Seeking Alpha

Precious metals soar as Fed stays dovish and Americans head into Iraq

Comments (54)
  • minecanary
    , contributor
    Comments (411) | Send Message
     
    PM's are flying until next week's option expiry beat down. No recession.
    19 Jun, 03:15 PM Reply Like
  • Jeb Handwerger
    , contributor
    Comments (622) | Send Message
     
    June is for junior gold miners...http://seekingalpha.co...
    19 Jun, 05:00 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    So the dilemma is, what is this, a dead cat bounce or is it real?

     

    If it's real, are you saying it's because of Iraq? Hardly.

     

    Inflation? Sure, some will say this. But then again there's Europe fighting deflation and the Fed is still doing QE, believe it or now. Yellen seem confused when answering the inflation question.

     

    Dollar only down 8 cents.

     

    10 year at 2.63%

     

    VIX showing no fear.

     

    hmmm

     

    Inquiring minds....
    19 Jun, 03:20 PM Reply Like
  • june1234
    , contributor
    Comments (2507) | Send Message
     
    fed printed too much, i'll go with inflation. If that is so bonds won't like it
    19 Jun, 03:29 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    True...and the 10 year rate went up some today, but still @ 2.63%. Would prefer a 3% or higher.
    19 Jun, 03:37 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    Dead cat bounce Doug.
    19 Jun, 07:04 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    Macro! Long time!

     

    Good to see you back...
    19 Jun, 07:47 PM Reply Like
  • TheLastSpartan
    , contributor
    Comments (110) | Send Message
     
    It looks more like quite a big, pissed off and not so dead cat :)
    19 Jun, 08:16 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    Same here Doug.
    19 Jun, 10:37 PM Reply Like
  • DeepValueLover
    , contributor
    Comments (8175) | Send Message
     
    This is almost certainly a dead cat bounce.

     

    Good opportunity to sell a little gold to raise cash to pay off some credit card or other expensive debt you may have.

     

    Gold back down to $1190 by Halloween.
    20 Jun, 05:46 AM Reply Like
  • CoinsK
    , contributor
    Comments (2775) | Send Message
     
    Sell ,Sell ,Sell ! Then after halloween Buy,Buy,Buy. LOL

     

    http://binged.it/1pPwRX0

     

    It's all about the holidays :)
    20 Jun, 07:25 AM Reply Like
  • ltsgt1
    , contributor
    Comments (1373) | Send Message
     
    Deep,

     

    If you have credit card debt, you really shouldn't own gold.
    20 Jun, 08:58 PM Reply Like
  • savings4u
    , contributor
    Comments (3) | Send Message
     
    Greetings!
    I cannot see why everyone out here cannot see what is there to see? So, this onion has the required layers, indeed ! So then, what exactly is this term ''inflation'' and why can't all people understand the simplicity of it's cause in our simple world, and here at home too? There is a little secrete too inflation. Seems that when a hundred billion or so $$$$ get pumped into a system, guess what then happens next? YUP! Most people would say that, too! However, they too would be, and are to date, incorrect. See, after this hundred billion $$$$$ is pumped in, this same hundred billion $$$$$ is next removed from circulation! The cash serves it's purpose, then is removed. Begs the question, ''inflation ? What inflation?'' See, there simply is NO INFLATION ! There is , however, a great risk of DEFLATION. So, YES there is a threat, indeed, to stability of our great ecconomie. After all! Cheers !
    26 Jun, 01:13 PM Reply Like
  • t time
    , contributor
    Comments (209) | Send Message
     
    So Doug, what are you saying???
    Is this just another bump like we had in January?
    19 Jun, 03:27 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    t time,

     

    I am saying I'm confused by my indicators not pointing to a blast off. I am not giving all my indicators out, but suffice to say they don't point to it, hence my questioning.

