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