IAC re: Palladium and "leaving out a few details".......
re: Your quote of:
["Your comparision overlooks a few important details. The average US investor has what 2 choices for Palladium stocks? Or they can use the futures market in which case they need to be both right about time and price. Either way it's an incredibly tiny market w/few choices which should get brought into the risk/reward criteria."]
Au Contraire mein heir....
Your interpretation of "only" having 2 choices relative Palladium is -- "mainstream stinkin'-thinkin"
Nothing personal IAC... your comments are spot on to what virtually everyone I ran the idea by in it's early days responded with.
They were all mesmerized by Oil and/or Gold.
The question was not whether Gold and/or Oil had topped, but rather -- were there better opportunities elsewhere, relative risk:reward and total upside return ?
They (and you) weren't just failing to think - "outside the box" ...they got complacent and never even stepped away from the Gold & Oil "commodity box" to take a look at it from different angles.
The beauty of the Palladium play was just that...
That there were only 2 mainstream stocks !
Because when (not if...) Palladium the metal moved... all the leverage, all the attention and all the coming money inflows -- only had 2 stocks in which to flow !$!$!
That was a significant part of the attractiveness of the play.
Other than the fact that Palladium had in my opinion, become the undisputed "value" play of the entire commodity sector.... a textbook classic:
Discrepancy between price and risk.
The Platinum:Palladium ratio had reached a historic max divergence and both the fundamentals and the technicals for Palladium had reached a compelling level on virtually any risk:reward metric.
Palladium had literally become as much of a no-brainer play as I have seen in the last 7-8 years.
It certainly doubled faster than $255 Gold, or $18 Oil, now didn't it (VBG) ?
The additional attractiveness in Palladium was that unlike the leap of faith that was required to leverage the Oilpatch during it's dark days ...or, even later in making the leap from "black" to Yellow Gold at the end of 2000... the entire commodity complex had already moved and relative Palladium, it became a when, not if ...move waiting to happen.
Silver to a lesser extent, was the same story...
It became cheap relative it's historic ratio to Gold...and given the chance of a Silver ETF coming to fruition...along with superior market fundamentals to gold -- it's outperformance to gold was also a when, not if...eventuality.
Relative risk verus reward....whether we want to talk about the Oilpatch in the dark days of the Economist cover story of an endless Oil glut, or the Central Banks dumping gold and the likes of the Gold leasing cabal pounding Gold down the $250's, or the recent bottom in Palladium...the following stragtegy has always held true in both making money in commodities and more importantly - in keepping it:
-- "Always be early to the party and never, ever, ever be caught hanging around at last call"
That is the single most profitable concept to trading commodities and cyclicals imho.
And relative to "keeping it"...and all you have to do, is to go to my previous post and look at all those commodity charts from the recent past and how their moves ended.
And if you want to be a speculator...then here is the single most profitable stategy for speculation:
"Be Early and Get Levered".
The multiple returns on the OSX, or HUI indicies, as well as on the individual commodities themselves; always occurs in that first major move up off the bottom.
Sadly, the average investor always arrives late and then leverages the late cycle tops of speculative bubbles... ie: the last Gold Bull of 1980, or the Internet & Tech Wreck of March 2000.
You make money when you're right...and lose money when you're wrong....it doesn't get more fundamental than that.
So, if you're going to be right...then, leverage the hell out of being both right and early !
And then when your early/levered position becomes -- "right" ... then gradually transition to more conservative money & portfolio management strategies as the cycle matures.
Here's another mistake that traditional thinking will lead investors into:
It's never a question of whether a given commodity, or index is going to move higher... it's a question of whether better risk:reward opportunities exist elsewhere.
Both Palladium and Silver stocks, as well as the underlying commodities themselves went on to significantly outperform Gold & Goldstocks.
The other half of a true contrarian strategy is to not get greedy, or complacent when things get "too easy" ...and to bank that outperformance into strength...instead of waiting to get taken out by pullbacks.
When I get an early, leveraged position and catch a major move in front of the market -- I always want to be selling & taking profits into strength... versus getting taken out on pullbacks.
Then going forward, I'd rather only risk "part" of the profits I've already banked via selling into strength...by buying leveraged options, or futures contracts on pullbacks...where I can still have significant leverage to remaining upside, but continually have less and less total portfolio exposure later as the move matures -- when risk is always going to rise relative to my potential reward.
Later,
Slider
PS: IAC re: your comment of:
["Can we put this tiring gold/palladium comparision to rest now?"]
Now, you want to "put it to rest" ?
-- whodathunkit ?
Well, the Oilpatch Permabulls "wouldathunkit"...ie:
finance.yahoo.com
PPS: Don't just think outside the box...pick the damn box up and shake the living hell out of it...
Bonds and the US Dollar...
Will it be 3 months, 6 months, 2 years ?
When, not if...
Tic' Toc` |