     

    I am ready to write a more bullish article with the thesis being this, since I know we aren't too far from a bottom (although I personally want one more smack down): "Does it matter if you buy gold now and it falls, when in a few years your are sitting on a 70% profit instead of a 100% profit?" If you answer that it doesn't matter, then buy. But my advice all along has been to dollar cost average into a position/allocation. Then go have fun. That still holds.
    19 Jun, 03:35 PM Reply Like
  • John Grandits
    , contributor
    Comments (210) | Send Message
     
    then what are 'some' of the indicators you're referring to?

     

    check out the triple bottom and reverse head and shoulder on daily charts for SLW and AG....those were strong signals for the recent bottom. SLW < $20 and AG < $9 were great entry pts for short and long term investors. I'd still buy both at current levels.
    19 Jun, 05:23 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    Hi John, the double bottom in gold is also a good indicator too, right? Last inflation report?

     

    I listed some of my indicators above.

     

    Dollar only down 8 cents.

     

    10 year at 2.63%

     

    VIX showing no fear.

     

    I also have a gold business where I have first hand knowledge of real demand from my own sales and from that of my suppliers, two of the largest in the U.S.

     

    Also my book sales aren't where they were when gold was viewed more positively.

     

    I have more, but those alone are enough.

     

    Mining stocks led gold down and many now say will lead gold back up like they have the last 2 weeks. While I am bullish on gold and mining stocks longer term, just because a few newsletter writers tell their subscribers to buy gold miners, doesn't mean we are at a bottom. The two you mention, SLW and AG can be good buys if years from now they are quadruple what you bought at today. Doesn't mean they won't go lower first. Invest in your allocation to them and go enjoy life. A difference of 20% gain isn't going to mean that much for some investors whether we go higher or lower.

     

    My advice has been and is the same. Dollar cost average into a position.

     

    But I'm just not convinced we are off to the races yet. May get a little more pop, but we'll see what happens.

     

    Good luck...
    19 Jun, 05:46 PM Reply Like
  • Stock Market Mike
    , contributor
    Comments (1873) | Send Message
     
    I hope you're not using the printed inflation number.

     

    Food - Bacon, beef, chicken, etc - 20-25% increases in 6 months?
    Oil - more than a 10% rise in 6 months?
    Housing/rent - about 6% annual rise since 2009?

     

    I'm no expert, but it looks like we might be in an Venezuela type situation? Costs rise, but inflation stays muted (for whatever the norm is in that country - around here it's sub-2%, but I think it was over 10% in that country), and then after the costs rise, the printed inflation number finally catches up down the road?

     

    Funds may have finally clued in. It seems probable that we'll see a 4-6% inflation number printed at least once in the next few years?

     

    -Mike
    19 Jun, 07:25 PM Reply Like
  • Ray_Rich
    , contributor
    Comments (44) | Send Message
     
    Yes a little strange the big jump in Gold and Silver. I would have expected a bounce like this to be joined with a market drop or adrop in the $.

     

    I to wonder if this is another dead cat bounce or the start of something a bit more real, I can not see the idea of a civil war in Iraq being the reasoning behind this.

     

    I believe we are nearing the end of QE and people are now starting to load up the bets on either a drop int he Markets or they are trying to hedge the gains from last year.

     

    Either way, with the end of QE I believe you will see a new dawn of gold. Believe it or not no one was expecting gold to drop when QE3 began but it did. It dropped a lot, now with about 3 months to go until it ends, I think you will see the markets getting ready for what comes next. The end of the free money QE "PUT"
    19 Jun, 03:32 PM Reply Like
  • howard26
    , contributor
    Comments (145) | Send Message
     
    I expected a bounce. But the volume in the movement of both GLD and SLV makes me reconsider how high this could go before declining again.

     

    Yet, because those traders who have been leveraged heavily (at a record high right now) may have to liquidate their PM holdings to pay for margin calls should the equities markets turn, I can still see a drop in gold and silver to new lows.

