Jump to content
Sign in to follow this  
Bosworth

Will we get one final round of deleveraging?

Recommended Posts

The question of whether we will get a sharp round of deleveraging before the next (and potentially final) round of intervention is vexing me.

 

If we do, then cash dollars has to be the place to be. Missing this means missing out on about 20-30% "extra" PMs.

 

Making the wrong call would potentially mean missing the parabola and wasting years of patient preparations. And given the likely Manic Swings (tm Bubb) I doubt there will be much time to exit a wrong strategy.

 

Clearly greed is bad, but interested to hear what percentages of people's holdings are "in play" and the signs people are waiting for.

 

Bosworth.

Share this post


Link to post
Share on other sites

I should clarify that I am not interested in trading (as such) just whether moving partially out for a time and then back in a few months later is a viable strategy and the macro indicators that would strengthen the confidence of that decisions.

Share this post


Link to post
Share on other sites

Nial Ferguson just now on Bloomberg:

 

"It is 100% certain that Greece will default.

The race is on to find a word that does not sound like default, but will be used to explain what Greece is doing when it does not pay its interest payments."

 

A Greek default ... just might lead us back into deleveraging.

Share this post


Link to post
Share on other sites

The question of whether we will get a sharp round of deleveraging before the next (and potentially final) round of intervention is vexing me.

 

If we do, then cash dollars has to be the place to be. Missing this means missing out on about 20-30% "extra" PMs.

 

Making the wrong call would potentially mean missing the parabola and wasting years of patient preparations. And given the likely Manic Swings (tm Bubb) I doubt there will be much time to exit a wrong strategy.

 

Clearly greed is bad, but interested to hear what percentages of people's holdings are "in play" and the signs people are waiting for.

 

Bosworth.

Well I am 100% in as I don't want to try and be cute and time/predict the market. I am still buying junior miners but haven't been adding to my metals over the last couple of years.

 

Following the big downdraft in 2008 I swapped gold to silver (@72 GSR), and have recently swapped some silver back to gold (@37 GSR) almost doubling the original amount. So any manic swings will mean that I can again swap metals to take advantage of the movement, that way I stay in metals but also increase my holding in the volatility. If we get another round of deleveraging it is likely that silver will be hit a lot more than gold again, so it seems a natural way to play it.

 

What would worry me about trying to be cute would be that a black swan can come along at anytime and change the outlook very quickly, I would rather be right and sit tight. That is not to say that there will be some that do a lot better than me out of this, but I would rather concentrate on other things than trading.

Share this post


Link to post
Share on other sites

I think Bernanke needs another "emergency" before he can pump again. I don't mean he is looking for one but without it QE3 would simply say QE1 and QE2 have not worked - and politically that would be difficult at the moment.

 

There are so many potential triggers for more deleveraging...Greece, munis, chinese (and BRIC) inflation, rollover in chinese housing, OECD slowdown etc etc.

Share this post


Link to post
Share on other sites

I think Bernanke needs another "emergency" before he can pump again. I don't mean he is looking for one but without it QE3 would simply say QE1 and QE2 have not worked - and politically that would be difficult at the moment.

 

There are so many potential triggers for more deleveraging...Greece, munis, chinese (and BRIC) inflation, rollover in chinese housing, OECD slowdown etc etc.

 

All Bernanke would need is some clear signs deflation was going to kick in and it would be more of the same. Their ability to remove that stimulus is more or less electronically instantaneous because the feds control the electronic payment systems.

 

On the other hand if some inflation trundles on then their hand is going to be a bit tied

Share this post


Link to post
Share on other sites

I guess it all depends if we start to see sovereign defaults. The legal framework for sustaining market conditions were not in place in 2008, but they are now. We now have mark to maturity instead of mark to market and so the only reason it won't work this time, is if there is no intention of honoring the debt. My view is, until they acknowledge the Glass-Steagall Act is essential in managing banking sector risk, they can't let any part of the system fail, as it's all interconnected. So in my opinion they will print at the first sign of systemic risk and the PIIGS states will have considerable pressure put on them, to accept bailout conditions using public assets as collateral. We all know it's going to come crashing down, but I don't think it will happen just yet.

 

I may play the G:S ratio with a small percentage of my silver holdings, but then again I might not...

Share this post


Link to post
Share on other sites

I guess it all depends if we start to see sovereign defaults. The legal framework for sustaining market conditions were not in place in 2008, but they are now. We now have mark to maturity instead of mark to market and so the only reason it won't work this time, is if there is no intention of honoring the debt. My view is, until they acknowledge the Glass-Steagall Act is essential in managing banking sector risk, they can't let any part of the system fail, as it's all interconnected. So in my opinion they will print at the first sign of systemic risk and the PIIGS states will have considerable pressure put on them, to accept bailout conditions using public assets as collateral. We all know it's going to come crashing down, but I don't think it will happen just yet.

