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Politics : Welcome to Slider's Dugout
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From: SliderOnTheBlack1/8/2009 10:52:28 AM
7 Recommendations  Read Replies (2) of 50356
 
Trading thoughts: Paired Trades & Valuation Gaps...

I've always believed that the first filter you should screen
all your trading strategies against, is "risk vs. reward."

That's one of the reasons I like the "Put Sale" trade here
against the early January backdrop of an expected pullback
in the gold stocks after a near doubling off the November
lows in just 6 weeks, and the stream of continuing negative
market and economic news.

One of my other favorite trades is finding "value gaps"
between strongly related/correlated stocks, sectors, and commodities.

Both Marc Faber and Eric Bolling echo those thoughts
relative valuation gaps in other metals relative gold
in the interviews below.

While Bolling's approach is long/short paired trades,
(short gold & long platinum) Faber's approach is simply
over-weighting the industrial metals to gold.

Bloomberg interview with Marc Faber:
-- why he favors industrial metals over gold.
-- WW III has already begun.

bloomberg.com

Eric Bolling Interview:
-- why he's short gold & long platinum in a "paired trade."

finance.yahoo.com

re: The valuation gap in platinum relative gold:





While palladium and platinum have suffered due to lower use
in catalytic converters, given collapsing auto sales;
valuation gaps have reached historic lows.

I've also been "selling puts" and buying some long ETF's
in base/industrial metals, and the DBA ETF.

And fwiw, during these transition corrections and pullbacks,
"selling puts" has been a license to print money.

There's more than gold in them thar' hills... so start
digging and researching the base metals and alternative
commodity plays.

Mo later,
S.O.T.B.

PS: Here's some news you can use:

German Bund Auction Fails:
ft.com

From Bulldozer yesterday:
Chinese yuan set to replace dollar:
asianews.it

U.S. debt approaches insolvency; Chinese currency reserves at risk:
asianews.it

Japan economists call for US Treasuries to be issued in Yen:

atimes.com

TOKYO - Japanese economists, increasingly concerned that the
United States might seek to pay its enormous and growing debt
obligations in a weakened US dollar, are looking to the
possibility of US Treasuries being issued in yen.
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