I'm going to talk a little bit about inflation today but I'm going to come at it from a little different angle and try and show you how it affects everyone personally and why you should keep inflation in mind when you make investing decisions.I'm going to use gasoline as an example because it's the most widely used form of energy but the principles can be applied to anything from food, tuition, housing, health care, you name it.
In 2000 right as the stock market was topping out gasoline would cost you roughly 75 cents to a dollar a gallon. So if you were to cash out one share of the Dow you could purchase 11,750 gallons of gasoline at that time give or take depending on the actual price of gas.
The Dow has been in a strong bull market right? We've been making new highs right? Stocks are a protection against inflation right? WRONG
As of yesterday gasoline was selling for $2.28 per gallon and the Dow was valued at $13,800. Well gosh darn it the Dow that has supposedly been in such an exceptional bull market now only buys 6,052 gallons of gasoline. Don't even get me started on how well the Nasdaq has done during this same period. Now if you were or are in bonds during this time you are getting eaten alive by inflation. Investors tend to view bonds as guaranteed but that only works if the government behind those bonds isn't destroying it's currency. (Ours is by the way)
During times like these investors must be invested in "REAL STUFF". Gold, silver, oil, wheat, soybeans, copper, you get the point. The government can print as many dollars as they want for free but they can't print a barrel of oil or an oz. of gold or a field of wheat.
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53 comments:
Gary
glad to see you post something like that about inflation.
They keep saying there is no inflation but I guess they aren't buying food, housing and fuel.
sure I can get a tv cheaper but I do'nt need a tv to survive.
Gas is 2.8 here today. $60 filled my truck and $40 filled my car. groceries have gone from $70 a week to $120. Our $15 eating out is now $60.
Assesed value of home has significantly outperformed the indexes and you are using the dji.
try using the ndx and look at the results. On and on it goes, you make a very valid point.
thanks
P,
Thanks for reminding me I wanted to point out the Nasdaq. It's now fixed!
While I often agree with your commentary, this comment on inflation is ludicrous.
Rising commodity prices aren't equivalent to inflation. To compare oil to the Dow's high in 2000, when it was ridiculously overbought, to to the Dow now, is a preposterous piece of anecdotal "evidence".
Ask yourself: why did China see massive inflation in the 1980s when the rest of the world was experiencing disinflation and when commodity prices were unquestionably dropping?
I just used gasoline because it's the commodity that the most people use for energy. BTW I was comparing gasoline not oil I think you missed that.
You could make the same comparison with gold, silver, copper, zinc, nickel, wheat, soybeans, corn, milk, cattle, hogs, housing prices, education, your doctor bills, insurance the list goes on and on.
I'll tell you why China was experiencing inflation. Because they were printing too many Yaun. Just like Weimar Germany printed too many francs and Venezuela is printing too many Bolivars and Zimbabwei is printing too many Zimbabwe dollars. I'll stick by the Austrian theory of inflation being a monetary phenomenon.
Who was it, Paul Volker(?), who said:
"There is no inflation, until you need to buy something."
How true.
Chuck
gary:
Nice post. Couldn't agree more. Also glad to hear you're a confirmed Austrian. The authors of the Declaration of Independence thought the same way also. So did the last great president , Andrew Jackson, who was the last presdient to truly balance a budget and get America out of debt. He also knew that freedom and the american experiment would die with national or Central banking.
Here is link you might find interesting. It is this guys measure of what he says the Real Dow average is/has been since 1924.
http://homepage.mac.com/ttsmyf/
if you believe what this guy is presenting then Gold and Silver are some of the best deals around.
Another link comparing real dow and real Home prices.
http://homepage.mac.com/ttsmyf/RD_RJShomes_PSav.html
have fun with this:
http://www.measuringworth.com/ppowerus/result.php
$120.20 in the year 1912 has the same "purchase power" as $100 in the year 1774.
