People are sentimental, markets are not

[Jay]

Re: People are sentimental, markets are not

Thanks for the wish. metalman, I don't give a hoot whether a move is a bubble or not. What I do care about is making and hopefully booking profits. There is always something going up if one wishes to play the long side and vice versa. It's unfortunate that we don't start life wise and get more ignorant with time, or is the fact we start life ignornant and end up the same? I'm continuing to gain insight into these mysteries.

At any rate, if someone's influence resulted or aided in my sitting again through a 100K or more loss, I surely would not be thanking them. People in my opinion should learn to use stop losses, and that is not a sure path to riches either. On the 15JUL I was long a bunch of +200% ETF's and was stopped out and immediately the market reversed. Fortunately after incurring only 5K of losses I got back in several hours later and rode it up to near the highs earlier this week. Pure luck I chose to get back in.

Having had the experience I had, I suggest it is worth while when entering postions to decide how much one is willing to lose and if that is hit, get out.

I am still waiting to see that picture or you shitting a brick. I expect if gold goes to 650, it will be one helluva brick. My guess is the decline will stop short of 700, but that is purely a guess, and if close should still result in a decent brick.

Jim, I didn't say 100k loss, I said swing. I'm still well in the black overall as I've been in on the PM call since 2003. I am interested in this swing because it is through this volitility that I am finding out my temperaments as an investor. I have figured out that I am not a trader and it is clear you are. To each his own. I hope you make gobs of money with all those trades. I plan on sitting tight and letting the longterm fundamentals do their work over the next few years or longer.

[Jim Nickerson]

Re: People are sentimental, markets are not

Jim, I didn't say 100k loss, I said swing. I'm still well in the black overall as I've been in on the PM call since 2003.

Sorry, DrJ, if I misunderstood that. If I were up 150K in profit and then it swung down to 50k of profit, even though I still had a profit on the underlying investment, I would look at that as having lost 100K. Is that not something like you described?

[Guest]

Re: People are sentimental, markets are not

Jay - Indeed that's the entire point about investing in a longer trend vs. dabbling. By holding a position for years, it "seasons", or "matures" by building up progressively more equity. When one has held through a number of savage corrections, one gains two things. A) courage and conviction in the trend's prospects to continue - aided by constant "intelligent vigilance", and B) E. Q . U . I . T . Y

The building up on ever greater equity in a holding makes the really vicious corrections ever more sustainable, because one develops a deep cushion of positive equity which provides a far improved psychological poise for withstanding the urge to "sell n' run". The final result of A + B is that one finds it progressively more manageable to hold on for the full secular duration, and make the REAL money.

Conversely, those who time the market pullbacks and harsh corrections every time are vulnerable to A) timing errors, B) constant tax and transaction draining costs, and C) worst of all, constantly having to start over again from zero with absolutely no 'equity" in their newly re-established position. In this way, the large corrections can really and truly be devastating to a recently established position. The mis-timing of entry points becomes perpetually magnified to the "critical" threshold, because any purchase mistimed to occur right before a large correction can devastate principal.

The buy and holder in the 21st Century will indeed be foolish, in the great majority of sectors. But there are one or two sectors for whom the trends favoring the buy and hold are so powerfully set now as to render their investment held across a longer term actually much more conservative than is apparent. Not getting on Jim's case here, but being perpetually in the position of having just established a fresh position in gold will leave him perpetually gnawed by fear of devastating loss at the very next downturn.

Those trying to time their gold buys and sells here, and congratulating themselves fearfully for having sidestepped this current blowout, do not cast their gaze up far enough to notice that those who bought in 2002 and have held through all the corrections are now in so strong a position with their equity in this sector that they really can almost shrug this off, as they have now graduated to become the strong hands. And graduating to strong hand greatly increases the odds of pulling some real, serious money out of the investment.

[Jim Nickerson]

Re: People are sentimental, markets are not

Jay - Indeed that's the entire point about investing in a longer trend vs. dabbling. By holding a position for years, it "seasons", or "matures" by building up progressively more equity. When one has held through a number of savage corrections, one gains two things. A) courage and conviction in the trend's prospects to continue - aided by constant "intelligent vigilance", and B) E. Q . U . I . T . Y

The building up on ever greater equity in a holding makes the really vicious corrections ever more sustainable, because one develops a deep cushion of positive equity which provides a far improved psychological poise for withstanding the urge to "sell n' run". The final result of A + B is that one finds it progressively more manageable to hold on for the full secular duration, and make the REAL money.

Conversely, those who time the market pullbacks and harsh corrections every time are vulnerable to A) timing errors, B) constant tax and transaction draining costs, and C) worst of all, constantly having to start over again from zero with absolutely no 'equity" in their newly re-established position. In this way, the large corrections can really and truly be devastating to a recently established position. The mis-timing of entry points becomes perpetually magnified to the "critical" threshold, because any purchase mistimed to occur right before a large correction can devastate principal.

