of the bottom is put in. When I've tried that, I'm almost always wrong about the exact bottom. My best guess for this downturn is around $700 for gold but as I said the other day, I've started adding to my positions and I'll let the market tell me what I'll pay for them.

icm63
08-14-08, 02:53 PM
Will the $USD get past $80?
Will oil hit $80 ?
Will Euro hit 1.3920 ?
Will SP500 hit 1380 ?

These are all turing zones that will confirm previous global trends continue, and Gold is one of them.

Ed says correctly that gold rallies on crises news. Well this (link) is the next crisis, time this some how, and you will have your entry point. But like Ed says, if you cant time, just buy.

Next crisis: http://www.youtube.com/watch?v=pmeBSWI9sF8 ALT A mess

Question: Can any one tell me which bank has the largest exposure to this junk ?

Jim Nickerson
08-14-08, 05:04 PM
Will the $USD get past $80?
Will oil hit $80 ?
Will Euro hit 1.3920 ?
Will SP500 hit 1380 ?

These are all turing zones that will confirm previous global trends continue, and Gold is one of them.

Ed says correctly that gold rallies on crises news. Well this (link) is the next crisis, time this some how, and you will have your entry point. But like Ed says, if you cant time, just buy.

Next crisis: http://www.youtube.com/watch?v=pmeBSWI9sF8 ALT A mess

Question: Can any one tell me which bank has the largest exposure to this junk ?

US$ probably will hit 80 in the next weeks to months.

Oil won't hit $80 in anyone's lifetime.

For $XEU to get to 137 isn't unreasonable.

SPX will hit 1200 before it ever visits 1380.

These are my bets.

phirang
08-14-08, 05:06 PM
In other news, China, India, Russia, and the Gulf States continue to buy-up Africa, South America, South-East Asia, and build and own infrastructure therein.

I bet copper won't go under $2.75/lb by end of 2008.

I bet steel will remain tight.

Mega
08-14-08, 08:11 PM
In a Nut shell:-
Gold had a great run, its likely to enjoy a GREATER run, but you might get a short term fall. I think you guys MUST look at all the "Fiat" thats got to be printed World wide..........Gold IS only going one way.
Mike

Contemptuous
08-14-08, 09:01 PM
I read last weekend that Frank Holmes of US GLOBAL INVESTORS says they are projecting copper to be a triple (300%) in the next four to five years. Apparently nobody told these guys there's supposed to be a global recession on, or maybe it's just copper ... doesn't want to know about that.

jtabeb
08-14-08, 10:56 PM
If gold gets to $780, that will be something else... because $780 is just about the marginal cost of production at this point. Spot silver is arguably under
its marginal cost of production (in the $17s).

I am buying!

Gold always punishes me before moving up to greater highs. Par for the course and I'm getting punished right now (silver too), can't wait for the next six months to go by:D

My TCC (treasure chest count) is way WAY up however.

metalman
08-14-08, 11:21 PM
Gold always punishes me before moving up to greater highs. Par for the course and I'm getting punished right now (silver too), can't wait for the next six months to go by:D

My TCC (treasure chest count) is way WAY up however.

there goes gold. under $800...

http://i34.tinypic.com/dy55zt.jpg

if it doesn't stop near $780 as itulip estimates, i'll shit a brick.

Jim Nickerson
08-14-08, 11:26 PM
there goes gold. under $800...

http://i34.tinypic.com/dy55zt.jpg

if it doesn't stop near $780 as itulip estimates, i'll shit a brick.

Perhaps you could get someone to photograph your doing that and then you could post it wherever people post pictures here. Will you please PM me the link so that I can see you in action.

sadsack
08-14-08, 11:27 PM
Gold always punishes me before moving up to greater highs. Par for the course and I'm getting punished right now (silver too), can't wait for the next six months to go by:D

My TCC (treasure chest count) is way WAY up however.

<BUBBA>As Bubba was wont to say, "I feel your pain . . ."</BUBBA>

The only way I've found to assuage it is to buy more at cheaper prices - after all, Au/Ag and oil are now officially "On Sale" . . .

sadsack
08-14-08, 11:43 PM
Perhaps you could get someone to photograph your doing that and then you could post it wherever people post pictures here. Will you please PM me the link so that I can see you in action.

This is disturbingly reminiscent of one of Der Feuhrer's fetishes . . . something about women, scat, and a glass table . . . :eek: :p

Then again, in the case of Metalman, perhaps the "issue" would be PM?

I'll only address the the "goldbricking" pun in "passing" (sorry) . . .

jtabeb
08-15-08, 12:15 AM
<bubba>As Bubba was wont to say, "I feel your pain . . ."</bubba>

The only way I've found to assuage it is to buy more at cheaper prices - after all, Au/Ag and oil are now officially "On Sale" . . .

I'm trying to buy every $30 gold price drop and every $2 silver price drop. Only $15K more to go then I'm all in till next year:)

1-2 ounces AU & 100 ounces AG at a shot.

ronin
08-15-08, 12:18 AM
i'm going to try to use "the small trade in the big trade" theory this time... use etf gld. i'll wait until $810, don't know if i have the guts to wait for gold to go under $800, and as you say there's a good chance it won't.

For those with the option, buying ETFs in an IRA brokerage account takes away (or at least defers) the tax hit. It is an obvious move to try to hold the tax disadvantaged investments (precious metals) in a tax advantaged account (IRA). I don't remember seeing this highlighted elsewhere, and wanted to mention it.

It seems that SLV might also be a consideration for the 'small trade'.
As of the 8/14 close, SLV is 32% off its 52 week high, while GLD was 21% off its 52 week high.
Silver is down an additional $1 tonight.
--Ronin

metalman
08-15-08, 05:48 AM
For those with the option, buying ETFs in an IRA brokerage account takes away (or at least defers) the tax hit. It is an obvious move to try to hold the tax disadvantaged investments (precious metals) in a tax advantaged account (IRA). I don't remember seeing this highlighted elsewhere, and wanted to mention it.

