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ilc

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  • Short Sellers Now Screaming About a Buy Side Silver Conspiracy [View article]
    Agreed, but don't try too hard to catch the falling knife. I think we are at the 100dma now, but the 200dma is something like $28, and the breakout point was down at $21. Silver could continue lower. I'd scale any new buys at this point (taking partial positions only). If it hits the 20s again, then more.
    May 5 06:05 PM | Likes Like |Link to Comment
  • What's Causing Silver's Slide? [View article]
    "Like the housing market, this could just be a speculative bubble that has burst." - Really?

    Are you aware that silver is still up 13% YTD, and up 100% since Jan 2010? Just to erase those gains (never mind collapsing below them), silver must still revert to $30 or $17, respectively. There is a massive support line (formerly a massive resistance line) for silver around $20; silver is unlikely to break below it ever again. Same for gold and the $1000 line.

    Silver is notoriously volatile. Since 2001, its climb has had several 'parabolic' or near-parabolic spikes, followed by 25-35% corrections. And yet, here we are, from $4 to well over $20.

    When the Fed changes policy so that real interest rates rise: then and only then, the precious metals bull market will be over. In the meantime, strong hands see these corrections coming. They stay long with their long-term metal holdings, while scaling into shorts with a bit of short-term capital if the metals do get a little bubbly. I am not going to sell any physical silver, until real interest rates rise; but I did a small short on silver this past week at $45, it was nice.
    May 5 05:38 PM | 6 Likes Like |Link to Comment
  • Osama Bin Deflation: The Money-Credit Paradox [View article]
    Deflation in real terms (as borrowing, production growth, and entrepreneurship / jobs contract in an economy) can coexist with inflation in nominal terms (as the central bank's currency devaluation / excess liquidity boosts the prices of assets and of commodities). That is what has been going on. Mathematically, it implies declining living standards, negative real interest rates, and a general (if volatile) uptrend in precious metal prices.

    The U.S. is in a new Great Depression. The difference from the 1930s is that the dollar back then was defined as a fixed quantity of gold (first a hair under 1/20 oz, later devalued by Roosevelt to 1/35 oz.) so that new dollars could not quite so easily be created by the central bank, and deflation showed up in nominal terms as well as real terms; whereas today, dollars can be created freely and so the gold market shows the dollar's declining value in real time (now less than 1/1500th oz. of gold per dollar) which masks the deflation-in-real-terms with some degree of counterbalancing nominal inflation.
    May 3 05:30 PM | 3 Likes Like |Link to Comment
  • Silver Fever Is About to Break [View article]
    Now Kitco shows silver back up at 47+, erasing the majority of its loss. No big point here, just that silver can be full of surprises!

    Silver's plunge on the Monday opening in Asia appears to have been exaggerated by thin volume, under market holidays in some countries. The Osama news appears to have begun a dollar rally except that it quickly stalled.
    May 2 11:29 AM | 2 Likes Like |Link to Comment
  • Silver Fever Is About to Break [View article]
    Interesting comments, thanks. I don't understand something. If silver is $20-30 over its long-term mean now, and was driven up mainly by large-bank short covering, and you know it must come down, then why do you see it being driven up to $90? More short-covering, but do the large banks have that many shorts *still* to cover?

    Extra questions if you have time:
    - If one doesn't begin scaling into a bear position here at $50, then where? (You would understand that nothing is guaranteed, therefore, one must scale into the short gradually as silver gets more crazy, lest one miss the ride down completely.)
    - If Bernanke goes on to QE3...13, further shrinking the dollar (and part of the bull case is that he will have to), then do your numbers change?
    Apr 29 02:21 PM | 2 Likes Like |Link to Comment
  • Book Review: 'Endgame: the End of the Debt Supercycle and How it Changes Everything' [View article]
    Your observations on Say's Law, and aggregate demand in general, are a mix of the trivially obvious and the nonsensical, viz.:

    "demand certainly creates the incentives to produce more supply" - Well, yeah. When more people want a thing, its price is bid up in real terms, which acts as a signal to produce more of it. Meanwhile, other things' prices are bid up less which acts as a signal to produce less of those. Nothing about that overturns Say's Law. Classical economists called it "supply and demand".

