*** re: My - "Mea Culpa" to the Gold Bugs ***
Now to listen to the gold “bugs” (that would be your first mistake)... you would think that they've actually made some money over the last 24 years (vbg).
To give them a break, let's just forget about the last 20-some years and let's just focus on the last couple of years.
Is this what I owe the Gold “bugs” a “mea culpa” for ?
finance.yahoo.com
…surely you jest ?
The above Chart would obviously indicate that perhaps there isn’t quite as much to really be celebrating about … as all of the Gold Bug ballyhooing would lead one to believe ?
Now don’t get me wrong, I think Gold has both it’s time and place…but, only relative to Risk versus Reward, it’s fair value given all of the metric’s that drive it's value…and maybe most importantly of all for those of us on SI who are “traders” – Gold relative to the other opportunities and alternatives that exist in the market place.
THAT… is my bone to pick with the “bugs.”
My problem is not with gold… it’s with the “bugs” who worship eternally at it’s altar.
And yes, at times - I have certainly been as vocal as anyone has ever been in cheering “Ole Yeller” along the way….but, unlike the true “bugs” – I neither worship Gold at the altar, nor do I have any problem with walking away from her at any given moment in time and leaving her all alone at the altar – when either she’s gotten more expensive than her keep, or benefits would otherwise justify.
As a Trader… Risk must always be weighed against Reward.
...correct that.
It (Risk) must continually be weighed against Reward.
That is yet another identifying factor between a normal gold “bull” and a gold “bug.”
I have been a gold “bull” – but, I’ve never been a gold “bug.”
For the Gold “bugs” …. Gold can never rise to a price level – to where it’s not going ever higher, nor to a level that it's no longer attractive on risk:reward metric’s…because that’s not how “bugs” are wired.
“Bugs” only focus on the reward side of the equation.
"Bugs" just can't help themselves...not unlike a gnat attracted to a streetlight in darkness... bugs, are all destined to meet the zapper - sooner, or later.
Bugs are true believers… not in Gold and what it “really” represents in today’s economic, or monetary world… but, what it represents in that ongoing conversation between their ears…
Gold represents the ultimate Lotto Ticket that they and only they – are going to cash in when the US Dollar, the Global Financial Markets and the World as we know it – meets Armageddon.
…perhaps the single most dominate of those motivations… is their near maniacal belief – that “they and only they” – know that gold is going to deliver them to their ultimate Shangri-la.
What every Gold, or Precious Metal trader should lie awake at night dreaming about… is not the collapse of the US Dollar and the World ending in Armageddon…but, rather in discrepancies between price and risk.
This spring… we had an extreme divergence between the ratio of the price of gold the metal and the HUI goldstock index – as we saw a complete and total capitulation to the tune of 100 Index Points on goldstocks.
We also had the US Dollar in a severe downdraft that was teetering at key technical support levels, a runaway Housing Bubble fueled by a historic low level of Interest Rates and reckless lending practicies and strong inflationary currents that were not being addressed, or recognized by either Politicians, or the Fed.
…not one single component of that story is any longer in place.
The US Dollar is much stronger, both the Fed and Politicians are cognizant about the risk for inflation and they are doing something about it…and Goldstocks are no longer cheap – by any metric.
The former scenario is when one wants to be buying gold stocks and the later sure sounds like an environment when one wants to be selling goldstocks, or at the least – looking for more attractive alternatives (a.k.a. hi-ho Silver & Palladium !).
Earlier this spring… I posted the article about Hulberts Digest showing that the sentiment for Goldstocks had reached an extreme, near historic low…many of the “name” Goldstock Newsletter Writers were extremely bearish...and you couldn't get a pulse on a gold bug here on SI.
…that was then – this is now:
Today, everyone and their mother – including Jimmy “Crack Corn, Cowbells, Whoopee Cushions and Clown Paint” Cramer… along with the likes of Joe “I never saw a market that wasn’t a Bull Market” Battapaglia are all pimping Gold.
Hello people ?!?!?
Goldbugs have had their heads handed to them on Silver Platters (pun and not so subliminal message intended) time and time again… not just over the last 2 years – but, over the last 25 years; each and every time that greed has gotten the better of them.
Some of you have heard me say – that you will always make more money by trading the traders – than you ever will by trading the stocks.
If you EVER listen to ANYTHING I EVER say... listen to that.
That was true back in April and May… and it will be true once again – very shortly (it already is.. in the case of Hi-Ho Silver & Palladium (repetition is the mother of all learning… I figure if I keep beating you all over the head with Silver and Palladium that maybe, just maybe – 1, or 2 of you will finally – “get it”).
Well the Gold “bugs” are not only - not selling… they’re smellin’ 1980 in the air all over again.