It seems that SLV might also be a consideration for the 'small trade'.
As of the 8/14 close, SLV is 32% off its 52 week high, while GLD was 21% off its 52 week high.
Silver is down an additional $1 tonight.
--Ronin

"small" trade's getting big... gold under $779.50!

jtabeb
08-15-08, 10:53 AM
there goes gold. under $800...

http://i34.tinypic.com/dy55zt.jpg

if it doesn't stop near $780 as itulip estimates, i'll shit a brick.

http://www.kitco.com/images/spot_gold.gif
<table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr> <td colspan="4" align="center"><!--status -->SPOT MARKET IS OPEN
closes in 6 hrs. 28 mins.</td> </tr> <tr align="center"> <td colspan="4" class="sb"><!--date -->Aug 15, 2008 10:48 NY Time</td> </tr> <tr> <td bgcolor="#f3f3e4"> Bid/Ask</td> <td align="center" bgcolor="#f3f3e4">786.80</td> <td class="spot" align="center" bgcolor="#f3f3e4">-</td> <td align="center" bgcolor="#f3f3e4">788.00</td> </tr> <tr> <td> Low/High</td> <td align="center">774.90</td> <td class="spot" align="center">-</td> <td align="center">800.70</td> </tr> <tr> <td bgcolor="#f3f3e4"> Change (javascript:NewWindow('/glossary/LiveSpotGold.html#Change','LiveSpotGold','top=50,l eft=200,width=500,height=350,channelmode=0,dependa nt=1,fullscreen=0,resizable=no,toolbar=0,status=0, scrollbars=1,location=0,menubar=0,directories=0'); )</td> <td align="center" bgcolor="#f3f3e4">-18.90</td> <td class="spot" align="center" bgcolor="#f3f3e4"> </td> <td align="center" bgcolor="#f3f3e4">-2.35%</td> </tr> <tr> <td>30daychg (javascript:NewWindow('/glossary/LiveSpotGold.html#30day','LiveSpotGold','top=50,le ft=200,width=500,height=350,channelmode=0,dependan t=1,fullscreen=0,resizable=no,toolbar=0,status=0,s crollbars=1,location=0,menubar=0,directories=0');)</td> <td align="center">-172.50</td> <td> </td> <td align="center">-17.98%</td> </tr> <tr> <td bgcolor="#f3f3e4">1yearchg (javascript:NewWindow('/glossary/LiveSpotGold.html#1year','LiveSpotGold','top=50,le ft=200,width=500,height=350,channelmode=0,dependan t=1,fullscreen=0,resizable=no,toolbar=0,status=0,s crollbars=1,location=0,menubar=0,directories=0');)</td> <td align="center" bgcolor="#f3f3e4">+117.90</td> <td class="spot" align="center" bgcolor="#f3f3e4"> </td> <td align="center" bgcolor="#f3f3e4">+17.63%</td></tr></tbody></table>

I think it's brick-shitting time:eek:

metalman
08-15-08, 10:56 AM
http://www.kitco.com/images/spot_gold.gif
<table align="center" bgcolor="#ffffff" border="0" cellpadding="0" cellspacing="0" width="100%"><tbody><tr> <td colspan="4" align="center"><!--status -->SPOT MARKET IS OPEN
closes in 6 hrs. 28 mins.</td> </tr> <tr align="center"> <td colspan="4" class="sb"><!--date -->Aug 15, 2008 10:48 NY Time</td> </tr> <tr> <td bgcolor="#f3f3e4"> Bid/Ask</td> <td align="center" bgcolor="#f3f3e4">786.80</td> <td class="spot" align="center" bgcolor="#f3f3e4">-</td> <td align="center" bgcolor="#f3f3e4">788.00</td> </tr> <tr> <td> Low/High</td> <td align="center">774.90</td> <td class="spot" align="center">-</td> <td align="center">800.70</td> </tr> <tr> <td bgcolor="#f3f3e4"> Change (http://javascript%3Cb%3E%3C/b%3E:NewWindow%28%27/glossary/LiveSpotGold.html#Change%27,%27LiveSpotGold%27,%27 top=50,left=200,width=500,height=350,channelmode=0 ,dependant=1,fullscreen=0,resizable=no,toolbar=0,s tatus=0,scrollbars=1,location=0,menubar=0,director ies=0%27%29;)</td> <td align="center" bgcolor="#f3f3e4">-18.90</td> <td class="spot" align="center" bgcolor="#f3f3e4">
</td> <td align="center" bgcolor="#f3f3e4">-2.35%</td> </tr> <tr> <td>30daychg (http://javascript%3Cb%3E%3C/b%3E:NewWindow%28%27/glossary/LiveSpotGold.html#30day%27,%27LiveSpotGold%27,%27t op=50,left=200,width=500,height=350,channelmode=0, dependant=1,fullscreen=0,resizable=no,toolbar=0,st atus=0,scrollbars=1,location=0,menubar=0,directori es=0%27%29;)</td> <td align="center">-172.50</td> <td>
</td> <td align="center">-17.98%</td> </tr> <tr> <td bgcolor="#f3f3e4">1yearchg (http://javascript%3Cb%3E%3C/b%3E:NewWindow%28%27/glossary/LiveSpotGold.html#1year%27,%27LiveSpotGold%27,%27t op=50,left=200,width=500,height=350,channelmode=0, dependant=1,fullscreen=0,resizable=no,toolbar=0,st atus=0,scrollbars=1,location=0,menubar=0,directori es=0%27%29;)</td> <td align="center" bgcolor="#f3f3e4">+117.90</td> <td class="spot" align="center" bgcolor="#f3f3e4">
</td> <td align="center" bgcolor="#f3f3e4">+17.63%</td></tr></tbody></table>

I think it's brick-shitting time:eek:

but it did stop near $780, so far...

http://i33.tinypic.com/10xfzty.gif

Andreuccio
08-15-08, 12:34 PM
US$ probably will hit 80 in the next weeks to months.

Oil won't hit $80 in anyone's lifetime.

For $XEU to get to 137 isn't unreasonable.

SPX will hit 1200 before it ever visits 1380.

These are my bets.

