Tuesday, February 1, 2011

Investment Theories, Gold and Silver, Cro Magnon Winners, Genius Losers

I've been looking at some charts for gold and silver all week. I don't get into specifics, other than I like to look at the standard patterns, primarily double bottoms in stocks for a floor or short term resistance levels for metals. Charting I think- is far more significant for short term traders and people playing with time sensitive options and futures contracts. Since I tend to be a long term investor and have exited options, I am not too concerned with daily fluctuations. Having said that, I am strongly considering getting back into options, which is why I have been paying close attention to gold and silver charts. Let me meander just a bit here to illustrate a point.

I never take a position or bet without asking one simple question. What am I hoping to achieve?

Having said that, I am going to let you in on a secret of mine. I nearly always make trifecta plays at the horse racing track. I put together exotic wheels that always allow huge scores. I key live longshots in all three positions and I build 36 dollar wheels. I look for very contentious races where almost anything can win. The more confused the betting public is- the better off I am. If you habitually key favorites on the top of trifectas, I can almost guarantee this will be an excellent strategy for losing.
Contrarian investing works in the markets and it damn sure works in horse racing. So I am always looking to reap big results. If I can't, I pass. Simple as that. If a puzzle is so obvious that the whole world sees it- it becomes a non starter, a non play for me. There is no money to be made. I am hoping to achieve significant results. I don't invest in anything, horseracing, stocks, or metals without asking that question and pulling the ripcord when my results have been achieved.

I also don't delude myself into astronomical projections, silver trading at 500.00. I have read that. That may happen but I don't expect it soon or in my lifetime. The stock market at these levels is a non starter for me. I missed the boat. Any move in now means I am shorting. Currently, that is suicide until Bernanke runs out of funny money. So I am just goofing off in metals.


The charts seem to back a theory that I have- one that has rarely failed me. When people double their investment, they sell. That's why people who bought silver at bargain prices, say 6-8 bucks an ounce, sell around 15 to 16 bucks. Those people buying at those levels start looking for the exits around 30-32. If the fundamentals remain intact, buyers at the 27 to 32 levels will start looking for the exits around 60. Those levels shake out supply and sellers. A certain amount of sideways trading occurs as the metal is absorbed. Thus those daily fluctuations. There may be a second wave of absorption before the metal begins to ramp up again. I am not overly concerned with these sideways moves in either length or duration if I am simply holding the physical asset. In the next two to three years, if the fundamentals still remain in place, I expect to see silver trade to 55 before meeting all the resistance it has met at 27-28 levels now. I am very comfortable owning silver and buying it at current levels. In fact, yesterday, silver traded up while gold traded down. Silver has been consolidating and it may continue to consolidate here for a while. Or it may have worked through supply. We'll know in the next few days and weeks.

Gold looks significantly weaker to me although I believe it is doing the same thing silver has been doing. Taking a breather, consolidating, sideways. Just on a larger scale. If it continues to consolidate at these levels and trades sideways for quite awhile and the fundamentals remain in place- I expect to see potential dips as low as 1100 and change through the current price. When the upside ramp occurs I think sellers begin in earnest around 2300 or 2400. That is my 2-3 year time horizon and I think it is doable.

Fundamentally speaking, the markets for gold and silver have never looked better. Many of us are betting that our government simply lacks the spine to effectively cut the size of government, spending, or fictional money creation. Because we know that the bankers run this place. Debt is money in a fiat currency system such as ours. Without debt, there can no wealth effect or money creation for the bankers. That's why they hate deflation so much. They get their asses kicked. They have only one bet. More debt. Inflate incurred debt away. Inflation is their only play. Metals love inflation.

If you know what your adversary has to do before he does it- he becomes completely transparent. I'd never lose one thin dime if every poker player showed me his hand before we made our bets. Wouldn't you love to play poker with a guy like Bernanke who only has one option available to him? Under those circumstances, I'd put my "Cro Magnon" brain against the Bernank's 1600 SAT brain- any day. Wouldn't be surprised to see some long metals trades in the Bernank's adjunct portfolio. Really.

1 comment:

date: said...

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