But, you know what… that’s what they were smelling back in November and December 2003 and again in November & December 2004…and yet again in November and December 2005… (pattern developing anyone ?).
But…. “this time it’s different”
Hope not only springs eternal for true “bugs”… but, the past never matters.
Surely, it wasn't any of "their" bones that I had to step over and around when I found them strewn all along the battered and bloodied road of the 100 Point HUI Death March from last November/Decembers highs to the April/May lows this spring - now was it ?
No... I am sure that they have blocked this dark chapter in history, completely out of “their” minds and thus... it no longer exists.
Making Money in Gold has not been the challenge since the longterm cyclical low in late 2000.
Keeping it - has been the challenge.
The HUI Roller Coaster Ride of Death & Despair over the last 2 years has been the great Darwinian equalizer.
The only way you get to both make a profit and "keep it" - is when you sell.
Preferably, you sell at a point much higher from where you bought.
The easiest way to do that on a very simplistic level, is to simply be a buyer when others are bearish/puking and selling...and then to become a seller when others are waving their pom-poms and/or buying.
But, selling seems to be a genetic predisposed impossibility amongst most “bugs.”
Actually, I should preface that. Selling when Gold is rallying - is what seems to be a genetic predisposed impossibility for gold “bugs”, because there was sure one helluva lot of selling & puking going on by goldbugs in those final days and weeks of the Death March Shakeouts each spring over the last 2 years !
For those that have been constantly shaken out on the violent corrections...who become silent and bearish...only to pile back in and break out the Pom-Pom's each and every time it rallies back... I only have two words to say:
- Thank You
Back to my "mea culpa" - so where do I begin to start addressing all the wonderful concerns the chihuahua herd has expressed of late regarding my health and welfare (vbg) ?
Let's see...
1. I have been driven off of SI and have gone deep into hiding because of my ohhhhh so terrible call on Gold.... I missed the entire move since HUI 190 - yada, yada, yada.
Actually, I made my final sale of Goldstocks on Sept. 16th around HUI 235ish.
Message 21708635
["Everything I had left - KaChing....Goldstockless for the first time since playing the leap from Black to Yellow Gold....Why you may ask ?....mo-later - have some buying of "something else" to do."]
* you may want to remember - that "buying of something else" I had to do.
That selling came off of a fresh re-loading at the bottom of this springs 100 Point HUI death-march in Goldstocks – and it’s not just buying the bottom that determines your profitability – it’s also “how” you buy it.
The other part of my “blown gold call” came off of this:
Message 21289622
[“…so I use "options"….10-15% Core Portfolio Weighted Position”]
You can do the math… on what type of leverage and return buying calls off of that bottom returned…oh – and yes; I had to sell my call options at HUI 200ish…because they were short-term out of the money calls facing expiration - that became 3,4 and 5-baggers….on 13% of my entire portfolio.
…do the math.
30-40 Index points off of the bottom – levered by a portfolio weighting of 13% all in call options on goldstocks and a total portfolio weighting of 65% in Goldstocks.
The HUI needs to go to about 320 just to equal that return.
Oh…and yes, I continued to be a fool and unloaded the rest of my common shares into strength (as opposed to the "bug" theory of selling every 20 points on the way down on the death spiral shakeouts) at HUI 210-215, 225, and finally at 235.
What a mo-ron… what was I thinking ?
Well… here’s what I was thinking.
Not that I didn’t try to spoon feed it to all of you about 27 times:
Here is how that quote/unquote:
* “buying of something else” on Sept 16th when I exited my final position in goldstocks - to move into Silver and Palladium has performed since – so royally “blowing the gold call” (vbg)?
stockcharts.com[d,a]daclynay[d20050916,20051206][pf][iut!uj[$gold]][j64295722,y]&listNum=2
stockcharts.com[d,a]daclynay[d20050916,20051206][pf][iut!lj[$gold]][J64296939,Y]&listNum=2
Sadly, Gold “bugs” also take on the characteristic’s of the See No Evil, Hear No Evil and Speak No Evil Monkey’s….even when it comes to alternative opportunities within the precious metals market – ie: Silver and Palladium.
People tend to notice only what they’ve consciously tuned into …they only see and hear what they want to see and hear. The reticular activating system is an amazing thing.
I hope there are a few people here who are familiar with the “RAS” – a.k.a. The Reticular Activating System ?
If you are not… my next post will share a Secret of becoming a great trader by becoming a master of… and not a slave to - your RAS.
It’s called – “The Secret of the Red Shirts”… I learned it from a master of another black art - that I will only refer to as - “Gary B”.
Who he is matters not… that he knows you – better than you know you… is why he’s made millions and millions and millions of dollars.
More on that later…
Got your ticket to the Palladium Train ?
Unlike gold... it has a reality based physical demand and Industrial use story...and you just may want to check it out.
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