$2100.00 in the year 2006 has the same "purchase power" as $100 in the year 1913.
price of gold in 1833 $20.65 per ounce
price of gold in 1913 20.64
avg price of gold for all of '06 london PM fix = 603.46
Therefore 5 ounces of gold from 1774 (1833) to 1913 was worth about 100.00 since 1913 the creation of the federal reserve to '06 5 ounces of gold is worth 3000.00 ++++..but there is no inflation..dollars are good, we must love them. our leaders tell us so..and the sky is falling and beanie will make billions in solars and have the last laugh.
lastly English Economist david ricardo on the effects of printing "paper money" this is the last couple paragraphs..text here.
http://oll.libertyfund.org/?option=com_staticxt&staticfile=show.php%3Ftitle=204&chapter=38442&layout=html&Itemid=27
f bills of exchange were payable in gold and not in bank notes, the restriction on the Bank from paying in specie, could not in any way affect the exchange beyond the limits which I before specified.
What becomes then of the argument which has so often been urged in Parliament, that whilst the rate of exchange continued against us, it would not be safe for the Bank to pay in specie, when it is evident that their not paying in specie is the cause of the present low exchange.
Let the Bank be enjoined by Parliament gradually to withdraw to the amount of two or three millions of their notes from circulation, without obliging them, in the first instance, to pay in specie, and we should very soon find that the market price of gold would fall to its mint price of 3l. 17s. 10½d. that every commodity would experience a similar reduction; and that the exchange with foreign countries would be confined within the limits above mentioned.
It would then be evident that all the evils in our currency were owing to the over-issues of the Bank, to the dangerous power with which it was entrusted of diminishing at its will, the value of every monied man’s property, and by enhancing the price of provisions, and every necessary of life, injuring the public annuitant, and all those persons whose incomes were fixed, and who were consequently not enabled to shift any part of the burden from their own shoulders.
[1 ]Morning Chronicle, 29 Aug. 1809.
I don't think i posted this link properly
have fun with it..gain some insight
http://www.measuringworth.com/
Here is another inflated item,
In 2002 I could buy a mid size rental return for 10k and today it is 14k. Its another must have item. I assure you my wages haven't gone up 40% to make up that difference.
There are probably lots more items like this if we stop and think about it.
Oh yeah, I bought a roll of copper wire for some new circuits about 3 years ago for $28 and last I checked it was over $100 for the same roll.
Gary -
to add an affirming urgency to your most recent update re: gold and silver future prospects, i offer the following:
Silver parabolics vs. Gold outperformance:
93 - gold outperformed silver for the 10 months preceding the parabola
95 - gold ouperformed for the 11 preceding months
97- gold outperformed for the 5 preceding months
03 - gold outperformed for the 16 preceding months
05 - gold ouperformed for the 11 preceding months
07? - gold has outperformed for the past 11 months
Based on the 5 examples of silver parabolic moves preceding 07, the stage is perfectly set up today.
Also, the 03 and 05 parabolics were set up by a break out of a downward wedge pattern - just as we have recently seen with the current 07 situation.
Mr. T.
A lot of interesting posts over the weekend.
On the topic of inflation, I think one could keep in mind that not all countries are experiencing inflation.
For many countries, such as where I am currently living, the currency is rising.
In fact in my case the currency has risen 65% since the bear market in stocks ended.
Prices are in fact going down here.
Every day a new story comes out about prices being dropped - from cars such as Porsche, clothes, books, and retailers dropping prices for Xmas due to the recent near 10% rise in the local currency.
And trips to Florida are getting cheaper every year - that's always nice.
IMO, countries in which their Central banks are not printing money and not running large deficits - will continue to benefit against those countries which want to live off the printing presses.
--
I like the Austrian theory.
But I don't 'buy' into it - at least for trading and investing.
Here's why:
It has so far been unprofitable to trade against the Central Banks.
Their printing presses are powerful.
What has gold returned over the last 100 years nominally?
What has the Dow returned over the last 100 years nominally?
One may argue in 'real' terms that the returns are the same - but that fact is we live and trade in the 'here and now' - in nominal terms.
It may be hard to accept - but the fact is that those who have gone into debt the most - have lived the most abundant lives (at least physically)
But no doubt - now is the time for Gold - as it plays catch up - but one has to face the facts:
Over the long term - paper IOU's and paper shares have performed better.
Anyways - don't markets run on liquidity, and on fear and greed? - not theories about how things should be?
--
And who can say when the credit/debit pyramid will end?
Can it ever end?
Just like a bull run that does not end until the last person buys, the credit/debit pyramid will not end until the last person borrows.
There is no shortage of people in the world.
Populations are expanding.
100's of millions are emerging into wealth - and they will borrow and go into debt.
