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XMFSinchiruna (27.11)

It's Fast Becoming a Buyer's Market for Gold and Silver Again

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November 17, 2010 – Comments (18)

I was selling portions of some positions pretty aggressively into that recent upsurge in gold, silver, and related equities. I told my self I was going guard a 10% cash position on the way up, but I kept selling. I sold until I raised about a 15% cash position, which on a percentage basis is now a bit more following the recent sell-off.

At no point did I sell out of any single positions entirely ... I prefer merely to shave off a portion of my holdings in some of the hottest performers. It's a difficult discipline to maintain when you're invested in a market that you perceive so much enormous upside in, but heavy is the memory of that 2008 correction when I found myself all-in and cashless through a 70% correction in many of my holdings. Never again. I maintain that gold and silver's volatility will increase enormously in subsequent stages of the bull market move, and I intend to move in and out with 10-15% slices of my holdings as the clearer peaks and valleys present themselves. If I misjudge a peak and it just keeps going, I've only missed out with a modest portion of my pm allocation. If I play those peaks and valleys effectively, however, I believe I can significantly enhance my overall gains from the sector.

Also, it's fun. :) Long-term buy-and-hold investing has its thrills, but there is something sweet about locking in profits and then reloading again into weakness.

I find the present sell-off in pms particularly amusing. How much strength to people really think the dollar can muster under the circumstances? Every time troubles in Euroland resurface, it's as if people become suddenly blind to the inescapable fact that our problems on this side of the pond are worse by orders of magnitude. For every Ireland or Greece in their Union, we have a handful of states that are themselves on the brink of failure. Has anyone seen what has happened to U.S. municipal debt over the past week or two? We are finally seeing admissions from within official circles that the foreclosure mess is far larger than originally conceded (surprise, surprise!). Isolated pockets of less frightening data are used to prop up continued hopes for recovery, while in the bellwether sectors I follow I'm catching multiple glimpses of a renewed downturn.Heck, housing starts fell 11.7% in October from levels that were already flatlined along a scary low.

QE2 is not the final round of QE that we'll see. There will be criticism and debate, but ultimately opposition to the Fed's knucklehead strategy will bow to the overwhelming fear of the alternative ... the unbridled deleveraging of our financial system. They'll opt for onw form of depression over another ... a hyperstagflationary depression that nonetheless will see deleveraging (because their strategy will fail) over the sort of cleansing (though still acutely painful) deleveraging that could have actually led to a fresh start.

As for gold and silver, the specter of China raising rates is nothing more than a distraction. It may spawn a slight continuation of the present sell-off, but that is to be viewed as a gift.

I began buying yesterday, and I will ramp-up that activity into further weakness from here. If I see a near-term bottom develop, I am prepared to make a large move to redeploy cash for the march to $1,500 or higher (which remains my near-term target). I am not concerned with identifying precise peaks or bottoms, but rather with the uninterrupted discipline of selling modestly into strength and buying modestly into weakness ... and in both cases ramping up the scale of that activity as movements become more pronounced. Meanwhile, 80-85% of my pm allocation is never touched.

Is anyone else employing similar tactics? Was anyone else a buyer yesterday?

Sinchi

 

18 Comments – Post Your Own

#1) On November 17, 2010 at 10:38 AM, outoffocus (23.46) wrote:

Same here. I took profits in some SLW calls (though admittedly not as high if I had sold at the recent peak) but still profits nonetheless and rolled them over into longer dated options with a set limit price. So its essentially a buy nonetheless. Thats been my strategy all along.  The recent violent drops made SLW calls nice and cheap for me.

But my base position in the stocks remain relatively unchanged.  I DCA into my positions via my IRA.  So the short term peaks and valleys are basically irrelevant. 

All in all I'm actually enjoying the ride.  It forces me to really pay attention and think about my strategy. 

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#2) On November 17, 2010 at 11:01 AM, MoneyWorksforMe (< 20) wrote:

"I find the present sell-off in pms particularly amusing. How much strength to people really think the dollar can muster under the circumstances? Every time troubles in Euroland resurface, it's as if people become suddenly blind to the inescapable fact that our problems on this side of the pond are worse by orders of magnitude."

Exactly right. And all of the developments within the EU, although allowing the USD to rise at the expense of the Euro in an attempt to avert risk (paradoxical, I know) has actually strengthened PM fundamentals. Investors are quickly running out of fiat currency options to preserve wealth. With each day that commodities and pm have been down, I have become increasingly bullish. 

The Euro was previously seen as a more robust currency as the region embraced austerity, while U.S., China, and Japan inflated their currencies. Well now with European problems escalating (again) it looks as though they too will be forced to inflate.

I think this all will eventually result in an influx of investors to commodities and precious metals, as with every day that passes major structural problems are growing, and fiat currencies are become weaker. There will be peaks and troughs, as we have recently seen, but the general trend will undoubtedly be higher.

I really don't think there can possibly be a better environment for pm and commodity investors than what we are experiencing right now.... 

"Is anyone else employing similar tactics? Was anyone else a buyer yesterday?"

I applaude your move. I think it was a very wise one and you will be rewarded accordingly. Yesterday also seemed to be a very good day to start...

I didn't get back into cash before the recent sell-off. In retrospect this definitely was a mistake. I did however manage to sell a few of my positions that saw significant gains immediately prior to this dip, reinvesting in other pm/miner positions that saw far less appreciation, which is stemming my losses.

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#3) On November 17, 2010 at 11:23 AM, outoffocus (23.46) wrote:

Hey Sinch, I read in the Pfennig this morning that the Repubs are trying to introduce a bill that will modify the Fed mandate to focus soley on price stability.  How successful do you think this measure will be and how to do you think it will affect commodity prices?