The buy and holder in the 21st Century will indeed be foolish, in the great majority of sectors. But there are one or two sectors for whom the trends favoring the buy and hold are so powerfully set now as to render their investment held across a longer term actually much more conservative than is apparent. Not getting on Jim's case here, but being perpetually in the position of having just established a fresh position in gold will leave him perpetually gnawed by fear of devastating loss at the very next downturn.

Those trying to time their gold buys and sells here, and congratulating themselves fearfully for having sidestepped this current blowout, do not cast their gaze up far enough to notice that those who bought in 2002 and have held through all the corrections are now in so strong a position with their equity in this sector that they really can almost shrug this off, as they have now graduated to become the strong hands. And graduating to strong hand greatly increases the odds of pulling some real, serious money out of the investment.

Luke, will you please go to the trouble to explain this thing called "fear."

I don't know "fear." The only thing I focus on perpetually is growing my portfolio. I only buy things that I think are going up, if they go down a certain percentage I sell them. If they go up parabolically, I am most liable to selling them. My present drawdown from my highest gains off the 2002 lows is 0.58%. What is yours?

[ocelotl]

Re: People are sentimental, markets are not

Well I'm one of the young one's here, in my 30's, and have never felt swings like this before, so I just want to say thanks as you all reafirm my willingness to sit tight. Never had 100k plus swings before. Wow, what an interesting study into my own psyche. I'm finding I'm learning more about myself than the economy; fascinating these markets, and not for the timid. I think that no matter what happens this ride is going to be good for me.

I'm 37, but coming from where I come is a base that many of you northeners haven't felt yet. In 1976 we left a 22 year standing peg of 12.50 MXP per USD, got to 22, then to 25. In 1982, all hell broke loose... We slipped to 150. I remember an analist claiming (I think in february 1984 or so) "This devaluation time is just unthinkable... Do anyone rally think an USD is worth 500 MXP?" For a few weeks, markets got to the oversold period and USD retreated to 400 MXP, but later the ugly fundamentals got back, the earthquake of September 1985 put the uncertainty feeling at the highest point since Mexican Revolution. I remember most of people back then was somber and frowning... Seeing shopping centers with people but without sales was the main sign of the times... Many salesmen had desperation in their faces...

Our currency has slipped a thousandfold since 1980-1, yours, just three or fourfold. I can tell you, You ain't seen nuthin yet...

[santafe2]

Re: People are sentimental, markets are not

Yeah but it doesn't help to have JK creeping us out with those spooky calls for a 50% correction like in the mid 1970's.

This pullback is fairly typical for metals. 50% would be large but certainly not out of the question. I will be more surprised if we turn around here and don't move down to ~$700. Moving down to $575 is certainly not out of the question.

This is one reason it's so important to trade out of positions during the occasional huge market run-up. In metals there have only been two serious blow off tops since 2001. If one took some profits then, it is much easier to buy at these levels without worrying about where the market is going over the next six to twelve months. For me, lower is better. If it turns around here, I'll be a bit pissed off as I'll have to buy in quickly to cover my core positions. If it goes below ~$700, I'll open some trading positions. I see this as opportunity and I'd really like to see more.

gold.jpg

[Guest]

Re: People are sentimental, markets are not

Jim -

The more "down" you can tolerate, the more "up" you can capture. That's it.

Luke, will you please go to the trouble to explain this thing called "fear."

I don't know "fear." The only thing I focus on perpetually is growing my portfolio. I only buy things that I think are going up, if they go down a certain percentage I sell them. If they go up parabolically, I am most liable to selling them. My present drawdown from my highest gains off the 2002 lows is 0.58%. What is yours?

[Guest]

Re: People are sentimental, markets are not

Santafe2 - I think you have made some of the most astute comments on this topic of anyone here. Much appreciated.

I am concerned that we may be looking at a two to four year period hereafter of relative underperformance of the precious metals, (after they do a stiff rally back into the new year) and that the USD will confound some of the smartest minds out there - EJ, John Williams, Doug Noland. All these people are making 100% rational calls on the direction of the USD. I've consulted with someone in recent days who has done more to shake my confidence in the imminent further downward trajectory of the USD than anyone in the past 7 years, who forecasts a resurgent buck that will defy a lot of expectations.

He may be wrong - EJ is my other most compelling guide and going in a totally opposite direction. However, so far, given this other opinion issued a call back in March at the gold and silver top that gold and silver, the other rare metals and all the commodities would "collapse in August", he's batting ten out of ten.

I broke my own rule (similar to yours) to take substantial profits at the last run-up and have taken a severe beating in this downturn, being overweight silver rather than gold and with substantial allocation to these most low-geared" plays. With the correction in silver, you can imagine. However I will not buy or sell anything until next January / February. This person was calling an imminent collapse of commodities in March (after being a gold and commodities bull since he called the start of it in 1999-2000, with several others, of course) and he is calling for a dollar (and US stock market) rally which will shred the reputations of some of the most wise and well respected commodity bulls and dollar bears around.

