Re: She packed my bags last night pre-flight newSubmitted by 2nd_ave (5556 comments) on Wed, 04/20/2011 - 20:28 #84302 (in reply to #84301) And all the technical analysis I don't understand It's just my job five days a week I'm a rocket man Burning out his fuse up here alone
Best day for me this year so far. My portfolio is up almost 1% today. I guess I have too many tech stocks. Hope everyone had a good day! My only down stock today was ECU. It was tough watching it fall while SLV was rallying. Reading David's posting helped to stop the desire to push 'Sell' button on ECU. -)
Mark,
Can you please be a bit more descriptive when you post something like "VMW!!". This way we can all quickly jump on the fast moving train.
David, The silver price is bubbelicious. Strange how the miners cannot even keep up. SLW. SLV has been outside the BB 5 days in a row. You all going to chase here?
Well, it's pretty obvious I kicked my trade this week. Waited until a seasonal edge presented itself, entered the trade, and panicked out. Left $3K on the table and managed to lose $300 in the process.
Why don't we all just simply buy index calls at the start of these Super/Mega-bullish seasonality weeks? After a quick look, it looks like "at the money" QQQ call options purchased at the open on Monday expiring today are up roughly 1,000%. These super seasonally bullish weeks (per Sentimentrader) which usually occur just before a holiday seem to be up 9 times out of 10.
Do the huge trading desks load up on calls and gently push the market up all week? Screw it, next time we get a similar seasonality setup, I'm putting a small % of my port in IWM calls since small caps are the most easily manipulated higher during slow market weeks.
S&P - I have an RSI(7) peek low of 31.61 on 4/18, but I'd bet it actually dropped under 30 at some point. The resolution isn't so good, what do you guys have?
"David, The silver price is bubbelicious. Strange how the miners cannot even keep up. SLW. SLV has been outside the BB 5 days in a row. You all going to chase here?"
RoBear, I am piling into ECU.TO, since, like Patrick wrote today in his post-close report, eventually the gap between the miners and the silver will have to close, and given that ECU.TO was 40% higher than now when silver was $30, I would assume that if silver drops 30% and stabilizes at $30, then ECU.TO will eventually rise to $1.30 and will keep rising as they keep expanding their production.
As for SLV itself, I bought 1K worth of at the money puts today, and will buy 2K worth of puts if SLV reaches $49.
"My only down stock today was ECU. It was tough watching it fall while SLV was rallying. Reading David's posting helped to stop the desire to push 'Sell' button on ECU."
Igor -- the ONLY way to make real money is to buy an out-of-favor stock and wait until it goes up N times. Going with the crowd (buying what is moving up and selling what is not) is a sure way to lose money over the long term.
And I don't believe that miners lead the metal, otherwise it would be considerably easier to trade the metal using candlesticks, and I still can't trade the metal using candlesticks like I can trade the miners.
David, i like hedging here with the puts. When i say Bubblicious I am on a real short time frame. So what I should more correctly say is at this moment in time Silver is way over bought. The last time it was this high I lived in a silver mining town of Tonopah, Nevada. It became a boomtown in a few weeks and a ghost town overnight. It ended very badly. Of coarse 40 1970 dollars is worth how many 2011 Dollars. A little perspective. No one could believe that gas was .50 cents a gallon. How could this country survive on that?
Didn't know it was margin rule changes that caused the collapse. "on January 7, 1980, in response to the Hunt's accumulation, the exchange rules regarding leverage were changed, when COMEX adopted "Silver Rule 7" placing heavy restrictions on the purchase of commodities on margin. The Hunt brothers had borrowed heavily to finance their purchases, and as the price began to fall again, dropping over 50% in just four days, they were unable to meet their obligations, causing panic in the markets." [edit]
OK boys and girls- We have until the end of the month to have our fun. Let's print a nice close above the bollinger bands on the monthly indices before the %$@^ hits the fan.
"While the VIX closed at a 52-week low on Wednesday, the CS Fear Barometer closed at a 52-week high on Tuesday. What this means is that overall volatility is expected to be low over the next 30 days, but S&P 500 traders are rapidly bidding up the price of protective put options relative to speculative call options.
This has not been a good omen for the market.
There have been 5 other times that the VIX was scraping along at or very near a 52-week low while the CSFB jumped to a 52-week high (and 2 more when the VIX was within 2% of a 52-week low). 6 of those 7 occurred within 3-11 days of an intermediate-term market peak. The dates are 3/19/98, 7/16/98, 12/16/03, 1/16/04, 1/6/10 and 4/9/10 and 2/11/11.
During the next two months following those instances, the S&P dropped a median of -5.9% at its worst point. That compares to a median maximum rally of +2.2%, which again was mostly during the next 3-11 days.
If you waited a week until after these signals, then those figures above drop to -6.9% and +1.4%. Not a good sign."
Silver closed 51% above its 200 dma in April of 2004. It went from $8.50 to $5.45 in the next month.
Silver closed 68% above its 200 dma in May of 2006. It went from $15.21 to $9.48 in....one month.
Silver closed 47% above its 200 dma in late March of 2008. It went from $21.44 to $16.06 in one month and to $8.40 in six months.....
Today's close? 68% above its 200 dma. Tomorrow's open? Close to 70%.
When the dollar has its inevitable, yet seemingly impossible 10% retrace, we will truly see "shock and awe" when it comes to silver as well as other commodities. I even saw Cramer yelling buy, buy, buy SLV 2 nights ago while it sat 65% above its 200 day. Now, we just have to wait for Goldman to put Silver on its "conviction buy" list when it hits $50. 4 weeks after their "recommendation"? $30.
AAII Sentiment Survey newSubmitted by 2nd_ave (5557 comments) on Thu, 04/21/2011 - 08:22 #84317 Week ending 4/20/2011 Data represents what direction members feel the stock market will be in the next 6 months.
Bullish 32.2% down 10.1 Neutral 36.8% up 10.1 Bearish 31.0% up 0
Change from last week: Bullish: -10.1 Neutral: +10.1 Bearish: +0.0
Re: Opening GE @ 20.14/ Adding @ 19.80 newSubmitted by 2nd_ave (5560 comments) on Thu, 04/21/2011 - 09:59 #84328 (in reply to #84325) To 40% of allocation.
Denninger - No doubt he's a piece of work, and PM prices have experienced a meteoric rise leaving the miners in the dust.
Also, a lower dollar makes US-listed equities cheaper in terms of foreign currencies.
Miners - Nobody seems capable of explaining the lack of participation phenomenon, which is why I chose RBY, nobody seems to know what they've got in their mineral deposit right next door to GG, the best guess I've seen is it's ~26% more than indicated.
I'm confident we'll see $50 silver and $1570 gold by July 4th, and assuming the global economy doesn't tank, PM prices have no fundamental reason to collapse. The FED was able to crush the Hunt brothers by changing the rules, but the situation is a bit different this time around, considerably more serious, is my assessment.
I'm not long PM's b/c I believe the global economy is about to implode...
Mark > I'm at home today watching last week's The Office and doing a little work on my web business...guess which commercial came on? Chase's ad about mobile check deposit. I'm gonna hold on to my MITK shares tightly. Given:
1.) How quickly these mobile apps grow 2.) how much banks are pushing for this service to be rolled out quickly 3.) How MITK owns the industry
I'm like anyways!!! Momentum traders are crooks? new Submitted by bobbyo (629 comments) on Thu, 04/21/2011 - 13:02 #84351 Bill, Am I misunderstanding your words. Reversal traders are angelic and momentum traders are crooks. I am dumbfounded at these comments.
"Although not mine, buying break-outs – buy high and sell higher -- is a favorite style of many traders. I don’t care for that because the winners tend to be front-running crooks while the majority of participants are left holding the bag. I have witnessed that happen too many times in the past 40 years not to have learned to avoid it."
Coulda' been the three or four six packs, I don't know, but look at the shape I'm in! My head is like a football, think I'm gonna die. Me oh me oh me oh my...
Yep, I'd bet we don't see a closing rally and tomorrow's another week so I'm not sitting around to find nothing happening.
CP -- I was playing bridge last night and didn't have a chance to check out your link. It worked -- thanks! That link actually suggests that miners will drop harder than the metal during a correction. But since I am a long-term investor in ECU now, this discrepancy between its recent share price movement and the movement in SLV is just a short-term curiosity, which will have to close by a powerful thrust up in ECU when the first piece of good news comes out and all those who were shorting it will run for cover.
