Friday Metals Wrap, 1/25/13

It's a fascinating time to be following the "markets." Something strange is afoot. The $VIX hasn't been this low since April 2007. What the hell was I even doing in April 2007? I vaguely recall a wedding of some sort where I drank myself practically into a coma and woke up next to the fat bridesmaid. Anyway, I've overlaid the $VIX (orange) over the "Gold Safe Haven" quotient. Gold doesn't exactly shine in this environment. I'm holding onto my puts, and in fact (as I mentioned in the comments section of S Prochemian's post), I added to my short position Wednesday when the miners (down big) decoupled from commodities and stocks (both slightly up). I've mentioned that trade several times here -- I learned about it during a two-week trial at Le Metropole Cafe. They could very well be right that it's some kind of manipulative signal. Or maybe you have a better explanation. Anyway, it's the one trade I can think of that has never failed. Sure, it might fail next time, but it's been easy money for a few years now.



 I want no part of the long side of equities right now. But I'm not short either, because the Fed will get what it wants until it doesn't.
 But gold continues to look awful. Finished the week below the 144-day MA again (and the 89-week, not shown).
And the linear chart shows that there's about $20 bucks of slack before what could be an ugly free-fall. (Which probably would be fairly short. But ugly.)




The "gold apocalypse" chart is near its parabolic resistance. While that's speculative, note the theme of lower highs. You gotta believe another test of the green support is just a matter of time. But I'm short, because I think that might be months away.

 Silver looks better, but if gold falls, it certainly has a fair amount of slack to the obvious support lines on the linear daily and log weekly charts below.



See you soon!
GM

8 comments:

duggo said...

As a firm believer that charts have nothing to do with the real World I'm fascinated how two people can look at charts and come to different conclusions.

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/1/25_3_Incredibly_Key_Charts_For_Battered_Gold_%26_Silver_Bulls.html

Obviously Egon von Greyerz could learn at lot from GM.

S Roche said...

Time-frames differ Duggo, time-frames.

duggo said...

@S Roche
Is that the time-frame experienced by two people jumping from the top floor of a skyscraper? The one who is passing the 50 th floor is relatively more positive than the one who has just passed the third floor? They will both experience the real-life (death) end result eventually.
When chartists draw lines on their selected points that form nice up or down channels they always seem to lose sight of the real World. They believe that breaking through these lines portends something when in fact all the price has done is to have crossed through their make-believe lines.
And remember never ask a TA expert to help you cross the road. He's always looking backwards.

duggo said...

As there doesn't seem to be too much activity on Screwtape Files leaving the experts twiddling their thumbs I was reflecting on GoldMoney and BullionVault (I have a position in both). I think both companies are sound and well run. However, I prefer the low profile of Paul Tustain to the "outgoing" style of James Turk. I find Turk boring. I think he loves the media attention. He's always popping-up everywhere and giving his ego a stroke. Turk recently came out with the usual "Gold is money and a preserver of wealth whereas shares are creators of wealth and they are completely different etc etc.".
As a person who is only interested in the "end result" (see above) I disagree. Shares on stock-exchanges are divorced from their real companies and are driven up and down by sentiment not unlike Gold. If I "invest" in Gold and it makes 10% increase it's just the same to me as a share making 8% plus 2% dividend. Who cares what it's called.
I was thinking of asking this over at FOFOA but you have to use words of ten syllables to be taken seriously.
Sorry for rambling on but it will make your comments section less ..... how can I put it..... un-used.

Slow Loris Larry said...

@ Duggo

To amplify S. Roche’s point about time frames in the new context of your most recent comment, let me also address the purpose one has in acquiring precious metals. I presume that you, and other potential readers already know everything I have to say, but I suppose that it doesn’t hurt to be reminded now and again.

I take your point that, on a day-to-day or week-to-week basis if you are a trader, or on a month-to-month or even a year-to-year basis if you are a speculator or even an investor, you may only be interested in nominal gains as measured in your local fiat currency, and it therefore makes little or no practical difference to you whether your gains (or your losses) come from bullion, equities, bonds, or even real estate.

What does matter is the amount of risk you take with your capital, and that should depend on your explicit reasons for trading, speculating, or investing, rather than just saving. So, what are the risks and other considerations in speculating or investing in the different asset classes? (I won’t address trading, as I am no good at it, and I am too old to put much at risk that way in any event. I will also assume that you acquire any particular kind of asset for capital appreciation and/or income, and not as disguised consumption, which is what most ‘investment’ in residential property really is.)

