Category Archives: Precious Metals
Emergency Derby Picks
Can Early Favorite Orb pull a “Big Brown” and win from the far outside post position?
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My apologies for not ringing in this week, but Derby Week is like Mardi Gras down here and I’ve a lot of responsibilities. Many of them include chaperoning Large Net Worths around, paying close attention to their words of wisdom, and occasionally matching them bourbon for bourbon, deep into the evening.
Gold an silver seem to be hanging in reasonably well, here, and $1,450 seems to be holding well. That’s a level to keep your eye on. In the meantime, I like AUY, NEM, AEM, and of course SLW and RGLD. All on sale now.
As for the Derby itself, I have to admit a certain loyalty to Rick Pitino’s magic horse, Goldencents, which, donning Kevin Ware’s #5 at Santa Anita, scorched the pack for the highest Beyer speed rating of any of the Derby preliminaries (105). Nobody else came even close to that in the Derby prelims, which lends the cold credibility.
I also like Normandy Invasion, and not just for the cool, retro-WWII name. I liked the way Normandy was making good time to almost overtake Verrazano in the Wood Memorial at New York’s Aqueduct Racetrack last month. That race was a mile and an eighth. I think with the extra 1/8 of a mile left in the Derby, Normandy should be sitting pretty.
Last I like the big winning colt, Orb… caution, this horse will likely be the favorite once all the Louisville Cardinal fans (Pitino’s GoldenCents) and multi-Derby winning jockey Calvin Borel fans (he will ride mud horse favorite Revolutionary) get too drunk to remember to bet by the 11th race. Orb has done nothing but win, and is coming off a sparkling win in the Florida Derby. The problem with this horse is it’s coming off the 19th hole, which has been a traditionally tough place to win from. Big Brown, however, won from #20 position in 2008 (see above) so anything is possible if you have a super horse. The question remains… is Orb enough of a Super Horse to win it?
Tune in tomorrow evening at around 6 pm on NBC! Look for me hanging off one of the balconies, hopefully not by one of my more delicate extremities.
Best to you all, and happy happy Derby!
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$1,400 is Key Here
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The 1,350 to $1,400 area is going to be important here. We banged against $1,400 a couple of times over the past two days and were not able to surpass it until this early this morning, when we had a quick break and then a jet to over $1,420. There was a lot of selling into that break, and so a retest of $1,400 will be increasingly important to see if this will be a failed bear flag or an actual recovery from the recent oversold condition.
We are as of this writing, trading at $1,407.
There is a possibility that we could snap back extremely hard on this recent down-plunge. There are stories all over the internet about large physical purchasing going on. This could be anecdotal (well, it IS anecdotal), or it could reflect the difference between the paper and physical markets. If the last couple of days action was a desperate move to combat an imminent physical delivery problem (as some have speculated), we could see a torching of the shorts like none have encountered since early 2009. Stay vigilant and nimble here.
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Was it Over When the Germans Bombed Pearl Harbor?
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I don’t need to tell any of you who were paying attention about Friday’s crater job on the precious. Coming about on the Friday before options expiration week, at at the end of a long and dreary down cycle, it certainly looked nicely timed to shake the trees loose of many golden and silver ducats. Friday was a nice day to make that first physical purchase and tomorrow morning may be even better as a result of the follow through.
I’m holding on to what I’ve got for the almost inevitable mean reversion play here. The precious miner bullish percentage index (“$BPGDM“) is at absolute ZERO. The last time we hit zero on that scale was in December of ’08, at the very nadir of the financial meltdown. What’s more the Hulbert gold sentiment rating is off the chart completely (yes, below -20, otherwise known as “uncharted territory.”) We lost another $50 tonight before the rebound, and we could even see $1400 tomorrow. Is this the time to give up the ghost? No, it’s blood in the streets time. You know what Mr. Rothschild said about the time to be looking to buy, right? Consider that the Buying on Weakness number for GLD was its highest ever on Friday at $144 mm in block trades. That’s the big boys out collecting.
The best bet right now is physical, and or waiting for the turn, with wariness and apt cunning. Fly got some AG on Friday, and while he may have been a touch early, I think he’s got the right idea. The fast flyers will rebound 20+% when this plunge is over. I also like the fat dividend alpha males like AEM and NEM here… they too have been beaten down over-harshly.
Hang on, folks, we’ve been through these before.
Best to you all.