     

    If today's run was all reaction to the Fed, it should give back over half in the next day or so like past "Fed induced" spikes. But because today's volume was so robust, I am questioning this as merely a reaction to the Fed. Or Ukraine (been around for a while), Iraq (again, seen this coming, or India's election (not going to move it that much in one day). No, just not sure here. Very impulsive.
    19 Jun, 04:17 PM Reply Like
  • William Rilling
    , contributor
    Comments (140) | Send Message
     
    I've bought SLV several times in the last year in th 18's, got a pretty good "Bump"and Ran.
    Kind of fun once in awhile.
    19 Jun, 03:35 PM Reply Like
  • Pring Turner
    , contributor
    Comments (27) | Send Message
     
    We touched on gold in a seeking alpha article last week. http://seekingalpha.co...

     

    After 3+ down years for gold, silver and other metals we could be on the verge of a new bull market.
    19 Jun, 03:35 PM Reply Like
  • Alex Winter
    , contributor
    Comments (26) | Send Message
     
    If you're long physical gold or silver, it's time to hedge a bit and buy some insurance in the form of DZZ or DSLV.
    People will try to lean on PMs after this nice price action upward. If you have no intention of selling (like me) but want some insurance against downward pressure, I would suggest scaling into these 2 positions around current levels.
    If gold continues higher in the long run, stay long the physical and eventually dump the DZZ and DSLV for a tax loss.
    If gold sells off, eventually take profits in DZZ and DSLV and reinvest in the physical.
    I've been doing this on and off for years and it works.
    These 2 ETFs are essentially insurance for your position in physical metals.
    Remember, if you're not long the physical, you don't own gold or silver.
    Good luck to everyone.
    19 Jun, 03:59 PM Reply Like
  • RM13
    , contributor
    Comments (712) | Send Message
     
    It's pretty clear that lots of people got caught on the short the PM wagon. Now this is the reversal of that play. However, it don't think this leads to drastically high PM prices, still to many 'gold bug' believers out there. So the way I see it - shorts/sellers have gotten caught on the wrong side, in few weeks/months, gold bulls will be on the wrong side.
    19 Jun, 04:05 PM Reply Like
  • gold1
    , contributor
    Comments (41) | Send Message
     
    I suspect this is mostly a short covering rally of a few big paper players who got burned.
    19 Jun, 04:06 PM Reply Like
  • gold1
    , contributor
    Comments (41) | Send Message
     
    RM13 we were typing at the same time, great minds think alike. LOL
    19 Jun, 04:08 PM Reply Like
  • David at Imperial Beach
    , contributor
    Comments (3322) | Send Message
     
    I said all along that when gold broke out of its wedge to the downside that it was headed in the wrong direction. Now that it's explored the down side and seen that there's no room for it there, it's breaking to the up side. Now the shorts have had to cover and will need to establish new positions on the long side. Next stop on this train is $1400.
    19 Jun, 04:28 PM Reply Like
  • 6151621
    , contributor
    Comments (1170) | Send Message
     
    At 11:30 I thought we needed to see gold above 1310, as that was a prior resistance (since April). That's been cleared. It could be that the recent 1240 becomes a higher low to last year's 1180s (x2). In any case, I'm cautiously bullish at this point but would like to see 1330 fall soon--as this was a key support/resistance earlier this year. Time will tell. Tomorrow is important. In recent history when gold took out R3 pivot point (1299, today) there was a sharp reversal the next day. Let's see what tomorrow brings!
    19 Jun, 04:31 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    Hey 615, I scalped some JDST for a quick trade end of day, but no way I would hold that overnight. Will play which ever way she goes for the short term. Spent the day after calling the Natural Gas correctly with DGAZ buying the dips in TZA (till it stopped trending) and AAPL (after some news) when I should have been buying the dips in NUGT or JNUG. My conservative approach still netted me 4 digits.

