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BillyTG (29.39)

Sold SLW Calls; Still PM Bullish; Positioning for Market Mayhem

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March 24, 2011 – Comments (8) | RELATED TICKERS: SLW , CDE

Today, I sold off about 80% of my SLW LEAPs that I purchased last year.  I made a small fortune, my biggest single trade ever.  Luckily the orders filled at my limit order price of $14, near the the day's top.

I have been wanting to take some gains for a long time, to increase my cash position.  I finally pulled the trigger with this most recent run.  Maybe silver will jump into the $40s before the month is out, but I'm becoming increasingly uncomfortable with the market, and the world in general. I don't know what to expect, but I want the option to pounce hard on any deals that come along.  

I still hold other SLW calls, CDE calls, and plenty of silver/gold stock.  A significant portion of my portfolio is physical. When I say physical, I'm talking actual silver rounds and bars that I've handled and locked up.  I'll buy more physical with my cash position if I see some good dips.  I think we might be due for some market and PM volatility this year and next and I want to hedge my PM position with cash (boy, that sounds backwards doesn't it?!).  Ultimately, my plan is to cash out of the market, buying real stuff along the way. I want agricultural land, homes, PMs, and off-the-grid necessities and comforts. I think I'll be able to get some of that cheaper if I wait a while.  A market/real estate crash combined with major PM appreciation is the perfect situation for capitalizing on this incredible mess the world is in.

My overall belief in the economy is that we will eventually have a global currency.  I blogged about this last Halloween:  http://caps.fool.com/Blogs/crazy-thought-could-imf/467341  Here's the best part from an article, worth reading:

The IMF Director, Dominique Strauss-Kahn, was the head of the 2010 Bilderberg Group.  The #2 guy, John Lipsky, is CFR and was Chase Manhattan's Chief Economist.  I haven't looked up the rest of the IMF's senior staff.

What will become important, however, is the G-20, that coalition of the strongest economies, the center of power in a new world. The G-20 gave the IMF $850 billion (€620 billion) and the mission to solve the crisis. What followed, says, Strauss-Kahn, was "the biggest global coordination ever."

Does this mean that the IMF became the first post-crisis world government?...In Strauss-Kahn's view, the IMF should become an administrative unit of sorts for the G-20, an agency that "tries to find solutions for global and national problems," and comes up with plans and create values. "In the end we aim at much more than just the right financial and economic policies. The ultimate goal, of course, is world peace through economic stability."

The Fund cannot afford a failure of the Greek bailout. Through Greece, it has gained a foot in the door of the First World, and if the IMF hopes to become the new world organization for economic policy, a thinking army to implement G-20 decisions, then now is the time. If Greece defaults, it could turn into another Argentina for the IMF.

The Greek crisis also introduced a new element: the concept of the "joint venture," or cooperation with other institutions, most notably the EU. The IMF dropped €250 billion over Europe, most of it coming from Asian contributions. The former Third World was coming to the aid of the old First World. It was undoubtedly a sign of a new world order.

Nine of the 24 directors are still Europeans, and five of the 24 are permanent representatives, appointed by their governments and not elected by anyone. The US director holds 16.74 percent of all votes, the Japanese director holds 6.01 percent, Stein holds 5.87 percent, and the French and British directors each hold 4.85 percent.

They constitute the top tier, with no potential for any of them to leave the board or be replaced by new members. Is it fair? IMF employees give a friendly smile when they are asked about fairness.

Sitting in his bare office at Harvard University with the shades drawn, Rogoff says, coolly and soberly: "A Greek bankruptcy is unavoidable. There is a 95 percent chance that Spain will go bankrupt. Hungary is on the brink. Things will get much worse in Eastern Europe. We will have a certain number of countries that will go bankrupt. We will have a number of euro zone countries that would be well advised to take a sabbatical from the euro for a year. The situation in the United States is very worrisome. The markets will refuse to tolerate this level of debt." The worst of it is that it sounds as if he were expressing unavoidable facts.

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In the 5 months since that blog, my belief that the IMF will head up this new currency has only grown.  My best guess is that the PIIGS will get bailed out, one by one, maybe firstly by other Euro nations, and then by the IMF.  Eventually the Euro will be bailed out by the Federal Reserve, which will be bailed out by the IMF.  We'll either have a drastically altered version of the dollar or some new name altogether.  Some basket of PMs/Commodities will probably back it. Countries not willing to participate in the new world order will be squeezed until they submit. 

Zerohedge today posted a new update on the IMF.

8 Comments – Post Your Own

#1) On March 24, 2011 at 11:07 PM, BillyTG (29.39) wrote:

Forgot to write that I also opened small positions, going long the dollar (UUP) and short the NASDAQ (QID), mostly as further hedge.  I've been short the Euro a little while now.

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#2) On March 24, 2011 at 11:33 PM, whereaminow (< 20) wrote:

BillyTG,

I'm glad to hear that you made a nice profit! The PM community here is tremendous. I've seen nothing but one excellent call after another.  Hope your future trades work out just as well!

David in Qatar 

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#3) On March 25, 2011 at 8:47 AM, MoneyWorksforMe (< 20) wrote:

 BillyTG,

I applaude your ability to take profits, but other than that I really don't like any of the moves you've made. I know you're trying to be contrarian here, but let's face it, contrarainism has sucked since August. We're at a point where everyone seems to be anticipating more QE, and justifiably so. This has resulted in people continuing to buy U.S. equities, and sell the dollar despite an onslaught of negative economic and geopolitical news. So this essentially means negative news has and will continue to have a positive effect on equity prices, as worse reports bolster the case for more fed intervention--it's an insane world, I know. Eventually this reaches a breaking point, when the fed is completely cornered, but that time is still months away, at least.

