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Van

Van's Journal (continuous)

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Over what time frame do you expect to make profits.

That is, how long will you expect to stay in trades?

 

EXAMPLE:

I'm (still) expecting Gold to fall into April, and maybe longer - that's based on the 4-6months cycle.

 

I have some shorts, and some Puts.

And I also have some longs

Why hold longs at all, if I expect the gold price to fall?

Because I don't want to trade my whole position over this short a time frame.

 

BTW, I havent touched my physical Gold holdings,

It is the paper positions that I am trading around

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Here is the latest evolution of my model, using relative ratios of monthly gold, silver & wage prices.

 

https://docs.google.com/spreadsheets/d/12xiAkvM25aY0yNs6Z2gXBVDH8CFdI7lGf5sh8eZSXKg/edit?usp=sharing

 

I have managed to get the model returning as much as x20 what a dumb buying strategy such "buy a fixed amount of a single metal" would have returned since 1968.

 

The model is NOT for short term trading, but for purpose of long term accumulation of as many ounces as possible. To this end, I found it necessary to set the boundaries in wage/gold/wages ratios to some pretty high level - I found using a 70 month moving average, coupled with a price movement of >1.7 standard deviations worked best for a "buy only cheapest metal" signal, and a price movement >2.3 standard deviations away for a "swap" signal. So, in other words, the model can be expected to deliver a swap signal once every 4.2 years.

 

Last signal was swap all silver for gold in March 2011, and before that swap all gold for silver in Oct 2008.

 

Currently the GSR would have to move above 87.3 to generate another swap signal, however that is academic for me as I currently don't hold any gold.

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" GSR would have to move above 87.3 "

 

hMM.

will you get a signal if it starts declining before that level?

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" GSR would have to move above 87.3 "

 

hMM.

will you get a signal if it starts declining before that level?

 

Sure, it doesn't matter if the GSR takes a breather before getting there, so long it gets there. The swap boundary is a moving target that is currently trending up,and so the GSR might have to reach a higher number to reach the swap number, depending on how prices move over the next few months. We got quite close in Nov-2015 when the GSR was 82.5 against a swap trigger level of 84.95.

 

 

Just looking historically at the model, the chances are very good that it will reach this level in the next year or so - whenever the price has moved beyond the "buy only silver" boundary it has then gone on the reach the "swap" boundary within a few years. Correspondingly, I would not be surprised to see a spike in the GSR any month now that would push it to that level. This might correspond with a final legdown lower in precious metals, where silver traditionally gets whacked down more than gold.

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Peak in GSR : we might have seen it already

 

GSR_zpsixvapaul.png

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Peak in GSR : we might have seen it already

 

 

 

 

Maybe, but quite likely not based on historical precedence of my model, which has shown that each time the price has crossed the first boundary, it has also gone on to spike above the 2nd boundary, which it has not done so yet. IMO, if and when it does, that will be the time to go "all in" on silver.

 

gsr.png

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Commodities-food based-must be good, if/when we catch inflation...or even if we don't, perhaps. I'm a bit reluctant to see other commodities doing well if the premise is "because they have done before". I'm also reluctant to say "it's different this time", but it sure as hell doesn't feel like 1990 or 2002 or even 2009. What could change that?

 

War could change that feeling towards commodities however. Another couple of years perhaps. China with their islands, ME, Russia and her gas to Europe, N Korea going apeshit. Japan changing her constitution.

In the meantime it seems everyone's wages are going down. Good jobs are harder to find. Many many unemployed. Oil/energy is too cheap for producers to stay in business. Banks have big money with them. It goes on. World pop is going up, but demand is down. Maybe there are limits to growth you aren't seeing. There's a lot of uncertainty, for sure.

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Interesting way of valuing stocks which I had not considered before - the Buffett Indicator, ie

 

Wilshire 5000 / US GDP

 

Current ratio is only slightly below the 2000 peak.

 

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http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX

 

'The Latest Margin Data

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is down 2.7% month-over-month and 14.3% off its real (inflation-adjusted) record high set in April 2015. Here is an overlay of margin debt and the S&P 500 adjusted for inflation. In nominal terms, the S&P 500 peaked on May 21st of last year. The monthly close peak, adjusted for inflation was three months earlier in February.'

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http://www.advisorperspectives.com/dshort/updates/NYSE-Margin-Debt-and-the-SPX

 

'The Latest Margin Data

The NYSE margin debt data is a few weeks old when it is published. The latest debt level is down 2.7% month-over-month and 14.3% off its real (inflation-adjusted) record high set in April 2015. Here is an overlay of margin debt and the S&P 500 adjusted for inflation. In nominal terms, the S&P 500 peaked on May 21st of last year. The monthly close peak, adjusted for inflation was three months earlier in February.'