     

    Like going home flat.
    19 Jun, 05:05 PM Reply Like
  • spydrman
    , contributor
    Comments (10) | Send Message
     
    I see another 3 or 4% to upside before any resistance, dead cat or not. Check the weekly charts. GLTA
    19 Jun, 04:53 PM Reply Like
  • rockymtnhigh
    , contributor
    Comments (2) | Send Message
     
    Could be that traders sense the big broad market move is nearing an end and are rotating into a beat down and cheap sector, gold and silver. Charts look like the gold downtrend is over. Especially note the year long inverted head and shoulders pattern in GDX. Head at 20 and shoulders at 22. Add in Iraq and possible upticks in inflation and we are off to the races.
    19 Jun, 08:27 PM Reply Like
  • Zerubabel
    , contributor
    Comment (1) | Send Message
     
    Its time for gold and silver to bounce back; this is the first leg up.Lots of mulaaaa to be made
    19 Jun, 08:27 PM Reply Like
  • floortrader
    , contributor
    Comments (19) | Send Message
     
    You fellows are getting all excited over a market that's stuck in a trading range. We continue to sit between $19.00 and $22.50 on silver. Every reason that this is the start of a rally has been around for weeks but some of you like to repeat it as if its new information. Traders needed this market move to find new places to go short .Its just a bouncing market and until a real piece of negative news overwhelms the market ,look for this to be a sideways market ,remember a rally here could only be a play to squeeze the option sellers .
    19 Jun, 08:35 PM Reply Like
  • eagle1003
    , contributor
    Comments (1494) | Send Message
     
    I don't think the rally is a dead cat bounce nor did it have anything to do with Iraq. Rising gold is symptomatic of a creeping loss of confidence in a financial system that is entering into the end game of the gigantic ponzi scheme that it is. Using money created out of thin air, the banks are acquiring as many assets as possible before the next banker beats them to it. Allowing banks to get into the commodity and equity markets and then loading them up with trillions in reserve money was like giving the candy store keys to children with the expectation that they will behave responsibly.

     

    Gold's long term chart, on a monthly basis, is looking quite positive. As a contrarian, I am encouraged that a number of former die hard bullish authors and commentators, who rode gold down as it collapsed in 2013, are now calling for 'one more' wave down to $1000 level (Ellliot Wave deduction). That may be, but I would much rather be long, than short, at this point.
    19 Jun, 08:59 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    Hi eagle, how does your interpretation of this "loss of confidence in a financial system" account for the stock market breaking to new highs and the VIX at a 6 year low? Just curious.
    19 Jun, 09:16 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    I think what he means is that _he_ has lost confidence in the global financial system.
    19 Jun, 10:40 PM Reply Like
  • Mark Humphrey
    , contributor
    Comments (589) | Send Message
     
    Market psychology is changing. Worries about inflation in years to come are becoming more pronounced, partly because consumer prices are starting to get heated the last few months. Gold has been beaten down and the miners have been almost everyone's most hated investment class. No wonder they're rallying.

     

    The fact the inflation psychology is changing shows in the bond market action today, as well. Yields were up a lot.

     

    We're getting near the shakeout in stocks. The market's headed for unpleasantness, because none of the ugly offshoots of the shift from inflation of financial asset prices to real goods prices has been discounted. The ugly offshoots include rising interest rates and weakening economic "activity" as margins narrow.
    19 Jun, 10:01 PM Reply Like
  • BullishonManagement
    , contributor
    Comments (144) | Send Message
     
    There is a shift happening.. Hedge funds are pumping and dumping equities
    19 Jun, 10:12 PM Reply Like
  • eagle1003
    , contributor
    Comments (1494) | Send Message
     
    Doug: The banks are now a major player in just about every market you can name. The correlation between the FEDS expanding balance sheet and the S&P is quite convincing. It would be naive to think that the trillions of 'printed' money is doing nothing while it sits as an entry into the reserves of the banks. In an environment where trust in the financial system is under duress, it is a logical course of action to secure assets with a fiat currency that is declining in value. That, I believe, is what the banks are doing. Make no mistake about it, as the world shuns the American dollar as being the favored currency of trade, it is going to take a whole lot more dollars to buy anything of value.

