Sunday, August 17, 2008
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.
Mentatt (at) yahoo (dot) com
Posted by The Short Story Man at 4:52 AM