gold to $650, silver to $9.80

[Andreuccio]

Re: gold to $650, silver to $9.80

ah, c'mon, jim. it'll be fun having luke in the back room behind the main room of the itulip bar and grill. too stuffy in there anyway... we can use the levity.

Levity's fine. My worry is that if Lukester starts posting in the Member's only section as well, the Internet might run out of space! :eek:

[Guest]

Re: gold to $650, silver to $9.80

Ah, c'mon. I'm actually regarded as being very succinct in my comments! :rolleyes:

Levity's fine. My worry is that if Lukester starts posting in the Member's only section as well, the Internet might run out of space! :eek:

[EJ]

Re: gold to $650, silver to $9.80

1. re the dollar. the best discussion i've seen of short-intermediate trajectory is today's at macro man http://macro-man.blogspot.com/2008/08/buck-up.html his feeling is that a sideways move is likely for the next months/quarters.

2. re drawdown. take your high water mark, i.e. the highest value your portfolio has ever attained in the history of the universe. subtract it from your current portfolio value. unless you are at this moment at your high water mark, this will produce a negative number. then divide this number by said high water mark. this is your current drawdown. it is the percentage you are down from your high water mark. this calculation is a common one in the world of money management, and e.g. hedgefunds will always be able to document their largest drawdowns. past drawdowns are a shortcut way of assessing risk, as people think past performance will predict future results; boilerplate warnings to the contrary are uniformly ignored.

3. #1 above refers to what someone thinks is "likely," while #2 above refers to "risk." probability and risk are what it's all about.

re the dollar- i'm really unsure, because in recent history currencies are an ugly contest. so i've got about 25% in u.s. dollars and 25% in [mostly asian] currencies, and i don't have a clue.

re trading versus long term positional investing - my personal concern is that i don't "blow up." money managers are said to "blow up" when they sustain losses that lead to them having to close up shop. i'm interested in avoiding big losses. i'm currently on an 11% drawdown, the worst i've sustained in recorded history. [of course i only began recording history, weekly at least, about 8 years ago. i can't vouch for what i might have experienced in the foggy days of my prior investing.] i am not happy with this drawdown, which i can pretty much ascribe to the sell off in pm's. i console myself with the fact that i'm flat ytd, while pm's are actually down, so i'm adding some value in other spheres.

i'm willing to ride with the moves in pm's, or at least have been willing to date, because of the conviction i have about them. it leads me to think that the risk is low relative to the likely reward. i've also outsmarted myself in the past trying to trade the pm's. specifically, i had a large position in cef when gld became available but slv had not yet come on the market. cef was at a premium, and my assumption was that the premium would be arbitraged away once slv became available. i therefore cleverly decided i would sell my cef, buy some gld and wait to buy slv once it became available, and avoid the loss of the arbitrage. it was at this juncture that silver rose from about 12 to over 15. and i missed that move, and in size in that i had a substantial position i had traded out of. so that was an opportunity cost, and taught me i'm not as smart as i'd like to think i am. and since then, btw, cef has maintained its premium because, i learned, as a closed end fund it is eligible for capital gains treatment, unlike gld and slv which are "collectibles."

4. re risk management. jim's short term trading approach exposes him to the risk of being wrong. he'll counter and say that this risk is limited by his stop loss orders- either placed or mental. i'll counter by saying that event risk raises the possibility of markets blowing through stop losses, by going to sleep with the price at one place, and waking up to the price being at a very different place indeed. but he'll counter that by pointing out that he controls the size of his positions, and keeps a big chunk in cash. and he'll be right. controlling the size of his positions is his most important risk control. what's yours?

As usual, a collection of sublimely astute comments. One confession on the discussions over the question of trading vs not: I have not been entirely clear and consistent. Let me see if I can remedy that.

Transaction costs of trading aside, I view PMs as dollar depreciation insurance. So far they have acted well as insurance, hedging dollar depreciation risk in my portfolio since 2001. In fact, they have worked too well, and by standard principles of portfolio balancing I "should have" sold roughly half to diversify, and would have if not for conversations I have had with a wide range of fund managers over the past six months that convey the increasing risk of admittedly still low probability more dire events that PMs also insure against, the kind that Jim Rogers is talking about.

