Saturday, January 7, 2012

"but at least I never picked cotton...."

The idea being, the guy's being taken to the gallows, yet he can still say "but at least I never picked cotton...."

This is analogous to the state of the shitty crappy junior gold miners:

At least you didn't buy solar power stocks!!!!1!

gold goes up from here

Damn damn damn. Can't find the blog post.

But someone who I read on my RSS everyday posted a few interesting posts a while ago on the relation of gold and real interest rates. Apparently, gold goes up at approx. 5.7 times the negative interest rate. So in a real negative rate environment, gold's most logical path is "up".

Real interest rates will remain negative for a while. It's the way governments have stimulated moribund economies - which they will have to do for a good long time in a deleveraging environment. Under Greenspan, it's also been used to purposefully overheat economies. So at least until we get an end to contractionary "austerity" budgets, and a return to the Volcker era of "slaying the inflation beast with crippling high rates", we'll continue to have negative real interest rates. Should be a while before we get there: we don't even have an inflation beast to slay, yet!

Also, gold physical demand, as Bernanke notes, is a function of fat tail risk. I don't see the perception of fat tail risk going away for a while; my own "history repeats itself" narrative still demands that we return to a high-inflation, high-unrest repeat of the 1970s. Certainly, both government austerity and the self-congratulatory victory of the banker class over democracy demand a return to the revolutionary struggles of 70s western Europe and the Americas. Thus fat tail risk continues.

So gold goes up from here.

Insert Otto's decade-long gold price chart with its usual "I think gold goes up from here" caption.

So why'd it go down? Some people are saying it happened because of MF Global related account liquidations. I also had a suspicion about gold (and silver and copper) liquidations caused by shadow banking problems in China earlier this year. People also suspect gold's been liquidated due to collateral problems in Europe. Plus EOY profit-taking, supposedly (I strongly doubt that one, but it's still being advanced as a reason).

I'm also strongly suspecting that a large part in gold's drop from $2000 this fall was the result of a huge loss of physical market after the Rupee collapsed. Whitey Sahib still doesn't fucking get it: India is the glorious physical driver of gold demand in the world, not the USA, not Europe, not China. So, when the Rupee pukes down, gold temporarily loses a major demand pressure on its price.

I doubt any of these "reasons for gold's drop" are going to get worse. And so, if these inputs to the POG fail to get more negative, we'll probably reach a new equilibrium point (probably already did), and then start to see gold go up again.

Whether miners manage to accomplish even the slightest improvement in share price in a rising-gold-price environment is still up in the air of course.

Oh, and by the way:

HGU (double goldminers up ETF) has been advancing these past four days, even though $HUI has been stuck in a range. Maybe because $USD has been going up? Dunno. Still, I am taking this as yet another lesson: when I'm invested in HGU, I should watch the chart for HGU (which looks good), instead of the chart for $HUI (which looks less good).

Read the chart you're invested in, basically.

Friday, January 6, 2012

so there

the divergence continues

USD strength and silver weakness, yet the $HUI continues to look okay. Slightly suggestive of toppiness (cos it refuses to truly advance), but until it pukes below the EMA(8) it's still okay in my book.

Re: yesterday's commentary about the BMO Ag commod ETF: final verdict was no. I looked at its constituents; too large in corn, and corn is weakened with the death of the moronic US corn ethanol subsidy. And I figure that the luxury Ag commods (coffee, cocoa, sugar) are never much for secular bulls, since if e.g. coffee goes up in price, you'll just see Venezuela (or whoever) plant 5x as much of it next year. I.e., no supply constraint.

So, yup, still wondering what to diversify into. I fear base metals since China is the big worry of the year (and India moreso, really, they're becoming a basket case now). Frankly, I think DOW/S&P500 is the place to be for this year.

Thursday, January 5, 2012

BMO Ag commods index ETF

What do you say about this chart?

By EMA(8), this is the perfect entry point: you're close to losing the EMA, which provides you a good quick exit on a tight stop-loss.

My problem is that the RSI(8) was recently showing an overbought signal. Now, maybe the overbought signal is only because it's done a 180-degree turn - it was dropping bad, but since Jan 3rd has been rising strongly.

I'm going to think about this one for a while. Right now, I'm leaning towards ignoring the RSI (since it's a derivative indicator anyway), and going by the short-term EMA.

Problem with things like RSI and MACD and so on is that it's telling you shit that is already being told to you if you look at the price and its trend. I'd rather start dumping these for price-volume indicators of some sort, except I'm not sure what to use right now.

Anyway, I'd really like to buy some Ag commod ETF. Ag commods feel good to me right now. No matter how many banks collapse, that's not going to make seven billion people stop eating pork and rice. I mean, fuck, really.

notice of paradigm shift possibility

One thing I want to keep note of is when the paradigm seems to be shifting. Case in point:

Up til now, srength in USD has meant weakness in the broad market and the PMs. But today, USD is up higher and yet PMs are strong, and the broad US market is acting strong as well.

I consider this important, because USD strength has (for the past few months anyway) been one of my PM danger indicators. This has broken down today.

Be warned. Good things might be about to happen when the market shrugs off relative USD strength. Or at least I think so.

market comment - post #700 edition

Sorry to make it sound like some sort of LiveJournal personal blog, but since this year I'm all about the system, I thought I'd share a couple thoughts for myself.

1) Market looked jittery this morning. I thought about dumping a few things, but in the end left it, and everything's fine. I don't care about the news; I care about the chart. And $HUI is still above the EMA(8) so that's all that matters. It's not really progressing upwards right now, but it's still above, so I don't sell.

BTW, my "sell" is $40K worth of HGU, the double goldminers up ETF - bought at $12.14 or so. I bought that instead of any particular producers, since the producers I'd want to buy don't look chartily good right now. DPM's no good, BTO's no good, and while AR looks nice today (maybe a buy?) it looked like crap on Monday. (And I already own RIO and GOZ.) Tuesday I was on the road, so no buying was possible. I have $50K left in cash which I might deploy sometime, but also need to move some unsheltered money to my TFSA and RSP accounts.

I was looking through some other ETFs. BMO has a beautiful "emerging markets infrastructure" ETF, ZGI.TO, that I strongly suggest you chart. It's been a straight upward line for all of the past several months' turmoil. (Too bad its volume and bid/ask suck so bad.)

So, while I'm still looking just at minerspace right now, I intend to investigate diversifying out into other products. That'll happen in the next couple weeks.

I figure I will still have some few miner positions, and will probably play them with HMU/D and HGU/D. But also, I was thinking of putting a certain percentage to the metals themselves (since miners underperform so badly); some percentage in a long or short position in energy via HEU/HED or HOU/HOD; a position in the S&P (since I believe US domestic economy will be the good play or 2012) via HSU/D; an emerging markets position either way with HJU/D; and some demographic plays like COW.TO or ZCA.TO (BMO Ag commods index ETF, another poor-volume good-prospects ETF).

How I divide them up is up to me. Notice with most of those, they're leveraged ETFs, but allow me either a long or short thesis.

Tuesday, January 3, 2012

market comment - the universe just smoked a big huge bowl of weed edition

Dude, I dunno. Silver's up over 6%. HUI crossed over EMA(8) and is now positive. Someone even bought a couple shares of Apoquindo.

Far as I'm concerned, the crossover is my signal to get back in, so I'm back in. I guess the last 2 weeks were a fat load of tax loss selling and reverse windowdressing, eh?

I'm at a loss which producers to buy. So I just bought a pile of HGU, the gold miners double up ETF. And a tiny bit of BCM, and some XG. I'll think about more later. I'm sure a hangover has to happen pretty darn soon.