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David Batson
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Mr. Batson thinks the most important fundamental that ought to be considered when analyzing liquid assets is the necessary multidecadal trade-off in outperformance between stocks and commodities. This is a natural part of the business cycle that allows supplies of raw materials to be increased... More
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  • Sell Your Gold (And Have It, Too)

    I was talking to my good friend Mr. X this weekend and he notes that it seems like the entire world has gone bear on gold. Those who have been permanently negative on the yellow metal (i.e. the Goldman Sachs of the world) are pushing their short sales. Those who actually understand the fundamentals are not selling, but aren't excited about buying either.

    Perhaps, then, this is a moment when I could gain some traction with something I have been talking about for years: using the futures markets to hedge exposure to physical gold. It isn't that those I have suggested this to in the past think it is a bad idea. They have just been indifferent to it for the most part. Perhaps they will consider the idea now, at least for future reference.

    What if in the past two years, someone with, say, 1000 ounces of gold had been short of three 100 ounce COMEX gold contracts, hedging 30% of their exposure? That would have been a pretty good deal. They would have experienced what is currently a 35% setback in the price of gold from its all time high in September 2011 as only a 23% drawdown in their personal exposure.

    What if, at various times, our investor had increased that to seven 100-ounce COMEX gold contracts short, hedging 70% of their exposure to phyiscal? They could have worked that loss even lower. Additionally, they could have taken the profits from their short sales and turned around and bought more physical gold.

    Now, one of the first questions that usually comes up when this is suggested is, "Why don't I just sell my gold?" The reason is, you are going to want physical gold several years from now. Whether it is a worst case scenario where you get a major collapse in the dollar and people are demanding hard assets in payment for basic goods and services or it just LOOKS like that is going to become the case, having physical precious metals in your possession is going to become widely appreciated (which will, ultimately, drive the final highs in prices).

    The other question that often comes up is, "Why hedge only 1/3 or 2/3 of my physical?" The answer is, the fundamentals have it going up. You don't want to get into a situation where you are fighting against your own proper understanding of reality. That creates internal conflicts which can do things like keep you up at night.

    Of course, it's hard to do this on your own. Better to seek someone out who has the experience to execute such a strategy. I have been trading futures contracts for more than a decade, always with an emphasis on precious metals. I am currently seeking clients who fit the definition of Qualified Eligible Persons. The best way to contact me is through my email:

    Dec 01 10:52 PM | Link | Comment!
  • Miley Cyrus And The Hemline Index

    There is an old and storied market indicator that is not uncontroversial, particularly in today's hyper-feminist atmosphere which insists that "ladies" can act however they like with no consequences. From women marching down the street wearing next to nothing in international "SlutWalks" (literally) to the day-to-day fashions that I see on the streets of New York City, it would appear that the hemline has not only risen to some unimaginable new high, but disappeared all together.

    And nothing illustrates this phenomenon more clearly than Miley Cyrus's disgusting and shameful display at the Video Music Awards last night. I didn't watch the video. I couldn't. But there are plenty of pictures on the Internet showing how the former Disney star has "matured" (hint: not much). I like well choreographed and executed dance routines as much as anyone, but I don't go to strip clubs because I find that paying for that sort of show leaves me very cold. As Ayn Rand pointed out, sex is a spiritual value. You don't buy it with money, you earn it with virtues.

    But I don't have to go to strip clubs anymore to see such flagrant displays of hyper-sexuality. They are everywhere now, it would seem. Now, I am not generally a prude (although if you want to call me so for being disgusted by Miss Cyrus's display, feel free) and I am certainly no fashion maven, but given the extreme highs of the current stock multiples, the admission by the Fed that it is manipulating said multiples higher and the general euphoria surrounding the stock markets, here is one more call to say that even if the stock market can push a bit higher from here, it is going to have to do so without me. And, I strongly suggest that anyone reading this consider taking the same stance.

    Aug 26 3:19 PM | Link | Comment!
  • Silver Is For Selling (But Buy It Here)

    For the last 12 years, I have been consistently saying "Sell Stocks and Buy Gold." Anyone who has followed my advice since then, has seen their investment return over 500% while the major stock indexes are flat to down, particularly when counting for inflation. One of the first questions that I am often asked is, "What do you think about silver?"

    I say, "I love silver. I especially love selling it."

    For years, there has been talk of a conspiracy to hold silver prices down through selling futures contracts short. You may count me as one of those conspirators.

    When I am trading futures, silver is the perfect hedge against downside in gold. It moves essentially in tandem but, particularly to the downside, is about twice as volatile as its yellow cousin.

    This is a pattern that that has consistently held true since I began recommending gold in 2001. Selling silver short against gold to hedge downside is a strategy I developed as a Commodities Futures Broker beginning in 2002. For all intents and purposes, it is currently my primary strategy now as a Commodities Trading Adviser.

    That being said, I do think you could buy silver here with a very high expectation of a solid return over the coming 18 months to three years.

    You just have to remember to sell your silver.

    There is nothing worse than seeing your investment return hundreds of percentage points--as silver did between 2008 and 2011--and then see it collapse 70%--as silver has done since September 2011.

    So, remember to sell your silver. Probably around $100 per ounce, which I think is a reasonable target between now and 2016.

    I also think that the iShares Silver Trust (NYSEARCA:SLV) is a good way to go. I generally recommend taking delivery of physical gold as a primary strategy, but the bid/ask spread is really too high in the physical white metal for my tastes; making it harder to sell.

    And I want you to remember to sell your silver, which I think you could buy today and through $33 per ounce.

    A couple of things about the silver chart that are really making me confident in this recommendation:

    1. The market is more deeply oversold than it was in 2008 as indicated by RSI. That marks an extreme low in sentiment and the RSI is now beginning to turn up.

    2. The MACD has been ticking higher as the market has been ticking lower. This creates a positive divergence and a buy signal.

    3. With silver around $20 per ounce--a major support level going back to 2007--it would be very difficult to push it lower. Even for conspirators such as myself.

    (click to enlarge)Silver September 2013 Continuation Chart

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

    Additional disclosure: I am long physical gold.

    Jul 11 12:14 PM | Link | Comment!
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