FIRE Buys Ice

[Chris Coles]

Re: FIRE Buys Ice

I should imagine that the Gold Market Adoption Cycle, as depicted above, is using the exact same diagram as any for a full market cycle for any trading opportunity; the losers being the laggards who look too early, forget to update the trend and then buy after the peak as the price drops back to its historic low. A classic example of timing being everything.

[*T*]

Re: FIRE Buys Ice

For those interested, iTulip are using the Pruden Model.

[Tybee Island]

Re: FIRE Buys Ice

I am riding with Sinclair, Fields and Armstrong on this one.

I think $2,500 is only the warm up ($5,000 is my minimum target). The fact that Paulson and Co., Greenlight Capital and now Northwestern Mutual have "publicly" announced their holdings is interesting.

The government will have a harder time putting a villainous face on gold as pension, firemen, and teachers funds adopt the metal too.

If only we could get the UAW to jump in, then we would have the "official" backing of the White House. Here's hoping that Ron baby is an iTulip subscriber.

[snakela]

Re: FIRE Buys Ice

Winner, Winner, Chicken Dinner!

Leverage kills during de-leveraging, or hadn't you heard?

I'm probably in a different position that many people here then. I'm in my mid 20s with a middle-class job and a middle class house and have never inherited a dime in my life. I'm not so much trying to protect a nest-egg rather than trying to protect my future so I'm more risk tolerant.

If I cash out all my savings for physical gold I'm then vulnerable to emergency money needs. Plus, I'll only be maintaining the buying power of at most 3 years worth of expenses.

[hayekvindicated]

Re: FIRE Buys Ice

I am riding with Sinclair, Fields and Armstrong on this one.

I think $2,500 is only the warm up ($5,000 is my minimum target). The fact that Paulson and Co., Greenlight Capital and now Northwestern Mutual have "publicly" announced their holdings is interesting.

The government will have a harder time putting a villainous face on gold as pension, firemen, and teachers funds adopt the metal too.

If only we could get the UAW to jump in, then we would have the "official" backing of the White House. Here's hoping that Ron baby is an iTulip subscriber.

$2500 is way too conservative for the price of gold at the top of this bull market in my view. How high it will go is impossible to say as of today. However, one pointer that I see is that Marc Faber, who is possibly the most measured of commentators and least given to hyperbole, now thinks that hyperinflation is inevitable. He thinks the probability of this is 100 percent.

Also, one should not lose sight of the long term picture - the US fiscal situation due to social security and medicare is absolutely horrendous. Funding those will prove to be impossible and will invite even more money printing (and with the entire baby boomer generation entering retirement , this disaster has not even started unfolding yet). What will gold be worth in worthless dollars by the time the social security medicare debacle has fully unfolded?

All I would say is that there will come a time when it would make sense to sell gold for perhaps Yuan or Asian stocks because in Asia a genuine economic recovery will be fully underway and real gains in those things will outperform gold. However, I doubt we will see a time again when it would make sense to sell gold for US Dollars. The Dollar is doomed.

[FRED]

Re: FIRE Buys Ice

For those interested, iTulip are using the Pruden Model.

No, we have for 12 years used a version of the technology adoption model.

sdf

[JKD]

Re: FIRE Buys Ice

I'm probably in a different position that many people here then. I'm in my mid 20s with a middle-class job and a middle class house and have never inherited a dime in my life. I'm not so much trying to protect a nest-egg rather than trying to protect my future so I'm more risk tolerant.

If I cash out all my savings for physical gold I'm then vulnerable to emergency money needs. Plus, I'll only be maintaining the buying power of at most 3 years worth of expenses.

You are not necessarily at great risk using a long option position, but obviously you have to give up something to get the leverage. In the case of a long call position, your risk is that the move on gold occurs after your option expires. Even if gold just goes sideways you will lose all of the money invested at higher strikes. It is up to you to decide if that risk is worth the outsized returns afforded by the leverage.

Let's say you are willing to risk half your money...

With $10k to invest, you can buy roughly 1,000 shares of GLD which will be worth roughly $25k if gold goes to $2,500. If gold drops in half you will lose $5k (assuming you cut the position).

You could also put $5,350 in the bank and spend $4,650 on Jan '11 calls, 100 strike, getting long 3 contracts ($15.50 per). If gold goes to $2,500 your options will be worth $75k. If gold falls the options are worthless but in either case you still have the $5,350 in the bank.

You can also buy strikes further out of the money to get even more leverage. Obviously the further out of the money, the more likely they will expire worthless.

The leverage is seductive for those who have very strong convictions, but the risks are real. Timing is much more important when it comes to options and trust me you will not be a happy camper if gold is still around $1,000 in Jan '11 and you are out half your money.

