Can Early Favorite Orb pull a “Big Brown” and win from the far outside post position?
___________________________________________________ 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.
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.
The Signs were out there, that’s for certain. They glow more balefully–frighteningly, perhaps – by the day. Soon you will find that their light will transform into warmth, and voila! — you are out of the cold. This week we saw the $HUI:$Gold ratio approach it’s late 2008 nadir, despite the lack of any similar shade of trouble in the SPY or any other major index for that matter. For many who have been suffering through this mind searing mini-bear in the miners, it was only one more pencil in the vile jellies. For me, it was the light at the end of the tunnel.
Adding reassurance were the hairshirt boys and the plungers. The hairshirt boys talked about “$21 dollar silver” and gold “heading back to $1200″ this week. More music to my ears. Then the dear plungers. Those who can always be counted on to ring the bell at the exact wrong time were actually starting to short stocks that had been pummelled for months now, quality be damned. Again, the scent of ambrosia, the ply of relief.
Can anyone predict the future? Only in Tom Hanks movies involving haunted vending machines, my friend. But there are time tested truths for all markets, and for the precious metal markets especially. Perhaps the hardest and truest is that both the bulls and the bears will suprise the hell out of you in this space. Such is the lot of a smaller capitalized, politically sensitive commodity group not exactly known for it’s GE-like management style. But an ancillary truth resides in the recovery from both a bull and a bear… namely, the harder the band is pulled either up or down, the greater the snap back to the up or downside.
Recently we’ve seen near-unprecedented disintermediation between the price of the miners and their underlying commodity in both gold and silver. Some of this is a result of input (cost) prices rising while commodity prices are remaining stagnant or falling off. Some is the result of rational hedging, and some the result of anticipatory momentum trading. It’s this last that has brought us to our most recent state, where one might say the blood in the streets approaches the door-level on our three-step brownstones.
But make no mistake, things are not going to be “different this time.” We’ve seen this all before, and the results have been similarly spectacular. We may have one more final “terrier shake” to throw the last remaining weak hands off the bus, but I have little doubt that the Fidelitys, the Blackrocks and the other large funds are right now gobbling up even more SLW and RGLD and AEM and AUY than they were last quarter. And AG…. oh my yes, AG.
I expect one more pullback today and perhaps into early next week, but I will initiate buys in AEM at any price under $40, if I am so lucky. Get yourself a dividend while you enjoy the rebound, why don’t you? You can always use the extra beer money, no?
As for our friends in the smaller silver market, I would think next week the safer bet, but if we see some pullback today, I wouldn’t gainsay your taking some risk. After all, for EXK to get back to a mere $7.00 (!!) is an almost 21% move from here. EXK will be $10 before next Christmas, if my predictions weigh out properly.
Here’s a stock I’ve purchased quite a bit of in the last week, pal. North American Palladium (PAL) caught my eye because it showed a bit of a sea change on the long term chart, and this past week, it’s established itself up above that long term trend line. Check this out:
Can it get to $3 bucks from here? Pal, I wish I could tell ya for sure. Alls (sic) I know is that’s a lot of buying in 2013 (black volume sticks), and the trend has changed. I’m holding onto my stack until at least June, so let’s see.
I also like AUY right now, and of course, you should be accumulating RGLD at these ridiculous prices, and SLW on every opportunity.
Sorry I haven’t been around to keep company. I’m being kept by many companies. At first glance, if you look at my favorite universe, it seems like it’s hand holding time. However, I’ve looked over my long term charts tonight and I can’t believe how cheap some of these miners are trading right now. SLW has held up reasonably well, but AG and EXK are Christmas presents here. Get them for your kids. RGLD continues to take hits, but mein gott it’s tasty here. I like AUY and even BAA, as well.
I held off the whole month of January, and did not spend any “year end funds.” That changes tomorrow. I’m getting more of “all of the above,” but will keep some dry powder for further Crazy Eddie liquidation sales. Everyone is printing folks. Every one is racing to the bottom. If you think that will hurt the precious, you need to have a look at how much Blackrock and Fidelity own of RGLD, and how much they’ve accumulated recently. If you think they are the dumb money, well… God bless.