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Wrapped Tight
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Everything’s relative, I guess, including pain. Today’s revisit to the recent lows (and no, we’re not there yet) is not as painful as, say — a bloody compound tibial fracture jutting messily out of one’s shin. That said, it sure has been a frustrating six months, hasn’t it? And yet, if you look at all the major charts, it looks like at this late point in the cycle, the worst we are going to get is a revisit to the end of February lows, which — not insignificantly– were at the 200-week exponential moving averages for most gold and silver stocks. Royal Gold (RGLD) is still my favorite here, but you’d have to be crazy not to take advantage of the yielding plays available through NEM, AEM, and even ABX — and those are large caps you’d never see me recommending in a “normal” market.
But this isn’t normal. There’s a concerted, global (read Big 8) effort to devalue currencies — and therefore reprice debt — the world over. The only way those central banks can get away with this kind of routine, and save their debauched systems, is to get it done under cover of a “deflationary” scenario. The easiest path to that is to keep their foot on the less liquid large commodity and precious metal markets. This whole American Earl Revolution is a God-send to the central bankers, because it’s bringing supply on line in a period of global currency inflation. Ask yourself why oil prices have remained so stubbornly high, however, despite the onlining of so much new supply in the world’s greatest petroleum consumer.
How much longer can this kind of thing go on? Until the little guy cries “uncle” as loud as Soc Gen just did? Given that I was expecting a retest, and the large volume bars we saw at the late February lows, I am thinking this week and maybe the next will be the final washout. I’m still holding tight to my remaining cash, however. Like in late February of 2009, I don’t expect these prices to hang around for very long once the next cycle takes flight. That said, I think there will be ample time to take part once the bull trend resumes.
Best to you all, and Go Cards!
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PS – this retrace is also an excellent time to buy some physical, if you’ve been holding off, including 100 oz silver bars and nice liquid gold coins like Maple Leafs or Eagles.
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You Sure You Want Some of This?
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Defense wins championships, right? It also keeps one alive to survive and advance. With Cypress pulling out the last minute levers to confiscate “excess deposits” in order to balance its public accounts, how good are you feeling about “independent” depository institutions right now?
Sure, I know. None of that stuff could ever happen in the U.S. We’ve only got $20 trillion or so in 401k assets across the country. We’re only a Bloomberg decision away from your friendly gummint deciding that asset plan could be much more “sustainable” under their “supervision.” And heck, what’s safer than gov’t treasuries after all?’
Remember, they are just looking out for your best interests.
But own some physical gold and silver anyway (now’s a great time to pick some up for the longer haul). And you know what? A Kimber ACP might not be the worst idea either.
Best to you all. Go Cards.
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Auditioning for the Sopranos
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…. the hard way!
Let me caveat what I am implying here by saying first that I fully expect the commodity price of gold to test the late 2011 lows of $1523, and perhaps even undercut them to really get the blood flowing. I am prepared for that, as I realize the run to $1900 — much like the run to $49 in silver, was too far and too fast, even in a fiat printing, race to the bottom, currency bubble. But with the $Gold:$HUI index approaching 2008 crisis highs, and the $Gold:$XAU index now reaching an unprecedented height, I am copacetic about holding what I have while becoming poised for a final shake out where I can harvest some of my favorite names once again.
Opportunities abound in high quality names, some of which offer dividends while one waits (I’ve already added AEM, as you know). There’s no need to stretch on speculation, now, and look for any miners doing business outside the safe zones of Canada and the U.S. and Mexico for some silver plays. RGLD at these prices is insane, and if you are worried about this pullback, please review that company’s past charts over the last ten years. All of these stocks — yes, even the quality ones like SLW and AUY — have trod this rocky path before. In my opinion, these, along with their underlying commodities, preferably held in part in the physical bullion, will help you weather the coming storm in collective currency crisis.
If however, you believe that Ben Bernanke can be the first Federal Reserve Chief to successfully inflate the economy out of a low growth, value inhibiting recession, then perhaps your trust in this new bull is warranted. In my business, and in the entire economy, I see inflated prices for everything already, so the valuations of the stock market come as no surprise. As we approach major all time highs in the SPX, I am increasingly skeptical that we can continue without a major correction, just as I was in late 2007-2008, when we saw similar overwrought behavior. I may miss the final euphoric highs, as I did last time, but I will not end up like the Capo Vito, either.
To be sure, I am not telling you to buy these miners at this bloody juncture. Even I am holding off for the turn, as I mentioned a few times over the last month. But I would also counsel you not to short a bull, no matter how wounded. Bulls are mighty, long lived beasts, and despite their weariness, can leave one singing soprano with little to no advance warning.
Best to you all.
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