 

I may play the G:S ratio with a small percentage of my silver holdings, but then again I might not...

 

The system will probably survive. Banks being wiped out does not matter - they just get nationalised. Glass-Steagall is a matter for the future once banking can manage without assistance and deflation is avoided. Countries exposed to the piigs will be humbled but not totally broken. The Euro might not survive.

 

The unknowns are more about who gets to be poorer and who becomes richer. Greek being governed by the military while being part of the euro is not impossible to imagine.

Share this post


Link to post
Share on other sites

Well I am 100% in as I don't want to try and be cute and time/predict the market. I am still buying junior miners but haven't been adding to my metals over the last couple of years.

 

Following the big downdraft in 2008 I swapped gold to silver (@72 GSR), and have recently swapped some silver back to gold (@37 GSR) almost doubling the original amount. So any manic swings will mean that I can again swap metals to take advantage of the movement...

Nice move.

You might want to think about some Gold stocks too, such as ASA and GDX

 

I got 25x Nov $30calls, for selling 10x Aug $30puts yesterday

 

I had also done the trade at 10P = 15C and 10P = 20C

Share this post


Link to post
Share on other sites

Nice move.

You might want to think about some Gold stocks too, such as ASA and GDX

 

I got 25x Nov $30c, for sell 10x Aug $30p yesterday

 

I had also done the trade at 10P = 15C and 10P = 20C

Sorry but I really don't have a clue what you re talking about, I don't have a brokerage account and have not even looked at how options work.

 

I have been buying junior miners, which I do so within my ISA. That seems a good way of doing things for me, what I tend to do is buy the dips and hold. I have sold some of my Jinshan (now CGG) and Great Panther Silver, when they 10 bagged, but just am holding most. I like the maximum leverage to the gold silver price that they offer.

 

I have taken a bit of the shotgun approach and currently have 15 junior miners in my ISA. I am hoping that a few more will 10 bag or better over the next few years, I have one that has been close, Silvercorp Metals, but it has been sold down recently.

 

At the end of 2008 I mainly bought producing juniors but lately I have been buying some riskier exploration juniors, as they seem better value to me at the moment. I have recently bought, ECU Silver (ECU), Gold Bullion Dev (GBB), Silvercrest (SVL) & Cosigo (CSG).

Share this post


Link to post
Share on other sites

Sorry but I really don't have a clue what you re talking about, I don't have a brokerage account and have not even looked at how options work.

If ASA Corp (my favorite "major" Gold stock) is over $30 on the August expiry date, I get a load of Nov. $30 calls for free.

 

ASA / ASA Gold & Precious Metals Ltd. (NYSE) ... update

ASA-3yrs.gif.jpg

 

If instead, ASA is trading below $30, then the stock gets "put" to me at $30 in August - and I am happy to buy it there.

 

There's a "double discount" :

+ ASA now trades at about a 10% discount to its NAV (portfolio is major gold stocks)

+ Major gold stocks trade at an approx. 10% discount to their "gold value."

 

So this is (a little bit) like buying Gold at $1525 x 80% = $1220

 

...And: I put up no cash, just use the buying power in my portfolio

Share this post


Link to post
Share on other sites

The question of whether we will get a sharp round of deleveraging before the next (and potentially final) round of intervention is vexing me.

 

If we do, then cash dollars has to be the place to be. Missing this means missing out on about 20-30% "extra" PMs.

 

Making the wrong call would potentially mean missing the parabola and wasting years of patient preparations. And given the likely Manic Swings (tm Bubb) I doubt there will be much time to exit a wrong strategy.

 

Clearly greed is bad, but interested to hear what percentages of people's holdings are "in play" and the signs people are waiting for.

 

Bosworth.

Due to this sort of uncertainty, I early on went 50/ 50 into gold and dollars. Assuming gold is in a bull market, I then think about trading silver volatility... in order to increase dollars [in case my assumption is wrong]. If I'm right, gold continues in a bull market [at around 20% a year]... if I get a dollar/ silver trade right, the dollar hedge may even out-perform gold [assuming the dollar doesn't blow up].

 

This strategy minimizes stress [it may not maximize profit... but who does that] while allowing the pruchase of a property, at a just price, in the future.

Share this post


Link to post
Share on other sites

If ASA Corp (my favorite "major" Gold stock) is over $30 on the August expiry date, I get a load of Nov. $30 calls for free.