As an example of people being sentimental:

:) HAPPY BIRTHDAY, JIM!!!!! :)

ocelotl
08-15-08, 12:41 PM
This correction is also hitting me a lot, still, measured in USD, it is as if my profits so far into the year have given me the as a gift all the physical silver I've bought.

Measured as it is valued, in MXN, my profits so far into the year have been erased by this correction, but as my father and me agreed upon last night, the good point of physical PM's is that they are there, and not just recicled electrons or bits of cotton paper or plastic. Also, this week I got nearly 700 USD on PM's (I prefer the ones at my signature and Hidalgos (http://www.taxfreegold.co.uk/mexico10pesos.html)), to reduce my average buying price, feel a bit overbought, but still can sleep well at night.

Charles Mackay
08-15-08, 03:16 PM
There is a time in every bull market where small cocky leveraged players enter the market cautiously, and then just shortly thereafter (with rapidly increasing prices) add to their positions incautiously. Anyone here trade gold in 1974? There was a eureka moment that year when leveraged players entered the market and thought it was a no risk situation. All that "moron leverage" had to be eliminated before the 8x move that followed could take place.

Anyone trade "spews" in 1987? Same situation. This is normal and happens prior to the real bull market.

I've posted many of my charts here on iTulip and the one that is still a glaring buy on gold is the gold/oil ratio... It hit an all time low of 6.5 last month. That's the lowest ratio ever... gold is very very cheap.

Andreuccio
08-15-08, 04:20 PM
I've posted many of my charts here on iTulip and the one that is still a glaring buy on gold is the gold/oil ratio... It hit an all time low of 6.5 last month. That's the lowest ratio ever... gold is very very cheap.

Hence Soros shorting oil and going long gold.

Do you have a link to that chart? (Updated version would be great, if possible.)

Thanks. :)

Charles Mackay
08-15-08, 06:12 PM
Hence Soros shorting oil and going long gold.

Do you have a link to that chart? (Updated version would be great, if possible.)

Thanks. :)

I'd be happy to Andreuccio. At the moment I'm in Netarts Bay getting away from the heat (probably the last heat wave we'll have this year on the west coast) .. will post a ratio chart with the latest data as soon as I get back to the "mainframe" :) ..

Andreuccio
08-15-08, 06:23 PM
I'd be happy to Andreuccio. At the moment I'm in Netarts Bay getting away from the heat (probably the last heat wave we'll have this year on the west coast) .. will post a ratio chart with the latest data as soon as I get back to the "mainframe" :) ..

Thanks. Enjoy the Bay. My sister's in Portland. Love it up there. I'd move in a heartbeat if I could duplicate my employment situation.

metalman
08-15-08, 07:49 PM
miraculously, said shit brick remains in oven...

http://i33.tinypic.com/xeeec1.gif

if $780 holds i'm wondering... wtf?

jk
08-15-08, 07:57 PM
in 76 gold went from 200 to 100, on the way to 800. that implies we could see about 510. ready for that?

phirang
08-15-08, 08:20 PM
in 76 gold went from 200 to 100, on the way to 800. that implies we could see about 510. ready for that?

I own more gold equities than bullion, and the equities are pricing in 600 gold already, and so bring the pain!

sadsack
08-15-08, 08:42 PM
It's a selloff - CEF was trading at a sub-4% premium to NAV yesterday (although it's back above 8% at the close of trading today).

I hope JN noticed . . .

santafe2
08-15-08, 08:56 PM
I've posted many of my charts here on iTulip and the one that is still a glaring buy on gold is the gold/oil ratio... It hit an all time low of 6.5 last month. That's the lowest ratio ever... gold is very very cheap.

I have a version of this chart that I reference occasionally. Mine only goes back to 1990. It would be interesting to see one going back to 1970. I've noticed a coincidence of these lows with recessions. In 3 of 4 cases, they presaged the arrival of bad economic conditions. Of course, 2005 is not explained by this.

Although I am currently buying, I'm not convinced the gold/oil ratio is telling us that gold is a screaming buy. It may be telling us that oil is becoming a more rare resource. It would not surprise me to see this ratio move below 5:1 in the next 10 years even as gold moves up.

502

Jay
08-15-08, 11:02 PM
Well I'm one of the young one's here, in my 30's, and have never felt swings like this before, so I just want to say thanks as you all reafirm my willingness to sit tight. Never had 100k plus swings before. Wow, what an interesting study into my own psyche. I'm finding I'm learning more about myself than the economy; fascinating these markets, and not for the timid. I think that no matter what happens this ride is going to be good for me.

Jim Nickerson
08-15-08, 11:19 PM
Well I'm one of the young one's here, in my 30's, and have never felt swings like this before, so I just want to say thanks as you all reafirm my willingness to sit tight. Never had 100k plus swings before. Wow, what an interesting study into my own psyche. I'm finding I'm learning more about myself than the economy; fascinating these markets, and not for the timid. I think that no matter what happens this ride is going to be good for me.

Tell me you wouldn't be happier if you had the 100K that has disappeared during the "swing." If I had lost 100K I would consider it to have been a spanking, and I sure would not thank anyone who might have influenced me to take it. I once lost 950+K sitting tight, and I surely would not suggest such a lesson is anything anyone should wish or needs to experience.

Here's one dude's opinion: (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/16/cndollar116.xml)


Julian Jessop of Capital Economics, who argued that gold could hit $650, said: "The bull market in gold is now over. Gold prices had been driven higher by financial market turbulence, record highs for oil and other commodity prices, increased global inflation fears, rising geopolitical risks and a weaker dollar. The worst case scenarios of a complete meltdown in the financial sector, $200 oil, a return to 1970s-style inflation and a dollar collapse are all much less likely now."

metalman
08-16-08, 12:03 AM
Tell me you wouldn't be happier if you had the 100K that has disappeared during the "swing." If I had lost 100K I would consider it to have been a spanking, and I sure would not thank anyone who might have influenced me to take it. I once lost 950+K sitting tight, and I surely would not suggest such a lesson is anything anyone should wish or needs to experience.

