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Listen up kids, I don’t do drugs.  

No, really.

No, I get high on… silver highs.   New one’s especially.  ‘Fact, I might even OD on breaking all-time highs, but I am doing wind sprints and having my sons jump out of random closets at me— “Cato-Clouseau-style” — in order to get my adrenaline glands in good condition for the eventuality.

Cause I’m pretty sure it’s coming.   Tonight we have new 31-year highs at $33.12, which is making me very happy.  Mind you I started buying physical silver at about $4.50 an ounce, and have never sold any of it.  That’s over 630% since 2002.  I wish I could say the same for my silver stocks, which I’ve traded perhaps with over-zealous vigour (sic).  In truth, they’ve been even more volatile than the commodity price itself.  

My favorite silver play continues to be the royalty play Silver Wheaton — SLW— which does not dirty its fingernails with crude dirt-scratching but instead secures royalty payment in silver at a certain price in exchange for financing miners.   Would you screech out loud if I told you that SLW had arranged to be paid in silver at the equivalent of less than $5.00 an ounce?   That’s like taking a time machine back to 2002 and rifling the unsuspecting corner numismatic storedfront for less than appreciated 100 oz. ingots, only to return to February 2011 and have them assayed for over $33… and counting.

Can you see why I’m so excited about royalty plays?  They are, in fact, leverage for the leveraged price of the precious metal, as that is what the miners do — they allow one leverage on an increasing precious metal price.  The royalty play is one step higher up the chain of amped return.  Is there risk of default and other mining related problems?  Of course, but like a bank, a diversified portfolio will absorb some of that volatility.  

 Remember this SLW  chart from a couple of weeks ago?   The two arrows are the places where I’ve made recent buys.  We’re still not back to our old December highs, but I think we’ll be there, maybe as soon as this week.  

 Royal Gold — RGLD — is another royalty play, this time on the gold side, and with an even more diversified portfolio than SLW.   That’s another Jacksonian you want to own.

I also like EXK, AGQ (be careful with this one), PAAS, MVG, SVM, AG, CDE (small), and SSRI.  Another great catch all for all of these (or most) is SIL, the silver miner ETF. 

For gold, the old standards, ANV, EGO, RGLD, IAG, GDX, GDXJ, NGD  are recommended, and newcomers IVN and AAU to taste.  I continue to believe also that the rare earth metals will resume their volatile climbs, and I like AVL and QSURD best.

Nothing going on in the U.S. stock markets tomorrow, but the precious metal, U.S. dollar and futures markets should be fun.  Ciao for now.

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I immediately went down to see what’s been keeping Danny from blogging…

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Since I was experiencing a cataclysmic Vitamin-D overproduction cycle out here in SoCal, the last sunny place left in America, I decided to come inside and see what the heck was going on with this market.  For one thing it closes at 1:00 out here, so the hippies have many hours with which to purchase pot and snugly pack their bongs before the 6 O’Clock news.  Odd, no?

Well, it turns out that despite my hedging and raising large amounts of cash, my portfolio continues to metastisize.   In fact, metaphorically, it looks like a large Engine No. 9 freight locomotive going down the slope of Mt. Pilot, with all it’s air and hand breaks on full stop.   I’m showering enough sparks off the railbed to tetch a bonfire, but I’m still moving forward.  

I don’t mind giving up some of that opportunity cost, however, because we’re trying to be responsible with our cash over here at the JakeGint Blog of Low(er) Grade Mental Disorders.  Here, we go by the semi-paranoid thesis that Mr. Market is trying to steal your wallet every second of every day.   So if that means we don’t partake in his reindeer games to the fullest extent allowed by California law, but we return home with all ten of our fingers attached and facing in the proper direction, then we’ve properly schooled you in the tenets of risk management.

Right now, reindeer games are accelerating already large wins in such Dogberts as FTK, QSURD, ENTR, and AVL.  If you have not taken profits in any of these, I would at least recommend a relatively tight stop.  As well, while the miners are beginning to stall (as predicted), other Jacksonians, like MON, ANDE, TCK and TC continue to push along oblivious to the divergences and breadth problems we’re seeing popping up all over.

And here’s my real problem… the Gold Bug Index $HUI has broken through some significant support here (the 20 and 50 day EMAs) and is now trying to rally back above those levels again.  Here’s the thing… I don’t think it can until it tests the 200 day EMA again like it did in the last major cycle down, back in July.  For those of you who are not as concerned about the PM market, a breakdown in the $HUI will usually give you 5 to 10 days to get the heck out of the rest of the market too.  

How long will I hold to this thesis you axe (sic)?   Until we clear that green line atop the circular bodies on the right in the above chart.   Only then will I say, “You have passed the test, $HUI, well done!”

More live pics of Danny to come…. best to you all.

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[youtube:http://www.youtube.com/watch?v=IHWeuQyFouo&feature=related 450 300]

Ladies and Gentlemen, the Best Ozzie Song of the 70’s

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He was only 2 years old, but the Fly had his theme song set in stone early….

It’s no coincidence that I bring you an Ozzie 70’s tune as tonight’s theme.  We are back in the 70’s ladies and germs, even down to the bizarre long sleeved coat sweaters that have come back into fashion (yes, I saw my wife in one this holiday season).  The current commodity inflation and the odd, Jimmah Carter-like disaffected President should serve as further nostalgia for the period.  

I guess all we can do now is await a Reagan-like figure.   In the meantime, may I present a couple of guest picks from none other than the Teahouse onna Trax man himself?

First, one I liked upon inspection today, but which is overbought considerably, is Canadian rare earth and uranium miner QSURD (a very risky venture, be warned) :

Another, I like better, as it’s Ozzie, like the Bee Gees, is Teahouse’s other pick, the rare-earth Saudi Arabia itself, GDNLF.  It actually looks like it’s got some more room here, and I may grab a bit early here, in anticipation of a more general pullback.  

Otherwise, I am standing fast with my current hedges, as the dollar is still ambivalent.  I did sell about 25% of my AVL today at over $7.55, a double even at my high prices.

Thanks for the contributions, Monsieur Teahouse on le Trax!

 

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