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XMFSinchiruna (27.58)

A painful blip on the screen for us commodity longs - an incredible opportunity for Fools sitting on cash!

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July 08, 2008 – Comments (14)

 

I always try to keep at least SOME cash on the sidelines for times when the market becomes this irrational, but this time around I have no reserves to take advantage of today's incredible buying opportunities.

For those Fools that do, however, today is about as obvious a buying opportunity as I've seen in quite some time.  My gold and silver stocks for the most part have not fallen below their lows reached during previous stages of the correction cycle which began in March, but they are certainly lower than I ever thought they would be again.  There is no rational reason for the USD to be rallying today, and the rally will end just as abruptly as it began.  CDE, Great Panther, MAG Silver... these are some of the more incredible bargains I've ever seen.

Bargains abound outside of gold and silver today, too.  ACH under $27 even as Aluminum prices have cruised higher.

And coal?  PCX under $120??  MEE down to $70 from its recent high of $95. Pretty much any coal name is a buy here, as higher coal prices will be with us through 2010 REGARDLESS of what oil does.  

And metals recycling names... they never should have been included in this sell-off.  They are all buys here... MEA,CMC,SMS,SCHN [see my recent blog post].

Big names like RIO at $31... ludicrous! Buy buy buy!

Any Fool sitting on some cash today is one seriously lucky Fool.  The ridiculousness of these price levels will soon be seen once some savvy investors come to the table... right now they're sitting back laughin at the tape with their fingers on themouse wondering precisely when to jump in.

14 Comments – Post Your Own

#1) On July 08, 2008 at 12:21 PM, kdakota630 (29.76) wrote:

I'm in the same boat as you.  No cash and getting absolutely hammered in the market today.

But hey, these things happen.  In the grand scheme of things, in 10 years, I'm sure neither of us will remember today as we're looking at our holdings.

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#2) On July 08, 2008 at 12:33 PM, binv271828 (< 20) wrote:

Yes indeedy!!!

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#3) On July 08, 2008 at 12:43 PM, Collin757 (< 20) wrote:

The pain!

 

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#4) On July 08, 2008 at 12:45 PM, XMFSinchiruna (27.58) wrote:

kdakota630

Absolutely right!  Days like today are reminders of the importance of taking the long view.  Still, I can't help wishing SOMETHING was near a 52-week high so I could consider cycling some profits into a Patriot Coal or a Massey... RIO... unbelieveable.

And with respect to Juniors... had I known the manipulation of the juniors would remain intact this long, I would have kept that whole allocation in CEF until... well.. today.  :)  I'm still up YTD... but not by much anymore.

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#5) On July 08, 2008 at 1:57 PM, sarcaz (22.77) wrote:

Nice post - I hope you're right for my real portfolio's sake.

I see you have EXK as a pick, too.  How would you rate it versus the tickers you mentioned here?

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#6) On July 08, 2008 at 2:11 PM, GNUBEE (25.13) wrote:

EXK was one of Sinch's earlier "buy metals" picks. I bought it when it was lower than his entry point. It has been one of my few bright spots in this current market.

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#7) On July 08, 2008 at 2:11 PM, Schmacko (57.35) wrote:

RIO's recent decescion to dilute it's stock by offering $14 billion worth of new shares isn't helping it's price.  Add that to the general commodity sell off and I think you'll get an opportunity to buy it for less than $30 shortly.  It does appear to be moving into oversold territory by it's RSI value... if you hold any faith in that.

SQM is another commodity miner that went from super hot to oversold in about a week.  It was due for a correction... but me thinks it feel to far too fast.

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#8) On July 08, 2008 at 3:56 PM, AnomaLee (28.71) wrote:

Chris, you're right about the fundamentals, but this sell-off does have justification since many of these stocks have been rising faster than yeast and the probability of a correction had just become so great. There are no parabolic rises especially in bear markets.

I don't know if you paid any attention to my comments over the past couples weeks when I said I sold my position in BTU a couple weeks ago and that I was expecting to buy positions back cheaper. I'd been trying to scale my CAPs porfolio too - I figured.... That was a hint...

Today, is a pure bear-market rally of retardation where financials are the best performer and people are selling the winners to buy the losers. I think oil could really lose its wings and stall for weeks, but I'm definitely looking to add to miners. The long-term story will continue...

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#9) On July 08, 2008 at 4:03 PM, klemenv (99.71) wrote:

Guys,

if you are absolutly sure it is buy, buy, buy,

and you are beaten and without cash,

buy long term, cheap, out of money call options. 