Here's one dude's opinion: (http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/08/16/cndollar116.xml)

because you rode the dot com BUBBLE down, jim. the long decline of the dollar is not a bubble. there is no gold bull... there is only the bonar.
your destiny is to never learn the difference, i reckon. we took a poll here... someplace... and a lot of folks did bail out in march with the 'small trade' call. no doubt that guy who says the gold bull is over will shut gold goes back up again but will come out of his hidey hole every it goes down and no one will call him on it.

oh, happy birthday :D

Contemptuous
08-16-08, 12:16 AM
Yeah but it doesn't help to have JK creeping us out with those spooky calls for a 50% correction like in the mid 1970's. Nobody rattles me here like JK when he hauls out that bogey-man in a dark cloak. Thanks JK! Much obliged! (as I reach for my Maalox and horse-tranquilizers).

Jim Nickerson
08-16-08, 12:19 AM
because you rode the dot com BUBBLE down, jim. the long decline of the dollar is not a bubble. there is no gold bull... there is only the bonar.
your destiny is to never learn the difference, i reckon. we took a poll here... someplace... and a lot of folks did bail out in march with the 'small trade' call. no doubt that guy who says the gold bull is over will shut gold goes back up again but will come out of his hidey hole every it goes down and no one will call him on it.

oh, happy birthday :D

Thanks for the wish. metalman, I don't give a hoot whether a move is a bubble or not. What I do care about is making and hopefully booking profits. There is always something going up if one wishes to play the long side and vice versa. It's unfortunate that we don't start life wise and get more ignorant with time, or is the fact we start life ignornant and end up the same? I'm continuing to gain insight into these mysteries.

At any rate, if someone's influence resulted or aided in my sitting again through a 100K or more loss, I surely would not be thanking them. People in my opinion should learn to use stop losses, and that is not a sure path to riches either. On the 15JUL I was long a bunch of +200% ETF's and was stopped out and immediately the market reversed. Fortunately after incurring only 5K of losses I got back in several hours later and rode it up to near the highs earlier this week. Pure luck I chose to get back in.

Having had the experience I had, I suggest it is worth while when entering postions to decide how much one is willing to lose and if that is hit, get out.

I am still waiting to see that picture or you shitting a brick. I expect if gold goes to 650, it will be one helluva brick. My guess is the decline will stop short of 700, but that is purely a guess, and if close should still result in a decent brick.:)

Jay
08-16-08, 12:47 AM
Thanks for the wish. metalman, I don't give a hoot whether a move is a bubble or not. What I do care about is making and hopefully booking profits. There is always something going up if one wishes to play the long side and vice versa. It's unfortunate that we don't start life wise and get more ignorant with time, or is the fact we start life ignornant and end up the same? I'm continuing to gain insight into these mysteries.

At any rate, if someone's influence resulted or aided in my sitting again through a 100K or more loss, I surely would not be thanking them. People in my opinion should learn to use stop losses, and that is not a sure path to riches either. On the 15JUL I was long a bunch of +200% ETF's and was stopped out and immediately the market reversed. Fortunately after incurring only 5K of losses I got back in several hours later and rode it up to near the highs earlier this week. Pure luck I chose to get back in.

Having had the experience I had, I suggest it is worth while when entering postions to decide how much one is willing to lose and if that is hit, get out.

I am still waiting to see that picture or you shitting a brick. I expect if gold goes to 650, it will be one helluva brick. My guess is the decline will stop short of 700, but that is purely a guess, and if close should still result in a decent brick.:)
Jim, I didn't say 100k loss, I said swing. I'm still well in the black overall as I've been in on the PM call since 2003. I am interested in this swing because it is through this volitility that I am finding out my temperaments as an investor. I have figured out that I am not a trader and it is clear you are. To each his own. I hope you make gobs of money with all those trades. I plan on sitting tight and letting the longterm fundamentals do their work over the next few years or longer.

Jim Nickerson
08-16-08, 12:58 AM
Jim, I didn't say 100k loss, I said swing. I'm still well in the black overall as I've been in on the PM call since 2003.


Sorry, DrJ, if I misunderstood that. If I were up 150K in profit and then it swung down to 50k of profit, even though I still had a profit on the underlying investment, I would look at that as having lost 100K. Is that not something like you described?

Contemptuous
08-16-08, 01:02 AM
Jay - Indeed that's the entire point about investing in a longer trend vs. dabbling. By holding a position for years, it "seasons", or "matures" by building up progressively more equity. When one has held through a number of savage corrections, one gains two things. A) courage and conviction in the trend's prospects to continue - aided by constant "intelligent vigilance", and B) E. Q . U . I . T . Y

The building up on ever greater equity in a holding makes the really vicious corrections ever more sustainable, because one develops a deep cushion of positive equity which provides a far improved psychological poise for withstanding the urge to "sell n' run". The final result of A + B is that one finds it progressively more manageable to hold on for the full secular duration, and make the REAL money.

Conversely, those who time the market pullbacks and harsh corrections every time are vulnerable to A) timing errors, B) constant tax and transaction draining costs, and C) worst of all, constantly having to start over again from zero with absolutely no 'equity" in their newly re-established position. In this way, the large corrections can really and truly be devastating to a recently established position. The mis-timing of entry points becomes perpetually magnified to the "critical" threshold, because any purchase mistimed to occur right before a large correction can devastate principal.

The buy and holder in the 21st Century will indeed be foolish, in the great majority of sectors. But there are one or two sectors for whom the trends favoring the buy and hold are so powerfully set now as to render their investment held across a longer term actually much more conservative than is apparent. Not getting on Jim's case here, but being perpetually in the position of having just established a fresh position in gold will leave him perpetually gnawed by fear of devastating loss at the very next downturn.

Those trying to time their gold buys and sells here, and congratulating themselves fearfully for having sidestepped this current blowout, do not cast their gaze up far enough to notice that those who bought in 2002 and have held through all the corrections are now in so strong a position with their equity in this sector that they really can almost shrug this off, as they have now graduated to become the strong hands. And graduating to strong hand greatly increases the odds of pulling some real, serious money out of the investment.

