The Collapse in Gold Was Only the Appetizer

Don’t believe for a second the drop in gold and silver were isolated events. As a matter of fact, it’s all tied into a single thesis, all to do with liquidations and the reemergence of risk off.

Oil will follow, luring people back into the fold due to a reduction in “input costs.” However, what they won’t realize straight away is the municipal dependence upon gasoline taxes and how lower gas prices is onerous for many state across the country.

There are beneficiaries.

Look at the shippers, companies like FRO are plagued by fuel costs–which comprise 67% of their expenses. If one could surmise a few simple points, they may start to believe that a company like FRO will benefit from sharply lower fuel costs.

But the shippers are not a short term play, as it needs to undergo restructuring in order to heal.

Be wary of the fast money trades, picking the depressed “for a trade.” Sometimes those trades end up becoming an albatross, something you will regret with every fiber of your existence–shortly thereafter.

“The Fly” will continue to wait out the tape in search for reasonable discounts. At these levels, following a mini-pullback, I do not feel a sense of urgency to jump into the fray.

I am not offering advice, but speaking to myself.

All I can do is wait for some of my favorite names to cheap, names like WETF, BX and USG. Sure enough, they’ll come down and it will be scary to buy when I decide to buy them. But there aren’t many pullbacks in this perpetually bullish market, so you might as well take advantage of the pullbacks when you can.

We’ve been sharply lower in May for the past three years. Some might say “it’s time for a change. May will be up.” But everything points to the continuation of this trend. In the big scheme of things, one month is a very small amount of time to wait for cheaper stock prices. Instead of risking 20-30% of your holdings, based upon the caprices of the Fed and our beloved policy makers, might I suggest taking a month for holiday?

Top picks: GTAT, HDGE

Today confirms what we’ve all suspected: this market is headed for much lower prices. Traditionally, the market is “let go” during the month’s of April through July. I see no reason to believe 2013 will be any different.

Volatility is back and so are treasuries. As you can see, TLT and VXX are heading up again.

My preferred form of short is HDGE, however. I am not looking to make a fortune on my shorts, just stem the flow of blood from leaving my body. I do not feel comfortable initiating short positions into the teeth of a decline–because based on recent history, shorting the market has been a losing endeavor.

So, my position is simple: 55% cash position and another 20% in HDGE to pair alongside my depreciating longs should allow me to remain in control of my destiny, at least for now. I am very eager to make back recent losses, but know the fastest way to accomplish this task is to bide my time and wait for my trade, not acting out of desperation like a dog fetching a scrap of food.

The Devil is net short too, but has a special situation that comprises all of his efforts at the moment. Hopefully this downward tape will allow me to buy some. However, it’s been very stubborn and extremely strong.

I have tailored made indexes that I use to keep track of what I deem to be important. Let’s just get to it and I’ll explain my sentiments along the way (now would be a good time to adorn your heads with top hats, thanks).

6 Month Charts

Here is the commodity index, which is basically a cross section of the entire space, e.g Ag, Steel, Gold, Oil. It is in a bear market, no explanation needed. Is this the bottom? Who know’s? It’s making fresh lows daily, so it’s a guess.

The financial index has held up very well, despite general market concern. If the market is really gonna roll over, this needs to be taken down a few notches.

This is my semi-managed index inside The PPT. Ironically, the chart sort of resembles my real portfolio. This is in free-fall mode. The chart is of a GARP index, specializing in growth stocks that appear to be inexpensive, using traditional methods.

This is the raw commodity index. Like the commodity index, the raw stuff, which represents the real stuff, not the retarded equities, is in super bear mode.

This is my risk appetite index. It is comprised of munis, govt bonds, foreign bonds, sovereign, corporate, junk etc. This is the credit picture, domestically and aboard. As you can see, the index foretold the weakness in April back in March. However, it’s on the mend again, likely due to the risk off nature of the equity markets. My analysis is simple: this is a risk off trade in stocks, nothing to do with deteriorating credit conditions. Nothing systemic.

Social media stocks have come a long way. This sector is a strong sell in a weakening tape. I am surprised it has held up so well. This is a sector I’d consider shorting immediately.

The tech industry is most representative of this market. It’s not in bubble collapse mode like gold and silver and not propped up like social media. It doesn’t look good.

Last but not least, my favorite: housing and housing related stocks. What a run this sector has been on. Like the finnies, it’s a leadership sector showing signs of weakness. I would not sell it short, since I firmly believe housing is on the mend. Instead, I’d track it closely and buy it up into weakness.

I need to lick my wounds for at least a day and refrain from buying anything. I just went outside for a quick ride to the local store and received a ticket in the process. Today is not my day and I don’t want to compound my losses through acts of desperation.

It was pathetic of me to buy AG, even though I outlined how silver stocks trading 15-20x sales was unsustainable and it was equally pathetic that I didn’t book gains in GTAT.

