People are sentimental, markets are not

[Charles Mackay]

Re: People are sentimental, markets are not

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

[metalman]

Re: People are sentimental, markets are not

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.

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]

Re: People are sentimental, markets are not

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.

Re: People are sentimental, markets are not

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.

Re: People are sentimental, markets are not

maybe i buy you an itulip subscription for your b'day, luke. you'd like Too many dollar bears? Janszen 4/27/07 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! Spot on. BTW, my b'day is 09/11. Born lucky I guess, (or was it "born lukey"?)

[metalman]

Re: People are sentimental, markets are not

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

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) is as a common share in USA, Inc. 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 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, 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 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.

[santafe2]

Re: People are sentimental, markets are not

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

[santafe2]

Re: People are sentimental, markets are not

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]

Re: People are sentimental, markets are not

Sorry, double post.

[Jim Nickerson]

Re: People are sentimental, markets are not

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%

Re: People are sentimental, markets are not

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

[jk]

Re: People are sentimental, markets are not

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.

[Jim Nickerson]

Re: People are sentimental, markets are not

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.

[bart]

Re: People are sentimental, markets are not

[FRED]

Re: People are sentimental, markets are not

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?