Jim Nickerson
08-16-08, 01:32 AM
Jay - Indeed that's the entire point about investing in a longer trend vs. dabbling. By holding a position for years, it "seasons", or "matures" by building up progressively more equity. When one has held through a number of savage corrections, one gains two things. A) courage and conviction in the trend's prospects to continue - aided by constant "intelligent vigilance", and B) E. Q . U . I . T . Y

The building up on ever greater equity in a holding makes the really vicious corrections ever more sustainable, because one develops a deep cushion of positive equity which provides a far improved psychological poise for withstanding the urge to "sell n' run". The final result of A + B is that one finds it progressively more manageable to hold on for the full secular duration, and make the REAL money.

Conversely, those who time the market pullbacks and harsh corrections every time are vulnerable to A) timing errors, B) constant tax and transaction draining costs, and C) worst of all, constantly having to start over again from zero with absolutely no 'equity" in their newly re-established position. In this way, the large corrections can really and truly be devastating to a recently established position. The mis-timing of entry points becomes perpetually magnified to the "critical" threshold, because any purchase mistimed to occur right before a large correction can devastate principal.

The buy and holder in the 21st Century will indeed be foolish, in the great majority of sectors. But there are one or two sectors for whom the trends favoring the buy and hold are so powerfully set now as to render their investment held across a longer term actually much more conservative than is apparent. Not getting on Jim's case here, but being perpetually in the position of having just established a fresh position in gold will leave him perpetually gnawed by fear of devastating loss at the very next downturn.

Those trying to time their gold buys and sells here, and congratulating themselves fearfully for having sidestepped this current blowout, do not cast their gaze up far enough to notice that those who bought in 2002 and have held through all the corrections are now in so strong a position with their equity in this sector that they really can almost shrug this off, as they have now graduated to become the strong hands. And graduating to strong hand greatly increases the odds of pulling some real, serious money out of the investment.

Luke, will you please go to the trouble to explain this thing called "fear."

I don't know "fear." The only thing I focus on perpetually is growing my portfolio. I only buy things that I think are going up, if they go down a certain percentage I sell them. If they go up parabolically, I am most liable to selling them. My present drawdown from my highest gains off the 2002 lows is 0.58%. What is yours?

ocelotl
08-16-08, 02:10 AM
Well I'm one of the young one's here, in my 30's, and have never felt swings like this before, so I just want to say thanks as you all reafirm my willingness to sit tight. Never had 100k plus swings before. Wow, what an interesting study into my own psyche. I'm finding I'm learning more about myself than the economy; fascinating these markets, and not for the timid. I think that no matter what happens this ride is going to be good for me.

I'm 37, but coming from where I come is a base that many of you northeners haven't felt yet. In 1976 we left a 22 year standing peg of 12.50 MXP per USD, got to 22, then to 25. In 1982, all hell broke loose... We slipped to 150. I remember an analist claiming (I think in february 1984 or so) "This devaluation time is just unthinkable... Do anyone rally think an USD is worth 500 MXP?" For a few weeks, markets got to the oversold period and USD retreated to 400 MXP, but later the ugly fundamentals got back, the earthquake of September 1985 put the uncertainty feeling at the highest point since Mexican Revolution. I remember most of people back then was somber and frowning... Seeing shopping centers with people but without sales was the main sign of the times... Many salesmen had desperation in their faces...

Our currency has slipped a thousandfold since 1980-1, yours, just three or fourfold. I can tell you, You ain't seen nuthin yet...

santafe2
08-16-08, 02:30 AM
Yeah but it doesn't help to have JK creeping us out with those spooky calls for a 50% correction like in the mid 1970's.

This pullback is fairly typical for metals. 50% would be large but certainly not out of the question. I will be more surprised if we turn around here and don't move down to ~$700. Moving down to $575 is certainly not out of the question.

This is one reason it's so important to trade out of positions during the occasional huge market run-up. In metals there have only been two serious blow off tops since 2001. If one took some profits then, it is much easier to buy at these levels without worrying about where the market is going over the next six to twelve months. For me, lower is better. If it turns around here, I'll be a bit pissed off as I'll have to buy in quickly to cover my core positions. If it goes below ~$700, I'll open some trading positions. I see this as opportunity and I'd really like to see more.

503

Contemptuous
08-16-08, 03:03 AM
Jim -

The more "down" you can tolerate, the more "up" you can capture. That's it.


Luke, will you please go to the trouble to explain this thing called "fear."

I don't know "fear." The only thing I focus on perpetually is growing my portfolio. I only buy things that I think are going up, if they go down a certain percentage I sell them. If they go up parabolically, I am most liable to selling them. My present drawdown from my highest gains off the 2002 lows is 0.58%. What is yours?

Contemptuous
08-16-08, 03:06 AM
Santafe2 - I think you have made some of the most astute comments on this topic of anyone here. Much appreciated.

I am concerned that we may be looking at a two to four year period hereafter of relative underperformance of the precious metals, (after they do a stiff rally back into the new year) and that the USD will confound some of the smartest minds out there - EJ, John Williams, Doug Noland. All these people are making 100% rational calls on the direction of the USD. I've consulted with someone in recent days who has done more to shake my confidence in the imminent further downward trajectory of the USD than anyone in the past 7 years, who forecasts a resurgent buck that will defy a lot of expectations.

He may be wrong - EJ is my other most compelling guide and going in a totally opposite direction. However, so far, given this other opinion issued a call back in March at the gold and silver top that gold and silver, the other rare metals and all the commodities would "collapse in August", he's batting ten out of ten.

I broke my own rule (similar to yours) to take substantial profits at the last run-up and have taken a severe beating in this downturn, being overweight silver rather than gold and with substantial allocation to these most low-geared" plays. With the correction in silver, you can imagine. However I will not buy or sell anything until next January / February. This person was calling an imminent collapse of commodities in March (after being a gold and commodities bull since he called the start of it in 1999-2000, with several others, of course) and he is calling for a dollar (and US stock market) rally which will shred the reputations of some of the most wise and well respected commodity bulls and dollar bears around.