What's up with WATG? It has been on a tear lately. They didn't announce their restated results yet, didn't they? Or is it simply the news leaking out about those restatements indeed increasing their profit and revenue for the past two years, just as WATG suggested initially?
CADC - Looks like the entry was $3.05 a couple'a days ago. Still waiting for mean 'ol Mr. Market to give newcomers one last shakedown and I might stick my toe back in the water...
GMO - Okay so here's the plan: Yesterday I sold my trading shares for $5.23, which is precisely where it will close today just to taunt me after having traveled all the way to $5.34 and back.
Monday, GMO will retest $5.34, retest this week's low, then jump to $5.51 and await further monkey business.
Re: Launch Delayed/ Zero hour 9 am Monday newSubmitted by 2nd_ave (5562 comments) on Thu, 04/21/2011 - 18:25 #84389 (in reply to #84332) What I had in mind was a 200+ point 'dog-'led rally on the DJIA.
Re: Downward Q2 GDP revisions to come/ Legalize Drugs! newSubmitted by 2nd_ave (5563 comments) on Thu, 04/21/2011 - 18:46 #84393 (in reply to #84390) I absolutely agree with the legalization of drugs.
(a) We tax cigarettes, do we not? A sin tax on drugs would generate substantial revenue.
(b) The ATF does not budget hundreds of millions for a 'tobacco war.' Users do not fund numerous tobacco cartels. Neighborhoods are not devastated by tobacco-related violence.
(c) On the other hand, there is no question that smoking is responsible for serious hits to the nation's health care budget.
(d) Overall, I think the argument has to be in favor of legalization. All 'vices' exact costs. Legalization at least tends to confine those costs to users.
Re: "Lust for Life"/ Moulin Rouge newSubmitted by 2nd_ave (5564 comments) on Thu, 04/21/2011 - 18:56 #84394 (in reply to #84392) A beautiful film indeed! Anyone who decides to download/rent the film should also check out the 1952 version of 'Moulin Rouge,' which depicts the story of Van Gogh's contemporary Henri de Toulouse-Lautrec.
I just hung out at SLV message board. Two words- utter pandemonium.
SLV closed today at a record 72% above its 200 day moving average at $27.
Going back to 2002, all prior instances above 50%, touched the 200 day moving average within one month.
I'm throwing crazy SLV short orders out there- 45.71, 45.73, 45.74, 45.75. They're ALL getting filled! I'm getting moderate orders of ZSL filled at 14.64 and 14.65. Its party time!
Mark/Team- Yes, short SLV. I like to live on the edge:)
This is dedicated to 2nd-
From LSGI Fund:
"Several decades ago an engineer at Bell Labs developed a formula that dealt with digital compression and bandwidth allocation problems associated with data transmission. Named the “Kelly Formula” after the scientist who developed it, the formula determined the most efficient means to compress data in phone lines.
This basic formula was later adopted by Professor Edward Thorpe who used the mathematical relationship to address the question as to how much to wager to maximize gambling returns while minimizing the risk of going bankrupt. Thorpe used the formula to develop a system to ‘bet’ in blackjack games – with the goal of maximizing returns while keeping the risk of insolvency minimal. Using the probability theory and formula he proceeded to ‘beat the house’ at blackjack – was banned from several casinos. Thorpe later wrote a best-selling book on how to win at blackjack using his system.
Thorpe found the key to using the Kelly formula is to only place bets when an investor or gambler had an ‘edge’. When the investor had no edge, the formula says not to bet or put money at risk. The number of times a bettor has an edge at a casino is very low – and the key to using the system is to find an area where an investor or gambler can find an edge. In gambling Thorpe found that he could develop an edge in blackjack. Other games of chance provided no edge, so he focused his efforts toward that specific game. The biggest issue in using the Kelly formula was finding an area where an investor or gambler had an edge. He found that inefficiencies of the stock markets are such that it is much easier to develop an edge in the equity markets than in the gambling arena.
Appling the formula to the stock market Thorpe summarized the rule as follows: When you have a substantial informational edge and know the risk/reward relationship is tilted heavily in your favor you invest heavily. When you have a slight informational advantage the size of the investment should be much smaller. Investments are made ‘proportionally’ to the risk/reward ratio, and the edge an investor may have. If a party has no informational advantage (a common occurrence) the party does not invest or bet at all. Over a 19 year period Thorpe used the formula to manage a portfolio and outperformed the major market indexes by 6.2% a year.
The downside of using the Kelly formula is that returns can be very volatile. But the volatility can be reduced using several management techniques without giving up too much from a return standpoint. To maximize returns the formula assumes the markets are relatively stable—something not entirely true lately with the 2008 global financial meltdown—but the equity markets have recovered for the most part. Over time the formula maximizes investor returns – and the formula is subject to the ‘power law”, that is returns will be exponential over time. Warren Buffett’s partner and Berkshire Hathaway Co-Chair Charles Munger has noted that the Kelly formula is one reason he and Warren Buffett have been so successful – when they had an informational edge they invested heavily. And when they did not they did not invest.
A chart of the stock price of Berkshire Hathaway (BRKA) over time illustrates the ‘power law’ nature of the Kelly formula:
The Kelly formula led them both Munger and Buffett to managing concentrated portfolios of firms they knew well in sectors they thought they understood. It also led them to invest in very small companies – Nebraska Furniture Mart, Borsheimes Jewelry, See’s Candies, HH Brown Shoe, Geico Insurance, and the like – firms that generally have done very well over time and are now much larger and part of Berkshire Hathaway.
Professor and textbook author Paul Samuelson noted that “in my experience the very few that somehow develop a knack for risk corrected excess total returns do become rich very quickly.” Samuelson tried to use the inefficient warrant market (a warrant is similar to a call option) to develop an edge, and used Kelly formula concepts, apparently with some success but never managed money for a living.
In our opinion, in today’s market many analysts and investors have not focused on the longer term trends in the energy sector other than to note higher gasoline prices in local markets. Most analysts and investors are of the opinion that the recent run-up in commodity and energy prices will be a short term issue, or one that will be easily addressed. We think otherwise, provided China and India’s economies continue to grow (see charts of China auto production in the blog below).
We think small and mid-sized energy producers that are overlooked by analysts and the market – both crude oil and coal producers – should be prime beneficiaries of global trends. The merger and acquisition frenzy in the resource sector should continue – and should put a floor under asset prices. We think we have an informational advantage in this sector, an ‘edge’. When this situation occurs the Kelly formula is telling us to invest proportionally to maximize portfolio returns.
Judging from the rate of the recent ascent in SLV, the end is near. The price is not important now -- the time is. If we know that SLV reverses within a week, then it doesn't matter how high it goes in the interim -- it might as well go to $60, but then one week later it will be at $40 and two weeks later at $30. The out-of-the-money puts on SLV are very expensive, and so I'll just keep rolling them over to higher strike prices (with a small percentage loss each time) as silver keeps powering up (didn't do it today but will do it tomorrow). In this way, I'll be sure to catch the top of this crazy silver move and get a "consolation prize" if silver collapses 50% afterwards. If, on the other hand, it follows the same path as many base metals took in 2006-2008 (a parabolic run up and then two years of a sideways motion), then my ECU.TO will have plenty of time to catch up with SLV (i.e., increase 5-fold). So I hope that I don't profit too much on my SLV puts, since 60% of my port is in ECU.TO now. :)
We think, based on current trends, we are entering an era we have never seen in the 150 year history of the oil industry – one in which supply and supply growth will not be able to meet the growth in global demand. Based on historical market behavior, the elements we are likely to see when excess capacity falls to extremely low levels are as follows:
(1) wildly volatile crude oil prices - mostly to the upside, (2) resource nationalization – domestic energy resources are too valuable to export, (3) irrational hoarding behavior by consumers, (4) a spillover of price volatility into the markets for other energy sources (coal especially), (5) a wild frenzy to acquire domestic oil and gas resources, (6) a ‘melt-up’ of the shares of energy and energy services companies, (7) a focus on energy conservation, (8) new opportunities in the solar and wind energy sectors, (9) more focus on biofuels (emphasized by the 2007 Energy Act) - which will drive grain prices to record levels, and (10) as a result of the extreme increases in food and fuel prices we expect to see food shortages, instability, riots, and the like in less developed and less stable countries.