    "Automation and outsourcing can compensate for lack of human labor; they cannot, however, compensate for a lack of consumers." - Again true in an entirely trivial sense: the economy is there to serve human needs; no humans means no economy. But, so what? The economy still revolves around production and trade (with humans obviously needed to do the producing and trading).

    "The economics of the Industrial Revolution were made possible by the promise of ever-increasing population growth." - That gets it exactly backward: ever-increasing population growth was made possible by the economics of the Industrial Revolution. History shows that without industrial-style techniques for the production and distribution of food, energy and other materials, and the machines involved in same, a large population is not possible. John Hicks should better have said, “Perhaps the whole population growth of the last two hundred years has been nothing else but a vast secular boom, largely induced by the Industrial Revolution.”

    "Mauldin writes that Japan has been unable to grow its economy in over 17 years because government debt has crowded out productivity-enhancing private investment" - And Mauldin is right.

    "In the absence of aggregate demand—which Japan’s aging demographics have sapped—new production would simply mean overcapacity and even worse deflation." - Nonsense. The demands of the elderly are *even greater* than the demands of adults in their prime, as anyone who works in medicine can attest. They're simply demands for different things. Whether new production means overcapacity, depends only on (1) what is being produced and (2) for what price relative to other goods (sale price). If Japan's economy is directed (say, by its government) to producing goods which people don't actually want more of, then of course it's overcapacity; businesses should retool to produce more of what people do want. People always, always want more of something - and, as in the classical view, production (of things that other people will actually want) is what creates purchasing power (or "effective demand"). Free markets send the price signals to drive retooling of production, and private investment responds and accomplishes the retooling. Again, classical economists knew about it and called it "supply and demand". Government spending acts as an artery-clogging sedative to slow down adjustment, in Japan and elsewhere. Again, Mauldin is right.
    Apr 29 12:37 PM | Likes Like |Link to Comment
  • Silver Fever Is About to Break [View article]
    Incorrect: the article mentions the dollar's decline as a factor in rising metal prices - Twice.
    Apr 28 05:14 PM | 13 Likes Like |Link to Comment
  • Parabolic Silver: No Profit Taking Yet [View article]
    Hmm... No noises from Bernanke today about tightening, and the market moving up now to retest $49-50.
    Apr 27 09:56 PM | 1 Like Like |Link to Comment
  • Short Sellers Now Screaming About a Buy Side Silver Conspiracy [View article]
    Mr. Goodman, if I have understood your article correctly... your argument for silver's powerful secular bull is more long-run, and you think that silver could easily plunge over the next several days or weeks as the manipulators scrub out the recent speculative froth. Is that right? You panned the Minyanville article but it still sounds like an attentive trader could take a *short-term* position in ZSL to profit from the plunge, getting out perhaps at silver's 50dma (now $37) or 200dma (now $27).
    Apr 26 12:11 PM | 2 Likes Like |Link to Comment
  • Parabolic Silver: No Profit Taking Yet [View article]
    $1000 was once major resistance for gold, and gold needed a few tries (with increasingly smaller pullbacks in between) before it could break through. Right now I expect $50 to exert a similar effect on silver. That means I expect silver to need a couple of tries to get through the $50 level, the resistance around that number being reinforced by the major 1980 top.

    Especially if Bernanke makes noises on Wed. about Fed tightening (and I know, they would only be noises - but a lot of people would believe him, at least initially), it would make perfect sense for silver to begin a retreat this week from the $46-50 area, to its 50dma around $37 or its 200dma around $28, or perhaps even to its last major ceiling (now to act as major support) around $20-21.

    On the other hand, lots of people thinking just like that, and so the "short silver" trade may be getting crowded, necessitating more punishment of the shorts, and that perhaps via a high consolidation. Interesting times we live in!

    I am a long-term metals bull, just trying to be realistic about silver's volatility esp. given the current parabolic spike. I feel pretty sure that we won't ever again see silver below $20, just as we won't ever again see gold below $1000.
    Apr 25 05:16 PM | 4 Likes Like |Link to Comment
  • Chinese Demand: Which Is a Better Short, Gold or the Miners? [View article]
    Yikes, so GLD Dec 130 puts have gone from $10.00 last December 10, to $2.60 now!

