csinvesting

Capitulation Part II

Posted on July 21, 2015 | 1 comment

An Epic Bear Market in miners

Mining securities are not the thing for widows and orphans or country clergymen, or unworldly people of any kind to own. But for a businessman, who must take risks in order to make money; who will buy nothing without careful, thorough investigation; and who will not risk more than he is able to lose, there is no other investment in the market today as tempting as mining stock.” – Charles H. Dow (1879)

There is NO REASON to own gold! (NOW, they tell us!)

No hope for gold holders

Global dollar stress might be causes gold price crashes.

The “price action” for gold is bad! The price of gold went down.

Why not be happy and say that the dollar buys you more gold because of this:

The holders of physical bullion are not selling, but futures traders are–see the red line rising which is the co-basis. If I hold gold in stock, but sell futures to lock in the price, then co-basis represents the difference between the bid price for spot and the offer price for futures. Leveraged futures traders are selling futures but bullion holders are not de-stocking (selling). The selling in gold futures has brought epic extremes in prices of miners relative to gold/silver. EPIC quantitative easing may be a factor.

Video: Sellers in action:SELL ‘EM!

Does Gold represent good “value?”

Only you can answer that question. Don’t confuse gold (money) as an investment. If you couldn’t find a margin of safety in the current stock market, you might own gold because you believe gold relative to dollars is safer, holds purchasing power better, more stable, etc.

See Value Investors Hate Gold

For those technical wizards out there, note that silver did not “confirm” the price decline in gold yesterday.

Just remember (thanks www.monetray-metals.com)

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Posted in Economics & Politics, Humor & Entertainment, YOU

Tagged Capitulation, Gold, miners, S&P 500

Capitulation Selling-A Real-Time Case Study

Posted on July 20, 2015 | 4 comments

The chart above shows an index of gold and silver miners relative to the S&P 500, breaking now to a new extreme. Will the world need to produce and find more minerals and metals or will the world just need health care and bio-tech?

The read line is the co-basis that is rising as the dollar rises relative to gold. This indicates rising demand for physical and more futures selling. Bullish.

So who is selling?

The Fed’s decision to restock the rate toolkit has got the gold market very nervous,” George Zivic, a New York-based portfolio manager at OppenheimerFunds Inc., which oversees $235 billion, said by phone. “We have already seen that gold did not perform as a safe-haven investment. There is not a single motivating reason to own gold.”

Who knows, perhaps money managers are funding their long equity positions with short gold positions.

“It looks like the end of an era for gold,” said Howie Lee, analyst at Phillip Securities in Singapore, adding that China had been grappling with oversupply after importing a record volume in 2013.

Money managers (a few of them) finally see gold as undervalued.

I am posting this so as to have a record of certain market events. I seek out where the most marginal or urgent seller is operating AFTER a long decline (four years).

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Posted in Investing Careers, Investor Psychology, Valuation Techniques, YOU

Tagged co-basis, Nasdaq, xau to gold

Reversion to the Mean/Mental Models; Money and Banking

Posted on July 20, 2015 | 1 comment

Bell curve

See Mental Models

Back to the extremes of the Internet Bubble years…………..and the extremes may become even more extreme!

Bank of England Money an Introduction (pdf) Part 1

Bank of England Modern Money Creation (pdf) Part 2

How QE Works by the Bank of England Part 3

Slanted but instructive.

he following quote from C. Edward Griffin tells the little known story how dollars are created.

The Mandrake Mechanism

The American dollar has no intrinsic value. It is a classic example of fiat money with no limit to the quantity that can be produced. Its primary value lies in the willingness of people to accept it and, to that end, legal tender laws require them to do so. It is true that our money is created out of nothing, but it is more accurate to say that it is based upon debt. In one sense, therefore, our money is created out of less than nothing. The entire money supply would vanish into bank vaults and computer chips if all debts are repaid. Under the present System, therefore, our leaders cannot allow a serious reduction in either the national or consumer debt. Charging interest on pretended loans is usury, and that has become institutionalized under the Federal Reserve System. The Mandrake Mechanism by which the Fed converts debt into money may seem complicated at first, but it is simple if one remembers that the process is not intended to be logical but to confuse and deceive. The end product of the Mechanism is artificial expansion of the money supply, which is the root cause of the hidden tax called inflation. The expansion then leads to contraction and, together, they produce the destructive boom-bust cycle that has plagued mankind throughout history wherever fiat money has existed.