We mentioned this new era, the correlation between economic growth and energy use, and the long term trends in crude oil supply and demand in our recent presentation to the Energy Prospectus Group in Houston:
http://www.lsgifund.com/SMU/EPG.wmv
And yesterday China announced oil consumption hit a monthly record in March with demand increasing 11 percent from year earlier levels to 9.16 million barrels per day. Inventory levels were essentially flat from year earlier levels. In the first quarter of this year oil consumption in China rose 10.2 percent with gasoline consumption increasing 5.6 percent and diesel ring 10.6 percent. More oil was used for industrial production, infrastructure construction, and in the agriculture sector. This was the sixth consecutive month oil demand in China grew by double digits.
Growth in global oil demand in 2011 will be above average according to IEA estimates and follows one of the highest rates of demand growth in decades in 2010. With the natural depletion of major existing fields, the slowdown of capital expenditures in the sector due to the financial crisis, the temporary drilling ban in the Gulf of Mexico after the BP disaster, and continuing unrest in a number of Middle East and African oil producing countries it is highly unlikely that productive capacity will rise as much as demand any time soon. Violence was reported in the press Sunday in Libya with continued fighting, with violent protests in Syria, Yemen, and Bahrain – and ongoing governance issues reported in Iraq with recent bombings. And Nigeria, another exporter of ‘light sweet’ crude is experiencing violent protests after this weekend’s elections.
The global excess productive capacity available to increase oil production (and exports) in our opinion will fall in 2011. While exact capacity data is unknown in many areas due to confidentiality laws, we think excess capacity will soon fall to levels that have precipitated price spikes in the past, provided demand is not restrained by a global economic recession.
So, the moral of the story is to wait for the "fat pitch".... i.e. REDF, MITK, TDSC, APKT, SIFY, COOL, IPGP, OPEN, PANL, SFLY, SHS etc.
So...if we truly are entering the age of "peak oil" and oil were to say double or triple to $230 or $350, how do you play it? Well... you guessed it!:)
You simply look at $350 oil; slap a historical 9 to 1 ratio to natural gas and come up with natural gas at $39:) How about those occasional ratio spikes to 6? That would be roughly $60 natural gas:)
Fortunately, investors have been given the gift of time while the oil producers have intentionally flooded the market with natural gas. The producers temporarily suffer in the short run as they position themselves to make literally hundreds of billions of dollars and create trillions in future market cap once they gain the required support for the natural gas bill(s). Even if the bill(s) are not passed for whatever reason, the price of natty should soar as the "cap" is removed.
Jesse, do you think the producer stocks will lead UNG during a true upswing? I am only following SWN, and judging by its late March move, the rise in UNG at that time looked like a real deal. But the current rise in UNG is not matched by the rise in SWN.
I think most investors believe that the producers are highly leveraged to the price of the commodity. My belief is that with the producers, you are highly susceptible to 1)a market crash which takes ALL stocks with it (btw- natty has risen during many market crashes) and 2) company specific news- financing, earnings, secondaries, bad wells, etc. etc..
If you look at Silver for instance. The big boys like SSRI and SLW have risen 100% during the current run. The highly liquid (after hours as well) and "safe" SLV is up roughly 180%.
Of interest is GAZ. It has been 15% ABOVE net asset value for 5 weeks now. I've never seen anything like it in the market. If you pull up the weekly chart, volume has declined in a straight line each week during this bullish weekly "flag" pattern as it rests just below its 50 week moving average. Given such an unsustainable spread between its price and NAV, still, there are no messages on the message board shouting about a shorting opportunity. I think there are 8 or 9 messages since it broke out 5 weeks ago.
This leads me to believe that individual investors are not invested in it. I believe the funds have moved in and are willing to accumulate it at any price given what they believe will happen later this year... What's a 15% premium if they believe they will make 1,200% in 18 months?
(1) wildly volatile crude oil prices - mostly to the upside.
If crude goes up 2,3,4,5 fold over the intermediate term, the global economy will simply collapse and collapse crude with it.
So, there's no way that crude and natty go up in a straight line (like Silver lol).
If we are in fact near the peak oil juncture, the market will start to price it in long before we see it coming. The market will simply crash and wall street will have no idea why.
We would see record earnings and extremes in bullishness while put prices reach extremes while the "smart money" positions for the road ahead.
Silver - I say look for a best of the Hunt brothers high. I would exit as the high is reached.
As what to do with my Jr. gold miner, I have yet to decide but it's not looking too good. I had hoped for some drilling news by now to observe the reaction and make a decision based on that.
Jesse, with all due respect, I think the fundamentals of the NG market have changed drastically over the past few years -- you can't escape the fact that there is a 100+ years worth of supply that can be tapped at will. The all-in production cost is on average around $6 from what I hear, so the most upside we can see for NG futures is 50% once the extra wells drilled in 2010 use up most of their supply (which should take about a year).
David, I'm not calling a top, rather I'm targeting $50 as a place I'd exit. Silver could move higher, but I would exit there and wait a bit. But that's me, in fact I'd probably exit prior to the event.
Mark - In my mind, the RBY drilling news was supposed to hit the wire prior to the PM peak, looks like it's not happening that way.
PM's - Sell in May and go away? Probably more like sideways action or possibly a bout of profit taking until the debt ceiling is raised before the next leg up?
Lots of folks were left on the platform and now are yelling at the train as it's leaving the station?
On top of it all, GDXJ actually sowed a decent gain for the week, so maybe I'm just over reacting to a little bout of RBY weakness.
Igor -- in case you think there is something wrong with ECU.TO, check out the charts of some other junior silver miners since March 23 (SVL.V, IPT.V, GPR, ECU.TO) -- they are all down over this time period (and ECU is not the worst one), while SLV is up 28%. So I think we have a great arbitrage opportunity now: buy junior silver miners and hedge with put options on SLV. If SLV does not collapse soon, then junior miners should explode upwards.
The secret to checking, in case you haven't played hockey, is to get low up under the person you're checking, and lift up while pushing them.
They fall on their ass every time. ;)
I once checked one of the players from the LA Kings team during a hockey school and was almost sorry I did b/c he fell on top of me landing on my head. It hurt for a while(headache) even though I had a helmet, I'm not sure if he was teaching me a lesson or if it was just a natural move by a pro to inflict damage in return for attacking him...
I don't normally like reading gold/silver newsletters b/c they mostly seems to have an agenda, but lately I'll admit to have read a few, just looking to see if I've overlooked some obscure phenomenon:
cheapy, as I noted above, this has been the case for all junior miners. I think this is an amazing opportunity for long-term investors, since we know that the fundamental factors are implying that the gold/silver bull market will keep going for years, and so this is probably the last opportunity to load up on junior miners cheap, before they go up 10X over the next few years.
I don't mean RBY, of course :), since it is very richly priced already and will at most double over the next couple of years (you can't expect much more than that with only $0.8 free cashflow per share once they start producing). ECU.TO, on the other hand, can go up 10X because they have the lowest valuation per oz of AgEq in their peer group (with some junior production companies valued at 10X that of ECU.TO) AND no one is expecting any decent production from ECU yet (even though they will start making $12M/quarter starting 3Q2010 if the silver/gold prices stay in place) and will produce their first ever economic feasibility report this summer, which will immediately place them "on the radar" of large investors and will make them a takeover target.
Shorter term, like in the next year or 2, doubling for RBY would be about what I'd expect, too, assuming gold doesn't go up a lot.
On the other hand, I think we will see $5000 gold in the next 5 to 10 yrs. Just like silver has had a huge run up, I think eventually gold will do the same when the US debt comes into focus, like PIIGS debt is today.
Beyond the tendency of paper money to eventually decline to its intrinsic vale of zero, I'm as clueless as the next guy.
"So, the moral of the story is to wait for the "fat pitch".... i.e. REDF, MITK, TDSC, APKT, SIFY, COOL, IPGP, OPEN, PANL, SFLY, SHS etc.
So...if we truly are entering the age of "peak oil" and oil were to say double or triple to $230 or $350, how do you play it? Well... you guessed it!:) "
Jess - I hear what you're saying...which is why I'm only focusing on things that will either benefit from rising oil or won't get hurt by it. I have most of my money in MITK, which is in the midst of a huge secular bull market for them. Banks are moving all of their operations online and through mobile phones because it is:
(a) more convenient for customers (b) customers are most comfortable with doing everything online and over their phones and (c) it's saving them money by reducing huge overhead costs.