He may of course be flat wrong. Everybody has to make their own bets, and there is no hand holding after getting dealt the results. I read his dollar resurgence and gold mega-crash call only a couple of months ago and laughed. Today I'm planning to allocate 1/3 of my assets to a managed account of his next January / February, and to sell half of my PM holdings after our fall / winter rally. I expect to see at least a rebound to $16 silver and will raise cash for a different 3 year strategy then.

The actionable trend for the next three to four years may have shifted in a direction which leaves the most intelligent and well studied dollar bears vulnerable. Interestingly, EJ's charting of the dollar trend out to 2012 - 2014 hints at the same "cross-currents" for the PM's in the next four years. I will keep a strong core holding in the PM's but plan to get into a portfolio that is heavy in alt-energy (something which as a Peak Oil guy I sort of turn up my nose at) and managed futures with a lot of hedging of a 1/3 alt-energy exposure. (Alt energy bull market - now where the heck did I read about this idea a year ago? Oh yeah! It was at iTulip! :rolleyes: ).

This person I've referred to suggests the PM's will meander and then go into their vertical ascent out in 2012-2014 or thereabouts and there are other fish to fry to better effect in the meantime. However all summed up, if I read EJ issue a "bugle call" that we are heading into the steepest part of the inflation imminently, I will heed EJ first. (Natch).

Very taxing and vexing time indeed.

This pullback is fairly typical for metals. 50% would be large but certainly not out of the question. ... This is one reason it's so important to trade out of positions during the occasional huge market run-up. In metals there have only been two serious blow off tops since 2001. If one took some profits then, it is much easier to buy at these levels without worrying about where the market is going over the next six to twelve months.

[phirang]

Re: People are sentimental, markets are not

How the heck is the dollar gonna rip if the Fed keeps cutting rates?

[Jim Nickerson]

Re: People are sentimental, markets are not

Jim -

The more "down" you can tolerate, the more "up" you can capture. That's it.

Luke, I think you are flat out wrong on this one.

How about: the more profits you book, and the less losses you take, the greater will be your wealth at any point in the future.

[FRED]

Re: People are sentimental, markets are not

cef has been around since 1983 for those who wanted to buy pm's without getting into physical.

edit - and btw, by virtue of being a managed, closed end fund, not just a commodity tracker, cef is eligible for capital gains treatment. this is what explains its persistent premium to nav.

So you can trade in and out of CEF like an ETF or physical?

[bart]

Re: People are sentimental, markets are not

[Jim Nickerson]

Re: People are sentimental, markets are not

So you can trade in and out of CEF like an ETF or physical?

jk can give you his answer.

CEF and GTU are closed end funds run by the same outfit in Canada. GTU is 100% in gold, CEF is 50% gold and 50% silver. CEF typically sells at a premium to the underlying gold and silver assets it holds; that is a disadvantage unless at some time one is able to buy it when it is selling at a discount to NAV, which I am not holding my breath to see occur.

GTU has not had near the premium to NAV (ETFconnect.com is offline right now so I can't see the numbers), but GTU has a big spread--maybe 1%.

Capital gains in both are treated as capital gains like they are in anything else except physical PM's and collectibles.

[jk]

Re: People are sentimental, markets are not

jk can give you his answer.

CEF and GTU are closed end funds run by the same outfit in Canada. GTU is 100% in gold, CEF is 50% gold and 50% silver. CEF typically sells at a premium to the underlying gold and silver assets it holds; that is a disadvantage unless at some time one is able to buy it when it is selling at a discount to NAV, which I am not holding my breath to see occur.

GTU has not had near the premium to NAV (ETFconnect.com is offline right now so I can't see the numbers), but GTU has a big spread--maybe 1%.

Capital gains in both are treated as capital gains like they are in anything else except physical PM's and collectibles.

the cef premium has been pretty consistent, and so can be for the most part ignored. you can trade in and out of cef like any stock, and the tax treatment is as for any stock. it is about 50% gold and 49% silver, last i looked, with the rest in cash. compared to gld and slv, it is a far superior vehicle for non-tax sheltered accounts, but it forces a 1:1 gold:silver allocation.

[Guest]

Re: People are sentimental, markets are not

Here you go Jim - came across this earlier today and thought of you.

"The key to making money in stocks is not to get scared out of them." -Peter Lynch

Jim - The more "down" you can tolerate, the more "up" you can capture. That's it.

Luke, will you please go to the trouble to explain this thing called "fear." ... I only buy things that I think are going up ... Luke, I think you are flat out wrong on this one. ... the more profits you book, the less losses you take, the greater will be your wealth