He may of course be flat wrong. Everybody has to make their own bets, and there is no hand holding after getting dealt the results. I read his dollar resurgence and gold mega-crash call only a couple of months ago and laughed. Today I'm planning to allocate 1/3 of my assets to a managed account of his next January / February, and to sell half of my PM holdings after our fall / winter rally. I expect to see at least a rebound to $16 silver and will raise cash for a different 3 year strategy then.

The actionable trend for the next three to four years may have shifted in a direction which leaves the most intelligent and well studied dollar bears vulnerable. Interestingly, EJ's charting of the dollar trend out to 2012 - 2014 hints at the same "cross-currents" for the PM's in the next four years. I will keep a strong core holding in the PM's but plan to get into a portfolio that is heavy in alt-energy (something which as a Peak Oil guy I sort of turn up my nose at) and managed futures with a lot of hedging of a 1/3 alt-energy exposure. (Alt energy bull market - now where the heck did I read about this idea a year ago? Oh yeah! It was at iTulip! :rolleyes: ).

This person I've referred to suggests the PM's will meander and then go into their vertical ascent out in 2012-2014 or thereabouts and there are other fish to fry to better effect in the meantime. However all summed up, if I read EJ issue a "bugle call" that we are heading into the steepest part of the inflation imminently, I will heed EJ first. (Natch).

Very taxing and vexing time indeed.


This pullback is fairly typical for metals. 50% would be large but certainly not out of the question. ... This is one reason it's so important to trade out of positions during the occasional huge market run-up. In metals there have only been two serious blow off tops since 2001. If one took some profits then, it is much easier to buy at these levels without worrying about where the market is going over the next six to twelve months.

phirang
08-16-08, 09:03 AM
How the heck is the dollar gonna rip if the Fed keeps cutting rates?

Jim Nickerson
08-16-08, 10:39 AM
Jim -

The more "down" you can tolerate, the more "up" you can capture. That's it.

Luke, I think you are flat out wrong on this one.

How about: the more profits you book, and the less losses you take, the greater will be your wealth at any point in the future.

FRED
08-16-08, 01:49 PM
cef has been around since 1983 for those who wanted to buy pm's without getting into physical.

edit - and btw, by virtue of being a managed, closed end fund, not just a commodity tracker, cef is eligible for capital gains treatment. this is what explains its persistent premium to nav.

So you can trade in and out of CEF like an ETF or physical?

bart
08-16-08, 02:11 PM
http://www.nowandfutures.com/images/oil_gold_ratio.png

Jim Nickerson
08-16-08, 02:21 PM
So you can trade in and out of CEF like an ETF or physical?

jk can give you his answer.

CEF and GTU are closed end funds run by the same outfit in Canada. GTU is 100% in gold, CEF is 50% gold and 50% silver. CEF typically sells at a premium to the underlying gold and silver assets it holds; that is a disadvantage unless at some time one is able to buy it when it is selling at a discount to NAV, which I am not holding my breath to see occur.

GTU has not had near the premium to NAV (ETFconnect.com is offline right now so I can't see the numbers), but GTU has a big spread--maybe 1%.

Capital gains in both are treated as capital gains like they are in anything else except physical PM's and collectibles.

jk
08-16-08, 07:16 PM
jk can give you his answer.

CEF and GTU are closed end funds run by the same outfit in Canada. GTU is 100% in gold, CEF is 50% gold and 50% silver. CEF typically sells at a premium to the underlying gold and silver assets it holds; that is a disadvantage unless at some time one is able to buy it when it is selling at a discount to NAV, which I am not holding my breath to see occur.

GTU has not had near the premium to NAV (ETFconnect.com is offline right now so I can't see the numbers), but GTU has a big spread--maybe 1%.

Capital gains in both are treated as capital gains like they are in anything else except physical PM's and collectibles.
the cef premium has been pretty consistent, and so can be for the most part ignored. you can trade in and out of cef like any stock, and the tax treatment is as for any stock. it is about 50% gold and 49% silver, last i looked, with the rest in cash. compared to gld and slv, it is a far superior vehicle for non-tax sheltered accounts, but it forces a 1:1 gold:silver allocation.

Contemptuous
08-16-08, 11:53 PM
Here you go Jim - came across this earlier today and thought of you.

"The key to making money in stocks is not to get scared out of them." -Peter Lynch



Jim - The more "down" you can tolerate, the more "up" you can capture. That's it.Luke, will you please go to the trouble to explain this thing called "fear." ... I only buy things that I think are going up ... Luke, I think you are flat out wrong on this one. ... the more profits you book, the less losses you take, the greater will be your wealth

Jim Nickerson
08-17-08, 12:11 AM
Here you go Jim - came across this earlier today and thought of you.

"The key to making money in stocks is not to get scared out of them." -Peter Lynch

"The key to making money in stocks is not to lose all of one's profits and none of one's capital." Jim Nickerson

I ain't ever gonna be Peter Lynch or whatshisname in Omaha.

But back to you and me, Luke, what is your drawdown now? Mine is 0.58%

santafe2
08-17-08, 02:58 AM
Sorry, double post.

santafe2
08-17-08, 03:12 AM
Santafe2 - I think you have made some of the most astute comments on this topic of anyone here. Much appreciated.

I am concerned that we may be looking at a two to four year period hereafter of relative underperformance of the precious metals, (after they do a stiff rally back into the new year) and that the USD will confound some of the smartest minds out there - EJ, John Williams, Doug Noland. All these people are making 100% rational calls on the direction of the USD. I've consulted with someone in recent days who has done more to shake my confidence in the imminent further downward trajectory of the USD than anyone in the past 7 years, who forecasts a resurgent buck that will defy a lot of expectations.

He may be wrong - EJ is my other most compelling guide and going in a totally opposite direction. However, so far, given this other opinion issued a call back in March at the gold and silver top that gold and silver, the other rare metals and all the commodities would "collapse in August", he's batting ten out of ten.