This will go on for a long long long long time IMO.
Imagine if China ever gets its act together- and enacts 'rule of law' and starts its own printing presses going.
Does a farmer in China moving to the city want gold coins and bars - or some paper money so he/she can buy new things or borrow against the paper money to speculate on stocks or land?
I think he/she wants those little pieces of paper more then he/she wants shiny pieces of metal - because greed is a powerful thing.
However Gold/Silver should keep pace with the rate of money printing - seems to be about 30% a year- at their current madness.
--
Lately I've been reading all kinds of writings about market analogies to past times.
And it's hard to argue against what Gary has been showing us.
It does seem like a new commodity cycle was kicked off at the end of the last decade.
To me things seem to be heading more to 'Stagflation' in the developed countries - less so inflation.
The market seems to be shaping up something similar to the 70's:
The 70's was really 2 markets.
1/2 of the market was booming (resources, inflationary type assets)
And another 1/2 of the market just kept going down until the 1980 recession.
It seems very similar now.
After the bear market ended in 2003 - we had a bounce for almost all stocks upto 2004 and for some others through 2005.
But since then 1/2 of the market has headed back down or is going nowhere.
The likes of many stocks like F (Ford) and many tech stocks - are just biding their time - until the next recession.
Some will go to penny stock status or become bankrupt.
(Even some sectors like Semi's and Financials - have been dead since 2006 - not exactly healthy).
Yet, the other 1/2 of the market - resources, emerging markets, global tech stocks - keep going up.
And since this 1/2 of the market just keeps going up - the other 1/2 just treads water and waits (hoping?).
Meanwhile the indices grind higher due to liquidity and the positive 1/2 of the market
.
So it's a split market.
--
As for the current market.
I noticed that Silver has regained its monthly trend.
The last time it did this was October 2005 - and Mr T has pointed out what happened in the past in such cases.
So, though trends are pretty much useless for the silver market - it is impressive that Silver could regain its monthly trend - despite the manipulation.
The other market that has almost regained its monthly trend is the Utilities.
(I think I saw someone posting a trade on XLU on the Blog the other day).
So the DOW and UTIL's are acting OK - but the dog in the house is still the Transports.
It would be nice to see FDX finally respond to another rate cut.
I also notice that often after a 'sell the news' on stocks with good earnings (or even those that miss) - many such stocks are trading right back up 2 or 3 days later. These are the strong stocks.
The one thing that puzzles me is: What was the hurry to run all these big tech stocks up?
And it was strange that AAPL already laid out their positive Xmas story in advance.
We all piled into this tech trade - (because it seemed like, other than oil/gold - this was the only trade going on) - but now what?
--
What do others think?
Are the seasonals going to kick in now, and with rate cuts, keep us afloat?
Or have we already essentially had the run-up?
Often lately the market seems to be running ahead of all known seasonal patterns - since every one is now aware of them.
hey Trade -
i wonder if/how many parabolic moves you have traded to date? how did you do? what have you learned (and will try differently the next time)?
Mr. T.
Pattern -
same questions for you, if you are interested in the dialogue. do you set up a target time frame and price point and sell if/when it is hit or?
thanks,
Mr. T.
Mr T
Nice question.
Well a lot of stocks I trade are Canadian - since the resources are hot.
One area I have been having good success with this year and has been going parabolic is the fertilizer biz - POT in particular.
At the moment to trade such stocks - I am simply using the simple indications we discussed before
ie: smoothed moving averages (13 period weekly in particular and sometimes the 7 period smoothed weekly average)
Basically I just eyeball the weekly chart and see if these smoothed moving averages are tracing out a quadratic type curve.
And then I buy the dips to said parabolic lines.
---
Actually I have been working on an indicator to scan for and trade parabolics - as it is really the only pattern I want to trade because it offers the best profits.
But they are tricky.
I haven't had the time to work on this yet - since I already spend 3 hours a day on the computer...
But here is the basis of my idea:
Using weekly data:
I will use the mathematical formula to 'fit' a quadratic curve through the major lows of the price points back in time on the weekly chart.
The curve must have a certain shape:
First of all it must be sloping up.
Second I believe that the variables in the equation for the fitted curve will be Fibonacci numbers - this will offer the best shape and I suspect such curves will also occur the most often.
