Friday, August 5, 2011

Snake oil salesmen

12:03 pm (Hawaii) Sure, the bondsman said. We'll pay you back. Guaranteed!

No. No way all this debt gets straightened out. There's no squaring all this crapola. Even with central banks and governments intervening. The most cartoonish, extreme parallel is the old "Why give a drunk more liquor?" scenario. Right? Why would you give a spendaholic an open line of credit ... then expect to be repaid in full. Not gunna happen.

That being said, I should be long FAZ, never mind that it's gone from 44 to 63 in a matter of days. I should've been long based on 1) fundamentals and 2) conviction. But I lacked conviction, so it has flown higher. Maybe 63.35 (after hours) isn't a bad entry price, but with Jackson Hole on Tuesday and QE3 (or some version) coming, I'll wait for FAZ to plunge.

Gold? At 1643 or so overnight, it was a good drop from the high above 1680 earlier in the day. Today, gold dropped to just above 1650 before rallying to 1663 at the close. Two notable trends: 1) Asia has been taking PM prices higher, 2) 12 noon is when stateside entities sell it off. That's the CME mafia for ya.

Right now, silver is something I refuse to buy — the paper version. Yes, AGQ could and should go back to new highs above 382 at some point. But right now, it can't walk straight and chew gum at the same time without the puppetmasters yanking its legs out from under. When noon came yesterday and today (Eastern time), silver had no chance. It was at 42 when the selloff began yesterday. It was at 39 when the drop hit again. Silver closed at 38.32, which makes this weekend's shopping trip into Metal City a bit more interesting. I wanted a pullback to 40. I want a pullback to 35. Even 32. But if and when QE3 hits the market, prices in PMs will surge with the rest of the market. Miners, in particular, will get a huge lift, riding that same wave as equities.

The wave won't go very far, and that's why I'm not adding mining shares or planning to hold XG very much longer. (Even with XG at a low today of 10.28.) There are external factors in a mining stock or stocks like AAPL. Trading a PM ETF like AGQ or ZSL repels stuff like mining costs, delivery costs, employment costs, tax issues. Simple works better in this market. So I'm holding my small portion of DGP, XG and GSVC. GSVC got as low as 13.10 today and closed at 13.79. That's a major pullback since two weeks ago, when it went from 10 to the high 19s. It's cheap here, but I'm not adding again, not yet. I want to see some consolidation first. I want to keep my positions small and be disciplined about it. Keeping some dry powder at my side is crucial.

They keep lying to us, most of these snake oil salesmen on Capitol Hill. They're in cahoots with Pure Greed, the banksters, so I believe nothing they say. But I'm not above making a buck once a trend is established. I'll be happy to short the banksters via FAZ. But if and when QE3 kicks in, I might be tempted to go long FAS for a few minutes or hours. More likely I'd go long PMs and/or AAPL. Maybe add more GSVC. In the end, I'm looking out for myself. I suggest we all do the same.

Silver was at 40.17 two Sundays ago. Almost 2 bucks cheaper now. Silver at a discount. Think I'll add to the stack real soon, continuing to average in.

Gold was 1600 two Sundays ago. Now 4% higher. Fairly low risk situation now in terms of political fires, timing of the Fed, etc. Averaging in? Probably.

There's always the deflation boogeyman out there. The market could shrink by half, taking gold and silver to those extremes or worse. But sooner or later, hyperinflation will be here, a small bag of potato chips will be $9.95 and a new currency will replace the US dollar. We won't be able to claim ignorance then.

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