I broke my own rule (similar to yours) to take substantial profits at the last run-up and have taken a severe beating in this downturn, being overweight silver rather than gold and with substantial allocation to these most low-geared" plays. With the correction in silver, you can imagine. However I will not buy or sell anything until next January / February. This person was calling an imminent collapse of commodities in March (after being a gold and commodities bull since he called the start of it in 1999-2000, with several others, of course) and he is calling for a dollar (and US stock market) rally which will shred the reputations of some of the most wise and well respected commodity bulls and dollar bears around.

He may of course be flat wrong. Everybody has to make their own bets, and there is no hand holding after getting dealt the results. I read his dollar resurgence and gold mega-crash call only a couple of months ago and laughed. Today I'm planning to allocate 1/3 of my assets to a managed account of his next January / February, and to sell half of my PM holdings after our fall / winter rally. I expect to see at least a rebound to $16 silver and will raise cash for a different 3 year strategy then.

The actionable trend for the next three to four years may have shifted in a direction which leaves the most intelligent and well studied dollar bears vulnerable. Interestingly, EJ's charting of the dollar trend out to 2012 - 2014 hints at the same "cross-currents" for the PM's in the next four years. I will keep a strong core holding in the PM's but plan to get into a portfolio that is heavy in alt-energy (something which as a Peak Oil guy I sort of turn up my nose at) and managed futures with a lot of hedging of a 1/3 alt-energy exposure. (Alt energy bull market - now where the heck did I read about this idea a year ago? Oh yeah! It was at iTulip! :rolleyes: ).

This person I've referred to suggests the PM's will meander and then go into their vertical ascent out in 2012-2014 or thereabouts and there are other fish to fry to better effect in the meantime. However all summed up, if I read EJ issue a "bugle call" that we are heading into the steepest part of the inflation imminently, I will heed EJ first. (Natch).

Very taxing and vexing time indeed.

Thanks for your kind comment. As do many others here, I like PM, agriculture, energy - alt and otherwise. I've also liked the US$ for some time. I don't try to time my investments with great detail, or worry about years where an asset class is floundering. As long as I think it's a good long time investment and the fundamentals haven't changed, I like to stay fully invested. But, there are times that call for flexibility if one is to take advantage of the opportunities the market offers.

I agree with your associate that the US$ has farther to move up and that will likely provide additional downward pressure on PM, (note I said pressure, not necessarily movement). But I have no time-line. I don't know if the US$ will complete its counter trend rally in 4 months or 4 years. Since I don't know, I'm preparing my exit scenarios. The argument is not that the US$ is the mighty slayer of all other fiat currencies, its just been taken out to the shed over the last 6 years while the Euro became the new fiat darling. I began shorting the Euro the day I heard a MSM report that some super-model wouldn't take payment in US$. When super-models are short the dollar, it's time to go long.

I like PM as a long term investment so I don't really care too much what PM does in the next 5 years. That may sound counter intuitive but I have no control over how it's going to move. If it goes down, I'll continue to add to my positions. If it turns around tomorrow and moves straight up, I have my orders in place and they'll get filled below where I sold but certainly not where I'd like to buy. Investing like life doesn't always work within the time frame we imagine. It will have its own cycle. I can't imagine a scenario where PM does not return 15% a year over the next 10 years. Actually I can, but you'll need your PM to buy bullets so it's not worth discussion.

santafe2
08-17-08, 12:00 PM
http://www.nowandfutures.com/images/oil_gold_ratio.png

Thanks Bart. the trend line is a nice touch. We know one thing, at some point the comparison will revert to mean.

metalman
08-17-08, 12:32 PM
Thanks for your kind comment. As do many others here, I like PM, agriculture, energy - alt and otherwise. I've also liked the US$ for some time. I don't try to time my investments with great detail, or worry about years where an asset class is floundering. As long as I think it's a good long time investment and the fundamentals haven't changed, I like to stay fully invested. But, there are times that call for flexibility if one is to take advantage of the opportunities the market offers.

I agree with your associate that the US$ has farther to move up and that will likely provide additional downward pressure on PM, (note I said pressure, not necessarily movement). But I have no time-line. I don't know if the US$ will complete its counter trend rally in 4 months or 4 years. Since I don't know, I'm preparing my exit scenarios. The argument is not that the US$ is the mighty slayer of all other fiat currencies, its just been taken out to the shed over the last 6 years while the Euro became the new fiat darling. I began shorting the Euro the day I heard a MSM report that some super-model wouldn't take payment in US$. When super-models are short the dollar, it's time to go long.

I like PM as a long term investment so I don't really care too much what PM does in the next 5 years. That may sound counter intuitive but I have no control over how it's going to move. If it goes down, I'll continue to add to my positions. If it turns around tomorrow and moves straight up, I have my orders in place and they'll get filled below where I sold but certainly not where I'd like to buy. Investing like life doesn't always work within the time frame we imagine. It will have its own cycle. I can't imagine a scenario where PM does not return 15% a year over the next 10 years. Actually I can, but you'll need your PM to buy bullets so it's not worth discussion.

maybe i buy you an itulip subscription for your b'day, luke. you'd like Too many dollar bears? Janszen 4/27/07 (http://itulip.com/forums/showthread.php?t=1271)


A member on the forums asks:
"Every opinion on the dollar is negative. The only difference is whether it is going to just drop, or crash.

"Can the crowd be right? Is everyone going to be right about the dollar? Forget contrary opinion, there isn't any. There is only unanimity. Huh? Doesn't this bother anybody?"
As a contrarian, the near unanimity of expectations of the dollar's decline is emotionally bothersome. However, the significance of the crowd's agreement on the dollar's decline depends on where we are in the cycle.

Back in 1998 when we first started to track the decline of the dollar on iTulip during stock bubble boom times, dollar negativity was uncommon, as you'd expect. The US economy was flying high. The government ran a fiscal surplus, the stock market was high, inflation was low, and so on. The iTulip 2001 gold call was based on the expectation that dollar depreciation was going to be part of the US economy reflation program. Finally, after years of dollar depreciation since then, popular sentiment has turned against the dollar.

The crowd gets on board after a trend is observable, and the crowd extrapolates the trend into the infinite future. The dollar trend they are on board with is the gradual decline. The crowd does not expect a dollar crash. So the question is, will the slow depreciation trend continue, accelerate, or reverse?