     

    There just isn't enough gold to go around for everyone and any attempt to acquire massive amounts of gold would become a bidding war very quickly. (that said, gold should go up as it will be the choice of the masses) An alternative for retaining wealth is to own and possibly, control, the world's largest corporations. I really don't think the banks are terribly concerned about how much they are paying for a stock, given that there has been a steady supply of free money from the world's central banks. It should therefore be no surprise that the markets are at record highs without the support of a healthy economy.

     

    The VIX can remain at very low levels for extended periods, as it did during 2005-06. Yes, it does give the media something simple for it's readers to focus on. Other than that, it's usefulness as an indicator is questionable. Saying that the VIX is low and therefore the market is due for a correction is much the same flawed logic as concluding that the market is due for a correction just because it has made a new all time record. Of course, it doesn't work that way.
    19 Jun, 10:39 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    Eagle, the Fed and Congress have put $9 trillion to work in stabilizing the economy and even more with QE yet the dollar is still above 80 on the index. How is that possible? How is it declining in value when it has been in an uptrend since 2011? Why wouldn't such a currency as strong as this, despite all of the shenanigans with the Fed still be viewed as the currency of choice? What currency would possibly replace it? Why would the "world shun the American dollar?"

     

    You can ignore the VIX if you want to, but the stock market isn't. Richard Russell says follow the price action. A dip will come soon possibly, but higher highs are also on the table.

     

    In gold that price action is currently in a bounce. But there is nothing that is telling me that bounce will continue much past $1,400 if it even gets there. What will gold bulls say "if" gold were to drop again? Will they have an excuse as to why? Manipulation maybe?

     

    You can't throw out "there isn't enough gold to go around" just yet. And the choice of the masses is the dollar in the U.S., not gold. Only 1% own gold. My next book will tell people why they should own gold as insurance, and hopefully increase that percentage, but you won't see me screaming dollar crash to get people to buy. I'm actually quite the opposite; I'm dollar bullish AND gold bullish long term. Just look at treasuries for your clue. Strong as ever. No fear. Why is that?

     

    Granted that can change, but the mistake most make is they discount the power of the Fed. But again, throwing $9 trillion didn't hurt the dollar. What if the Fed printed another trillion? Kind of nice to have the printing press or the computer to make things happen.

     

    China's not ready to take over as the world currency. The Yen is toast. The Euro is finally feeling the effect of what I have written about as their banks have to adhere to new capital rules beginning next year and they still have some lousy derivatives on their books they have not unwound. That leaves the Euro out. That's 70% of the dollar that isn't doing too well.

     

    I have multiple reason to be bullish gold, but until you see the velocity of money pick up, the 10 year treasury over 3% and these other currencies begin to falter more (dollar bullish), gold will have some issues for the short term. Don't worry. It won't last. And my advice is that if you are convinced this is the bottom, as you are, then go all in with your allocation and be happy with a 70% return in a few years instead of an 80%, 90% or 100% return if gold has one more smack down coming. Either way, any investor with those returns will be happy.

     

    Thanks for the reply and open to critique of course. I'll be writing an article probably tomorrow using most of the above as my fodder but with more detail and reasoning. http://bit.ly/1uGdqh1
    20 Jun, 12:58 AM Reply Like
  • eagle1003
    , contributor
    Comments (1494) | Send Message
     
    Doug: The dollar index you refer to only tell us where the dollar stands against other major world currencies, all of which are declining in 'value' (purchasing power) due to worldwide inflation. Currently, gold is rising in terms of practically every single currency on the planet, more so in those currencies which are falling relative to others.

     

    The fact that the US dollar index has been sitting near the 80 mark for sometime does not mean that it has been retaining value versus a basket of commodities. In fact, the CRB index of commodities has shot up a whopping 9% since the beginning of the year. It is quite conceivable that gold could appreciate 20% or more without the dollar index budging from the 80 level.
    21 Jun, 11:28 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    Wroldwide inflation. Right. Here's the average inflation for countries with top-10 GDP, covering about 70% of the total GDP of all countries in the world. The weighted average inflation is 2.4% in the 2009-2013 period. Source is the World Bank. But what do they know?

