Joined Apr 19, 2009
721 Blog Posts

$1,400 is Key Here

Gold shorts

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?

[youtube:http://www.youtube.com/watch?v=q7vtWB4owdE 450 300]


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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My Favourite (sic) Bridge



I  know quite a few of you might expect a post today about tonight’s National Championship Final down in Atlanta, where my beloved Redbirds will be playing Cain’s Be-sooted (sic)  Maize and Blue Marvel Comix Characters (no bologna).

However, I will humbly defer, due to an acute allergy to all bad ju-ju and other such superstitious toxins.  I learned my lesson after taking Wichita State a little too casually and as a result experiencing four or five apoplectic cardiac arrhythmias during Saturday evening’s semifinal game.

Let’s take this time then to talk Kentucky Derby and one of my favourites (sic) in both the equine and suspension categories — Verrazano — the Winner of this weekend’s Wood Memorial Derby Prep at Acqueduct.     I am usually very partial to the winner of the Wood Memorial, as it’s quite often racing against the best 3-year old competition prior to the Derby, and what’s more important, racing in very similar conditions to that of the Derby itself. 

This is extremely important, and often overlooked by fans of the Florida, Louisiana,  Arkansas and Santa Anita Derbies (the other noted Triple Crown prep races).   While there’s much difference in attitude between my native home and my adopted one, there’s actually very little difference in overall climates.  We might get slightly milder winters and less hurricanes down here in the Bluegrass, but for the most part our weather patterns, up to an including ambient temperatures are very similar. 

Moreover, the Wood Memorial at Acqueduct , is conducted in a similarly aged (and aging) facility, and on a dirt track — no small matter in this age of synthetic (read “rubber”) surfaces.   So I like the winner of this race way better than I do the palm-swaying pooftahs down in California or Florida.   Mind you, The Illinois Derby (which is no longer considered a Derby prep), in Cicero, IL, is another similarly-conditioned race, but it never seems to draw the same top flight competition that the Wood, Florida, Arkansas, Louisiana and Santa Anita races do.   

(Rumor has it the Illinois was dropped from the Derby trials because Gap and Yap has been caught waving a sparking taser at the horses there one too many times, and they lost their insurance coverage.)

Pulling back to Verrazano, he’s a plucky “working” horse with a lot of muscle to him, and he reminds me of former Kentucky Derby winner Fusiachi Pegasus in that regard.   He ran something of a slow Wood Memorial (finish time for the 1 and 1/8 miler was 1:50:37) , but that could mean nothing, given he was only following the pace horse (ChrisandtheCapper) for the first three quarters of his run, and biding his time to make his move.  What’s important is that he held of his competition in a very game Vyjack (who fell to third after going neck and neck), and a surging Normandy Invasion, who took second at the wire. 

The only smoke on his horizon may be that Verrazano’s jockey, John Velasquez, who also rode Florida Derby winner Orb (see below), got hurt late yesterday in a fall at Acqueduct.  A change in jockey can be a big problem for a young horse

I also like Orb, the Florida Derby winner and of course Goldencents (whatta name!), the Rick Pitino-owned colt that just took the Santa Anita Derby prep from Bob Baffert-trained favorite Flashback.   I will have more to say about those ponies in the coming weeks, but for now, let’s hope Verrazano is not a Bridge Too Far. 

Oh, and cover those silver shorts too, while you are at it.


UPDATE: Breaking… Flashback has been pulled from the Derby Trail due to a bonechip injury resulting from last Saturday’s Santa Anita Derby.  Out for at least two months.  

Pitino wins again!



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Wrapped Tight



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!


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?


[youtube:http://www.youtube.com/watch?v=YuHYMv_6KNU 450 300]


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



…. 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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