Basing My Long Silver Trade Off Mathematical Precision

I am a firm believer in mean reversion, the proverbial rubber band stretching too far and then snapping. As you know, for fundamental reasons, as well as philosophical, I’ve been a vocal bear on precious metals, having just closed out a short position in AG. Prefacing those beliefs at the forefront, I can tell you that silver, as well as gold, have indeud breached the outer stress bands and might be due for a bounce, perhaps a very big one.

Using my algorithms inside The PPT, which specializes in finding mean reversion plays, silver and gold are being flagged as being OVERSOLD and the inverse ETFs being OVERBOUGHT. Before I show you the statistics, just know that I am not a fool and understand that mathematical models are meant to be broken, when speaking of statistics and correlations. So, I enter this long AG trade, which is now my largest position, with eyes wide open and a bias against it.

UGLD

GLL

Gold Oversold

Silver Oversold

And GLD

Based upon what the algos are telling me, this trade should be profitable within 3 trading days, peaking out in 7. It’s also worth noting that this trade is contingent upon silver remaining down today, therefore allowing the Overbought and Oversold indicators to register on a closing basis.

Technical scores are in a state of constant flux, ranked on 5 core principles.

All categories are ranked on a scale from 1-5, 5 being the highest/best score possible. There are other factors that are built into the scores, which are not seen here. We like to call them “Sub Rosa” and “Sixth Column” factors, that include price fluctuations in all major currencies, commodities and bonds. We’ve tried to fine tune the scores based on historical precedence, all to do with correlation. However, eventually, correlations become unreliable, as time and news events change the trading paradigm.

We’ve adjusted for this by allowing our algorithms to “reset” every 3,6 and, 12 months–which accent our core historical algos. This might sound a little complex, but it isn’t.

It’s a tool that helps me survey the market from a high perch, find things that are hidden that I would most certainly miss if doing it manually.

I am giving this AG trade until next Friday to yield 5-10% on my money.

I covered my short in AG the other day and now I am going long, under $13.88.

I bought a decent amount with some of my 40% cash, in for the Costanza trade, mean reversion shall have its say, according to the algos inside of The PPT.

Never bet against the Fed. Ever.

With gold and silver down between 4-6%, the miners are getting killed. They are hitting new and fresh 52 week lows, ad hoc. If you’re looking for stocks to short, perhaps the ones above their 52 week highs can offer a target price, something tangible for sellers to sink their fangs into.

I am merely a steward of information, a middle man of sorts, protector of the truth through transparency.

Gold, silver and bitcoins are all undergoing ‘generational tops,’ meaning they will never reach new highs during this era. If you are waiting for gold to eclipse $2,000 or silver $45, you will be waiting until the year 2035, if not longer.

Again, this isn’t my opinion, per se, but facts on the ground.

Precious metals should be avoided, like hookers in the south of bronx. Miners should be sold short, but not on gap down days. Sell the rips short and avoid the temptation of buying any dips–due to the severity of the erosion in the space.

As for bitcoins: they’re now trading $65-75, which is still $65-75 too expensive.

Let me know if I left anyone out.

Here are the choices:

Coal
Natural gas
Nuclear
Apple
Shippers
Steel
Aluminum
Silver
Bitcoins
Gold
Chinese stocks
Solar

I’m mixed on this question due to my overall bearish opinion on stocks. However, if forced to choose, I’d have to go with shippers, thanks to the upside potential and unsustainably low rates that currently plague the industry.

What are your goals– as it pertains to this business? Get rich quick?

Not for me.

I want to be like Carl “I’ll take three seats on your board, and you’re fired” Icahn. Some are put off by his abrasive demeanor; but that’s a breath of fresh air for me, a kid from brooklyn growing up playing inside of sewers.

He started from nothing and is now worth $18 billion. He creates real value for shareholders in the companies he bullies around. The CEOs and CFOs should fear Carl’s wrath, not us shareholders, investors who are looking to bank a little coin. He will twist their heads off, have their jobs, and sell their companies to the highest bidder. Short sellers, like Bill Ackman, should fear Carl too, as he’s very old, very rich and especially belligerent.

Some people like to call him an idiot because he has a New York accent. The man graduated from Princeton, a philosopher no less. Should we deride a great man, such as Carl, because of his major during college?

I believe his philosophy is to break the backs of those who bet against him, is it not? There’s nothing shameful about that.

iBankCoin is a proud supporter of The House of Icahn, the Frank Sinatra, Chairman of the Board, of this finance racket

We sincerely hope Carl becomes a vampire and lives for another thousand years, menacing those who get in his way of financial dominance.

Heck, the guy even does a mean stand up comedy routine.

NOTE: I was +1.25% today–thanks to GTAT and FRO.

All of these dollar skeptics are chasing windmills, truly. They decry the “dollar will be worthless one day”, all due to monetary policy and the absence of gold in treasury vaults.

What is gold? Just because some mining company enslaved a few thousand workers to procure something from a cave or ground, I am supposed to have faith in that?

I don’t think so.

You know what I have faith in? Drones.