So the best parabolic trades will have Fibonacci numbers as the constants for the quadratic equation.
Now once we have this formula, this newly calculated equation will then project future prices and tell us where to buy on pullbacks.
Importantly: the optimum point to buy into this parabolic curve will be calculated by:
Taking the derivative (slope) of the above calculated curve.
(See that Calculus is school is useful after all LOL)
Now this tangent on the parabola should have the slope beginning to accelerate upward at around 50%.
If it is less than 50% it is too early.
If it is more than 67% it is getting to late and the risk is increasing.
What ya think?
Trade -
i think i love it. u r thinking about mathematical solutions to the challenge and though i took 3 semesters of calculus, i never knew what they were talking about....as long as i passed, which i did.
i like your weekly idear.
i have a couple ideas that i will tinker with. moving averages for sure.
but i am looking for ways to guestimate when the balloon is going to pop.
will study bollinger band width, longer rsi timeframes, ditto for ROC (which itself goes vertical at the end) and whatever I can find under the kitchen sink.
i am guessing that when the underlying sentiment for a parabolic move shifts, the top is near. the trick will be to find another tool that is intimately linked to the psychology of the parabolic move. ideas?
Mr. T.
Mr T
One thing you can look at that used to be big in the 1999 momo market was some indicators from some guy named Price Headley (not sure about the spelling)
http://tinyurl.com/25fgt6
Basically uses bands - but rather than Bollinger or Keltner he uses momentum bands.
When the price breaks the upper band and holds - that's when the stock supposed goes parabolic.
Not all stocks will work with it.
And in fact if it does not go parabolic - it is often a contrary indicator to sell or sell short.
But if some stock or sector is going to pop - the indicator I guess could help.
If you can't find the formulas - I have them - and can give them to you.
tradit:
funny lots of stories in Cdn newspapers about the fact that while the currency has appreciated vs the US dollar (while very slight vs Euro) prices have NOT been dropping. In fact there are stories everyday of canadians flocking to US border towns because prices are CHEAPER in the USA, on everything from cars, books, well almost all manufactured goods. Online shopping by canadians on US sites is up 30% by some estimates. yup canadian are shopping..just not in their country. Why? prices are too high. But their is no inflation...haha.
Don't fool yourself the Bank of canada doesn't increase money supply. Their latest numbers, '06 show a 5% increase from '05. the differnce is canadians "own" their debt. Actually what they have done is mortgage their own future earnings and the earnings of future generations. So one generation of canukleheads sold the future generations into slavery to the state, so they can have a "perceived" better lifestyle. Someone has to pay the debt. I suppose this is better than mortgaging your future earnings to foreigners as Americans have done. However Americans could choose not to honour Federal reserve notes as the federal reserve is neither federal or a reserve, but a private consortium of bankers. Just like the bank of england. The US government could issue its own money.
Now, back in the late fifties and early 60's my father on a salary of 7K a year had 4 kids, which he paid for with private insurance, had a stay at home wife, had a car, and lived in a very nice middle class suburb, had a 3 % mortgage on his house for 30 years. (neither of which exist anymore in canada). Of course that was when the cdn dollar was backed by gold. Now in canada almost all families are two income families, there are less kids and over 60% of individual production goes to the state. But there is no inflation..
I do not how old you are trade but I suggest you talk to your parents or grandparents about what life WAS like in canada 50 years ago. It is unfortunate that canadians have been brainwashed into believeing that the state could do a better job raising their kids than moms.
"It may be hard to accept - but the fact is that those who have gone into debt the most - have lived the most abundant lives (at least physically)"
What does this mean? What do you mean by physically abundant? where do these people live?
I understand from the paradigm you operate in as a day trader that you only are focused on increasing your assests daily or weekly.
I guess what I see from your post is lack of recognition of the cost to individual freedom by exchanging wealth (gold and silver) for debt (government notes).
Yes millions of Chinese will flock from the farms to the cities, exchange their real wealth (if they actually have any) for Notes, so they can acquire bobbles and trinkets with their greed, watch extra and buy people magazines to read about britney spears, but they will still be slaves to the State. Swell.
I don't really play the stock market, I offer no advice, but I hope you make more money in the stock market. You'll need it.