The basic problem with real estate investment is that it can become very illiquid just when you really need to raise cash. Also, it is normally an all or nothing proposition: you cannot sell a normal residential property a bit at a time to raise cash for ongoing expenses (although if you are old enough and live in Australia, you might be able to get a ‘reverse mortgage). And if you do sell, you can never get the same property back. So, your profits (or losses) are all or nothing and real estate prices are nothing if not volatile (or will become so even in Australia as they are becoming in Canada), so in a buyer’s market you may never realise what you thought you had gained during an earlier seller’s market.

Stocks represent a share of ownership in a company, making their value in the long run dependent on the integrity and acumen of its management as well as business conditions and the variable demand for what the company offers to its markets. Plenty of risk there, in both regards, particularly for current ‘market darlings’, but stocks in general are often over-priced for long periods in terms of PE ratios and dividend returns. So, nominal gains from stock markets are unlikely to dependable over the long haul when inflation is take into account, as price histories demonstrate.

Bonds are just loans to governments and corporations. Traditionally they have been regarded as less risky than stocks, but nowadays who in their right mind (apart from Central Bankers) would loan money to any government for ten years at 2% annual interest, or to the average corporation at a somewhat higher rate? Remember that as interest rates rise, the market value of bonds falls, and may fall a whole lot under some foreseeable circumstances.

Slow Loris Larry said...

Continued

And bullion? Well, if you only own 1000 oz bars of silver or particularly 400 oz bars of gold, you cannot sell a little at a time to meet monthly expenses, unless that is, you have a whole lot more of the stuff and a hugely higher standard of living than I do. There are various ways around those kinds of problems in any event, and unlike selling a property, there is always a buyer for precious metals, even if you don’t care for the going price. So, what are the real advantages of owning physical metal over the other kinds of assets?

First of all, physical gold and silver represent savings, or insurance, and some folks cquire them for that purpose. One can of course trade, speculate, or invest in the precious metals without going to the bother and expense of actually obtaining them physically and storing them safely, but that is a different matter. As savings, unlike fiat money or its electronic equivalent in a bank account earning derisory rates of interest, savings held in precious metals is an inflation hedge. There is also no counter party risk, which does exist even with either GoldMoney or BullionVault (or their equivalents), although I do have an account with one of them, and have nothing against the other. One could argue that risk of theft of personally held bullion is a risk, but there are good ways to mitigate it.

So, basically, I think that bullion ownership can be usefully undertaken as a means of preserving the future purchasing power of one’s savings, something of real importance as one ages and may no longer have a regular income. If one also gets a real gain in purchasing power over time, so much the better, but as Rick Rule recently commented at the Vancouver Resource Investment Conference (http://www.gotgoldreport.com/2013/01/rick-rule-mining-shares-at-deep-discounts-now.html#more), huge increases in the prices of gold and silver will only come at the expense of economic and social breakdown, implying that precious metal ‘bugs’ should be careful about what they wish for.

So, ‘Long Live The Manipulation’ of the markets for paper bullion, as 20% or so average annual gains in nominal precious metals prices is plenty enough to keep me and mine at our accustomed level of consumption for as long as we shall live.

duggo said...

Slow Loris Larry
I'm pretty long in the tooth myself and your discourse was very interesting for someone who is new at the game of investing and life. I'm not sure why you needed to put my name at the top of it. I've made most of the mistakes that anyone can reasonably make in investing and life and have managed to acquire a nice "stash" of humour. The internet is full of people and sites that are "experts in a week-end". They all all suffer from the same symptom as Eric Hoffer quite rightly stated. They all suffer from being "True Believers". Whether it's Siiver Conspiracy or Technical Analysis they all exhibit an ardent unshakeable messianic belief and never realise how funny they are. Very few have a sense of the ridiculous. The guy I like is the YouTube Silverfuturist he actually talks at lot of sense even though he's sometimes gets tied up in knots speaking.
I also like Screwtape Files. So there.

duggo said...

Slow Loris Larry continued.

I often wonder how many of the authors and people who comment on blogs such as Screwtape, BrotherJohn, FOFOA, Silver Doctors, Sliver Viglante etc. are millionaires. I suspect Jeff Berwick is but not many. Most of them are "talking the talk" but not "walking the walk".
I leave you to speculate which camp I'm in.