Good stuff. The cycle has clearly peaked, and without new policy to incentivise more margin debt the market will not be putting in a new leg higher. However never underestimate the power of the fed to change the rules of the game. I am sure they will attempt to do so.

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I have closed out all trading positions to give myself a much needed break. Don't know how long it will be for, but it is overdue. I can't remember the last time that I DIDN'T have a position open, which probably means it is far too long ago. Have made good profits but I can tell that I was beginning to get too impulsive and sloppy.

 

Instead, I have been looking into raising a bit of extra cash via matched sports betting. As the profits are (in theory) fixed and guaranteed, it is an entirely mechanical process and almost zero stress. Just takes a lot of work to set up the bets to release the value on offer. I'm not going to get rich any time soon doing this, but it is good for some pocket money, and more importantly it is developing a new skill which I am having a lot of fun doing.

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I have closed out all trading positions to give myself a much needed break. Don't know how long it will be for, but it is overdue. I can't remember the last time that I DIDN'T have a position open, which probably means it is far too long ago. Have made good profits but I can tell that I was beginning to get too impulsive and sloppy.

 

Instead, I have been looking into raising a bit of extra cash via matched sports betting. As the profits are (in theory) fixed and guaranteed, it is an entirely mechanical process and almost zero stress. Just takes a lot of work to set up the bets to release the value on offer. I'm not going to get rich any time soon doing this, but it is good for some pocket money, and more importantly it is developing a new skill which I am having a lot of fun doing.

 

Dipping my toes back in with some TVIX - a good risk/reward play if any market selloff creates a spike on volatility.

I certainly do not think that the next 2 months will be as good for stocks as the last 2 months have been.

 

Having a lot of fun with the Matched Betting too, although now I'm mostly used up all the signup bonuses and am starting to work on reload offers the going is a bit tougher.

 

Good primers:

 

http://matchedbettingblog.com/

http://www.jollyodds.com/betting-strategy/

 

I may look into a service like ProfitAccumulator or BookieBashers.net which supposedly does a lot of the legwork for you, but I want to get a good handle on it manually first before rely on any 3rd party services.

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We've just hit new 1yr highs in the gold/siver ratio, and getting up to the 10yr high. Silver is SO cheap right now. We will look back on this period as a once in a decade chance to buy silver this cheaply.

 

Don't know how many standard deviations above mean we are, but it has to be right up there.

 

My original plan was to cost-average my silver-buying over the next 12 months, but I am revising that to front-load it.

 

365d_sm_gold_silver_ratio.gif

 

3650d_sm_gold_silver_ratio.gif

 

At under 1/80th of an oz, loading up on silver was a complete no-brainer.

Priced in gold, silver is now up 16% from its recent bottom. I think we will see a 80-100% trough-to-peak move at which point I will aim to exchange most of my silver for gold. Might take a couple of years to get there. Enjoy the ride in the meantime.

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You learn something new every day.. or at least a new spin on an old theme.

 

Contrarian investors make their money by betting against crowds, but most of the time the crowd is right, not because their individuals know better, but because of the collective wisdom of the herd will arrive at a market price which is very close to the true value:

 

http://www.pinnaclesports.com/en/betting-articles/betting-psychology/wisdom-of-the-crowd-applied-to-betting

 

"No one-person got the correct weight but Galton calculated the median of guesses as being within 0.8% of the answer, stating that “the middlemost estimate expresses the vox populi"

 

Why am I particularly interested in this?

 

Because in sports betting we can use this principle of the market price set at the exchange as the true likelihood of the event actually occuring in order to set up bets with positive expected value which will make this a winning venture if repeated many times over.

 

On normal bets we have a negative expected value (-EV), because the bookie will price all outcomes with a built in overround as their profit margin. However, on many special offers that the bookie regularly run such as money-back if your bet loses, double/triple odds payouts, free bets, money back if your horse finishes 2nd etc... ALL these have a +EV, and it is just a question of how to structure your back & lay bets in order to extract that value and turn it into cash.

 

It's like calling someone's all-in flush draw in poker when you have made top set, the pot-odds are in your favour, AND you already know for certain what cards they are holding, AND you are able to hedge against the flush card arriving. You can't NOT win.

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What is the point of the stock market now? It's no longer anything to do with the real economy, or even company profits it seems, as even 4 negative quarters of earnings growth in a row isn't enough to put a dent in the S&P.

Now even the great AAPL has missed earnings, yet the PPT step in to soak up any selling.

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Still continuing to watch from the sides, rather disbelieving that this bull market is close to 8 years old, but the numbers don't like, whichever way you cut it.

 

Have not been doing too much trading this year as I've been doing sports value betting (mainly each-way arbitrage on horse races). Once you understand how bookies operate and how value is found then it is actually a pretty easy way to make steady and not insignificant sums of money on a fairly consistent basis.

 

Still steadily stacking PMs for the next crisis, and rather pleased with the amount I have built up.

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