Without naming names, one of the highly respected people I have interviewed for iTulip over the years once expressed the opinion that Jim's views are extremist – and I'm using polite language here, as distinguished from the language the interviewee used. But let's consider the pattern of behavior that we have seen in the actions of Hank Paulson. This article is worth a read by all members as it is an excellent piece of journalism, and I'm disappointed that it was pulled off the Chicago Sum-Time's site – praise to Fred for keeping a copy somehow. The "money shot" quote is from ex-Fed governor Larry Lindsey:

"Surely things are somewhat amiss when a country's finance minister plays bond salesman for a supposedly privately owned company."

- Lawrence B. Lindsey on US Crony Capitalism

Yes, something is amiss. Here is how I'd summarize the events that Lindsey refers to:

• Government looks the other way while FIRE Economy interests take huge risks to make piles of money.
• Bets blow up in their faces, threatening said FIRE Economy interests and the taxpayer's economy, too.
• Government takes action to bail out the FIRE Economy with taxpayer money ostensibly to rescue taxpayers; FIRE Economy interests are rescued, too, even though FIRE Economy interests never distributed their winnings to taxpayers back when they were winning.
• A third world style politically oriented wealth transfer has occurred, and not a peep from the New York Times, Wall Street Journal, et al, only a few dozen screaming bloggers and, from the MSM, a little article in the Chicago Sun-Times that disappears a month later.
• A child could see it all coming.

Does this behavior recommend a policy of trust that this same government might not confiscate wealth again to "save the economy" again, in the future via capital controls?

And as long as this pattern of behavior continues, is it wise to lighten one's insurance policy against the likely impact?

It is these "forest" issues that I believe weigh most heavily on our portfolio decisions, unfortunately, and that is why I spend so little time on "trees" issues that are important for trading purposes.

As for the confession, I preach "don't trade" making the argument that between errors in timing and transaction costs, net of time spend on the project, you can't make money unless your time is free. That said, I've made some decent timing calls that make it appear as though making money on trade timing is possible. For consistency, I will not longer provide those here but elsewhere.

[Jim Nickerson]

Re: gold to $650, silver to $9.80

As usual, a collection of sublimely astute comments. One confession on the discussions over the question of trading vs not: I have not been entirely clear and consistent. Let me see if I can remedy that.

Transaction costs of trading aside, I view PMs as dollar depreciation insurance. So far they have acted well as insurance, hedging dollar depreciation risk in my portfolio since 2001. In fact, they have worked too well, and by standard principles of portfolio balancing I "should have" sold roughly half to diversify, and would have if not for conversations I have had with a wide range of fund managers over the past six months that convey the increasing risk of admittedly still low probability more dire events that PMs also insure against, the kind that Jim Rogers is talking about.

Without naming names, one of the highly respected people I have interviewed for iTulip over the years once expressed the opinion that Jim's views are extremist – and I'm using polite language here, as distinguished from the language the interviewee used. But let's consider the pattern of behavior that we have seen in the actions of Hank Paulson. This article is worth a read by all members as it is an excellent piece of journalism, and I'm disappointed that it was pulled off the Chicago Sum-Time's site – praise to Fred for keeping a copy somehow. The "money shot" quote is from ex-Fed governor Larry Lindsey:

"Surely things are somewhat amiss when a country's finance minister plays bond salesman for a supposedly privately owned company."

- Lawrence B. Lindsey on US Crony Capitalism

Yes, something is amiss. Here is how I'd summarize the events that Lindsey refers to:

• Government looks the other way while FIRE Economy interests take huge risks to make piles of money.
• Bets blow up in their faces, threatening said FIRE Economy interests and the taxpayer's economy, too.
• Government takes action to bail out the FIRE Economy with taxpayer money ostensibly to rescue taxpayers; FIRE Economy interests are rescued, too, even though FIRE Economy interests never distributed their winnings to taxpayers back when they were winning.
• A third world style politically oriented wealth transfer has occurred, and not a peep from the New York Times, Wall Street Journal, et al, only a few dozen screaming bloggers and, from the MSM, a little article in the Chicago Sun-Times that disappears a month later.
• A child could see it all coming.

Does this behavior recommend a policy of trust that this same government might not confiscate wealth again to "save the economy" again, in the future via capital controls?

And as long as this pattern of behavior continues, is it wise to lighten one's insurance policy against the likely impact?

