Wednesday, April 18, 2012

Stay In The Trade

Men who can both be right and sit tight are uncommon.  I found it one of the hardest things to learn.  But it is only after a stock operator has firmly grasped this that he can make big money.  -  Jesse Livermore
I don't have time produce some of my own work, so I wanted to highlight Eric King's interview with Rick Rule at King World News:

You know, Eric, for investors who are frustrated, past is probably prologue. They need to have a sense of what happened in the 1970s market. If you go back to that bull market, you will remember there were numerous occasions, probably 25 or 30 in that decade, where the precious metals prices fell 10% or 15%. The equities associated with gold and silver fell even further.

The grandaddy of all of those declines was in 1975. Now, what’s instructive to know is that nothing changed with regards to the fundamentals for gold and silver. What changed was the official sector’s interest rates and people’s perceptions of the value of gold and silver.

If you were in the market and had the cash and the courage to stay in the market from peak to trough, that is from the bottom of 1975 decline, five years later you were up eight-fold. It’s tragic that some people had the idea behind the bull market, but didn’t have the cash or the courage to stay the trade. Can you imagine getting shaken out of a trade where you were right, and then missing five years of an eight-fold advance?

So, for people who are frustrated with the volatility in this market, especially the downside volatility, simply remember that what is changing are people’s attitudes, not the fundamentals. The market doesn’t care if you are frustrated. The market doesn’t care about your time frame.

The market doesn’t care about anything. The market is merely a facility for buying and selling assets. If you have the courage of your convictions, if you believe, as an example, that gold is a better store of wealth than fiat currencies, then stay the trade.

That's most of the interview and here's the rest: LINK

Not much to add to that other than that I have found in that in twenty years of trading, which encompassed being an institutional junk bond trader/market maker, a trader of my own capital and the manager/trader of a small hedge fund, the worst time to bail out of a trade that I know is right is when I feel the most uncomfortable holding it.  Right now the sentiment in the metals and mining sector is about as putrid as I've observed it for close to eleven years of doing this sector exclusively. 

I can say with complete conviction and confidence that the best gains in this sector are still ahead of us. 


  1. Dave; you are so correct. This is made more difficult because "we" were never mainstream on this anyway.

    Bottom line: if you think most if not all the econ problems will be solved soon without continued piling up of debts, if you believe the banking crisis (with the mark to bullshit accounting)has been fixed, if you think the US can attract manufacturing and services back to our shores and still be competitive, if you believe there is no supply demand issues with PM,

    then there is no need to own PM--unless there is the outside chance your beliefs are wrong and we have problems beyond belief.

    Checking the mental status: I think gold and silver are still up on the year--silver 12%? Gold up ~ 4.7%, SPX 10.3%. HUI admittedly has been tossed around like an orphan.

  2. michael schumacherWednesday, 18 April, 2012

    I don't disagree with anything you've it in fact. However at no time in our history have we had the MASSIVE intervention to control what TPTB's good hand (fiat and paper) and bad hand (any hard assets)are perceived as. They have control of virtually everything now.....the capper being JPM's controlled yield in the credit markets. That is control in it's finest form. Leads me to believe that if anything should ever "happen" the Fed will just come in and print massively and/or declare force majeure and once again the consequences of this roller-coaster will thus only be felt by people like you and I. The markets will only correct unless the very people who control them are positioned for it ALA 2008. That happens when they want something.....

    1. Actually MS, if you use the yardstick of history, market intervention/manipulation fails badly over long periods of time. This one will fail very badly. My only fear is that it will start WW3 when someone like the Chinese calls the Fed on proving up the gold supposedly safekept on behalf of the Treasury/People Of The United States.

    2. michael schumacherWednesday, 18 April, 2012

      Agree it always fails but my point is that we've never seen it on this scale and yet if you told me 4 years ago what we are looking at now (too numerous to even begin to list) would you have the markets at these levels? I certainly wouldn't. Goes back to my comment of about a week ago stating that it already failed...they just don't allow the actual consequences of it. That is where it really is different this time around.....and not in the pump and spin way that phrase is tossed around. The history of capitalism has always had winners and's the very equation that allowed our country to become what it has. We don't have that any longer simply because the consequences are not allowed at the top level.

    3. Size and scale just mean that the counter-effect snap-back will be equally as massive. That's why I fear war as the counter-effect more than I relish in the dreams of $30k gold/$2k silver and GG at $18,000/share.

      Right now, the massive money printing and intervention is serving its purpose. Eventually the law of diminishing marginal returns will invade the money being printed and it won't work. It already takes a lot more money/debt at the margin to create the intended effect. At some point the rest of the world will not accept dollars under any circumstances except threat of war. That threat worked against Iraq and Libya, so far Iran is saying "fuck you"

  3. Soon the AAPL cash flow will be ours. Patience. We have not even touched a "mania" phase (third phase) of this bull yet and with the "developments" (surprise surprise,) in Spain and Italy maybe we can renew phase 2 of the bull shortly. Phase 3 will be great.

    1. Good call there on AAPL cash flow!

    2. Dave, As usual,lots of wisdom in your "posting" today.
      What is "AAPL cash flow" ?

      Bill S.

    3. He's referring to all the institutional/hedge fund money that is being throw into AAPL stock. He's just referencing the fact that the final "blow off" stage - like what happened in internet stocks and homes recently - is yet to come.

