Scanning the financial news media and assorted websites this media morning, the consensus seems to be that there is indeed “blood in the streets” with respect to the precious metals sell-off. Interestingly, the metals were not of much interest to most market players for months on end.
While it should be obvious that they remain short-term very oversold, these moves could also be breakaway gaps for a fresh leg lower. Furthermore, they might actually have been on the cusp of a bloody washout, buyable bottom if the majority assumed they were, in fact, breakaway gaps lower.
Instead, the more popular view seems to be that a major bottom is imminent, which has me leaning more towards the breakaway gap thesis.
Regarding the blood in the streets, consider this:
Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with saying that “The time to buy is when there’s blood in the streets.”
He should know. Rothschild made a fortune buying in the panic that followed the Battle of Waterloo against Napoleon. But that’s not the whole story. The original quote is believed to be “Buy when there’s blood in the streets, even if the blood is your own.“
Buying the blood is not for everyone. For every Baron Rothschild, there are countless speculators who fade off into the night with their wallets empty. Make sure you know that your own risk tolerance and portfolio sizing strategies are sound ones. We practice these disciplines on a daily basis inside 12631.
Take a gander at ABX. Nearing its 2008 lows already. 3.5% divi.
Funny you mentioned ABX. That’s actually the first one I’d take a stab at.
What is happening to margin requirements on the exchanges? I haven’t seen any news about increases, but the exchanges must be nervous about traders not being able to meet margin calls given the huge increase in volatility.
Rothschild, that sly fox, everybody figured he would know what happened and was watching him, so he apparently did some public selling to help encourage a crisis atmosphere, while keeping his buying private.
Baron Rothschild didn’t buy the post-Waterloo panic on a hunch, speculation, nor psychological fortitude. He bought due to [legal] asymmetric information; he had hired a fleet of couriers, who delivered the news of Waterloo to him days in advance of the government itself hearing of the outcome. #HistoryToldbytheVictors
“Buy when there’s blood in the streets, even if the blood is your own”… a romantic notion, but perhaps a bit of ex post facto attribution or rationalization. There’s a survivorship bias that makes us look at such instances and wish we had bought, but cemetaries are littered with far more traders who bled out from buying too soon–as Chess intimates.
With many of those traders in mind, I think the more prescient maxim is “the market can remain irrational longer than you can remain solvent,” which brings to mind Buffett buying 20% early in 2008.
Excellent, excellent points. Thank you.
I played through options, but put premiums are so pumped up now I wouldn’t touch them, and I have sold all of mine. With this kind of volatility, I don’t see a trade with good r/w any other way.