     

    Country GDP Inflation
    USA $17.5 1.5%
    China $10.0 2.6%
    Japan $4.8 0.4%
    Germany $3.9 1.5%
    France $2.9 0.9%
    UK $2.8 2.6%
    Brazil $2.2 6.2%
    Italy $2.2 1.2%
    Russia $2.1 6.8%
    India $2.0 10.9%
    Top-10 $50.4 2.4%
    21 Jun, 12:53 PM Reply Like
  • eagle1003
    , contributor
    Comments (1494) | Send Message
     
    Macro: Welcome back! Sorry, but your data is already obsolete and to a gold trader, of little relevance . How about if we look at some data that is a little more recent, up to May of 2014?

     

    The three largest economies of the world are that of the US, China and Japan. The combined GDP of just those three is almost double that of the next seven largest. Two of the top three, the US and Japan, have seen their CPI rates jump significantly during the past 12 months (vs 2013). The US went from 1.14%(2013) to 2.3%. Japan went from 1.5% (2013) to 3.41% and China's rate is up slightly to 2.5%. These numbers are not just "noise". It is laughable how the government (and media) can perpetrate a con job on the public with talk of deflation when exactly the opposite is occurring!
    Three other countries that are in the top 10, Russia, India and Brazil have unacceptably high rates (2014) of 7.58%, 7.08% and 6.10%, respectively. Deflation? Not bloody likely!

     

    Let's not pretend that inflation is remaining subdued. Despite the government's best attempts to mask the true extent of inflation, by way of continually changing a calculation methodology that purposely mitigates actual price increases (hedonics), the numbers are still bad enough to paint a not so rosy picture. Is it not obvious that inflation is moving up and doing so rather quickly, every time we buy the necessities of life like food, gas, insurance, health care, tuition, haircuts, paper goods, services... did I miss anything?

     

    I suspect the smart money saw what was coming some months ago, and that may explain why gold , after bottoming nearly a year ago, has since been moving up in stealth fashion with series of higher lows. The most recent surge is likely not just not a 'bounce' as some have suggested, but rather, a taste of what is to come: higher gold and silver prices.
    21 Jun, 09:53 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    Eagle, People who do time series analysis are taught the "golden" maxim. One month does not a trend make. The reality may be that worldwide inflation ticked up above the 2.4% in recent months. But that's not a trend. And that's happening in the middle of extraordinary monetary supply growth. Which means the fundamental pressure on the economy is deflationary and not inflationary. I work with several large corporations, and no one has any pricing power. That is not indicative of any inflationary pressure whatsoever.

     

    But look, it's your money. If you want to put it in gold, that's your choice. I would rather put it in XIV/SVXY and double my money YoY.
    21 Jun, 10:17 PM Reply Like
  • Rock228
    , contributor
    Comments (574) | Send Message
     
    MI and Eagle - Why can't you both be right? Inflation is high (Eagle is right) but it isn't manifesting itself in high base metal prices, instead it is showing up in stocks, bonds, etc. (MI is right - buy stocks). Inflation is the expansion of the money supply - since the advent of Central banking when has the money supply shrunk over a long period of time? So there is no deflation. Pricing power has many factors, not just core inflation or base prices. Companies are being stretched because productivity peaked in Q3/Q4 last year and net margins are at historical highs. Factor in the lack of skilled labor for the new high ends jobs - companies are starting to pay up for workers, they have already outsourced as much as they can to cheap labor countries, etc. Now throw in even a small amount of input cost rises with our anemic 1.8-2.4% GDP growth year after year. There is your lack of pricing power and inflation increase.