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#10) On July 08, 2008 at 4:30 PM, mhy729 (30.80) wrote:

Hi, I'm new to TMF and CAPS, and have found the pitches for gold and for silver to be very convincing.  I enjoy reading your posts, TMFSinchiruna, they are informative and easy-to-follow...thank you.  I see there is one Fool who does not share the enthusiasm for gold:  Nick Kapur has put up a new headline "You Are About to Make a Bad Investment" and he makes it known that he is not very fond of gold.  Any thoughts on what he had to say?  Thanks, I really like your writings here on TMF!  I'm glad I discovered this site, and hope to continue to learn.

- Marcus 

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#11) On July 08, 2008 at 6:56 PM, XMFSinchiruna (27.58) wrote:

sarcaz

EXK is one of my largest junior miner holding also... that's a definite keeper.

AnomaLee

I agree completely, but my investing style is buy and hold.  I'm playing the long-term trend, and refuse to get caught up trying to time corrections along the way.  I'm glad you're able to tweak your gains by selling and getting back in... but we can't be right all the time.  Jesse Livermore advocated buy and hold for any secular bull market, and if it worked for him... :)

klemenv

No thanks.  No options, no calls, no puts, and most importantly of all no margin, just pure long equities for this Fool.

mhy729

Hey Marcus, welcome to TMF and CAPS!!!  All I can suggest is that you go WAY back through my blog to find my case for gold.  I've said my peace about gold and silver more times than I care to remember. Also here, here, and here.  Not to mention published pieces here, here, and here

To some degree, between researching and writing, there are insufficient hours in the day to engage every gold naysayer in a lengthy debate, but ifanyone ever feels prepared with a cohesive argument for why they think gold is going down from here, I'm always game for a good debate.  :)

 

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#12) On July 08, 2008 at 8:11 PM, XMFSinchiruna (27.58) wrote:

mhy729

I just read the article you referenced.  He's making a point about performance over the VERY long term.  For example, over a twenty or thirty year period, I would agree completely... and in fact I plan on shifting back into equities just as soon as the dollar begins to show signs of a technical reversal and the financial waters have calmed considerably.  I don't have an exact timeframe, but loosely I'm targeting 2011-2012 for a possible peak in gold and a great time to transition into equities (as well as real estate).  I shouldn't even share my loose timing estimates, because really it's more about indicators and fundamentals, and no one knows for sure when they will reverse.  What I do know for certain, is we're nowhere even close to that point yet.

Sadly, my colleague completely mis-spoke with this paragraph:

"Short-term, return-chasing investing is precisely what is driving this modern-day gold rush and that is exactly why you should be looking elsewhere."

That is just false.  Gold prices have been in a long-term secular bull market since 2001/2002 and the dollar's demise and the inflation presaged by Fed policy and and reckless spending (via the Bernanke/Greenspan printing press) have been the principle drivers.

The other silly standout in that piece is this one:

"With all the bear markets, through the oil crises, Black Monday, the implosion of the dot-coms, stagflation, and all the economic risks you can think of, do you know which asset class was the only one that lost money in a 10-year time frame? Yup, our favorite precious metal: gold."

1.  Which 10-year time frame is he referring to?  I'm not doubting that it did lose during a given decade, but without knowing which one we have no context.  Also, is he adjusting for inflation???  That's the biggest question of all.  If you compare today to the last great spike in gold from 1979 to 1980,it appears gold has surpassed even that lofty spike, but adjusting for inflation from 1979 to now... we won't surpass the 1980 spike until at least $1,650 gold... one of the central reasons for my $1,650 gold price target.

2.  He suggests, or hints, that gold may have underperformed small caps through periods of stagflation.  False. The closest thing we've had to stagflation was precisely the event which culminated in the 1980 $800+ spike.

Anyway, it's a very unfortunate article IMO.  I posted a comment beneath it.  Thanks for bringing it to my attention.

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#13) On July 09, 2008 at 7:08 AM, klemenv (99.71) wrote:

Ok, let me explain my comment. 

One of caveats of 'wanna be investors' is limit stop. Investors close positions, only to find observe stock rebounding few moments later.

Long term, out of money call may be seen as 'limited damage investment'. Price of an option is maximum total damage, and the only thing left is upside potential.

Compared to doubling on the way down, or averaging down, it is much safer strategy.

Stil I understand your 'No thanks.' You only need to be right on direction.With options you have to be right on direction WITHIN specific timeframe.

 

 

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#14) On July 09, 2008 at 2:03 PM, XMFSinchiruna (27.58) wrote:

klemenv

Yeah... I watched a friend get badly burned on some June options he bought right before the beginning of the gold correction in March.  He lost major money, while I doubled down and will be just fine.  If you have ultimate confidence in the long-term direction, as I do with gold, doubling down into corrections is a low risk venture IMO.  :)  Everyone has their own risk tolerance though... despite being 95% invested in precious metals and commodities, I consider my risk tolerance to be very low.  :)  That statement would confound most money managers... but I believe my commodities exposure is the lowest risk I could achieve at present.

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