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#4) On November 17, 2010 at 11:32 AM, XMFSinchiruna (27.11) wrote:

outoffocus

They will not remove the Fed's ability to conduct QE. Political expediency will guarantee that economic weakness will be combatted at every turn. I hope they succeed, as any reduction of the Fed's authority is a plus for the world, but additional QE is a foregone conclusion in every scenario.

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#5) On November 17, 2010 at 11:40 AM, 4everlost (29.67) wrote:

Chris,

I learned through experience that anytime I feel absolutely giddy about the performance of any position that I should take some profit.  I felt that way last week and sold a portion of the top performers.  After selling them I put in limit buy orders and - voila - many of them filled yesterday.  Right after those orders filled I added new buy orders just in case there is another correction.

I agree with you that it is fun.  It's even more fun when those kind of moves end up with profit attached!

P.S. I really appreciate your commentary and the ideas that you put out for consideration, review and discussion.  I've benefitted in RL and in CAPS!

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#6) On November 17, 2010 at 11:50 AM, silverminer (30.48) wrote:

Got Gold? Last week's edition of the Got Gold report is free for public consumption, because they felt it to be a particularly important edition.

http://www.gotgoldreport.com/2010/11/sunday-ggr-now-public.html

4everlost

I'm so glad to have helped. Helping people through this difficult period is precisely why I'm here for this chapter of my life.

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#7) On November 17, 2010 at 2:58 PM, starbucks4ever (97.77) wrote:

I was not a buyer yesterday because yesterday gold was too expensive. When it becomes really cheap, then I'll buy it. 

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#8) On November 17, 2010 at 3:10 PM, silverminer (30.48) wrote:

zloj

good luck

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#9) On November 17, 2010 at 3:16 PM, mcornice1 (27.79) wrote:

zloj:

Expensive is all relative. When we look back in a few years we'll look at $1300 and $1400/oz of gold as the same thing: cheap. I do agree, however, with the idea of using a small allocation to buy at certain times as to maximize gains.

Sinch:

Did you see RBY's news today? Looks like you correctly predicted (again) that the market would respond favorably. Any comments on this news and their results would be appreciated. But I'll understand if you need a few days to discuss the details...

Thanks to you, I have holdings in SLW, EXK, GPRLF, RBY, AUY, and TGB. I didn't get in at the ground floor, but I am looking at near doubles in a few of those. Thanks a lot and keep up the good work. I've become much more educated about these things, which unfortunately has saddened me somewhat about what our country may soon become. 

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#10) On November 17, 2010 at 5:14 PM, SN3165 (< 20) wrote:

Sinch, please check out two new tickers  - gold royalty companies, Sandstorm Resources and Gold Wheaton ..

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#11) On November 18, 2010 at 7:50 AM, XMFSinchiruna (27.11) wrote:

SN3165

Thanks for the heads up on Sandstorm. That's one to keep an eye on. I hadn't seen news of the Black Fox transaction, and that's pretty solid of them to acquire a stream from a producing mine.

--- In a cruel twist of fate, my broker just made pink sheet stocks trading for <$1 off limits to its clients, stating "it's just not where the company wants to go", and citing potential manipulation of such shares as a contributing cause. [When they started thinking they had a fiduciary responsibility to me, I'm not sure]. Anyway, Sinchi is scrambling for a new broker ... anyone have suggestions? ---

As for Gold Wheaton, they've been around for a while, and I've been keeping an eye on them as well. I haven't had a chance to compare balance sheets as yet, but at first glance I like the looks of Sandstorm.

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#12) On November 18, 2010 at 3:06 PM, REITDUDE (84.35) wrote:

Mr. Sinch, I like your style, but what do you do about taxes?

Short term capital gains = not so fun

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#13) On November 18, 2010 at 5:10 PM, silverminer (30.48) wrote:

REITDUDE

Right, so the fun challenge there is to make the gains worthwhile. If once can enhance realized yield by more than the percentage differential between LT and ST capital gains, then the effort is worthwhile.

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#14) On November 18, 2010 at 7:39 PM, 100ozRound (29.41) wrote:

Sinch - who is your broker?  I <3 thinkorswim!

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#15) On November 23, 2010 at 7:10 PM, jesusfreakinco (29.00) wrote:

Sinch,

Many of us still reel from the pain of the last PM bashing in 08/09 and are afraid to stay fully invested.  I am staying as near to fully invested now as possible until something changes.  The upsdie with a potl Comex default is too huge.

I am about 5% cash and don't some daytrading long some shares.  It has worked well the past couple of days as the squid takes silver down early in the day and the Asians buy the rest of the day.

Haven't said that... I think your strategy is good and I intend to go back to that after the upcoming blowoff due to the comex default.  Hopefully that will come in Dec so we can get on with our lives...

JFC

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#16) On November 23, 2010 at 8:17 PM, Bays (29.98) wrote:

Sinch,

Not sure if you can open up a brokerage account in Canada, but if so I'd recommend Credential Direct. 

I'm pretty sure TD Waterhouse in the US allows you to buy stocks from the TSX Venture exchange -- you can try looking into that.   

Of all people, you really need access to the TSX Venture!

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#17) On November 26, 2010 at 9:21 AM, silverminer (30.48) wrote:

Bays

Tell me about it!

Unfortunately, there are complications in my case that force me to the pink sheets.

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#18) On November 26, 2010 at 9:26 AM, silverminer (30.48) wrote:

I'll look into TD ... thanks guys! :)

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