I tried...
"Not letting Buy & Hold become -- Buy and Fold."
Do you remember how giddy everyone was in June & July?
All the permabull goldbug pundits were breaking out their
pom poms, dusting off their "Gold $2000" headlines, calling
it a seasonal low, calling it THE bottom, and herding their
faithful headlong into loading the boat for the imminent
breakout to new highs?
When I wrote the post below, I said -- "take profits" on this
move when it reached the top of our "trading range." I pleaded
with people to -- "take what the market was giving you" -
ie: The Trading Range.
I also pounded the table to apparently deaf ears about
the changing market fundamentals and the shift in the
market winds from inflationary to deflationary forces.
Not surprisingly when I wrote it, this post was not
very popular, as it rained on most goldbugs parade...
==============================================================
From: SliderOnTheBlack 7/1/2008 10:16:56 AM
2 Recommendations
Message 24720567
re: "Taking what the market gives you?"
Here's our range, and here's what "the market is giving us."
The key concept being... that YOU take it (profits) in BOTH directions.
PS: bullbud - re: historic June lows for gold?
Last year we had 2 "back up the truck" opps.
One in August, the other in December.
Fwiw... I have never been a true believer in "seasonal"
trends... because economic, geopolitical, and market
"events" don't give no stinkin' care about what month
is showing on the calendar <vbg>.
PPS: Straddles and strangles been berry berry good for me.
If the market gives you volatility - take it.
Remember, the last trading range took gold 15 long,
volatile, and very painful months in which to base,
before launching to new highs.
It also gave us a couple of "hundred" HUI index
points in the cash register.
A billionaire who's name everyone on this board
would know... once lectured an audience of which
I was a member on this concept...
(in regards to commodities and cyclicals)
"Buy and hold, always becomes... buy and fold."
While commodities, and cyclicals may move in broad
multi-year cycles...they are still "cyclicals"...
and you never know how many "years" will be in
that particular cycle.
Never confuse cyclicals, or commodities with growth stocks.
Print that one out and remember it... it's a keeper,
especially in regards to keeping an open mind on the
very "dynamic" ongoing inflation/deflation debate.
Goldbugs... "let the Yen:Dollar chart guide you here,
it will take you where no cheerleader, or pom pom
waver has ever gone before."
=============================================================
Read the last sentence in that post one more time.
Those 23 words were the difference between anticipating
vs. reacting, leading vs. following, and between
sleeping like a baby vs. swilling bottles of Maalox.
Why?
Here's why....
Because those that followed them -- completely avoided
this correction in it's entirety:
sliderontheblack.com
The gold stocks topped on July 15th - the day I posted
that chart, and wrote that post.
I followed those thoughts the next day(July 16th) with this...
=============================================================
To: SliderOnTheBlack who wrote (10437) 7/16/2008 4:38:05 PM
From: SliderOnTheBlack 6 Recommendations
Message 24764074
Scratch & Sniff test...
...Last August the Fed started it's interest rate cut campaign,
and gold, oil, and the CRB soared to new highs fueled by
a lower US Dollar, ramping money supply, and rising inflation.
But, what's happening now?
The DOW has collapsed 3,000 points off it's highs, and
housing has continued to implode, while gold, oil, and
the CRB continued on to new highs.
So why the disconnect, and what caused the DOW to fall?
The US economy has rolled over, real income is down,
unemployment is rising, both consumer sentiment,
and spending have collapsed. And we've seen asset
deflation in housing, financial instruments, and
stocks continue.
Smells like deflation doesn't it?
So why the continued rise in oil, gold, and the CRB?
The Fed began it's rate cuts last August and did not stop
until this April. The US Dollar sank. CPI, and PPI rose, and
whether due to speculation, changes in supply:demand, or
geopolitical supply disruption risk - oil went to new highs.
We all know that the Fed rate cuts, and monetary stimulus
have a lag effect. Inflation numbers have continued to
soar... largely from the impact of higher commodity costs
and explosions in food, and energy prices.
But, the Fed has actually slowed the expansion of the money
supply, and asset deflation has continued unabated in
housing, and in the equity markets.
And in the last 48 hours we've seen unprecedented
intervention to save Fannie Mae, and Freddie Mac,
and perhaps the US financial system from collapse,
and... we've seen oil, nat gas, energy stocks, gold,
metals, and mining stocks, along with commodities
selling off?
Are commodities finally getting a whiff of a slowing
global economy, a Fed that's throttled back on the
rate of money supply expansion, and intervention
on speculators?
I wrote about this two weeks ago here:
Message 24720459
-------------------------------------------------------
PPS: Relative the ongoing inflation/deflation debate,
there can be no question that so far...
this has been an "inflation" trade.
But, that doesn't mean it will continue to be so.
Is anyone thinking (ahead) about how gold, and
gold stocks perform in the various stages of deflation?