In a "normal" economic environment I could see your strategy as being very successful, but I'm afraid what we are experiencing now is anything but normal... 

Silver also continues to look very strong here, from both a fundamental and technical perspective. Yesterday's breakout above 38 looks to be a prelude to a run above $40...

Regardless, there is certainly no shame in taking profits. I've been long SLW since $18/share, and have yet to take any, only adding on dips...Perhaps this will come back to bite me; my conviction is it won't. 

Congrats on your SLW trade, and good luck! 

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#4) On March 25, 2011 at 9:11 AM, outoffocus (23.56) wrote:

Theres nothing wrong with selling options because they are the most volatile.  I've been banking gains through calls for the past 6 months and its been a great strategy for me. My only regret, ironically enough, is selling long calls too soon; typically right before SLW has (or during) a huge breakout.  SLW's sharp upward movements have caused to be a little more patient when pulling the trigger. All signs point to a strong bull market in silver right now. The trend is your friend. Right?

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#5) On March 25, 2011 at 2:23 PM, PeteysTired (< 20) wrote:

Does anyone else think the uber rich don't own significant amounts of physical gold and silver?  How is Gadfi (sp?) able to pay for armies, food, fuel, guns and ammo with frozen bank accounts?

I wonder if physical metals is one "cheap" option available to the very rich to fight against wealth confiscation by gov'ts and central banks?

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#6) On March 25, 2011 at 6:53 PM, BillyTG (29.39) wrote:

Thanks for the comments. I didn't totally cash out of PMs. Not even close. I've sold off some CEF and non-PM stocks, but other than that, I still have all the PM junior miners I've ever held, and left some SLW and CDE calls on the table.  It's just that when I log into my brokerage account and see certain options totalling over 20% of my total portfolio, I figure I better take some off the table!

Plus, with so many people down on the dollar, and a strengthening Euro (despite the major failures they're having), and the uncertainty of a QE3, I want some cash on hand.  Those other bets are to hedge myself.  I'm trying to apply a little risk management as my PM wealth grows.  With QE3, I'm thinking we might be in for a major surprise, where those betting FOR QE3 and those betting AGAINST a QE3 will both be right...but maybe with a few months gap.

Imagine a scenario in which QE2 runs out in June.  Without a QE3, who is there to prop up the economy? No one. I think that means the market is in for some major shock and awe.  Now imagine things getting bad enough, stocks dropping enough (including junior miners), real estate sinking more, jobs being lost. Eventually, the people and politicians will cry uncle and beg for QE3.  If this plays out, I want to have cash ready to scoop up physical and PM stocks for (hopefully?) lower prices. I have no idea if this scenario will play out, but with so much weirdness, I want to be ready for anything. For me, that means lots of PMs, some oil, and lots of cash.

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#7) On March 25, 2011 at 7:11 PM, BillyTG (29.39) wrote:

Yet another plug for PMs:

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#8) On March 25, 2011 at 7:28 PM, BillyTG (29.39) wrote:

And another force wanting to create a new global currency ASAP.  I can't believe how many people, including many on TMF, believe that the status quo will remain the status quo.

Excerpts:

 

Two years ago, George Soros said he wanted to reorganize the entire global economic system. In two short weeks, he is going to start - and no one seems to have noticed.


On April 8, a group he's funded with $50 million is holding a major economic conference and Soros's goal for such an event is to "establish new international rules" and "reform the currency system." It's all according to a plan laid out in a Nov. 4, 2009, Soros op-ed calling for "a grand bargain that rearranges the entire financial order."

The event is bringing together "more than 200 academic, business and government policy thought leaders' to repeat the famed 1944 Bretton Woods gathering that helped create the World Bank and International Monetary Fund. Soros wants a new 'multilateral system," or an economic system where America isn't so dominant.

More than two-thirds of the slated speakers have direct ties to Soros. The billionaire who thinks "the main enemy of the open society, I believe, is no longer the communist but the capitalist threat" is taking no chances.

What is a big deal is that Soros is doing exactly what he wanted to do. His 2009 commentary pushed for "a new Bretton Woods conference, like the one that established the post-WWII international financial architecture." And he had already set the wheels in motion.


Just a week before that op-ed was published, Soros had founded the New York City-based Institute for New Economic Thinking (INET), the group hosting the conference set at the Mount Washington Resort, the very same hotel that hosted the first gathering. The most recent INET conference was held at Central European University, in Budapest. CEU received $206 million from Soros in 2005 and has $880 million in its endowment now, according to The Chronicle of Higher Education....

The introductory slide to the video is subtitled: "How currency issues and tension between the US and China are renewing calls for a global financial overhaul." Skidelsky called for a new agreement and said in the video that the conflict between the United States and China was "at the center of any monetary deal that may be struck, that needs to be struck."

....

The speakers include:Volcker is chairman of President Obama's Economic Advisory Board.

Economist Jeffrey Sachs, director of The Earth Institute and longtime recipient of Soros charity cash. Sachs received $50 million from Soros for the U.N. Millennium Project, which he also directs.

Soros friend Joseph E. Stiglitz, a former senior vice president and chief economist for the World Bank and Nobel Prize winner in Economics.

 

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