  4. how much treasury/USD does china hold--somewhere between 1 and 2 trillion?

    China could write it off what with the nat resources holdings it is building and sit an laugh as we self destruct.

  5. Off topic Dave

    Big Government on Steroids: Senate Bill Calls for Black Box Recorders on All New Cars

  6. @Shill:

    Morons fiddling while Rome burns...

  7. IMF Chief Jackass Calls for Taxpayer-Funded Bank Recapitalisations to Avoid Painful Deleveraging; Mish Says Fire the Parasites and Disband the IMF

    Who exactly do these jackasses represent?

    The answer is obvious. The IMF is not setup to help countries or taxpayers, it was created to rob countries, rob taxpayers, and generally wreak havoc in times of trouble just so the wealthy class can be bailed out again, and again, and again, whenever the banks and bondholders get in trouble by taking on excessive risk.

  8. Greg said: Re: Senate Bill 1813

    Boy, someone must get paid by the pages they write. I skimmed the bill and just the table of contents would put you to sleep...probably their intent. There appear to be two sections of interest: Section 32301 pertains to commerical vehicles in which the "Electronic On-Board Recording Device" will track GPS location and hours driven/day. The stated purpose is to prevent accidents from too many hours on the road for commercial vehicles. I guess I can see the intended purpose, but it certainly implies Big Brother is watching. The second section of interest: Section 32710 pertains to private (motorcoach) vehicles and it is much less vague on the intented usage...hmmmm

  9. Jim Willie: “In 2 Year’s Time, the Gold Cartel WILL HAVE NO PHYSICAL GOLD”

    Starting out with the global markets overall, Jim indicated we are currently in a “false calm.” He said, “We have not gotten past the aftermath of MF Global, the distrust of COMEX is enormous, a lot of companies are just not permitted to use COMEX anymore…We’ve had a few naked short raids of the gold market, and I think they go hand in hand with some of the gigantic dollar swap exercises that have—I believe—dumped at least $2 trillion dollars into the system in the last several weeks alone. We’re on the verge of Europe fracturing Tekoa. I think it’s happening right in front of our eyes.” Here’s the interview:

  10. We Are Witnessing The Largest Financial Bubble In History

    Mankind has a long history of participating in bubbles. In past times, people exchanged fortunes for simple tulip bulbs. In another, they exchanged cash for stock in Louisiana swampland. In our own time, from the early ‘70s until the late 2000’s, people held the belief that real estate was a one way asset and bought on extreme leverage.

    The biggest bubble in human history is in sovereign debt, the obligations of governments around the world. The classic signs of a bubble are present. Despite the fact that virtually all governments are insolvent (the Reality), there exists an almost universal belief that sovereign debt is safe (the Perception). There is a massive gap between reality and perception.

    What we hear is that gold, silver and oil are in bubble mania. Nothing could be further from the truth. The perception is so far below the reality that we effectively have a negative bubble. Buyers of these three assets are speculating fools according to the mainstream media. The only thing that is foolish is not holding onto positions and not adding as nominal prices periodically come down.

  11. In an audio interview with Metallwoche, Egon von Greyerz talks about the
    options of either a deflationary implosion of the financial system or unlimited
    money printing leading to hyperinflation and the importance of gold for both
    scenarios. Egon von Greyerz on Metallwoche: Keep your Gold outside the banking

    You may view the full post at

  12. The Check Is In The Mail And Other Lies

    BAC and MS had “great” earnings. MS no longer includes DVA in its “continuing operations” headline number. It was a loss of $2 billion this quarter. With 2 billion shares outstanding, that would have wiped out the gain. What bothers me, is that in Q3, when it was a gain of $3 billion, it was part of continuing ops. Really? It is that easy to change what is part of ongoing business and what isn’t. During this quarter they allegedly made $600 million from unwinding a trade with Italy. They were taking credit reserves against this trade, and were able to release it. Fair, but it should be categorized the same as DVA. This DVA categorization shift seems incredibly misleading and is the exact sort of thing I thought Sarbanes-Oxley was supposed to protect investors from. The quarter was okay, but this shift strikes me as very untrustworthy. On BAC, there is a $3.3 billion adjustment to Fair Value Obligations. Fair enough, but what are the obligations, and what is the adjustment? It seems that something that is size of the quarter’s earnings should be disclosed more fully. I would like to know what it is, and it has to be hedge that tightened, because nothing much went materially wider this quarter. On other hand, the new issue bond side must have killed it, great quarter for bond issuance, is that sustainable?

  13. 3.1 M Ounces of Silver Withdrawn from Brink’s Tuesday, JPM Reports Paper Deposit as ‘Silver’

    Brink’s reported a massive 3.1 million ounce silver withdrawal from the customer inventory Tuesday, and our friends at JPMorgan reported a deposit of 720,000 ounces.
    The farce continues:
    JP Morgan again made a mockery of the COMEX physical inventory update by reporting Tuesday’s deposit of exactly 720,000.000 ounces. The statistical likelihood of 720 one-thousand ounce bars adding up to exactly 720k ounces…to 3 decimal places is roughly the same as the likelihood of the sun rising in the Western sky on 4/19.
    This means the ‘deposit’ reported by JP Morgan is merely a paper shuffling of ‘silver’ inventory around as the cartel is now desperate to keep the charade going a little longer.