The question is easier to answer if posed as follows. The dollar (bonar (http://www.itulip.com/glossary.htm#Bonar)) is as a common share in USA, Inc. (http://www.itulip.com/forums/showthread.php?t=936) As an individual or institutional investor living outside the US, would you invest in USA, Inc. at its current share price knowing what you know about the housing, stock market, and other bubbles?

If you are a foreign government, you have had little choice but to support the dollar. The Dollar Debt Hot Potato (http://www.itulip.com/glossary.htm#dollar_debt_hot_potato) is passed from one unhappy holder to the next. To complicate matters, as we've pointed out several times and Jeremy Grantham pointed out today (http://biz.yahoo.com/ts/070427/10353243.html?.v=3), the act of coordinated global central bank reflation has produced global bubbles in all assets, leading to the possibility of a symmetric impact on major economies during the next crisis, with dollar value either neutral or even a beneficiary, at least in some part of the event.

We received Grantham's full letter to portfolio managers today. He states that the only assets that make sense to hold at this point when the "everything is a bubble" are cash and sovereign bonds. Period. (He goes on to say that as portfolio managers, his readers cannot afford the career risk of going to cash.)

We refer to this disinflationary process as the "Ka" phase of a Ka-Poom disinflation/reflation cycle. Grantham does not hypothesize what happens after the "bump ride" is over. Dr. Hudson refers to the process as a "debt deflation." It should be noted that hyper-inflation is a form of debt deflation, which refers to the process of debt being wiped out, either via defaults or monetary inflation.

We expect the next reflation cycle will lead to undesirably high levels of inflation fueled by the increase in the price of imported goods due to accelerated dollar depreciation "Poom" phase which involves an asymmetric decline in the US economy relative to others. Jim Rogers in a recent interview (http://www.itulip.com/forums/showthread.php?t=1130) states that he expects the US economy to go into recession while others do not. We don't see a way for that to happen without an asymmetric negative impact on the dollar relative to other currencies.


there's more. i doubt the itulip guys will like it if i post the whole thing.

Contemptuous
08-17-08, 03:10 PM
maybe i buy you an itulip subscription for your b'day, luke. you'd like Too many dollar bears? Janszen 4/27/07 (http://itulip.com/forums/showthread.php?t=1271) there's more. i doubt the itulip guys will like it if i post the whole thing.

Great extract Metalman, thanks. I especially enjoyed EJ's description of how he approaches "hoary shibboleths" such as GENERIC CONTRARIANISM. Like approaching a buried land mine - walking on eggshells and with extreme caution! :D Spot on. BTW, my b'day is 09/11. Born lucky I guess, (or was it "born lukey"?)

Contemptuous
08-17-08, 03:32 PM
Rock solid investment philosophy Santafe2. Textbook for how everyone should invest through this next decade, IMHO. Mine is not as clearly articulated, but this general direction (among other things it is very "grounded") is exactly what I strive for. Learning some interesting lessons right now - and the mid to long term outlook in fact remainsquite bright for these investment classes.


Thanks for your kind comment. As do many others here, I like PM, agriculture, energy - alt and otherwise. I've also liked the US$ for some time. I don't try to time my investments with great detail, or worry about years where an asset class is floundering. As long as I think it's a good long time investment and the fundamentals haven't changed, I like to stay fully invested. But, there are times that call for flexibility if one is to take advantage of the opportunities the market offers.

I agree with your associate that the US$ has farther to move up and that will likely provide additional downward pressure on PM, (note I said pressure, not necessarily movement). But I have no time-line. I don't know if the US$ will complete its counter trend rally in 4 months or 4 years. Since I don't know, I'm preparing my exit scenarios. The argument is not that the US$ is the mighty slayer of all other fiat currencies, its just been taken out to the shed over the last 6 years while the Euro became the new fiat darling. I began shorting the Euro the day I heard a MSM report that some super-model wouldn't take payment in US$. When super-models are short the dollar, it's time to go long.

I like PM as a long term investment so I don't really care too much what PM does in the next 5 years. That may sound counter intuitive but I have no control over how it's going to move. If it goes down, I'll continue to add to my positions. If it turns around tomorrow and moves straight up, I have my orders in place and they'll get filled below where I sold but certainly not where I'd like to buy. Investing like life doesn't always work within the time frame we imagine. It will have its own cycle. I can't imagine a scenario where PM does not return 15% a year over the next 10 years. Actually I can, but you'll need your PM to buy bullets so it's not worth discussion.

Charles Mackay
08-18-08, 11:08 AM
I'd be happy to Andreuccio. At the moment I'm in Netarts Bay getting away from the heat (probably the last heat wave we'll have this year on the west coast) .. will post a ratio chart with the latest data as soon as I get back to the "mainframe" :) ..

Here's the gold price in bbls of oil chart. 6.5 bbls is the lowest on record since the beginning of the oil age. 35 bbls of oil is when it gets extremely overpriced. Note the circles at the bottom... every time the ratio hit a low bbl price, gold accelerated in a new bull leg.

http://webpages.charter.net/bigboard/bbl.jpg

metalman
08-18-08, 10:16 PM
Here's the gold price in bbls of oil chart. 6.5 bbls is the lowest on record since the beginning of the oil age. 35 bbls of oil is when it gets extremely overpriced. Note the circles at the bottom... every time the ratio hit a low bbl price, gold accelerated in a new bull leg.

http://webpages.charter.net/bigboard/bbl.jpg

nice chart. ever correlate gold/dow with gold/oil to see if the two point to anything in particular... like where gold might be if the dow falls to 10,000?

Charles Mackay
08-19-08, 11:44 AM
nice chart. ever correlate gold/dow with gold/oil to see if the two point to anything in particular... like where gold might be if the dow falls to 10,000?

metalman,

Short DJIA/long gold for another 12x ... boring but profitable. I don't know of anyway to correlate that with the gold/oil ratio... here's the gold/djia ratio

http://webpages.charter.net/bigboard/DJIA-GOLD.GIF