It is these "forest" issues that I believe weigh most heavily on our portfolio decisions, unfortunately, and that is why I spend so little time on "trees" issues that are important for trading purposes.

As for the confession, I preach "don't trade" making the argument that between errors in timing and transaction costs, net of time spend on the project, you can't make money unless your time is free. That said, I've made some decent timing calls that make it appear as though making money on trade timing is possible. For consistency, I will not longer provide those here but elsewhere.

EXTREMIST!!! Screw up you courage and tell me who the guy is and I'll blow his knees out; I'm not extremist.

[EJ]

Re: gold to $650, silver to $9.80

EXTREMIST!!! Screw up you courage and tell me who the guy is and I'll blow his knees out; I'm not extremist.

A conversation between you and Jim Rogers would be highly entertaining.

[drumminj]

Re: gold to $650, silver to $9.80

Last things, first. I try not to "imply" anything, and I have not implied nor thought to myself that anyone who doesn't trade is a "silly sap."

Jim, I don't have much to say with regards to the rest of your comment (besides thanks for the insights -- I do need to pick up a book on TA one of these days just so I can understand the specifics of what people are talking about, but simply knowing that TA + presumably a gut feel is what led you to unload those positions is helpful), but I wanted to apologize for reading too much into your comments here. You do appear to be one to not hold back your opinions, so I have no reason not to believe that you did not intend to imply such a thing.

[Jim Nickerson]

Re: gold to $650, silver to $9.80

A conversation between you and Jim Rogers would be highly entertaining.

When I first retired and was too cheap to stay online much, this was 1992-3 somewhere in there, and I was longdistance from any internet connections being way out in the woods in Alabama my main contact with what was happening in the investment world was CNBC. Rogers used to be on there not uncommonly, and someway I got his address and wrote him offering to pick him up in Birmingham when he flew home to go to visit his mother who was in Demopolis, AL. I am sure I told him I would do this, and I would have, so as to be able to talk with him about whatever he wished to talk. He wrote me back on a post card (which I still have taped to my chest) thanking me but failing to accept my offer.

With both of us being Alabama boys, I am sure we would get along.

I am sure Rogers knows nothing about trading, oh, but wait, isn't that the way he made his forture (actually I don't know whether he traded or was a buy and holder), so it would actually be a wasted conversation probably because it would be like the local trash collector talking with a rocket scientist at Houston.

[FRED]

Re: gold to $650, silver to $9.80

When I first retired and was too cheap to stay online much, this was 1992-3 somewhere in there, and I was longdistance from any internet connections being way out in the woods in Alabama my main contact with what was happening in the investment world was CNBC. Rogers used to be on there not uncommonly, and someway I got his address and wrote him offering to pick him up in Birmingham when he flew home to go to visit his mother who was in Demopolis, AL. I am sure I told him I would do this, and I would have, so as to be able to talk with him about whatever he wished to talk. He wrote me back on a post card (which I still have taped to my chest) thanking me but failing to accept my offer.

With both of us being Alabama boys, I am sure we would get along.

I am sure Rogers knows nothing about trading, oh, but wait, isn't that the way he made his forture (actually I don't know whether he traded or was a buy and holder), so it would actually be a wasted conversation probably because it would be like the local trash collector talking with a rocket scientist at Houston.

The essence of Rogers' philosophy: "People feel like they always have to be doing something, constantly making trades. What they don't see is that this takes time, time they could be spending making real money. I spend my time looking for a free bag of cash that someone's left in the corner. When I find it, I go pick it up."

Here at iTulip we choose to spend our time looking for free bags of cash, such as PMs in 2001, and figuring out when to dump them instead of trading in and out of little price movements.

[Jim Nickerson]

Re: gold to $650, silver to $9.80

The essence of Rogers' philosophy: "People feel like they always have to be doing something, constantly making trades. What they don't see is that this takes time, time they could be spending making real money. I spend my time looking for a free bag of cash that someone's left in the corner. When I find it, I go pick it up."

Here at iTulip we choose to spend our time looking for free bags of cash, such as PMs in 2001, and figuring out when to dump them instead of trading in and out of little price movements.