This shift isn't going away regardless of higher oil prices. And it might actually benefit from higher oil prices because people have to make less trips to the local bank branch.
MITK owns the entire mobile deposit market. I know check writing is a slowly dying business, but it's still a huge market for a tiny company like MITK. And every major bank is getting into the act. Chase is the first major player to adopt this and they literally just started offering it. Why would I want to bail now when the party is just getting started?
Has Wall Street begun retaliating with help from S&P (reference US rating downgrade) against Levin and company, for pointing the finger at GS for misleading and front running their customer base?
Wonder what Wall Street & Co.'s plan entails, if anything? Maybe Sen. Carl Levin & Co. are simply attempting some CYA in advance of the next shit storm?
They're all accomplices in my book, starting with the active effort to export employment. What were they thinking, how did they think such an endeavor would eventually end, anyway?
"I thought checking was where you pull the other guy's jersey up, pinning his arms, while you pound away at him with a hockey stick."
That's called a fight, and happens after you check someone who doesn't have the puck, or if you "stick" someone who has control over the puck.
Let's say you wake up down the rink picking yourself up off the ice, you may have just been "sticked". You're pissed, so you skate to the other end and check the opposing team member who sticked you, then pull his jersey up over his head and commence to pummeling. ;)
It's called entertainment, and appeals to a certain (perhaps broad?)element of the crowd.
I can't say I've ever witnessed 2nd throw a stone, but I do recall throwing a few in my time.
I really got lucky once when I threw a stone at a bully from probably 50 yds, hitting him smack on the head with a thump! He immediately stopped trying to bother me and never did try again, after that. I think I even made him cry... maybe he felt unwanted???
Hey Anon, Was I deleted over there? Got to admit anon I had your hero do a complete 360 which I will give him credit for doing. In the past i think I would of been deleted. Anyway i check in maybe twice a week there and it usually depresses me. If 2nd, team and others from this site didn't post the blog would be called, "Slit Your wrist now" .com. I will continue to do the Smart Trader, Dumb Trader routine with Vad. Other than that pure melancholia. http://www.youtube.com/watch?v=EBV73-SBLZc then its this: http://www.youtube.com/watch?v=Z-b5hSMB50g&feature=related
CP -- the median price gets distorted if the composition of sold homes changes. For a true home price, I suggest you check the Case-Shiller indices published on the last Tuesday of every month:
All the technical analysis I don't understand, it's just my job 5 days a week...
ReplyDeleteRe: She packed my bags last night pre-flight newSubmitted by 2nd_ave (5556 comments) on Wed, 04/20/2011 - 20:28 #84302 (in reply to #84301)
ReplyDeleteAnd all the technical analysis I don't understand
It's just my job five days a week
I'm a rocket man
Burning out his fuse up here alone
Best day for me this year so far. My portfolio is up almost 1% today. I guess I have too many tech stocks. Hope everyone had a good day! My only down stock today was ECU. It was tough watching it fall while SLV was rallying. Reading David's posting helped to stop the desire to push 'Sell' button on ECU. -)
ReplyDeleteMark,
Can you please be a bit more descriptive when you post something like "VMW!!". This way we can all quickly jump on the fast moving train.
I thought he was just saying Viva Mark W!
ReplyDeleteI hear you, igor. It was tough watching WFC sell off as well.
ReplyDeleteMaybe they'll come out with upgrades on WFC tomorrow.
ReplyDeleteLarge caps lead the indexes to new highs? That would be the ultimate high.
ReplyDeleteTIVO - OMG, nice pop there!
ReplyDeleteCOMEX gold reached $1506.20 at 05:40 ET, now it's back above that level...
ReplyDeleteDavid, The silver price is bubbelicious. Strange how the miners cannot even keep up. SLW. SLV has been outside the BB 5 days in a row. You all going to chase here?
ReplyDeleteIn 1980 silver prices topped out at $49.45/oz during the Hunt Brother's shenanigans.
ReplyDeleteSome folks think T's are the bubble.
2nd- Just under the video there is a 'share' tab now. Click on that and it gives you the embed option.
ReplyDeleteIgor- Sorry, your right. I'll try not to wet myself until AFTER I post. Rookie mistake.
Miners - Perhaps this is far fetched, but maybe if/once people stop selling, you won't be able to buy at any price?
ReplyDeletehttp://wakingthebull.com/entry.php?866-Great-Article-Hedge-Fund-Ratio-Spreads-Continue-to-Distort-the-Value-of......
Well, it's pretty obvious I kicked my trade this week. Waited until a seasonal edge presented itself, entered the trade, and panicked out. Left $3K on the table and managed to lose $300 in the process.
ReplyDeleteWay to go rookie. Weak.
Guess I'm stuck in single A for another summer....Dreams of the Bigs dash.
ReplyDeleteWhy don't we all just simply buy index calls at the start of these Super/Mega-bullish seasonality weeks? After a quick look, it looks like "at the money" QQQ call options purchased at the open on Monday expiring today are up roughly 1,000%. These super seasonally bullish weeks (per Sentimentrader) which usually occur just before a holiday seem to be up 9 times out of 10.
ReplyDeleteDo the huge trading desks load up on calls and gently push the market up all week? Screw it, next time we get a similar seasonality setup, I'm putting a small % of my port in IWM calls since small caps are the most easily manipulated higher during slow market weeks.
Look at EWJ. Lots of tails under $10 forming a nice base to launch from. I'd like to find some Japanese small caps that were beaten to a pulp.
ReplyDeleteS&P - I have an RSI(7) peek low of 31.61 on 4/18, but I'd bet it actually dropped under 30 at some point. The resolution isn't so good, what do you guys have?
ReplyDeleteI just blew through the Japan ADRs. TM SNE MFG look good on the daily and weekly.
ReplyDeleteHIT - Not exactly a small cap, but it was beaten up pretty good. Trades a little thin...
ReplyDeleteJOF, small cap Japan stocks
ReplyDelete"25% Of Scotia Mocatta's Silver Transferred From "Registered" To "Eligible" Status: A 45% Reduction In "Physical""
ReplyDeletehttp://www.zerohedge.com/article/45-scotia-mocattas-registered-silver-transferred-eligible-status#new
Thanks for the Japan plays guys. CP- HIT looks really good. No resistance for a retracement rally...
ReplyDelete"David, The silver price is bubbelicious. Strange how the miners cannot even keep up. SLW. SLV has been outside the BB 5 days in a row. You all going to chase here?"
ReplyDeleteRoBear, I am piling into ECU.TO, since, like Patrick wrote today in his post-close report, eventually the gap between the miners and the silver will have to close, and given that ECU.TO was 40% higher than now when silver was $30, I would assume that if silver drops 30% and stabilizes at $30, then ECU.TO will eventually rise to $1.30 and will keep rising as they keep expanding their production.
As for SLV itself, I bought 1K worth of at the money puts today, and will buy 2K worth of puts if SLV reaches $49.
CP -- can you please post the full link to the article about hedging and the miners? Thanks...
ReplyDelete"My only down stock today was ECU. It was tough watching it fall while SLV was rallying. Reading David's posting helped to stop the desire to push 'Sell' button on ECU."
ReplyDeleteIgor -- the ONLY way to make real money is to buy an out-of-favor stock and wait until it goes up N times. Going with the crowd (buying what is moving up and selling what is not) is a sure way to lose money over the long term.
David - Did the link not work? You're referring to my 8:22pm waking the bull hedge fund link?
ReplyDeleteThe "....." is actually part of the original headline, the link works as above I just tested it.!.!.! ;)
Let me know otherwise, I'll take another look.
BTW, there's another theory that says if the market collapses then PM's go with it and miners get hit extra hard.
UXG - Popped up today, are these miners going to start popping like corn in a kettle as PM's move on up?
ReplyDeleteMiners earning season is upon us, FCX reported just today, popped nicely then lost a decent part of those gains retesting the 50SMA.
Assuming the link still didn't work, try this one, you can navigate to the article:
ReplyDeletehttp://wakingthebull.com/blog.php?4-RighteousTrader&s=339a2996d2bda97984ca7bef6d7e5556
And I don't believe that miners lead the metal, otherwise it would be considerably easier to trade the metal using candlesticks, and I still can't trade the metal using candlesticks like I can trade the miners.