    I do think there is a chance that gold could get down to the $1250 range in July - its "summer doldrums" - if the Fed suspends QE and makes the right noises about tightening, now (or soon). But it would only be a temporary dip. Fed tightening would only be tactical, as it would kill the asset markets and elicit howls of protest, leading to QE3 and beyond. Gold will never again break below $1000, and will break over $2000 sometime in the next five years.

    Today at $1498, it is a bit pricy - but I can say that because I already own. If I owned none, I'd be getting in at these prices gradually (partial positions).
    Apr 20 12:11 AM | 1 Like Like |Link to Comment
  • Commodity Prices and Inflation: How Strong Is the Link? [View article]
    I agree, the Fed's point is lame. Food and energy are commodities, key ones! The Fed is saying that if you simply define inflation so that it excludes the price increases in key commodities then presto, no inflation, even though you are having big increases in key commodities. I know B.S. when I smell it.
    Apr 15 01:35 AM | 1 Like Like |Link to Comment
  • Position for a Collapse in the Japanese Yen [View article]
    Daily Trading, I don't understand something. If you think the yen is going down substantially, why have your articles in the past couple weeks talked about going heavily long on Japanese equities? Wouldn't the time to go long be *after* the currency has broken down? Perhaps even after it has bottomed.
    Apr 11 08:53 PM | Likes Like |Link to Comment
  • The Impending Collapse of the Gold Bubble [View article]
    This article is filled with 'wishful' leaps in thinking. The author apparently wishes that gold were in the very advanced stages of a bubble. Gold *is* in a bubble process, but it's still earlier than the author thinks.

    Let me step through the holes in a few of the author's "indicators".

    The TV indicator: I never heard of Gold Rush: Alaska until I read this article. How can the author call it a "popular" show? People are barely talking about it. At the peaking of the housing bubble, people were talking about the house-flipping shows a lot; even my elderly parents were pushing them. The TV indicator may be real but no, for gold we are only at the beginning of it.

    The Time cover indicator: A guy in the 1970s did a study, showing its validity. But in this cycle, gold hasn't been on Time's cover. The author offers, with NO study to back it, his personal hope that gold's getting a Wall Street Journal headline is an equivalent indicator. Lame.

    Gold's media attention has definitely increased, in the last year. We are perhaps in the "Media Attention" phase of the bubble process. But to say that we have reached the "Enthusiasm" phase (apart from the enthusiasm of longtime gold bugs who are still often mocked) is a stretch.

    Which brings me to the author's "We Buy Gold" indicator, the prevalence of ads urging people to sell their gold. That is not a bubble indicator at all. It is the *opposite* of a bubble indicator. The bubble indicator would be "We Sell Gold" ads, i.e., ads urging people to buy. Right now, some very smart money is still getting people to part with their gold. It will sell the gold back to people later, at much higher prices. When it happens, THAT will be the bubble indicator.

    The "Gold vending machines" indicator - OK, that is the beginning of the efforts to sell gold back to the public, to be sure. But not, by itself, the end. After all, the machines are still pretty rare.

    I could go on, but I don't want to spend all night on this. Suffice to say that the author himself fails to understand the bull case for gold - while announcing that he does somehow understand it. He wrote this:

    "I completely understand the bullish case for gold: It’s a "tangible" store of value, it can act as a hedge for currency risk, demand is expected to continue to grow, etc."

    That dismissive recitation leaves out the core of the pro-gold case, the factor that explains and drives the rest, which is simply this: Gold is a hedge against negative real interest rates. Right now, we have a regime of negative real interest rates. That is what drives gold forward. The bubble will end when real interest rates rise.

    Once more, I have carefully read an anti-gold article by ChartProphet, striving to take it seriously as a challenge to my thinking, only to find that his arguments are still full of holes and leaps. I take that situation as a pro-gold indicator. ChartProphet will be eventually be right about gold being an advanced bubble and having to go down. "But not today."
    Apr 1 03:58 AM | 6 Likes Like |Link to Comment
  • Q4 GDP Stats Suggest Market Not Overpriced Nor Overinflated [View article]
    This article fails to see the big picture. In truth, because corporate profits are so high as a percentage of GDP, they are very likely to head down; especially in the coming year or two as commodity & producer price inflation accelerate. It would be irrational for the market to go any higher than it is now.
    Mar 27 12:34 PM | Likes Like |Link to Comment
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