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Kevin McElroy

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  • Why Did Silver Drop So Much? [View article]
    Yes, I'm long silver - and thanks for the clearer explanation of margin requirements. I didn't intend to go into great detail on margin - but it's obvious that margin requirement increases are normal parts of any market. The coherent explanation I think you're looking for is that margin requirement increases made it more expensive to be long silver - and some folks were forced to liquidate their long positions. Sorry that wasn't clearer or better explained...
    Sep 29 07:56 AM | Likes Like |Link to Comment
  • How Low Could Gold Go? [View article]
    What's fair value? Serious question...

    I just hope you're not looking at production costs per ounce as your basis.
    Sep 28 03:45 PM | Likes Like |Link to Comment
  • The Largest Bubble Is Actually Treasuries [View article]
    Thanks for further oversimplifying my oversimplification.

    I wish I could give an accurate answer as to what will cause the Treasury bubble to burst.

    If history is any guide, it will probably be the day after the last buyer enters the market. A treasury auction where no one shows up except for the Fed - perhaps. We already know that the Fed is tying the dollar to the fortunes (or misfortunes) of the Euro by supplying vast and sundry loans, liquidity, backstops, front stops and side stops. And the Euro's woes are tied closely to Europe's largest banks. Greece has been a slow-motion domino, maybe when it finally falls it will take out a few European banks, which will quickly create en masse flight to Treasuries for the survivors. But who will buy Treasuries the day after an en masse flight from Europe? Who will be left to buy?

    Yes, the Fed will be around to buy, but there are two problems if the Fed seems to be the only entity buying Treasuries:

    1) The market will dump Treasuries in anticipation of interest rate increases that would slaughter their current holdings.
    2) The Fed is becoming an extremely public political villain. Eventually U.S. leaders (right or wrong) will step in and not just take away the punch bowl, but possibly end the party altogether.
    Sep 22 08:15 AM | Likes Like |Link to Comment
  • Is Bernanke Robbing The U.S. Taxpayer? [View article]
    I hope you see the obvious reason why I "cherry-picked" the data. In the previous 100 years before 1975, the money supply was rather flat. Only after the dollar was completely decoupled from any constraints did we see this kind of M1 growth. So, showing M1 going back to 1945 or 1905 would only exaggerate my point - not put it into historical context. We've been on the other side of the rabbit hole since 1971. If I had posted a chart going back to 1945, you'd tell me that my chart was meaningless because before 1971, M1 was constrained by the remnants of the gold standard. Either way... I fail to see how Bernanke will now "pull back" without severely violating his mandate to maximize employment, or completely slaughtering the Treasury market. If you can see a way out I think we'd all like to hear it though.
    Sep 17 10:39 AM | Likes Like |Link to Comment
  • Why Is GDXJ Underperforming? [View article]
    Good question. I did some digging, and it appears to be a "special" dividend of sorts, related to some of the unique assets that this particular ETF holds, in addition to ordinary mining companies.

    Here's the scoop from the Van Eck customer relations folks:

    "This was an annual dividend derived from Passive Foreign Investment Company (PFIC) Income Several Market Vectors ETFs may make investments in non-U.S. corporations classified as “passive foreign investment companies.” Generally speaking, PFICs are non-U.S. corporations having 50% or more of their assets invested in cash or securities, or having 75% or more of their gross income originating from passive sources, including but not limited to interest, dividends and rents. In other words, these foreign companies primarily derive their revenue streams from investments (rather than operations).

    We expect to have a PFIC distribution again this year, but unfortunately cannot estimate it at this time."

    So that's the long answer. My short answer is that I would not look at GDXJ as an income vehicle. I'm actually hoping they don't pay a dividend. I'd prefer that they keep more of their assets in the types of small mining stocks that can skyrocket in price - not these wacky PFIC things that don't seem to have a core of their business related to exploration/developmen... of pm assets.
    Sep 11 02:18 PM | Likes Like |Link to Comment
  • Is Bernanke Robbing The U.S. Taxpayer? [View article]
    I'm not advocating for violence you twit. I'm saying violence is here. Central bankers have mucked things up so badly for so long, and we're just beginning to see the fallout. If I were a central banker, I'd be backing slowly towards the door.

    Congrats for invoking Timothy McVeigh on the internet. Godwin 2.0.

    I'm not a right wing lunatic. I'm not a evangelical end-times Christian. I'm not a frothing at the mouth Limbaugh fan. I'm not any of the stereotypical things you believe me to be, and which allow you to lazily and conveniently ignore the substance of my claims.

    I'm just one more person pointing out the obvious problems with our monetary system. I'm a regular guy who thinks it's fundamentally wrong for the government to raid the worth of the dollar for any old reason they like. We're seeing the fallout of that policy. You seem to think the riots in Europe don't mean anything. You seem to think that the Arab Spring is just a nice little democratic movement for brown people.

    Things are changing quickly and majorly. Western hegemony hangs in the balance.