ReplyDeleteSo I say the metals lead the miners.
On top of it all, copper was up a hell of a lot today, +2.6%, right as it's RSI(7) hit 30
ReplyDeleteDenninger heard a rumor the Yuan may receive a 10% revalue soon?:
http://market-ticker.org/akcs-www?post=184595
WMT - Hmm, didn't move very far but was green. Need to watch this one closely if a yuan revalue is coming.
ReplyDelete"Large Senate delegation to visit China, led by Majority Leader"
ReplyDeletehttp://www.washingtonpost.com/politics/senators-chinese-junket-is-shrouded-in-secrecy/2011/04/19/AFhndp7D_story.html
AMSC - Just keeps right on falling
ReplyDeleteDavid, i like hedging here with the puts. When i say Bubblicious I am on a real short time frame. So what I should more correctly say is at this moment in time Silver is way over bought. The last time it was this high I lived in a silver mining town of Tonopah, Nevada. It became a boomtown in a few weeks and a ghost town overnight. It ended very badly. Of coarse 40 1970 dollars is worth how many 2011 Dollars. A little perspective. No one could believe that gas was .50 cents a gallon. How could this country survive on that?
ReplyDeleteDidn't know it was margin rule changes that caused the collapse.
ReplyDelete"on January 7, 1980, in response to the Hunt's accumulation, the exchange rules regarding leverage were changed, when COMEX adopted "Silver Rule 7" placing heavy restrictions on the purchase of commodities on margin. The Hunt brothers had borrowed heavily to finance their purchases, and as the price began to fall again, dropping over 50% in just four days, they were unable to meet their obligations, causing panic in the markets."
[edit]
OK boys and girls- We have until the end of the month to have our fun. Let's print a nice close above the bollinger bands on the monthly indices before the %$@^ hits the fan.
ReplyDelete"While the VIX closed at a 52-week low on Wednesday, the CS Fear Barometer closed at a 52-week high on Tuesday. What this means is that overall volatility is expected to be low over the next 30 days, but S&P 500 traders are rapidly bidding up the price of protective put options relative to speculative call options.
This has not been a good omen for the market.
There have been 5 other times that the VIX was scraping along at or very near a 52-week low while the CSFB jumped to a 52-week high (and 2 more when the VIX was within 2% of a 52-week low). 6 of those 7 occurred within 3-11 days of an intermediate-term market peak. The dates are 3/19/98, 7/16/98, 12/16/03, 1/16/04, 1/6/10 and 4/9/10 and 2/11/11.
During the next two months following those instances, the S&P dropped a median of -5.9% at its worst point. That compares to a median maximum rally of +2.2%, which again was mostly during the next 3-11 days.
If you waited a week until after these signals, then those figures above drop to -6.9% and +1.4%. Not a good sign."
BTW-
ReplyDeleteSilver closed 51% above its 200 dma in April of 2004. It went from $8.50 to $5.45 in the next month.
Silver closed 68% above its 200 dma in May of 2006. It went from $15.21 to $9.48 in....one month.
Silver closed 47% above its 200 dma in late March of 2008. It went from $21.44 to $16.06 in one month and to $8.40 in six months.....
Today's close? 68% above its 200 dma. Tomorrow's open? Close to 70%.
When the dollar has its inevitable, yet seemingly impossible 10% retrace, we will truly see "shock and awe" when it comes to silver as well as other commodities. I even saw Cramer yelling buy, buy, buy SLV 2 nights ago while it sat 65% above its 200 day. Now, we just have to wait for Goldman to put Silver on its "conviction buy" list when it hits $50. 4 weeks after their "recommendation"? $30.
walking on the wild side this a.m., short 6E at 23, stops at 28, target 17 then the round number at 10
ReplyDeletevery sloppy pa, took small profit at 19 and bailed
ReplyDeletenow the 6E rolls over...
ReplyDeleteAAII Sentiment Survey newSubmitted by 2nd_ave (5557 comments) on Thu, 04/21/2011 - 08:22 #84317
ReplyDeleteWeek ending 4/20/2011
Data represents what direction members feel the stock market will be in the next 6 months.
Bullish 32.2%
down 10.1
Neutral 36.8%
up 10.1
Bearish 31.0%
up 0
Change from last week:
Bullish: -10.1
Neutral: +10.1
Bearish: +0.0
Long-Term Average:
Bullish: 39%
Neutral: 31%
Bearish: 30%
Interesting results. Drop in bulls, no change in bears. A lot of fence-sitters.
Opening GE @ 20.14
ReplyDeleteSubmitted by 2nd_ave (5559 comments) on Thu, 04/21/2011 - 09:42 #84325
On the morning drop.
"Denninger heard a rumor the Yuan may receive a 10% revalue soon?:"
ReplyDeleteI think Denninger hears rumors in his head all day long. He's still calling for S&P 210.
At least what I follow in energy isn't very bullish.
ReplyDeleteBAC needs to fill it's 12.08 and be done with it already. Everyone knows it's going to happen.
ReplyDeleteRe: Opening GE @ 20.14/ Adding @ 19.80 newSubmitted by 2nd_ave (5560 comments) on Thu, 04/21/2011 - 09:59 #84328 (in reply to #84325)
ReplyDeleteTo 40% of allocation.
Man, that's a crazy day range for GE. Any reason?
ReplyDeleteTrying to add to MITK @ 5.67.
ReplyDeleteit's tough getting MITK orders filled...CL on the other hand is a breeze - I get in and stopped out at the same time...LOL
ReplyDeleteNatty call. 61.63bcf injection. Is that specific enough?
ReplyDeleteJB :). You going to jump in MITK? If so, I'll pull my bid to see if you can get in lower.
MITK- Sorry, just filled.
ReplyDeleteCan someone out there please take a picture of a check?
ReplyDeleteno prob, Mark, have a nice position from the other day, and putting a stink bid in at 5.60.
ReplyDeleteyou got a nice pop right after your entry -cool!
Ha! MITK- Whoever took that picture, thank you :).
ReplyDeleteJB- Yeah, that was really funny! Probably end the day @ 5.50 :)
ReplyDeleteLaunch Delayed newSubmitted by 2nd_ave (5561 comments) on Thu, 04/21/2011 - 10:35 #84332
ReplyDeleteTechnical issues, no doubt.
AEZS- I tell ya, this sucker wants to run...But I personally wouldn't buy it here.
ReplyDeleteDenninger - No doubt he's a piece of work, and PM prices have experienced a meteoric rise leaving the miners in the dust.
ReplyDeleteAlso, a lower dollar makes US-listed equities cheaper in terms of foreign currencies.
Miners - Nobody seems capable of explaining the lack of participation phenomenon, which is why I chose RBY, nobody seems to know what they've got in their mineral deposit right next door to GG, the best guess I've seen is it's ~26% more than indicated.
I'm confident we'll see $50 silver and $1570 gold by July 4th, and assuming the global economy doesn't tank, PM prices have no fundamental reason to collapse. The FED was able to crush the Hunt brothers by changing the rules, but the situation is a bit different this time around, considerably more serious, is my assessment.
I'm not long PM's b/c I believe the global economy is about to implode...
CADC - Today's action makes me think the MM wants sub $3, or a capitulatory move...
ReplyDeleteMITK/LEXVF- Man, watching these 2 is like watching the hot dog race the polish sausage during the 7th inning stretch of a Giants game...
ReplyDeleteL8tr players...
ReplyDeleteCheck out the weekly chart of GAZ and the declining volume in its flag. Thing of beauty to me...
ReplyDeletePosts on the SLV message board today- 1,275.
ReplyDeletePosts on UNG board today- 12.
Is today the day after 2 long years??
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID660602&cmd=show[s207384618]&disp=O
Reverse head and shoulders pattern for the indices- http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID4371160&cmd=show[s226371299]&disp=O
ReplyDeleteWe should rocket higher in the short term. Maybe till mid May?
Mark > I'm at home today watching last week's The Office and doing a little work on my web business...guess which commercial came on? Chase's ad about mobile check deposit. I'm gonna hold on to my MITK shares tightly. Given:
ReplyDelete1.) How quickly these mobile apps grow
2.) how much banks are pushing for this service to be rolled out quickly
3.) How MITK owns the industry
This should be a great 1-2 year investment.
HIT - Lookin' pretty good to me...
ReplyDeleteI'm like anyways!!!
