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John Thomas graduated with a bachelor’s degree in biochemistry with honors and a minor in mathematics from the University of California at Los Angeles (U.C.L.A.) in 1974. He moved to Tokyo, Japan where he was employed by a medium-sized Japanese securities house. Thomas became fluent in... More
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  • Jumping Back Into Gold.

    I am going to use the recent day's $40 sell off to jump back into the gold trade. It appears that it was a single, badly handled "SELL" order, probably from a foreign government, that took the barbarous relic down so precipitously. I wouldn't be surprised if it concerned Turkey's payment for Iranian oil with gold. It will take a few weeks for the truth to leak out.

    Gold is not dead, it is just resting. I believe that the monetary expansion arguments to buy gold prompted by QE3 are still valid. But because QE3 is entirely focused on the housing market through the Fed purchase of $40 billion a month of mortgage backed securities, the effect on the broader money supply is delayed. However, I expect it to start kicking in during December, bringing a dramatic increase in the monetary base as calculated by the Reserve Bank of St. Louis.

    Worsening strikes at the mines in South Africa also help this position. So does stepped up capital flows into emerging markets. Individual investors have to carry out tax selling which took the yellow metal down 10% from its September high. Foreign central banks don't.

    The (GLD) January, 2013 $157-$162 Call Spread allows for a 3.5% decline in (GLD) from the current spot price and still expire at its maximum point of profitability. The $162 level is also a key support level on the charts, as it is just above the 200-day moving average, giving you further protection. This call spread is really the best way to jump on a moving train. If you can't do the spread for whatever reason, just buy longer dated calls outright, or the underlying ETF (GLD). This position should do well if the modest "RISK ON" rally continues until the end of the year, which I expect it will.

    For the longer-term fundamental case for owning the barbarous relic, please refer to my earlier piece on "If You Had Any Doubts About Gold" by clicking here, and "The Ultra Bull Case for Gold" by clicking here.

    The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. This alert is for the monthly options. Don't buy the weeklies by accident. The difference between the bid and the offer on these spread trades can be enormous. Don't buy the legs individually or you will end up losing much of your profit up front. If you don't get filled, then just wait for the next Trade Alert. There will be many fish in the sea.

    The same applies if you don't understand this trade. Better to watch this strategy unfold on paper in the model portfolio before you try it with real money.

    Dec 02 10:30 PM | Link | Comment!
  • Who Says There Aren't Any Jobs?

    While recently winging my way across the South Pacific, I spotted an unusual job offer:

    WANTED: Social worker, tax free salary of $60,000 with free accommodation and transportation, no experience necessary, must be flexible and self-sufficient.

    With the unemployment rate stuck at 9.1%, and running as high as 45% for recent college grads, I was amazed that they were even advertising for such a job. Usually such plum positions get farmed out to a close relative of the hiring officials involved. Intrigued, I read on.

    To apply you first had to fly to Auckland, then catch a flight to Tahiti. After that you must endure another long flight to the remote Gambler Island, then charter a boat for a 36-hour voyage. Once there, you had to row ashore to a hidden cove, as there was no dock, or even a beach.

    It turns out that the job of a lifetime is on remote Pitcairn Island, some 2,700 miles ENE of New Zealand, home to the modern descedents of the mutineers of the HMS Bounty. History buffs will recall that in 1790 Fletcher Christian led a rebellion against the tyrannical Captain William Bligh, casting him adrift in a lifeboat.

    He then kidnapped several Tahitian women and disappeared off the face of the earth. When he stumbled across Pitcairn, which was absent from contemporary charts, he burned the ship to avoid detection. An off-course British ship didn't find the island until some 40 years later, only to find that Christian had been killed for his involvement in a love triangle, decades earlier.

    The job is not without its challenges. There is one doctor, and electric power is switched on only 10 hours a day. Supply ships visit only every three months. The local language is a blend of 18th century English and Tahitian called Pitkern, for which there is no dictionary. Previous workers have a history of going native. Oh, and 10% of the island's 54 residents are registered sex offenders, due to its long history of incest.

    The next time someone you know complains about being unable to find a job, just tell them they are not looking hard enough, and to brush up on their Pitkern.

    Dec 02 10:29 PM | Link | Comment!
  • Testimonial.

    "I LOVE trading with you. You are so level headed. My biggest positions are Apple-based and the recent volatility has been scary. You are a totally calming influence on my trading. Starting in January, I am going to up my trading on your suggestions to 20% of my portfolio. By comparison to the market you are very soothing. Very. And I love that you have an open mind politically. This is not the norm. Most of what I read could have been written by Atilla the Hun. Reading your daily posts makes my day."


    Abu Dhabi

    Dec 02 10:29 PM | Link | Comment!
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