    The writing is on the wall, but you seem more interested in debating what font it's in.
    Sep 11 11:33 AM | 3 Likes Like |Link to Comment
  • Is Bernanke Robbing The U.S. Taxpayer? [View article]
    Yeah, Woodrow Wilson and the Congress believed those selling points, but really it was just a power grab by the world's richest bankers to further control the world's finances. If no one except for maybe Paul Krugman actually believes central bankers can manage the business cycle (of their own invention) - why are we still playing out this ridiculous charade? The dual mandate of the Fed is joke: they have about zero impact on jobs, and they have an abysmal track record on inflation. Now the currency itself is in trouble.
    My buest guess is that central bankers around the world better be looking for the exits. Is the guillotine still around in Europe?
    Sep 10 08:23 AM | 2 Likes Like |Link to Comment
  • A Gold Correction Is Coming [View article]
    I don't know what to tell you. I predicted that gold would move downward 5-10% and it happened. I didn't say it would stay at that price forever!

    I also recommended using the dip in price as a buying opportunity. Honestly, I'm not always right, and when I am right, I'm rarely this accurate. Save your ire for when I screw up, not when I'm spot on...

    I'm a long term gold bull, and I certainly don't work for JP Morgan or Goldman Sachs. But hey, if anyone from those two banks is reading, I could have made you a bunch of money if I was working for you...
    Aug 26 06:45 PM | Likes Like |Link to Comment
  • Identifying The End Of The Gold Bull [View article]
    Good point Moon: counterparty risk is one reason to avoid treasuries altogether. Who knows what ridiculous ex-post-facto law will be enacted to punish evil "speculators" who short treasuries.
    Aug 26 07:56 AM | 2 Likes Like |Link to Comment
  • A Gold Correction Is Coming [View article]
    Doc,
    Thanks for compliments. To be perfectly honest, I'm not a chartist or a psychic. Chalk this one up to a combination of good horse-sense and a healthy dose of lucky timing.

    I do closely follow the PM markets, and after what we all saw with silver, it just looked too good for gold to continue as it was.

    If you really want to be impressed, you should check out the work of my colleague Andrew Crowder. He actually had the stones to profit off of this latest correction in precious metals, and the correction in silver back in May. You can email him at Andrew.Crowder @ wyatt research dot com or read his editorial by searching for his name here on Seeking Alpha.
    Aug 25 09:09 PM | Likes Like |Link to Comment
  • Identifying The End Of The Gold Bull [View article]
    Unless you prescribe to the often and easily debunked labor theory of value, the cost of producing gold has nothing to do with its sticker price.
    Aug 25 02:37 PM | 3 Likes Like |Link to Comment
  • A Gold Correction Is Coming [View article]
    TL, you're right: this time isn't different. The meltdown of fiat paper will occur as it always has - leaving precious metals and anything else approaching honest money as the heirs. It's the idea that paper is money that will be unmasked as the impostor - however - and not real assets.

    That's what I don't get: why is the dollar different? You have a lot to answer for if you're betting against gold - and therefore, on the dollar over the long term.

    So tell us: why is it different this time for the dollar when, as Rick Rule says, the history of paper money is so far unblemished by success? If you're betting on paper, it seems as though YOU are the one who's saying it's different this time.
    Aug 24 01:16 PM | 1 Like Like |Link to Comment
  • A Gold Correction Is Coming [View article]
    UV, I own some semi-numismatic coins like the 'Helvetica" 20 Swiss Franc coin, but I don't own it for its collector value. I bought it because of its denomination and its relative popularity - the same reason I buy American gold eagles and British sovereigns.

    Collectibles are a different asset class, and they take a different level of sophistication and expertise. I buy bullion for all of the standard reasons most people buy gold. I buy art and collectibles for different reasons. I wouldn't recommend buying numismatic coins if you're interested in the bullion content, because if/when the SHTF, your counterparty won't likely be interested in the relative rarity or art of the gold you want to sell them or trade with them. They'll look at a gold eagle or a krugerrand or maple or MS64 graded coin and see a hunk of gold. They may or may not recognize the krugerrand, but they probably won't know too much about the numismatic value of a graded rare coin.
    Aug 24 11:13 AM | Likes Like |Link to Comment
  • 4.3 Reasons to Buy ConocoPhillips [View article]
    For a clue to my assumptions about oil prices, you should check out the excellent book by Jeff Rubin "Why Your World is About to Get a Whole Lot Smaller."

    The thesis: increased demand from non-OECD countries (especially including oil producing nations) in addition to depleted easy-to-get oil will mean sustained higher oil prices for the foreseeable future.

    Cheap dollars are not a good replacement for cheap oil! (that's a Rubinism).

    For my thoughts on splits, I suggest checking out Joel Greenblatt's book "You Can Be a Stock Market Genius."

    The tale of the tape for mergers, acquisitions and spinoffs is that there's almost always a winner and a loser. Someone pays too much in an acquisition. Someone gets too little in a merger. And one business gets shafted in a spinoff.

    There are exceptions where both businesses clearly benefit (McDonalds and Chipotle comes to mind) but we should be weary of winners and losers in this split.

    Corporations take advantage of the intricacies of the law to shed themselves of the lousy parts of their businesses to increase the profitability of the good parts. From first blush, it looks like the refinery business might be the worse for wear, but that could change. In any event, I think there's time to come to a helpful conclusion - up to and even including after the split.
    Aug 15 09:01 PM | Likes Like |Link to Comment
  • 4.3 Reasons to Buy ConocoPhillips [View article]
    Great question. I haven't done too much digging into the specific seasonality of this company, but my thesis for higher oil prices supports earnings power for oil majors to stem the tide of a rocky market at least on a relative basis.
    Aug 15 03:41 PM | 1 Like Like |Link to Comment
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