ReplyDeleteMomentum traders are crooks? new
Submitted by bobbyo (629 comments) on Thu, 04/21/2011 - 13:02 #84351
Bill,
Am I misunderstanding your words. Reversal traders are angelic and momentum traders are crooks. I am dumbfounded at these comments.
"Although not mine, buying break-outs – buy high and sell higher -- is a favorite style of many traders. I don’t care for that because the winners tend to be front-running crooks while the majority of participants are left holding the bag. I have witnessed that happen too many times in the past 40 years not to have learned to avoid it."
Coulda' been the whisky, mighta' been the gin.
ReplyDeleteVodka.
ReplyDeleteLooks like all of the traders have left for the weekend.
ReplyDeleteCoulda' been the three or four six packs, I don't know, but look at the shape I'm in! My head is like a football, think I'm gonna die. Me oh me oh me oh my...
ReplyDeleteYep, I'd bet we don't see a closing rally and tomorrow's another week so I'm not sitting around to find nothing happening.
I should be placing a bid on HIT at the 20SMA...
Anyway, scream at you galz later!
CP -- I was playing bridge last night and didn't have a chance to check out your link. It worked -- thanks! That link actually suggests that miners will drop harder than the metal during a correction. But since I am a long-term investor in ECU now, this discrepancy between its recent share price movement and the movement in SLV is just a short-term curiosity, which will have to close by a powerful thrust up in ECU when the first piece of good news comes out and all those who were shorting it will run for cover.
ReplyDeleteWhat's up with WATG? It has been on a tear lately. They didn't announce their restated results yet, didn't they? Or is it simply the news leaking out about those restatements indeed increasing their profit and revenue for the past two years, just as WATG suggested initially?
ReplyDeleteQPSA? Si!!!
ReplyDeleteToo funny..as soon as CP leaves GMO gets snappy.
ReplyDeleteCADC - Looks like the entry was $3.05 a couple'a days ago. Still waiting for mean 'ol Mr. Market to give newcomers one last shakedown and I might stick my toe back in the water...
ReplyDeleteThus, it won't happen?
GMO - Ha! Yeah, but I'm back now so the price will sink again... ;)
ReplyDeleteGMO - Okay so here's the plan: Yesterday I sold my trading shares for $5.23, which is precisely where it will close today just to taunt me after having traveled all the way to $5.34 and back.
ReplyDeleteMonday, GMO will retest $5.34, retest this week's low, then jump to $5.51 and await further monkey business.
See, Mr. Big Shirt soaked up all excess inventory at $5.23
ReplyDeleteREDF: oh what could've been...
ReplyDelete1st close above 2 year downward channel for UNG. Not a single word of this on twitter or the message boards. Could this finally be the real deal?
ReplyDeletehttp://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID660602&cmd=show[s207384618]&disp=O
Re: Launch Delayed/ Zero hour 9 am Monday newSubmitted by 2nd_ave (5562 comments) on Thu, 04/21/2011 - 18:25 #84389 (in reply to #84332)
ReplyDeleteWhat I had in mind was a 200+ point 'dog-'led rally on the DJIA.
jesse- You have a point- assets always rally when no one's paying attention.
ReplyDeleteRe: Downward Q2 GDP revisions to come/ Legalize Drugs! newSubmitted by 2nd_ave (5563 comments) on Thu, 04/21/2011 - 18:46 #84393 (in reply to #84390)
ReplyDeleteI absolutely agree with the legalization of drugs.
(a) We tax cigarettes, do we not? A sin tax on drugs would generate substantial revenue.
(b) The ATF does not budget hundreds of millions for a 'tobacco war.' Users do not fund numerous tobacco cartels. Neighborhoods are not devastated by tobacco-related violence.
(c) On the other hand, there is no question that smoking is responsible for serious hits to the nation's health care budget.
(d) Overall, I think the argument has to be in favor of legalization. All 'vices' exact costs. Legalization at least tends to confine those costs to users.
Ha-
ReplyDeleteThe UNG message board averaged 40 posts per day this week. SLV is on pace to have 3200 posts just today.
I think that speaks volumes about each of these asset classes. I can't wait to see how this plays out...
Re: "Lust for Life"/ Moulin Rouge newSubmitted by 2nd_ave (5564 comments) on Thu, 04/21/2011 - 18:56 #84394 (in reply to #84392)
ReplyDeleteA beautiful film indeed! Anyone who decides to download/rent the film should also check out the 1952 version of 'Moulin Rouge,' which depicts the story of Van Gogh's contemporary Henri de Toulouse-Lautrec.
I just hung out at SLV message board. Two words- utter pandemonium.
ReplyDeleteSLV closed today at a record 72% above its 200 day moving average at $27.
Going back to 2002, all prior instances above 50%, touched the 200 day moving average within one month.
I'm throwing crazy SLV short orders out there- 45.71, 45.73, 45.74, 45.75. They're ALL getting filled! I'm getting moderate orders of ZSL filled at 14.64 and 14.65. Its party time!
Jesse- Just to be clear. Your short SLV?
ReplyDeleteYeah I couldn't tell either Jesse :)
ReplyDeleteGood luck. It's definitely parabolic.
Mark/Team- Yes, short SLV. I like to live on the edge:)
ReplyDeleteThis is dedicated to 2nd-
From LSGI Fund:
"Several decades ago an engineer at Bell Labs developed a formula that dealt with digital compression and bandwidth allocation problems associated with data transmission. Named the “Kelly Formula” after the scientist who developed it, the formula determined the most efficient means to compress data in phone lines.
This basic formula was later adopted by Professor Edward Thorpe who used the mathematical relationship to address the question as to how much to wager to maximize gambling returns while minimizing the risk of going bankrupt. Thorpe used the formula to develop a system to ‘bet’ in blackjack games – with the goal of maximizing returns while keeping the risk of insolvency minimal. Using the probability theory and formula he proceeded to ‘beat the house’ at blackjack – was banned from several casinos. Thorpe later wrote a best-selling book on how to win at blackjack using his system.
Thorpe found the key to using the Kelly formula is to only place bets when an investor or gambler had an ‘edge’. When the investor had no edge, the formula says not to bet or put money at risk. The number of times a bettor has an edge at a casino is very low – and the key to using the system is to find an area where an investor or gambler can find an edge. In gambling Thorpe found that he could develop an edge in blackjack. Other games of chance provided no edge, so he focused his efforts toward that specific game. The biggest issue in using the Kelly formula was finding an area where an investor or gambler had an edge. He found that inefficiencies of the stock markets are such that it is much easier to develop an edge in the equity markets than in the gambling arena.
Appling the formula to the stock market Thorpe summarized the rule as follows: When you have a substantial informational edge and know the risk/reward relationship is tilted heavily in your favor you invest heavily. When you have a slight informational advantage the size of the investment should be much smaller. Investments are made ‘proportionally’ to the risk/reward ratio, and the edge an investor may have. If a party has no informational advantage (a common occurrence) the party does not invest or bet at all. Over a 19 year period Thorpe used the formula to manage a portfolio and outperformed the major market indexes by 6.2% a year.
The downside of using the Kelly formula is that returns can be very volatile. But the volatility can be reduced using several management techniques without giving up too much from a return standpoint. To maximize returns the formula assumes the markets are relatively stable—something not entirely true lately with the 2008 global financial meltdown—but the equity markets have recovered for the most part. Over time the formula maximizes investor returns – and the formula is subject to the ‘power law”, that is returns will be exponential over time. Warren Buffett’s partner and Berkshire Hathaway Co-Chair Charles Munger has noted that the Kelly formula is one reason he and Warren Buffett have been so successful – when they had an informational edge they invested heavily. And when they did not they did not invest.
A chart of the stock price of Berkshire Hathaway (BRKA) over time illustrates the ‘power law’ nature of the Kelly formula:
The Kelly formula led them both Munger and Buffett to managing concentrated portfolios of firms they knew well in sectors they thought they understood. It also led them to invest in very small companies – Nebraska Furniture Mart, Borsheimes Jewelry, See’s Candies, HH Brown Shoe, Geico Insurance, and the like – firms that generally have done very well over time and are now much larger and part of Berkshire Hathaway.
ReplyDeleteProfessor and textbook author Paul Samuelson noted that “in my experience the very few that somehow develop a knack for risk corrected excess total returns do become rich very quickly.” Samuelson tried to use the inefficient warrant market (a warrant is similar to a call option) to develop an edge, and used Kelly formula concepts, apparently with some success but never managed money for a living.