Trade -
i'll look into your link. thanks.
i have a hunch i know how to predict when a parabolic will likely conclude - practically to the day. i'll test it on some more examples and see how it fares.
but the idea is simply this:
use RSI (14)
draw the lower trend line.....extend it out to above 70.
what happens in a parabolic is that the upward price movement is quite constant. the RSI reading therefore continues to climb at a similar constant.
WHEN and WHERE the RSI line runs through 70 is where the party will end. it worked on the 2004 and 2006 silver parabolas like a charm. now i need to find some other examples to verify what seems to me like an easy 'truth' to prove.
?
Mr. T.
nan
I enjoy your posts.
Your right about the mail order.
I've been doing more of that lately - since the local retailers haven't been dropping their prices too fast.
But they are now finally bowing to public pressure.
Even Mercedes is now trying to offer deals.
Yes the Bank of Canada has really been pumping the money in lately - they are worried.
Counter to what certain uninformed people think - Canadian markets are to some extent more capitalist than the US.
We have no Federal Securities regulator.
Even Canada's Central Banker has called it the 'wild west'
Insider trading is rampant.
Free wheeling and dealing.
Pumps and Dumps.
It's easy to start a company and go drill some hole in the ground and then issue some PR's saying you may have hit oil or gold.
The list goes on and on.
It's a joke.
It's also why Canada's asset backed paper market blew up - because there were hardly any rules on the paper -nada.
Pretty soon we will have to adapt the 'socialist' ways of the SEC in the US. Regulation Regulation Regulation.
-
nan, I find myself agreeing with all your points - yet I know I will not be able to make any money off of acting on these beliefs - either short term or long term (I do invest long term - not just short term trading)
And when the 'inevitable' finally comes at least I will being invested to some extent in some hard assets.
But this day may never come in my life.
So in the meantime - we can all have a lot of fun (and hard work) trading and investing the paper stuff - right?
Shoot Trade, I didn't know you still lived in Canada!
I guess I'm unperceptive.
_________
You guys see what gold and silver are doing tonight?
Let's see if "they" try to slam them tomorrow morning...
tradeit;
Well I do not really play the stock market. You guys on this site know far more about the internal workings of the dow, S&p, nasdaq, TSE than I do. I like some of the insights each of the poster here provide. Sometimes its similar and sometimes different.
here is a question I was thinking about. I don't know the answer nor do I know if it is the right hypothesis. On the website measuringworth.com, I entered $100.00 invested into the Dow in 1913. it would be worth about 16k today. therefore it certainly held its Purchasing power, infact increasing purchasing power by about 7 times over the time period. Now just buying and holding 100.00 of gold in 1913 (about 5 ounces) would be worth 3900.00 today. holding its purchasing power, but clearly not as good a return as Dow. However the only way to "invest" gold is to lease it. At least thats the best I could think of. So i am curious to know what 5 ounces of gold fully leased would have returned from 1913 until today? is this even a good hypothesis?
As I said I hope you all make money. I like success stories.
by the way..I am a canuklhead too..eh.
The problem with a never ending strategy of printing money is it ends up in inflation or hyperinflation. There is no free lunch in this world boys. Never has been never will be. Eventually the world is going to have to pay the piper for trying to get something for nothing. Make no mistake we entered a secular bear market for paper assets in 2000. The central banks around the world are going to try and print their way around this bear market but in the end there are going to be rough times ahead. Probably much worse than they need to be because of the global monetary policies. I may try and elaborate more in tomorrows daily update.
N,
Remember all asset classes move in cycles. There will come a point in the not to distant future where the Dow and gold will be trading at least close to parity. At that point I think you will find that gold has held up much better than at this particular moment. Our job as investors is to determine when certain asset classes have swung to far in one direction. In 99 commodities had swung to far down and were set up for a secular bull market. In 74 paper assets had become too cheap and were primed for a huge secular bull market. Right now it's commodities turn.
Inflation is the reason that Bill Gate isn't the richest man in history. Incidently, eGates is now surpassed by The Burrito Man.