     

    Companies products prices are always in a "deflationary" position, that is how competition and markets work or we would still have $1,000 bag phones. Sell more products at lower prices and if you are good lower costs to produce. Lack of pricing power can also simply come from massive competition. There will always be winners and losers. If your companies don't adapt they will fail but they can't blame it on pricing power because someone else will succeed, how did they do it? Didn't they feel the same constraints of pricing power?
    22 Jun, 09:28 AM Reply Like
  • Rock228
    , contributor
    Comments (574) | Send Message
     
    BTW - Welcome back MI! I look forward to your article on your new Volatility strategy. It got a little boring on here without you around to set everyone straight :)
    22 Jun, 09:31 AM Reply Like
  • eagle1003
    , contributor
    Comments (1494) | Send Message
     
    Macro: The 2.3% rate for the US is a past 12 months number, not a one month extrapolated calculation. It may not be a trend, as you have suggested, but I believe that the behavior of the PM's is saying otherwise.
    BTW, the XIV/SVXY strategy is excellent. (XIV is an ETN and therefore less desirable than SVXY) I have been waiting for a significant jump in volatility and a draw down before buying in which, in hindsight, was a not a good idea as SVXY has marched upwards.
    22 Jun, 11:34 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    Rock, I disagree that inflation equals expansion of money supply. The velocity of money is just as important. Money velocity sucks now as people have been cutting down on debt for a while (except student loans).

     

    If you take monthly inflation data for the past say 3-4 years and then draw a trendline, you will see that the line is downward sloping.

     

    I am trying to find time to write the article. But in case I don't get there. Here's the strategy in a nutshell.

     

    Define V = VIX, F1 = first month vix future, and F2 = 2nd month vix future.

     

    Define R = (F1/V - 1 + F2/F1 -1)

     

    Average R over the past 10 years is around 8%.

     

    Invest in SVXY if current R > -8%, else invest in UVXY.

     

    This strategy returns average annual return of 85% over the past 10 years using simulated SVXY and UVXY.

     

    SVXY buy and hold returns 35% in the same time period.
    22 Jun, 11:45 AM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    "The 2.3% rate for the US is a past 12 months number, not a one month extrapolated calculation. It may not be a trend, as you have suggested, but I believe that the behavior of the PM's is saying otherwise. "

     

    Eagle, that's like saying inflation is high because PMs are going up, and PMs are going up because inflation is high. That's a tautology.
    22 Jun, 11:47 AM Reply Like
  • rodh7858
    , contributor
    Comments (138) | Send Message
     
    Just out of curiosity, you said "invest in SVXY if current R > -8%"(as in negative 8%). Is that correct or a typo? Should it just say "invest in SVXY if current R > 8%" ?
    23 Jun, 07:11 PM Reply Like
  • Macro Investor
    , contributor
    Comments (8630) | Send Message
     
    No, greater than -8%. Typically SVYX will go up by R/2 to the next expiration. I am willing to take a downside risk of up to -4%.
    23 Jun, 08:41 PM Reply Like
  • floortrader
    , contributor
    Comments (19) | Send Message
     
    I started at the Chicago Board of Trade in 1969 . I was the office manager of Peavey Co. the 5th. largest brokerage firm in the Futures Markets at that time .It became E.F.MAN &Co. I purchased a seat in 1974 and started to trade for myself .I started my own brokerage firm and cleared floor traders trades and had over 30 brokers handling customer business in Chicago ,the firm was sold to Collins Rosenthal . I then went into the paving business and sold that and now retired .
    21 Jun, 03:57 PM Reply Like
  • Doug Eberhardt
    , contributor
    Comments (2727) | Send Message
     
    floortrader, my father, who turns 80 this year, was a commodities broker with ADM Investors. Nice to see a CBOT guy from back in the day! He still likes to dabble!
    22 Jun, 02:00 AM Reply Like
  • floortrader
    , contributor
    Comments (19) | Send Message
     
    I still say we are in a sideways market and will bounce around in a trading range of 19.00 and 22.50 only three closes above 22.50 will signal a change of trend .We been here for months
    21 Jun, 09:02 PM Reply Like
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