In our opinion, in today’s market many analysts and investors have not focused on the longer term trends in the energy sector other than to note higher gasoline prices in local markets. Most analysts and investors are of the opinion that the recent run-up in commodity and energy prices will be a short term issue, or one that will be easily addressed. We think otherwise, provided China and India’s economies continue to grow (see charts of China auto production in the blog below).
We think small and mid-sized energy producers that are overlooked by analysts and the market – both crude oil and coal producers – should be prime beneficiaries of global trends. The merger and acquisition frenzy in the resource sector should continue – and should put a floor under asset prices. We think we have an informational advantage in this sector, an ‘edge’. When this situation occurs the Kelly formula is telling us to invest proportionally to maximize portfolio returns.
Judging from the rate of the recent ascent in SLV, the end is near. The price is not important now -- the time is. If we know that SLV reverses within a week, then it doesn't matter how high it goes in the interim -- it might as well go to $60, but then one week later it will be at $40 and two weeks later at $30. The out-of-the-money puts on SLV are very expensive, and so I'll just keep rolling them over to higher strike prices (with a small percentage loss each time) as silver keeps powering up (didn't do it today but will do it tomorrow). In this way, I'll be sure to catch the top of this crazy silver move and get a "consolation prize" if silver collapses 50% afterwards. If, on the other hand, it follows the same path as many base metals took in 2006-2008 (a parabolic run up and then two years of a sideways motion), then my ECU.TO will have plenty of time to catch up with SLV (i.e., increase 5-fold). So I hope that I don't profit too much on my SLV puts, since 60% of my port is in ECU.TO now. :)
ReplyDeleteWe think, based on current trends, we are entering an era we have never seen in the 150 year history of the oil industry – one in which supply and supply growth will not be able to meet the growth in global demand. Based on historical market behavior, the elements we are likely to see when excess capacity falls to extremely low levels are as follows:
ReplyDelete(1) wildly volatile crude oil prices - mostly to the upside,
(2) resource nationalization – domestic energy resources are too valuable to export,
(3) irrational hoarding behavior by consumers,
(4) a spillover of price volatility into the markets for other energy sources (coal especially),
(5) a wild frenzy to acquire domestic oil and gas resources,
(6) a ‘melt-up’ of the shares of energy and energy services companies,
(7) a focus on energy conservation,
(8) new opportunities in the solar and wind energy sectors,
(9) more focus on biofuels (emphasized by the 2007 Energy Act) - which will drive grain prices
to record levels, and
(10) as a result of the extreme increases in food and fuel prices we expect to see food shortages, instability, riots, and the like in less developed and less stable countries.
We mentioned this new era, the correlation between economic growth and energy use, and the long term trends in crude oil supply and demand in our recent presentation to the Energy Prospectus Group in Houston:
http://www.lsgifund.com/SMU/EPG.wmv
And yesterday China announced oil consumption hit a monthly record in March with demand increasing 11 percent from year earlier levels to 9.16 million barrels per day. Inventory levels were essentially flat from year earlier levels. In the first quarter of this year oil consumption in China rose 10.2 percent with gasoline consumption increasing 5.6 percent and diesel ring 10.6 percent. More oil was used for industrial production, infrastructure construction, and in the agriculture sector. This was the sixth consecutive month oil demand in China grew by double digits.
Growth in global oil demand in 2011 will be above average according to IEA estimates and follows one of the highest rates of demand growth in decades in 2010. With the natural depletion of major existing fields, the slowdown of capital expenditures in the sector due to the financial crisis, the temporary drilling ban in the Gulf of Mexico after the BP disaster, and continuing unrest in a number of Middle East and African oil producing countries it is highly unlikely that productive capacity will rise as much as demand any time soon. Violence was reported in the press Sunday in Libya with continued fighting, with violent protests in Syria, Yemen, and Bahrain – and ongoing governance issues reported in Iraq with recent bombings. And Nigeria, another exporter of ‘light sweet’ crude is experiencing violent protests after this weekend’s elections.
The global excess productive capacity available to increase oil production (and exports) in our opinion will fall in 2011. While exact capacity data is unknown in many areas due to confidentiality laws, we think excess capacity will soon fall to levels that have precipitated price spikes in the past, provided demand is not restrained by a global economic recession.
So, the moral of the story is to wait for the "fat pitch".... i.e. REDF, MITK, TDSC, APKT, SIFY, COOL, IPGP, OPEN, PANL, SFLY, SHS etc.
ReplyDeleteSo...if we truly are entering the age of "peak oil" and oil were to say double or triple to $230 or $350, how do you play it? Well... you guessed it!:)
You simply look at $350 oil; slap a historical 9 to 1 ratio to natural gas and come up with natural gas at $39:) How about those occasional ratio spikes to 6? That would be roughly $60 natural gas:)
Fortunately, investors have been given the gift of time while the oil producers have intentionally flooded the market with natural gas. The producers temporarily suffer in the short run as they position themselves to make literally hundreds of billions of dollars and create trillions in future market cap once they gain the required support for the natural gas bill(s). Even if the bill(s) are not passed for whatever reason, the price of natty should soar as the "cap" is removed.
Jesse, do you think the producer stocks will lead UNG during a true upswing? I am only following SWN, and judging by its late March move, the rise in UNG at that time looked like a real deal. But the current rise in UNG is not matched by the rise in SWN.
ReplyDeleteDavid-
ReplyDeleteI think most investors believe that the producers are highly leveraged to the price of the commodity. My belief is that with the producers, you are highly susceptible to 1)a market crash which takes ALL stocks with it (btw- natty has risen during many market crashes) and 2) company specific news- financing, earnings, secondaries, bad wells, etc. etc..
If you look at Silver for instance. The big boys like SSRI and SLW have risen 100% during the current run. The highly liquid (after hours as well) and "safe" SLV is up roughly 180%.
David-
ReplyDeleteOf interest is GAZ. It has been 15% ABOVE net asset value for 5 weeks now. I've never seen anything like it in the market. If you pull up the weekly chart, volume has declined in a straight line each week during this bullish weekly "flag" pattern as it rests just below its 50 week moving average. Given such an unsustainable spread between its price and NAV, still, there are no messages on the message board shouting about a shorting opportunity. I think there are 8 or 9 messages since it broke out 5 weeks ago.
This leads me to believe that individual investors are not invested in it. I believe the funds have moved in and are willing to accumulate it at any price given what they believe will happen later this year... What's a 15% premium if they believe they will make 1,200% in 18 months?
I think it all boils down to #1:
ReplyDelete(1) wildly volatile crude oil prices - mostly to the upside.
If crude goes up 2,3,4,5 fold over the intermediate term, the global economy will simply collapse and collapse crude with it.
So, there's no way that crude and natty go up in a straight line (like Silver lol).
If we are in fact near the peak oil juncture, the market will start to price it in long before we see it coming. The market will simply crash and wall street will have no idea why.
We would see record earnings and extremes in bullishness while put prices reach extremes while the "smart money" positions for the road ahead.
Silver - I say look for a best of the Hunt brothers high. I would exit as the high is reached.
ReplyDeleteAs what to do with my Jr. gold miner, I have yet to decide but it's not looking too good. I had hoped for some drilling news by now to observe the reaction and make a decision based on that.
Jesse, with all due respect, I think the fundamentals of the NG market have changed drastically over the past few years -- you can't escape the fact that there is a 100+ years worth of supply that can be tapped at will. The all-in production cost is on average around $6 from what I hear, so the most upside we can see for NG futures is 50% once the extra wells drilled in 2010 use up most of their supply (which should take about a year).
ReplyDeleteCP -- I agree that $50 is a target for silver, and I'll add more puts in high 40's next week.
ReplyDeleteHolly cow! I put in a bid for 1000 ZSL @ 14.61 before I left for Kendra's practice and it filled. Yikes, I have a seat at the silver table :)
ReplyDeleteTZOO - Nice day there, why is it we keep getting pigeon-holed into dead money plays and never seem to be in the right place at the right time?
ReplyDeleteCP- Yeah, RBY really seems at a cross roads. I've tried to enter a few times, but keep wondering...'Why have I gotten so many opportunities?'