 

ASA / ASA Gold & Precious Metals Ltd. (NYSE) ... update

ASA-3yrs.gif.jpg

 

If instead, ASA is trading below $30, then the stock gets "put" to me at $30 in August - and I am happy to buy it there.

 

There's a "double discount" :

+ ASA now trades at about a 10% discount to its NAV (portfolio is major gold stocks)

+ Major gold stocks trade at an approx. 10% discount to their "gold value."

 

So this is (a little bit) like buying Gold at $1525 x 80% = $1220

 

...And: I put up no cash, just use the buying power in my portfolio

Well done that sounds like a good deal, but it is above my understanding and finances to arrange something similar. The other problem I would have with it is the trusting of paper contracts to be honoured as the SHTF. Maybe one day I will have the time and feel the inclination to learn what it is that you are doing, but currently I am happy sticking with what I know and concentrating on getting my business busier via working on my website and SEO.

 

Just a thought, are the major gold stocks trading at discount to their gold value because they have massive organisations to keep running, wages to pay etc. and are also are subject to inflationary pressures when trying to get their gold out of the ground. When you look at some juniors they are trading at massive discounts to their gold or silver in the ground.

Share this post


Link to post
Share on other sites

 

 

At the end of 2008 I mainly bought producing juniors but lately I have been buying some riskier exploration juniors, as they seem better value to me at the moment. I have recently bought, ECU Silver (ECU), Gold Bullion Dev (GBB), Silvercrest (SVL) & Cosigo (CSG).

 

4 good companies in my opinion.

 

Silvercrest hasn't done as well as it should have, but I like it.

 

I am just putting together a new report and have specifically recommended my readers NOT to bother with majors. I just don't see the point. They outperform gold by about 10 or 20%, and often underperform. Why take on all that extra risk for that tiny outperformance? Own the metal and if you want leverage use GDXJ, which does outperform.

Share this post


Link to post
Share on other sites

4 good companies in my opinion.

 

Silvercrest hasn't done as well as it should have, but I like it.

 

I am just putting together a new report and have specifically recommended my readers NOT to bother with majors. I just don't see the point. They outperform gold by about 10 or 20%, and often underperform. Why take on all that extra risk for that tiny outperformance? Own the metal and if you want leverage use GDXJ, which does outperform.

cool.gif

 

Or even better buy the stocks that are just about to be added to the GDXJ this Friday. I particularly like the fact that ECU, GPR and EDV are being added.

 

20110614-pt31cwpquhamfcwubia6iqi79s.jpg

 

 

 

 

 

Share this post


Link to post
Share on other sites

DrBubb,

 

what about Pinetree Capital, just released their NAV at $4.30 current share price is $2.10 so deep discount currently.

Share this post


Link to post
Share on other sites

DrBubb,

 

what about Pinetree Capital, just released their NAV at $4.30 current share price is $2.10 so deep discount currently.

 

didn't Pinetree's CEO just pay himself USD 34m! he gets 10 of all new growth in the company's capital - I think that means that if you buy shares in the company you pay a 10% tax to the CEO. A pity, beacuse it seems like a good company otherwise...

Share this post


Link to post
Share on other sites

Interestingly, despite some heavy downward pressure on markets gold and particularly silver have held up well.

 

Suggests the downside to PMs might be less than worst case?

Share this post


Link to post
Share on other sites

Interestingly, despite some heavy downward pressure on markets gold and particularly silver have held up well.

 

Suggests the downside to PMs might be less than worst case?

There are many saying so (JT, JS etc.), surprise summer rally here we come.

Share this post


Link to post
Share on other sites

I am just putting together a new report and have specifically recommended my readers NOT to bother with majors. I just don't see the point. They outperform gold by about 10 or 20%, and often underperform. Why take on all that extra risk for that tiny outperformance? Own the metal and if you want leverage use GDXJ, which does outperform.

Here's why:

+ You get a double gain, if you get your timing right

+ Gold rises, and the Ratio of Gold stocks-to-Gold rises also

+ In fact, the Ratio itself is a helpful timing tool.

 

You can see this in the following ASA chart ... update

ASA-3yrs-vsGold.jpg

 

And in the Ratio of ASA-to-Gold

ASA-to-GLD.png.jpg

 

If you bought ASA on the Oct.08 low, and sold on the Dec.10 high, you made +247.5%, versus only +103.9% for Gold bought and sold on the same days. You might do even better by switching to Gold when you sell ASA, because it tends to peak later (ie Gold $1563 came in late April 2011, five months after the ASA peak.)

Share this post


Link to post
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
Sign in to follow this  

×