But, oh FRED, wouldn't the world be a much duller place if we all wore the same faddish clothing, had the same tattoos, listened to the same songs on iPods, had the same wireless carrier, and no one owned anything but an iPhone, had the same sized flat-screen TV's, drove the same model of Infinity's, had exactly the same features in our home theaters in our McMansions and all had to act on what any single financial guru thought?

I couldn't stand it.

Seriously, if my "extremism" is counter-productive to the goals of iTulip, let me know, and I'll come blow out your knees; I am not an extremist. Seriously let me know if I am sand in the gears, and I'll try to stop commenting. You know I actually will stoop and pickup a penny on the street, I guess my philosophy is one should try to make a buck when and wherever one encounters the opportunity.

[FRED]

Re: gold to $650, silver to $9.80

But, oh FRED, wouldn't the world be a much duller place if we all wore the same faddish clothing, had the same tattoos, listened to the same songs on iPods, had the same wireless carrier, and no one owned anything but an iPhone, had the same sized flat-screen TV's, drove the same model of Infinity's, had exactly the same features in our home theaters in our McMansions and all had to act on what any single financial guru thought?

I couldn't stand it.

Seriously, if my "extremism" is counter-productive to the goals of iTulip, let me know, and I'll come blow out your knees; I am not an extremist. Seriously let me know if I am sand in the gears, and I'll try to stop commenting. You know I actually wil stoop and pickup a penny on the street, I guess my philosophy is one should try to make a buck when and wherever one encounters the opportunity.

You realize that EJ was talking about the other Jim was considered by another interviewee as extremist, right?

Got another investment tip for you

"Don't gamble. Take your savings and buy some good stock and hold it til it goes up, then sell it. If it don't go up, don't buy it." - Will Rogers

[Jim Nickerson]

Re: gold to $650, silver to $9.80

You realize that EJ was talking about the other Jim was considered by another interviewee as extremist, right?

Got another investment tip for you

"Don't gamble. Take your savings and buy some good stock and hold it til it goes up, then sell it. If it don't go up, don't buy it." - Will Rogers

Awh, shit!! I totally blew that, didn't I? I was wondering why EJ was singling me out. See, I keep writing I am not very smart, and I don't always read with full comprehesion. Glad to be wrong here.

I agree fully with Rogers' (Will) philosophy. To make it work, one has to close it out if the position goes against the hope.

[touchring]

Re: gold to $650, silver to $9.80

You realize that EJ was talking about the other Jim was considered by another interviewee as extremist, right?

Got another investment tip for you

"Don't gamble. Take your savings and buy some good stock and hold it til it goes up, then sell it. If it don't go up, don't buy it." - Will Rogers

i like buffet's quote -

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."

[Jim Nickerson]

Re: gold to $650, silver to $9.80

i like buffet's quote -

"Rule No.1: Never lose money. Rule No.2: Never forget rule No.1."

Check out BRKA ,and it makes one wonder if Buffet has forgotten his rule, at least for most of this year. I think it just shows that nobody can be correct without setbacks.

[metalman]

Re: gold to $650, silver to $9.80

Awh, shit!! I totally blew that, didn't I? I was wondering why EJ was singling me out. See, I keep writing I am not very smart, and I don't always read with full comprehesion. Glad to be wrong here.

I agree fully with Rogers' (Will) philosophy. To make it work, one has to close it out if the position goes against the hope.

will rogers was making a joke... you can't not buy a stock because it didnt go up, you've already bought it. that's called irony.

this livermore quote sounds like what ej was saying: "Every stock is like a human being : it has a personality - a distinctive personality - aggressive, reserved, hyper, high-strung, volatile, boring, direct, logical, predictable, unpredictable. I often studied stocks like I would study people; after a while their reactions to certain circumstances become more predictable."

livermore was anti-trading, just life all the guys who made lots of money: "Throughout all my years of investing I've found that the big money was never made in the buying or the selling. The big money was made in the waiting."

that's not what he did, tho. he kept trading anyway, even though he knew it wasn't the way to make money. the #1 problem with active trading is that it uses up your time. the jim rogers way, you spend your time living your life... livermore's most famous quotation: "My life has been a failure."

[Andreuccio]

Re: gold to $650, silver to $9.80

the #1 problem with active trading is that it uses up your time. the jim rogers way, you spend your time living your life... livermore's most famous quotation: "My life has been a failure."

I don't spend much time trading. I do, however, spend a significant amount of time reading iTulip.