Are you keeping an open mind -- as far as the
inflation/deflation debate is concerned?
Or, are you a "one way" trader?
Gold bugs may soon reach a crossroads.
One, in which choosing the right road,
may lead to massive windfall profits.
And the other, which may result in becoming
road-kill and giving it all back.
Markets move in both directions.
Markets, and economies are dynamic, not static.
Gold wears many hats, as should traders.
How many hats do you wear?
Are you a dynamic trader, or a static one?
ALWAYS be thinking...
ALWAYS be asking questions...
ALWAYS be anticipating...
ALWAYS keep an open mind...
AND never, ever, fail to take what the market gives you.
You have two choices in this environment...
Pro, or Joe.
Which one do you want to be?
Tune out the cheerleaders, and put away the pom poms.
You'd better be 110% focused, and on your "A-game"
going forward...
Because the "throw a dart"... easy $h!t is over.
-------------------------------------------------------------
This collapse in the DOW and financials was pricing in the
realities of a rapidly slowing economy, if not outright
deflation.
Sooner, or later, it's inevitable that commodities do
the same thing...and they may be doing that right now.
-- The Fed has slowed the expansion of money supply.
-- The Fed has ended it's rate cut campaign.
-- The Dollar has held it's bottom.
-- The US and global economies are still slowing.
-- And the US is still experiencing a deflationary
collapse in housing, and financial assets.
Yes, the inflation numbers are rising, but those
are lagging indicators, and ex food and energy
which are correcting... those numbers may come
down hard in fast, if the economy continues to slow.
You can anticipate these changes, or you can react to them,
and equally as important - you can get pre-positioned to buy
back the collapse in commodities, because if deflation does
gain traction... Bernanke will deliver on his promise to
do what central bankers do best... inflate.
But, right now... he's praying for a little food,
energy, and commodity deflation.
And actually, with this degree of intervention in
the markets... they're doing more than praying.
So stay on your toes, don't drink the Kool-Aid,
and stop every once in a while to take a sniff test
of the market winds... because they be a changing.
S.O.T.B.
------------------------------------------------------------
One thing you should notice, and hopefully learn from,
is that those posts above, and all of my posts over
the last few years that pounded the table on taking
profits at tops, or about playing the trading range,
got very low "reco's."
There's a message there. A very valuable one.
I want to keep this short as we have a very large short
nat gas trade going on and my time (and money) is largely
devoted to that. So let me get to another point...
I have never, ever received as many nasty emails, or PM's
as I have on this leg of the gold cycle. My posts about
"sniffing" the deflationary winds filled my mail box with
nutball rants questing everything from my parentage, to
my sanity.
And when I said I still have half of my shorts
and puts from the trading range turn @ HUI 460-470
running here, and that I was only interested in "scalping"
options to build a "free/house money" position in
longdated options and LEAPS, I received PM's telling
me that I was going to miss the boat, that I had to
be cRaZy with inflation and deficits running at all
time highs, that I was a manipulator...yada, yada, yada.
And when I talked about waiting for oil to turn, and that
shorting natural gas would be a better risk:reward trade
than shorting oil itself, I had another wave of people
telling me -- "I had lost it"... that natty was going
to $20, and Oil to $200 etc.
Well Nat Gas never reached our dream "risk:reward" target
of $15, and we missed (waited) for the technical confirmation
that the trend was broken and began to short it into this
chart on the break of $11.47 and laid it on heavy @ $10.36
Message 24783435
We didn't get it all... never intended to, but we've got
a nice, fast, and fat, low risk:high reward 30% that's
still working in an ugly tape.
And... we still have half our shorts from the HUI
460-470 trading range top running.
For gold, and gold stocks, in my view, this is the weakest
risk:reward leg of the last couple of years, because the
fundamentals have completely changed.
We no longer have the Fed cutting rates 325 bps, we no
longer have a US Dollar in free fall, we no longer have
a massive shadow banking system creating unprecedented
levels of credit, and doling out unlimited amounts of
credit and leverage to hedge funds, and we no longer have
an entire commodity complex exploding atop a massive
influx of levered speculation.
I simply can not believe that the gold bug punditry got
soooooo bullish on this leg, because this was the
single worst risk:reward environment of this entire cycle.
But, it is...what it is.
And now, the million dollar question remains...
Is this it, is this the bottom?
Is this yet another incredible buying opportunity, and is
yet another explosive "V-bottom" rally awaiting
bottom fishers?
Or, is this quite the opposite?
Is this the bulltrap of all bulltraps?
Is this where everyone gives it all back?
Or, is it a time to ask better questions, such as...
Are gold, PM's, and energy even the play?
Or, is there something else out there, that is
the next great risk:reward trade?
An anomaly.
A discrepancy between price and risk.
Something that everyone is ignoring?
Something that everyone is forgetting?
Something that everyone if missing?
Mr.Something,
S.O.T.B. |