Good luck,

John

[JKD]

Re: FIRE Buys Ice

I am riding with Sinclair, Fields and Armstrong on this one.

I think $2,500 is only the warm up ($5,000 is my minimum target). The fact that Paulson and Co., Greenlight Capital and now Northwestern Mutual have "publicly" announced their holdings is interesting.

The government will have a harder time putting a villainous face on gold as pension, firemen, and teachers funds adopt the metal too.

If only we could get the UAW to jump in, then we would have the "official" backing of the White House. Here's hoping that Ron baby is an iTulip subscriber.

Wait until one of the signatories of the Central Bank Gold Agreement buys gold. Might be a few years away still but it will happen.

Place your bets...

Oesterreichische Nationalbank
Banca d'Italia
Banque de France
Banco do Portugal
Schweizerische Nationalbank
Banque Nationale de Belgique
Banque Centrale du Luxembourg
Deutsche Bundesbank
Banco de España
Bank of England
Suomen Pankki
De Nederlandsche Bank
Central Bank of Ireland
Sveriges Riksbank
European Central Bank

John

PS Hey Tybee Island, how's that "coldest beer in America" treating you??

[sn1p3r]

Re: FIRE Buys Ice

I'm probably in a different position that many people here then. I'm in my mid 20s with a middle-class job and a middle class house and have never inherited a dime in my life. I'm not so much trying to protect a nest-egg rather than trying to protect my future so I'm more risk tolerant.

If I cash out all my savings for physical gold I'm then vulnerable to emergency money needs. Plus, I'll only be maintaining the buying power of at most 3 years worth of expenses.

the way I understand it iTulip doesn't recommend you "cash out savings" for physical gold...they recommend a hedge with physical gold of a certain % (i think it's up to 30% now?). I also recall EJ making a few comments about having some cash on hand (month or 2 of expenses?)...the combination of these is a pretty commonly accepted way to approach your cash and will allow you to know that the market can't wipe out all of your savings while still giving you the emergency cash on hand to handle mr. murphy...

[Tybee Island]

Re: FIRE Buys Ice

I see the sign everyday but never have ventured inside to see just how cold it is. However, I can tell you that the "Breakfast Club" has never been greasier.

[ravenmoon]

Re: FIRE Buys Ice

I am riding with Sinclair, Fields and Armstrong on this one.

I think $2,500 is only the warm up ($5,000 is my minimum target). The fact that Paulson and Co., Greenlight Capital and now Northwestern Mutual have "publicly" announced their holdings is interesting.

The government will have a harder time putting a villainous face on gold as pension, firemen, and teachers funds adopt the metal too.

If only we could get the UAW to jump in, then we would have the "official" backing of the White House. Here's hoping that Ron baby is an iTulip subscriber.

I was thinking about when the Bankers would start making Gold look bad and today (6-2-09) on the "Fast Money" show they said drug dealers are starting to demand payment in Gold. So the take might be, If you by Gold then you are buying drugs with it or a ban on selling Gold is to stop the drug trade. I can see all kinds of bad and DUMBASS things coming from this if it takes hold.

[metalman]

Re: FIRE Buys Ice

I was thinking about when the Bankers would start making Gold look bad and today (6-2-09) on the "Fast Money" show they said drug dealers are starting to demand payment in Gold. So the take might be, If you by Gold then you are buying drugs with it or a ban on selling Gold is to stop the drug trade. I can see all kinds of bad and DUMBASS things coming from this if it takes hold.

from nov. last year...

The range of future popular opinion of private gold holders under those drastic circumstances ranges from villain or hero and everything in between. If gold owners are vilified, you can count on a less than friendly government policies on gold taxation and possession. The 1933 confiscation was strictly old school; the modern approach is more likely to take the form of a 90% capital gains tax on private gold sales with high penalties to encourage sales to the government at a fixed price and slow a popular rush to the metal, and of course create an enormous black market in the bargain. If that sounds paranoid, you haven’t been watching the news lately.

[LargoWinch]

Re: FIRE Buys Ice

I sent this story to the radio hosts at PTG (a bullion dealer in the US), they off course picked-up the news with gusto. :p

Tune-in at about 7:00 for comments on the story:

[*T*]

Re: FIRE Buys Ice

No, we have for 12 years used a version of the technology adoption model.

sdf

V Interesting, thanks - I love all this background. Different ways of thinking etc.

[ST]

Re: FIRE Buys Ice

FIRE Buys Ice

Love it.

If the US market this year goes back to a lower level than we began the year at (iTulip's assertion), would you expect gold to keep increasing from here through that?