http://www.activistpost.com/2011/08/g-edward-griffin-mandrake-mechanism-and.html

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Posted in Economics & Politics, Free Courses, Risk Management

Prize for Investing Students

Posted on July 16, 2015 | 4 comments

SANTANGEL’S INVESTOR FORUM

The Santangel’s Investor Forum invites eligible students to apply to receive a free ticket to attend the 2015 Forum, to be held in New York City on October 22, 2015.

A benefactor who wishes to remain anonymous has endowed a table at the upcoming conference to enable a select number of talented students to attend the annual invitation-only event.

All enrolled undergraduate and graduate students are eligible. Interested candidates should apply by emailing their resume and a current investment idea write-up to Steven Friedman (sfriedman@santangels.com). The idea can be for any type of security or asset class, but the write-up must be limited to 300 words. Preference will be given to unique and original ideas. Please submit ideas by September 15, 2015.

Please feel free to pass this along to anyone who may have an interest.

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Posted in Free Courses

Tagged Contest, Free, Santangels

The Secret to Good Returns

Posted on July 14, 2015 | Leave a comment

Reversion to the Mean and Using History as a Guide

Posted on July 10, 2015 | 3 comments

What’s going to happen is, very soon, we are going to run out of petroleum, and everything depends on petroleum. And there go the school buses. there go the fire engines. The food trucks will come to a halt. This is the end of the world. Kurt Vonnegut, Jr. in Rolling Stone (August 2006)

It is very difficult to predict energy markets. In thirty-five years in the industry, I have never seen a forecast of the future that has been right. Jim Rogers, CEO of Duke Energy “U.S. Boom Won’t Hurt Australian LNG, Says Duke” (The Australian, 26th February 2013)

Gold is headed to $700. When will gold crash again and natural-gas-natural-gas-natural-gas

People who purport to foresee, in other words, characteristically “see” the future exclusively through the lens of the present: if today it’s sunny and warm, then they’re upbeat and anticipate that tomorrow’s weather will be even more pleasant; but if it’s presently storming and cold, they are downcast and expect that the gloom will persist and worsen.

On May 6th, 2008, when the price of Brent crude was $125 per barrel and had doubled during the previous 12 months a Goldman Sachs analyst:

“I would suggest that the likelihood of that happening sooner has increased tremendously … sometime in summer,” Jeffrey Currie told an oil and gas conference in the Malaysian capital, referring to oil at $150 a barrel.

Goldman Sachs, the most active investment bank in energy markets and one of the first to point to triple-digit oil more than two years ago — a once unthinkable level — said last month oil could shoot up to $200 within the next two years as part of a “super spike.” Oil to $150 to $200 a barrel, May 2008

Quite the contrary: during 2009 it collapsed below $50–and within a few years it doubled.

Don’t take “expert” opinion seriously and the blunt truth is that neither you nor I nor anybody else can know the economic and financial future. Yet investors must ACT TODAY in light of their expectations–however misplaced–about tomorrow. So what do we do? What’s happened historically can OCCASIONALLY (not always) provide credible clues about what might subsequently occur.

To learn more, a must read: jul15_newsletter RTM.

The author combines a fundamental understanding of the supply/demand dynamics of oil (inelastic supply/demand) and the past history of oil prices. It is that COMBINATION that helps with expectations.

Take the time to understand his analysis of RTM in the oil market. It is an expectation not a prediction. A supplement to this might be: Pzena on oil 4th Q 2014 (the marginal cost producer in oil).

My attempt at gold: Estimating Where Gold will go using history as a guide and Historical-Gold-Prices

Gold prices are, in my mind, more difficult to analyze since the production of gold does not influence price because the stock to flow ratio is so high (180,000 tones to 2,500 tons per year). The reservation demand for gold is what drives the price. Does gold mining matter? For an analysis of gold: In Gold we Trust 2015 – Extended Version (e)

Also, see gold-when-will-it-crash-again The author believes that gold is a commodity that went into a bubble and, like 1980, will decline 65% to below $700.