Rockerfeller makes them both look poor.
gary:
yes, that makes sense. I played around some more with my 100.00 cash vs gold and voila..this below sort of confirms what you are saying has happened. Going forward if you are right and I believe you are, gold would have to reach 3800 and ounce to reach parity with 2006 Dow, assuming the djia doesn't crash. This suggests to me even if DJIA goes sideways or drops even substantially, Gold has quite a bit of room to go much higher. hmmmm
by 1960 $100 saved in 1913 would be worth: $1,061.48 if saved in a DJA portfolio.
by 1975 $1,378.99 if saved in a DJA portfolio
by 1980, $1,530.54 if saved in a DJA portfolio.
by 1990 $4,602.07 if saved in a DJA portfolio.
by 2000 $18,428.06 if saved in a DJA portfolio.
by 2006 $19,609.99 if saved in a DJA portfolio.
100.00 of gold (5 ounces)in 1913 would be worth,
in 1960 $155.00
in 1975 807.25
in 1980 $3048.00
in 1990 $1924.95
in 2000 $1450.50
in 2006 $3050.00
Gold Charts GOLD 10/29/2007 00:37 791.80 793.30 +$8.30 +1.06%
Silver Charts SILVER 10/29/2007 00:37 14.32 14.42 +$0.15 +1.06%
Crude Oil 93.01 +1.15
if this holds through the night it is going to be a wild day at the NYMEX and all the markets
"Bank of America Corp To close its base and precious metals trading desks in NY and London - wire citing sources - closes the metals trading desks after Q3 losses"
LOL
Who loses money in a metals bull market?
Guess they were shorting....
Maybe others already saw this...
http://tinyurl.com/2yjyzx
Kind of funny - so much for buy and hold.
Buy and hold is essential to building real wealth. Don't listen to the idiots out there.
Buy/hold and Trade = the holy grail
Believe it!
I guess the question is for alternative energy and solar fans - was the awarding of a Nobel prize to one Al Gore - the spokesman for the 'Green' movement - a contrary signal.
Often when some movement or theme hits the front pages or the awards - it is a signal for traders and longer term investors to get out - since the theme is now being recognized by the masses.
Or does the alternative energy theme have staying power?
If I was going to invest in alternative energy I would choose wind. At least there the tech. is already in place. For solar to really make any kind of dent in energy consumption we would have to cover the state of South Dakota in solar cells. Not very efficient. Our civilization is going to be using oil for quite a while yet. Nuclear also has strong possibilities. Can you imagine how long it would take to convert autos over to another energy source. Just think how long it took to convert over to unleaded gasoline.
Gary
I was wondering what your take on Oil is here.
It does not seem to be selling off during the shoulder period as it often does - and as you pointed out some commericals removed their shorts last week.
Were they caught off guard by what's happening in the Middle East?
I'm not so sure - because usually when oil spikes up on geopolitical fears the stock market does not go up with it - so in this case everyone seems to be back to the 'all boats' rising trade - sensing a 'free lunch' from the falling dollar and pending rate cuts.
Everyone expects the Fed to cut interest rates - that is known.
In fact the bond market has been saying this for a donkey's age.
It is interesting that the Fed announcement was shifted to Wed - right after a slew of econ data.
I guess he could use the high price of Oil as a reason to not cut or cut a little bit - but if he implies more cuts ahead after only a 25 beeps cut - that will only fuel the 'run away from the US dollar trade' even more.
Trade,
I have several things I want to go over in tonights update. I'll add oil to the list :)
Hi Gary,
Interesting tidbit I saw this morning. China increased imports of silver by 73% year-over-year in September while exports decreased by a like amount. As a result, China has gone from an exporter or silver in 2006 to a net importer with a difference of 1.35 million kilograms year-over-year.
I do not know if this is for industrial purposes or as a quasi-currency play (I own silver, but view it more as a quasi-currency compared with gold. Just my own view), since they also increased imports of some other industrial metals as well. Or, in general it could be part of their desire to hold diversified assets away from the USD with silver offering multiple purposes in that regard.
Anyway, that is a bullish development.
Best,
John
Yep and I suspect we're going to be hearing quite a few bullish developments for silver before this is all over. One thing I can guarantee is that all of us will eventually be amazed at how high the PM bull is going to go...including me!
Mr. T,
I took your advice the other day and subscribed to the SMT. I asked Gary to forward a couple of weeks worth of daily updates along with this weeks spreadsheet and I must admit you were 100% correct. I'm now addicted to my daily update fix just like Paul :)
I did some snooping around today and came accross some interesting ways to play commmodities, gold, etc. I have a futures account, but don't use it much anymore.