I have faith in M1A1 tanks putting craters in your capitol. I have faith in a F-35B Lighting II fighter jet taking out your mint.

Money, as you like to call it, “fiat”, is backed by power. Power is supported by military might, which is fueled by ingenuity, productivity and of course hard work.

See the dollar is backed by something.

Now what is a bitcoin backed by? I see the price has “dipped” a bit from yesterday’s highs of $265, now trading at $65. Last I checked, the dollar has never declined by 75% in a single day.

Backers of the internet currency might argue that the bitcoin was trading at $40 last month and $2 a year ago. Therefore, today’s “volatility” is nothing more than a speed bump.

But I thought the bitcoin is an alternative currency, not speculative investment?

How is wealth created?

Believe it or not, wealth is primarily created through productivity, my grandfather busting his ass refinishing furniture for 12 hours and delivering it up 10 flights of stairs in a building without an elevator. The money he made was placed into a bank account, where he hoped it would retain its value.

A currency should store value, not create it.

Having said that, the dollar has been devalued over the years, which has fueled the “dollar is finished” cult. Look, the dollar is down because they want it to be down. We are currency reserve, a GDP sporting $16 trillion, bank accounts worth in excess of $50 trillion. That’s wealth, not some two bit internet currency being used as an “Occupy Wall Street” movement, only dumber.

The Bank of Japan is the most prolific manipulators of asset prices in the world, which was forecasted here long ago and the reason why the NIKKEI was my top pick for 2013.

HIG just guided up, partly tanks to its Japanese exposure.

Taking a quick glance at Japanese stocks traded here, most are in the green and making new highs. The NIKKEI is +55% since November.

Outperformers include TM, KUB, NMR, IX and MTU. Two stocks that haven’t moved yet that should benefit from the sinking yen are HMC and CAJ. After a market decline, it’s worth a shot.

The big story of 2013 is the move up in mega cap dividend payers. Long term investors need yield. There is a select group of stocks, with caps over $10 billion, that are quietly minting coin for their investors.

Here are some notable outperformers.

BX, XRX, WAG, KMB, CPB, BMY, BLK, CNP, PAA, BDX, CSX and EXC.

Truth is, I have more than 200 names with market caps over 10 billion, yielding more than 2%, that are +10% year to date. It’s incredible and of course absurd.

This market is begging for a beat down. It’s real hard to bet against liquidity because “they” have an infinite amount of money. Nevertheless, even they know markets need the illusion of normalcy. Periods of distress can only embolden public opinion in their favour.

Therefore, you should expect markets to behave as they have in the past, because they’re too lazy to deviate from the blueprint.

May will be down and those losses will redouble in June. By July, the media will be clamoring for more QE. Hence, Bernanke’s job will be supported by a vocal Wall Street, helping him manage the US economy with impunity.

If this plays out the way I just explained it, volatility will be a supreme buy towards the end of April and taking a net short position will be extremely profitable by June. However, be mindful that it’s an extremely difficult task, this business of timing tops. You might be better served taking my approach via a very large cash position and the patience of an elephant.

Our good friend Rhino resigned from his position of interim tabbed blogger last night, due to an array of issues. This isn’t the first time a blogger resigned from iBC and it won’t be the last.

It’s a selfless business, one that occupies a great deal of time for little to no reward. There is, however, opportunity, but only after a significant amount of time and effort. The truth of the matter is, I don’t pay for content.

Best of luck to Rhino with his future endeavors.

What to do when you are in cash, waiting for the market to correct?

This question reminds me of when I was a young broker, training to speak to affluent people without making myself look/sound like an idiot. My mentor would always tell me “never think with your own pocket.”

What does that mean?

It means, just because you’re a piker and can’t afford to spend 200k on a kitchen renovation, that doesn’t mean that everyone else is a piker. Never talk with your own pocket, no matter how big of a shot you think you are. There is always someone bigger. On the other hand, try to avoid exaggerating your position in life to the point people think you’re hallucinating. A good, young, manager of other people’s money is humble and listens to what is being said to him. He will filter the message and try to tackle the issue.

Now a good finance blogger will not call a roaring bull market boring, just because it’s dull for him. Just because you’re in cash doesn’t mean your readers are in cash. Moreover, if you’re bearish, don’t alienate 90% of the people who read you by ignoring them.

Another topic worth discussing is humor and how to use it.

Comedy is not for everyone. Some of us can spin a story and make it funny, others bring disaster to their names by feebly delivering hard to understand jokes. If you’re not funny in real life, odds are, you’re not funny on the interwebs.

Lastly, I want to discuss the matter of being abrasively cocky and how it pertains to being childish.

When blogging, try to avoid torching your readers with napalm. Ninety-nine percent of you will be unable to chastise your readers correctly, because you were spun from inferior silk. The texture of your outer-garments are of the burlap variety. Do not write in such a manner that you are abrasively cocky because that, my friends, is childish. No one listens to a child. They have no authority.

The best form of humor is the self-deprecating kind, mixed in with a little insanity. I find myself at home on iBC when the halls are polished, floors waxed and the population in a state of catatonic shock.

Class dismissed.