There's more than gold in them thar hills...
I thought silver was getting too cheap to gold and due for a pop.
And it was...
And one of the reasons I still like overweighting silver
to gold - is the massive Bear Stearns paper silver short
that JPM inherited.
It may be the Volcker rule, the adoption of Glass Steagall,
or a sovereign debt crisis, but it's when, not if - the mother
of all short squeezes one day sends silver parabolic.
I think the pullback of silver to $14/$15 last month was a
gift horse buying opp.
And speaking of gift horse buying opps...
Last year I talked about buying physical Palladium and
Platinum because they were getting historically cheap
to Gold...
---------------------------------------------------------------
Message #14255 from SliderOnTheBlack at 1/8/2009 10:52:28 AM
Message 25307847
"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."
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
While palladium and platinum have suffered due to lower use
in catalytic converters, given collapsing auto sales;
valuation gaps have reached historic lows.
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.
--------------------------------------------------------------
Well today I just cashed in 1/2 of my physical palladium
as I got a double out of it, and now by selling half at
twice my cost basis, I get my original investment back,
and get to keep half of what I bought.
Here's a chart that may be a shocker to some people.
A one year chart on gold, silver, platinum and gold:
&i=p60049131521&a=192966229&r=8856)
Not only did palladium and platinum outperform gold and silver,
but physical palladium vastly outperformed even the gold stocks.
You always wish you would have bought more, but hindsight
is 20:20.
This palladium sale replenishes my cash reserves after making
a physical silver buy last month, and if the global economy
rolls over into part deux of the global recession, I should get
an opportunity to buy palladium back significantly cheaper
than today's selling prices. And a double in the bank, turns
what I have left into a "0" cost basis, no worry, bury it on
the back 40 and don't lose any sleep about it, longterm hold.
And finally, here's a bit of an outside the box trade for
your consideration...
We all know the Fed is nearing the end of it's prop job
of buying up Fannie & Freddie paper. And we all know
that the US has one helluva lot of US Treasury paper
to sell into an environment where virtually every
nation on earth has internal economic problems, if
not it's own brewing sovereign debt crisis. Many
traders are looking at rising interest rates and
shorting US Treasuries as the coming "trade of the decade."
I'll get further into the "trade of the decade" part
of that thesis at a later date, but what I want to
talk about today is yet another "put sale" opp into
a very compelling risk:reward environment.
Here's the historic chart of the TBT ETF which is a short
trade on long dated bonds...
While the premiums on the strike prices I like aren't into
the 25-30% bet the farm range, there's some decent premiums
at strikes where you're getting paid decent money to buy
TBT at a re-test of it's all time lows.
You can get a fat $9.35 premium for selling the $50 strike
on the Jan 2012 LEAP puts.
finance.yahoo.com
Would you be a buyer of TBT at 40?
Or, you can get paid $2.18 to $6.00 for selling the $35, $40,
or $45 strikes on the 2012 TBT puts.
Would you be a buyer of TBT at 36, at 33?
Of course you would.
But wait - there's more!
Here's the kicker...
Remember what the Black Swan recommended in that video
I posted a few weeks ago from the 2010 Russian Summit?
Message 26307281
Taleb said that you should take a very small portion of your
portfolio and make a deep, deep, max out of the money bet
on shorting treasuries. And buying out of the money LEAP calls
on TBT is a great way to make that bet.
But I want to take Taleb's trade and make it even better...
-- I want to make it an ever stronger risk:reward trade.
-- I want to put a big wad of cash in your pocket today,
via getting paid for being a willing buyer of TBT if it
should ever re-test it's all time lows.
-- And I want you to use just a small fraction of those
put sale premiums to fund your "Black Swan" trade.
This one is so sweet, that I am going to tell you all right up
front, that I'm going to be expecting Kindles, rare first
editions, vintage 1st growth Bordeauxs, Lobster grams and
Kobe beef from Allen Brothers when you cash in on this one.
Once again here's the trade...
1. Sell the $35 to $50 strikes in the 2012 LEAP puts on TBT.
2. Take a small portion of the premiums you're going to receive
and buy some deep out of the money 2012 LEAP calls on TBT.
3. Bank the bulk of the cash and sit on it as insurance for
buying in TBT if it should re-test it's all time lows.
I'm thinking we have a damn good shot on collecting on both
ends of the trade... banking the premiums, and collecting on
the calls.
Mo later,
SOTB
PS: Call me an optimist, here's the link to Allen Brothers
for future reference...
allenbrothers.com
I can taste it now...
PPS: As you bank trading profits on this move, don't forget
to take a small portion of those profits and buy a couple
of deep out of the money "Black Swan" puts, as insurance
on your gold, silver, and PM stocks.
Maybe a little insurance here with some trading profits.
Then again at a re-test of $1200 gold/$20 silver.
Then again into new highs - say $1500 gold/$25 silver.
*Pro's buy insurance into the rallies when it's cheap.
This is an all the time - mechanical trade that keeps
greed in check, and takes emotion out of the equation.
Have a plan and stick to it. |