I was looking for a different way to play specific markets without getting ripped off by the pits, and controlling the leverage. Plus, I wanted to find a way to specifically invest in Sugar, should I decide to do so.
Barclay's recently launched iPaths which are similar to iShare ETFs except iPaths are Exchange Traded Notes (it's a note, and there is no tracking error with the index. The credit risk lies with Barclay's, so if you think they're going under you're hosed If not, then it's no big deal).
They have a bunch of commodity linked plays as well as some currencies (I don't like the currency ETFs though -- I invest directly in the Forex market).
There is also a company called ETF Securities which offers exchange traded commodities (ETCs) on specific commodities. For example, you can buy an ETC just on Cotton. Or, just on Sugar, etc. Until now, these mostly have been in indexes with weightings that vary. Now you get 100% exposure if you want.
But, they were offered in foreign markets (U.K. and Germany). I called up E*Trade where I have a couple of accounts, and as it turns out, I was able to open a global account which allows me to trade these securites offered on those other markets.
The only thing is that you assume some currency risk as the ETCs are priced in Euros or Pounds (or whatever) depending on where you trade them.
But, it also makes for an interesting look at Gold versus the Euro, or the Pound, or whatever as trading this way allows one to speculate on gold versus those currencies rather than just the USD.
Recently, gold has risen against the paper currencies en masse. But, it lags behind its performance vs. the USD given that the Euro has appreciated rapidly against the USD. So, it makes for a viable way to play gold in other ways.
kirk
thanks for your post. glad you are impressed with Gary's spreadsheet and daily updates! you will make a lot of money listening to this guy...if you are patient.
Mr. T.
Ps. I bought the $SPX at 1505 the day it crashed and after sitting still 6 days I have nice 40 point gain. Not selling yet, though. Going to follow Gary's rules for the VTO / Bollinger Band crash trades. It would not surprise me to see $SPX 1600 when it is time to sell.
And silver - what can I say? I have about 70% on that and smiling from ear to ear. (Thanks Gary)
SLW doing great! SA is a bit perplexing. All gold stocks up, except SA. Could not find any co specific news. Is it just consolidation, like Gary thinks. Should I get out of SA and roll into SLW or some other gold stock?
Any ideas?
thanks..
A couple days back I put out a request for info on a silver miner I had just bought. Nobody responded. up 8.75% today. EXK
Anyway, this is a second request for another I own. Anybody familiar with the company? ROY.
Reuters: Outperform. Gold/Silver miner. Float 70M. announced 10M secondary at $6.30 to close Nov. 5. Stock gapped down on the news, now trading at $6.56 - about to jump to $6.75. I'm guessing in this strong marketthe share price is being supressed until Nov. 5
?
Mr. T.
BAB,
I am holding on to SA myself. It is showing the volume surge that stocks that are ready to move exhibt. This will be clearer when you get tonight's update.
T,
I don't know anything about EXK but it is showing a big volume surge. Investing in juniors can be extremely profitable but they can also get crushed quickly on the slightest bad news so just keep your position size small so you don't get hurt by any unexpected mishaps.
Gary,
do you know anything about 'ROY'?
also, good advice on position size. i have spread out over about 5 miners, besides a core SLV position, to avoid a disasterous pick pocket with a miner.
what i seem to notice is that the miners will double and triple the return of the hard stuff - if you get the right ones.....
BAB,
i doubt Gold is up even 30% since Jan 1, 07.
SA is up 300% since 1/1/07. Looks like an incredible stock to me!
also, SA made a 100% move this summer, then retraced half or so of it. that is 'normal'.
in the single month of October this stock has made a 30% move. now it is retracing as people who made fast $$ are taking their profits. also, this is normal.
i don't own this one, but i wish i did!
Mr. T.
Don't know anything about ROY. It's not showing a volume surge. How did you hear about it? If it was on a blog be careful of a pump and dump scheme.
Gary
I see they are going to start trading futures and e-mini's on the emerging markets.
http://tinyurl.com/ywxbp4
Wonder if they will start reporting this in the weekly COT report??
--
Mr T
Sounds like you are interested in silver stocks.
Here is a list from my database of active silver stocks.
Note that some may be penny stocks and some may just trade on the Canadian index.
They are Yahoo symbols.
Some of these are speculative and would not be ones Gary would probably recommend.