So, here we are again. The great equalizer is working its magic and everyone gets a fresh start. I am going to stick with my original thesis that the market is on the cusp of much lower prices. Therefore, it goes without saying, nothing should be bought.

I do not ban people because I am bored or annoyed by what people say. I ban people because they disgust me and I like to take away whatever freedoms available to them, within my control. If you are reading this and unable to comment, that means you’ve received a level 2 banning. If you are unable to access the site without using a proxy, you have a level 1 ban, which means you’ve committed the equivalent of “high treason” around these parts and should be executed.

Because I cannot arrest you and carry out this punishment, you’re banned from accessing the site, a good deal, very lenient, with all things considered.

If it pleases you to know, I’ve taken a wrecking ball to myself once again, as is tradition here on an annual basis. It should also please you that each time I’ve done this, I actually predicted the market decline, effectively ignoring my own warnings.

My losses in AG were of the egregious sort, punishing my year to date returns down to a pedestrian 13%. After selling AG, my cash is now upwards of 50%, with another 20% in HDGE. I am in a very “safe place” now, but not in a position to make my money back. I’d have to allocate funds to do that, something I am afraid to do.

As fate would have it, I have a really good tip from The Devil regarding a certain stock that “looks good” on his radar. Coming off of a mountainous win in UNXL, “The Devil” is feeling his oats, confident in his market analysis.

The problem is, the stock is a bit too illiquid for me and I cannot afford another loss. The conundrum with that, of course, is that scared money never makes money, so I’m stuck in a catch 22.

As we speak, the stock is shooting higher and I am missing out.

I sold out of AG, booking a two day 16% loss.

Thanks for the ride, lady.

The market collapses immediately after tax day is being considered a mere “coincidence.” Meanwhile, I’ve suspected this was going to occur for months, based upon the onerous trading action of stocks during the months of April through July over the past 3 years.

Full fledged collapse awaits in the balance. I made grave errors, yet again, by doubting my very own prophecies.

In all seriousness, I see nothing but war, terrorism and earnings shortfalls in the not-so-distant future.

Oddly enough, coincidence or not, everything has changed.

Why bother troubling yourself with today’s market prices? We all knew this was coming, so let’s not act all “rapish” now that it’s here. Looking ahead, there are many wonderful things to look forward to. In particular, I am eagerly awaiting the beginning of the hurricane season, scheduled to begin in mid August.

Falling victim to a “Deacon of Death”, as some like to call them, is like winning the lottery, only more permanent. I can guarantee you, should your retarded home get blown to pieces (extra three little pigs), the stock market decline will not bother you in the least.

By then, stocks should be down anywhere from 30-50%, terrified by a spectacular Chinese collapse and subsequent popular uprising. North Korea would have detonated 20 nuclear bombs on its neighbors and commodity prices would have fallen by at least 40%, bankrupting thousands of companies in the process.

Ben Bernanke will attempt to “QE Again,” but the market will become smart to his parlour tricks, sending treasuries to the graveyard, alongside the US economy–leading to default. At that point, our sagely government officials will attempt to curtail the dollar’s precipitous drop by “taxing the rich” through the seizure of bank and retirement accounts.

The Dow Jones Industrial Average will trade down to 38.

Let us enjoy these modest declines and savor the diminishing taste of crony capitalism, for it shall be ending sooner than you think!

We’re all fixated on gold and silver like idiots. The vast majority of the internet elite are now marching out in goose step formation, declaring “how incredibly stupid” gold and silver truly is, when in fact, none of those bozos were saying it two weeks ago. As far as I see it, I was the only one declaring the industry to be a waste-pit of time and resources– and put my money where my mouth was– by selling it short.

But nothing goes down forever, not even solar stocks or bankrupted boat companies.

I curtail your pessimism by the outright purchase of silver miners. They will bounce off your face and detonate on your balls.

Back to your regularly scheduled blog.

These are the best stocks in the market, ranked by my algos.

And here are the worst stocks.

Now have a look at the percentage losses in the silver and gold sectors, over the past week.

Pretty amazing, isn’t it?

The reason why these stocks are getting killed is due to the corrupt nature of gold/silver miners, pertaining to the absurd production costs associated with operations. Let me put it to you this way: should gold dip to $1,200, many of these junior miners will start losing money, crushing their “NAV.” Granted, the “NAV” is a very mobile valuation metric, based upon the whims of spot gold/silver. But it’s worth noting there is a material difference in the way these companies are valued at $1,400 spot and $1,200, almost to the point of absurdity.

Should gold drop another $150 from here, the precious metal stocks are going to be decapitated, revisiting levels you never knew existed, let alone possible. But if the price recovers from here, most names will enjoy 15-30% runs.

That’s what I call fun.