ReplyDeleteDavid, I'm not calling a top, rather I'm targeting $50 as a place I'd exit. Silver could move higher, but I would exit there and wait a bit. But that's me, in fact I'd probably exit prior to the event.
ReplyDeleteTOF- That's picking 1 out of 7,000.
ReplyDeleteMark - In my mind, the RBY drilling news was supposed to hit the wire prior to the PM peak, looks like it's not happening that way.
ReplyDeletePM's - Sell in May and go away? Probably more like sideways action or possibly a bout of profit taking until the debt ceiling is raised before the next leg up?
Lots of folks were left on the platform and now are yelling at the train as it's leaving the station?
On top of it all, GDXJ actually sowed a decent gain for the week, so maybe I'm just over reacting to a little bout of RBY weakness.
GLD The RSI(7) is in the clouds over 81, so it's quite natural to be nervous about it.
ReplyDeleteZero posts today on GDXJ board, maybe I should keep the RBY and add soon...
ReplyDeleteWatching a really tough Sharks game with Kendra...
ReplyDeleteKendra- I wish we could check in soccer.
Dad- Don't worry hun, you can, you can. Just not yet.
Kendra- Cool.
Igor -- in case you think there is something wrong with ECU.TO, check out the charts of some other junior silver miners since March 23 (SVL.V, IPT.V, GPR, ECU.TO) -- they are all down over this time period (and ECU is not the worst one), while SLV is up 28%. So I think we have a great arbitrage opportunity now: buy junior silver miners and hedge with put options on SLV. If SLV does not collapse soon, then junior miners should explode upwards.
ReplyDeleteThe secret to checking, in case you haven't played hockey, is to get low up under the person you're checking, and lift up while pushing them.
ReplyDeleteThey fall on their ass every time. ;)
I once checked one of the players from the LA Kings team during a hockey school and was almost sorry I did b/c he fell on top of me landing on my head. It hurt for a while(headache) even though I had a helmet, I'm not sure if he was teaching me a lesson or if it was just a natural move by a pro to inflict damage in return for attacking him...
I don't normally like reading gold/silver newsletters b/c they mostly seems to have an agenda, but lately I'll admit to have read a few, just looking to see if I've overlooked some obscure phenomenon:
ReplyDelete"50 factors powering gold & silver"
http://asiapacifica.com/?p=1462
I think RBY is somehow being used as the weak side of a pairs trade, either vs metal, large cap miners, or an index.
ReplyDeleteWe will see when bad news arrives. It has a funny habit of going up on bad days for gold.
cheapy, as I noted above, this has been the case for all junior miners. I think this is an amazing opportunity for long-term investors, since we know that the fundamental factors are implying that the gold/silver bull market will keep going for years, and so this is probably the last opportunity to load up on junior miners cheap, before they go up 10X over the next few years.
ReplyDeleteI don't mean RBY, of course :), since it is very richly priced already and will at most double over the next couple of years (you can't expect much more than that with only $0.8 free cashflow per share once they start producing). ECU.TO, on the other hand, can go up 10X because they have the lowest valuation per oz of AgEq in their peer group (with some junior production companies valued at 10X that of ECU.TO) AND no one is expecting any decent production from ECU yet (even though they will start making $12M/quarter starting 3Q2010 if the silver/gold prices stay in place) and will produce their first ever economic feasibility report this summer, which will immediately place them "on the radar" of large investors and will make them a takeover target.
Shorter term, like in the next year or 2, doubling for RBY would be about what I'd expect, too, assuming gold doesn't go up a lot.
ReplyDeleteOn the other hand, I think we will see $5000 gold in the next 5 to 10 yrs. Just like silver has had a huge run up, I think eventually gold will do the same when the US debt comes into focus, like PIIGS debt is today.
Beyond the tendency of paper money to eventually decline to its intrinsic vale of zero, I'm as clueless as the next guy.
I thought checking was where you pull the other guy's jersey up, pinning his arms, while you pound away at him with a hockey stick.
ReplyDeleteOr where you delete readers' comments and ban them from posting, while you pound away at your detractors.
ReplyDelete"So, the moral of the story is to wait for the "fat pitch".... i.e. REDF, MITK, TDSC, APKT, SIFY, COOL, IPGP, OPEN, PANL, SFLY, SHS etc.
ReplyDeleteSo...if we truly are entering the age of "peak oil" and oil were to say double or triple to $230 or $350, how do you play it? Well... you guessed it!:) "
Jess - I hear what you're saying...which is why I'm only focusing on things that will either benefit from rising oil or won't get hurt by it. I have most of my money in MITK, which is in the midst of a huge secular bull market for them. Banks are moving all of their operations online and through mobile phones because it is:
(a) more convenient for customers
(b) customers are most comfortable with doing everything online and over their phones and
(c) it's saving them money by reducing huge overhead costs.
This shift isn't going away regardless of higher oil prices. And it might actually benefit from higher oil prices because people have to make less trips to the local bank branch.
MITK owns the entire mobile deposit market. I know check writing is a slowly dying business, but it's still a huge market for a tiny company like MITK. And every major bank is getting into the act. Chase is the first major player to adopt this and they literally just started offering it. Why would I want to bail now when the party is just getting started?
"Or where you delete readers' comments..."
ReplyDeleteWhich you never did here, right 2nd_ave?
The live silver chart at http://www.kitco.com/charts/livesilver.html is creeping up despite the market being closed -- THAT'S what I call MOMENTUM. :)
ReplyDeleteThat's right. I check all the time.
ReplyDelete$1512 gold last night...
ReplyDeleteHas Wall Street begun retaliating with help from S&P (reference US rating downgrade) against Levin and company, for pointing the finger at GS for misleading and front running their customer base?
ReplyDeleteWonder what Wall Street & Co.'s plan entails, if anything? Maybe Sen. Carl Levin & Co. are simply attempting some CYA in advance of the next shit storm?
They're all accomplices in my book, starting with the active effort to export employment. What were they thinking, how did they think such an endeavor would eventually end, anyway?
Honey Badger! (I'll admit to never having watched the video but it's got to be good)
ReplyDeleteJust thought I'd point out that if you feel the need to throw a stone at someone for doing what you did just as well...
ReplyDelete"I thought checking was where you pull the other guy's jersey up, pinning his arms, while you pound away at him with a hockey stick."
ReplyDeleteThat's called a fight, and happens after you check someone who doesn't have the puck, or if you "stick" someone who has control over the puck.
Let's say you wake up down the rink picking yourself up off the ice, you may have just been "sticked". You're pissed, so you skate to the other end and check the opposing team member who sticked you, then pull his jersey up over his head and commence to pummeling. ;)
It's called entertainment, and appeals to a certain (perhaps broad?)element of the crowd.
I can't say I've ever witnessed 2nd throw a stone, but I do recall throwing a few in my time.
ReplyDeleteI really got lucky once when I threw a stone at a bully from probably 50 yds, hitting him smack on the head with a thump! He immediately stopped trying to bother me and never did try again, after that. I think I even made him cry... maybe he felt unwanted???
CP the hockey player. WTF? You been holding out on us?
ReplyDeleteHey Anon,
ReplyDeleteWas I deleted over there? Got to admit anon I had your hero do a complete 360 which I will give him credit for doing. In the past i think I would of been deleted. Anyway i check in maybe twice a week there and it usually depresses me. If 2nd, team and others from this site didn't post the blog would be called, "Slit Your wrist now" .com. I will continue to do the Smart Trader, Dumb Trader routine with Vad. Other than that pure melancholia.
http://www.youtube.com/watch?v=EBV73-SBLZc
then its this:
http://www.youtube.com/watch?v=Z-b5hSMB50g&feature=related
The median home price is back to mid-80's level?
ReplyDeleteThere must really be some depressed home prices out there in pockets offsetting the remainder of those that haven't fallen but a fraction of that...
Thanks for depressing me CP! AZ would be on the really depressed side. Offsetting probably everywhere else.
ReplyDeleteCP -- the median price gets distorted if the composition of sold homes changes. For a true home price, I suggest you check the Case-Shiller indices published on the last Tuesday of every month:
ReplyDeletehttp://www.standardandpoors.com/indices/sp-case-shiller-home-price-indices/en/us/?indexId=spusa-cashpidff--p-us----
around here prices in some areas have fallen back to 80's-early 90's levels.
ReplyDeletethat's why I'm heading to a triple wide in bullhead city az...yikes!