But here's my list anyways if you or anyone else is interested:
Oh, one last point, I notice sometimes (and Gary often points this out) - that once the whole sector starts moving - the money rotates from one stock to the other - and often the laggards start later in the move and begin to catch up to the leaders.
Though as jake pointed out it is best to stick with the winners - at least that is what I mostly do - - but if some of the other silver stocks start to kick in maybe some like SIL could kick in at some point??
enjoy
Silver Stocks:
ARQ.V
ARZ.TO
AUG.V
BMD.TO
CDE
CEF
CUU.V
EDR.TO
FR.V
GBG.TO
GRS.TO
GSC.TO
HL
IMN
IPOAF.PK
IPT.V
MAG.V
PAAS
PDL.TO
PTM.TO
QTA.V
SF.V
SIL
SLGLF.OB
SLW
SRLM.OB
SSO.TO
SVL.V
SVM.TO
XCL.TO
fyi
i have been getting warned about fraudulent canadian stocks.
today i tried to place order for bldp but automatically connected me to my broker who stated they have some potential fraud reports with that stock, or something like that.
caveat emptor
check out vlnc and satc
both are doing very well.
Thanks Trade -
i was not able to get info on the .v and .to stocks.
most of the others I had already researched. SLW is the only 'Outperform' of the bunch, though I do own some HL.
SWC, not on your list, came up as an 'Outperform'. Looks like a long shot but i may watch it....the underdog.
Flat earnings this year but big earnings projected for 08.
It had a similar situation in 03/04 and the stock went up 800% *with the parabola* as the earnings did indeed materialize.
Mr. T.
SWC is a palladium miner. In case you didn't know.
Mr T
That list isn't mine.
I'm not in the habit of recommending names or trying to pick stocks or harp on what I am trading.
The list is from about the only Gold Silver website I follow:
www.clifdroke.com
What he does is create a list of the active silver or gold stocks (or any sector for that matter)
He then keeps track of which ones are making a new high.
Momentum indicators using 10 30 60 and 120 day time frames are then calculated to see what the rate
of change of new highs is for all silver stocks (or any sector).
(ie: a momentum indicator on new highs as opposed to price)
This tells you whether momentum within the sector is increasing or decreasing.
As the momentum increases what seems to happen is that money rotates through all the main stocks in the sector.
So in simple terms - if silver is going to keep going up - more silver stocks will keep making new highs - as the tide lifts all boats in the sector (even the crappy Canadian stuff LOL...)
Thanks Trade. I checked out the site, but it is locked shut. Anyway, appreciate your thought about rotation within the silver sector as things go forward. I am going to have several i watch and possibly trade in and out a little as some get stretched, etc. Please give me a head's up if you see something interesting, ok?
Mr. T.
T
I just rotate between SLW PAAS and SSRI... though I am not impressed with the management of SSRI as they invested a lot of shareholder money in subprime paper.
If you 'must' trade, it is best IMO to keep a core position and don't touch it - and trade the other.
My #1 rule is to buy silver gold stocks only on pullback or shakeout - never chase -
Beacase textbook analysis does not really work on the PMs - as Gary has often pointed out.
For example I bought on last Monday's gap down - that was a shake out. Technical traders probably did not buy until 2 or 3 days later.
My#2 rule is to sell some of the trading portion when there is a frenzy or we reach certain key levels - like today - as we begin to approach $800 on ld.
Because you could wake up some morning and be facing a large gap down.
The 90 day EMA often acts as support for many precious metals stocks when they pullback.
Also you can time the entries by watching the spot prices and the action of the 4 9 and 18 period EMA's on different time frames.
---
But to be honest it is a lot easier to follow Gary's principles - and just buy in on the obvious shakeouts and hold until they spike.
good luck
Trade -
"But to be honest it is a lot easier to follow Gary's principles - and just buy in on the obvious shakeouts and hold until they spike."
EXCELLENT advice! I also like the idea of focusing on a small handful of the majors and trading their spikes and flops. I'm not there yet, but definately leaning that way.
thanks again,
Mr. T.
T --
I don't know much about ROY, but I like the idea of royalty financing.
I've owned RGLD from below $5.00. It's closing on $35 (again).
If ROY is a "real" thing, it's going to experience the same kind of operational leverage (which is also financial leverage, that any royalty financier would).
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