Sunday, August 17, 2008

No Manipulation

ALL paper currencies go to ZERO, there are no exceptions.

The RACE to the bottom has twists and turns, and at the moment it appears that the other major currencies are gaining on the US$ in that race.  

So if all currencies are going down in purchasing power, why are Gold and Silver going down with them?  Markets are not perfect discounting mechanisms in the short term.  It would appear that far too many people had leveraged bets on an immanent US$ collapse at the wrong time.  They are now exiting the trade en masse, and it is likely to get worse before it gets better.  Markets tend to overshoot, and opportunities will present themselves at some point.

Commodities are, for the most part, not buy and hold instruments.  This may not include bullion but it certainly would mean ALL futures contracts.  Every time you enter into a futures contract, there is someone on the other side of that trade.  Do you really think that you are going to be right, and the other guy wrong, every time you trade? Really?

Commodities are a Zero Sum Game.  For every winner there is an equal and opposite loser.  In order for the pros to make a living at this, they need a constant supply of new meat to beat up and send home a little lighter in the pocket.   We, on the other hand, want to avoid that at all costs.

When a trade is going against you, exit the trade!  Don't hold losers and hope they come back.  If it is going against you, you were wrong in your analysis, and it is time to stop the pain.  If you cannot do this very simple thing - admit you are not always going to be right - then don't enter into any trades.  You are not a trader.  You are the new meat about to go home a little lighter in the pocket.  You know those folks that are always right, have never been wrong, and would blow up everything in their lives in order to "win" an argument or debate?  You won't find a lot of them working as a professional trader.

Good luck!

Mentatt (at) yahoo (dot) com

8 comments:

Don said...

Gold and silver are also forms of currency.

What exactly can you do with a pile of either?

Anonymous said...

(From the non-regulating bureaucrat):

I waited a long time to invest in the (Jimmy) Rogers commodity fund (RICI) when it became available to new meat like me. And while it is still trapped in a related bankruptcy case, and is very dependent on Jim Roger's belief that China is going to need massive amounts of everything (commodities) for quite a while, and that we are not even halfway thru a commodities "supercycle," I have a big problem being in a "day trader" mentality with the commodities. If they are the building blocks for everything we create, even with energy scarcity, what is wrong with holding contracts forever, continually fliping them as they go up and up? Up until recently, the Rogers Fund was going gangbusters.

Greg T. Jeffers said...

A good method for average joe is to let a pro manage your commodities in a managed futures fund.

I was speaking about the ass kicking that has befallen those long gold and silver. I took my hits that were not "spreads", and I am getting email from folks asking me if they should sell now...

Firstly, why ask me? I have not been right on this one. Secondly, i sold me after the first black eye. I did not stick around to get stomped.

The bottom ain't in yet, I don't think. Further, I am waiting for Oil to firm up, and I have something to say on that so tune in.

The point I was trying to make is that some folks SHOULD NOT trade, commodities can be bad for your health. If you are a trader, you cannot be a "believer". If the trade goes wrong, you gotta be gone. You can ALWAYS buy it back, and I will bet for a better price.

I still think Silver and Gold go much, much higher. But right now, they nobody agrees with me. This is no time for me to argue. My time will come.

Anonymous said...

And yet you gotta believe in certain things. I believe that oil will always surprise to the upside (and perhaps downside) :-)
In any case I have some duration left. Unless it goes down to $110 I will not pull the trigger on selling my option. Meantime, I think you are right and it is important to stay humble and not be married to your position. Psychologically you are very correct on being able to admit that you are wrong and then change your strategy. Next time I will definitely set my stops at 10% loss and execute them no matter what.

Best,
Chuck H.

Greg T. Jeffers said...

See my new post

Don said...

Currency has value as long as people believe it has value. Same with gold and silver. Belief in gold and silver goes way back and will outlast that of the belief in dollars.

However, Native Americans thought white men insane when they dug in the ground and panned streams in search of shiny bits of metal.

I tend to agree with the indians.

While I don't trade commodities, I do produce them. At the moment I have two grain silos full of corn and I am waiting for a better price before I sell them.

I have one hell of a lot more invested in that corn than someone that buys and sell the stuff on a computer.

Furthermore, I will not sell this corn at today's price unless absolutely forced to, and if I am forced to, I will probably not be planting corn again next year.

Despite what you may think, input costs make today's prices a break even prospect in my neck of the woods, and I tire of working for free.

Anonymous said...

Hey Don,

You are not the only one who feels that way! Silver producers are holding back too, waiting for better prices. As Catherine Austin Fitts said at her blog: "Precious [metals] dealers report that they have all buyers and no sellers. Wholesalers will not sell at these prices. That means that there is no market at these prices — a symptom of a very forceful manipulation."

Anonymous said...

No Manipulation?!

Have you never heard of the PPT?
(Plunge Protection Team)

The FED is giving away 17 Billion dollars each and every day of the week.

No Manipulation indeed ;-)