Re: Caps-Elite Dominated by herdlike goldbugs
TMFSinchurina made a great comment on my earlier blog today http://caps.fool.com/Blogs/ViewPost.aspx?bpid=56898&t=01008631960540474609#comments , so I wanted to respond. I'm going to post at length from TMF's comments: (his comments in bold)
"One day's movements amount to exactly squat. :) Even 2.5 - 3 months of range-bound trading since this correction began mid-March amounts to exactly squat. There are only 2 ways to lose money on gold and silver in this long-term secular bull market.
I have done neither, so I have not lost a cent[. . .]
I was going to joke around and challenge you to load up on additional gold miner shorts to back up your stance, but I'd rather see you change your mind and switch to long positions... so we can all enjoy the rising scores when gold breaks out again. It's not about herding... why not ask the question in a different way... If the preponderence of CAPS All-Stars are bullish on gold and silver, given the kind of anti-herdlike mentality that it often takes to consistently outperform the indeces, then isn't it just possible they're onto something?
[. . .]
Let's debate evidence, not the swaying fates of CAPS scores over a 24-hour period. I enjoyed our debate at the beginning of this correction. I'll start by admitting that this correction has not followed the four-week pattern that was beginning to be established by the more minor corrections that preceded it. Technically speaking, however, the correction carved a clear bottom on April 28, and the battle back to $1,000 and beyond is on.
[. . .]
We can agree to disagree on the future direction of precious metals prices if you wish, but I think it would be far more interesting to debate the reasoning behind our respective stances. You?"--TMFSinchiruna
First of all, you are correct that until proven otherwise, we are still in a metals bull market. I would not be at all shocked if we run back to $1,000 gold and $21 silver before falling back. However, should the Fed try more nonsense, then quite conceivably, these tops could break and we go to new highs for gold, and multi-decade highs for silver. I view this as unlikely for reasons I will discuss later, but for now, I shall move on to the 2nd point.
It should be noted that I'm not overwhelming bearish on metals in my picks right now. I really enjoy the industry and would love to work in Calgary/Vancouver as a mining analyst eventually. Currently, I have picks in both directions... I redthumbed Yamana today. I have a redthumb on GG that is up 6 points... got it right at 44 as it turned. In particular, I wonder why you keep a green thumb out of GG when your bullish pitch admits that the Glamis buy was a major goof. GG is the most ludicriously valued of all the miners without even a prayer of ever having earnings to justify their market cap (but I digress.)
I have green thumbs on Metallic Ventures (MTLVF.PK) (oh god, the suffering is unbearable with that dud.), US Gold (UXG), Northgate Minerals (NXG), and Kimber Resources (KBX). I recently closed winning outperform picks on Novagold (NG) and Jaguar Mining (JAG). I have often blogged about the wonders of Jaguar Mining, otherwise known as the best stock out there right now any sector or
style. Want value, want growth, want good management, Jaguar has it all! I just closed my pick as it ran up from $8.80 to $12.30 in days, but I'm already getting my trigger finger ready to outperform (and buy back my real-life shares) if it drops back below $11.
My overall (active/closed) gold sector picks is +88 points on 55% accuracy with 8 outperforms and 10 underperforms. There is much room for improvement, but clearly I'm not totally out of touch with the shiny metal stocks. All that being said, I have no particular bias to the long or short side of metals. However, I tend to believe that the American depression/world recession will temporarily pull the plug on the commodities boom. Interest rates (as seen in the TNX and fall in the TLT) are rising despite the Fed's wishes. To fund the government's debt, the Fed will have to drain liquidity to keep the bond market from collapsing... we all know what happens when liquidity shrinks--and it isn't pretty for metals. While the Fed may just be talking a tough game against inflation, I believe that the spike in oil has really intimidated the Fed into taking a harder line that won't involve lots of money-printing... This is American depression #4... 1780's, post-civil war, and 1930-37 being the other three, yet the dollar remains... a perpetually weakened, yet never totally debased currency.
More specifically, why am I excited about mining shorts now? Because the charts, in particular on SLV, are nasty. You have a double top at 207 followed by a low at 165... subsequent lows have been 162 and then 158. Meanwhile, the highs are also declining. Lower lows and lower highs after decisively falling from a double top with high volume? That's bearish beyond belief.
I think it is a fascinating question as to whether the people at the top due to metals are right
because of a herd to metals, or an anti-herd away from the crowd. Once the commodities boom ends (and it could still be awhile) we will see whether people like DownwithInfidels adapt to the new conditions or whether they fall by the wayside.