Friday, February 29, 2008

Heavy Institutional Selling, Gold Higher--$HUI Lower

interest rates will continue much lower--Helecopter Ben will have to throw more and more money at these unstable markets. I call it Ben's Golden PUT.

Keep a trailing stop on your gold stocks. I am looking for $1000 gold very soon. Will gold stocks continue their selloff with the rest of the markets?

I look for January lows to be tested for the broad financial markets.

Investor business daily reverses and records current outlook as rally under pressure.
One of my favorite stocks SWN joined leaders down in volume--Monday I will sell my small oil and gas portfolio.

Thursday, February 28, 2008

Wednesday, February 27, 2008

Saturday, February 23, 2008


Throughout the late 90s, gold outperformed gold stocks, but that reversed in the earlier part of this decade through the start of 2004. Since 2004, however, the two have been trading relatively inline with each other, with gold stocks lagging for about a year and a half now. The ratio is currently just slightly above the average since 1993.

Friday, February 22, 2008

some more juniors for my watch list


10% Of Home Loans Under Water

Remember our leading indicators?

We haven't seen the end of the subprime housing crisis yet.

Thursday, February 21, 2008

Gold sets new high

You have to choose between trusting to the natural stability of Gold.. and the honesty and intelligence of the members of the Government. And with due respect to these gentlemen, I advise you to vote for Gold.

George Bernard Shaw

Wednesday, February 20, 2008

Two New Stocks to my Watch List

I remain bearish with spy puts--taking some heat on this trade.

BUCY and CAT.V are added to my watch list.

Sunday, February 17, 2008


“To put some historical context on this measure, since 1974, the Gold/XAU ratio has been greater than 5.0 about 15% of the time. When the ratio has been this high, the XAU has followed with annualized gains of 89.6%, on average – a figure that remains high even if the data is split into multiple samples. When the ratio has been greater than 4.0, the XAU has followed with average annualized gains of 27.4% (though the finer profile of returns has been sensitive to other conditions such as interest rates, economic trends, and inflation). In contrast, when the ratio has been less than 3.0 (meaning that the gold stocks are very elevated relative to the actual metal), the XAU has declined at an annualized rate of -36.6%, on average.

“Importantly, the return/risk profile for precious metals shares is strengthened further if the economy is experiencing weakness. For example, when the Gold/XAU ratio has been greater than 5.0 and the ISM Purchasing Managers Index has been less than 50 (indicating a contracting U.S. manufacturing sector), gold shares have appreciated at an average annualized rate of 125.6%. In contrast, when the Gold/XAU ratio has been less than 3.0 and the Purchasing Managers Index has been greater than 50, precious metals shares have plunged at an average annualized rate of -49.9%.”
John Hussman
Such strong periods for gold are also generally associated with weakness in the U.S. dollar. Short term the dollar seems to be stronger. But there is no doubt in my mind that the economy is weakening. Here are the recent ISM reports.

ISM PMI values above 50 indicate expansion. Values below 50 indicate contraction.
see :

ISM PMI - ROB Report on Business | ISM Services Index
of Manufacturer's Business Activity Index| or Non-Manufactuering Business Activity
_________________________________________ | __________________________________ ALSO ANNOUNCED IN REPORT ON BUSINESS:
Announcement Announced and | Announcement Announced Revised (1) (2) (3)
For Period Date ISM PMI as revised | Date Non-Mnfg ISM PMI to New Orders Employment Production (bus activity index)
__________ ______________ ____________ __________ | ____________ ________________ _________ __________ __________ __________

Feb 2009 | Mar 3, 2008 . | Mar 5, 2007
Jan 2008 | Feb 1, 2008 50.7 . | Feb 5, 2007 44.6 43.5 43.9 41.9
Dec 2007 | Jan 2, 2008 47.7 . | Jan 4, 2007 53.9 53.9 51.8 54.4
Nov 2007 | Dec 3, 2007 51.9 . | Dec 5, 2006 54.1 51.1 50.8 51.5
Oct 2007 | Nov 1, 2007 49.6 . | Nov 5, 2006 55.8 55.7 51.8 50.0
Sep 2007 | Oct 1, 2007 54.6 . | Oct 3, 2006 54.8 53.4 52.7 50.5
Aug 2007 | Sep 4, 2007 56.1 . | Sep 6, 2006 55.8 57.0 47.9 50.5
Jul 2007 | Aug 1, 2007 53.8 . | Aug 3, 2007 60.7 56.9 55 50.5
Jun 2007 | Jul 2, 2007 56.0 . | Jul 5, 2007 60.7 60.3 51.1 62.9
May 2007 | Jun 1, 2007 55.0 . | Jun 5 2007 59.7 57.4 54.9 .
Apr 2007 | May 1, 2007 54.7 . | May 3 2007 56.0 55.5 51.9 .
Mar 2007 | Apr 2, 2007 50.9 . | Apr 4 2007 52.4 . . .
Feb 2007 | Mar 1, 2007 52.3 . | Mar 5, 2007 54.3 54.8 52.2 .

Friday, February 15, 2008

When the going gets tough, the tough go trading

The simple explanation for this is that the market is an emotional place. As Princeton psychologist Daniel Kahneman told Jason Zweig in the book Your Money & Your Brain, "Financial decision-making is not necessarily about making money. It's also about intangible motives like avoiding regret or achieving pride." So ask yourself, "WHY DO YOU TRADE?"

Read the following link for an explanation of CDO's and the subprime mortgage mess. Bad loans are still bad loans. To paraphrase Bershire vice chairman Charlie Munger, "If you mix m&m's with turds you still have turds."

Thursday, February 14, 2008

nasdaq whipsaw new sell signal

IBD was whipsawed. New sell signal for NASDAQ.

I am short the market with 10 spy puts in my small speculative account.

THE Gold/XAU Ratio IS AT 5.15

Wednesday, February 13, 2008


Look what happened the next day--(we would all be rich if we had this chart 24 hours early)

The Nasdaq's action met IBD's standards for a follow-through rally confirmation today. However the nasdaq P&F chart remains bearish.

MER remains bearish.

Saturday, February 9, 2008

New Buy Signal HUI

How low will this bear market go? See Fib projections.

Friday a new buy signal was flashed for Gold Stocks. Also note the gold/xau ratio continues above 5.0

Sunday, February 3, 2008

M3 Money Supply Increasing at 15% Rate

Remember our leading indicators MER and FCX? Both remain bullish on P&F chart.

"Whether we are in a recession or not is irrelevant because we are slowing down, and results are becoming more negative. The Federal Reserve has been very much aware of this and has been acting consistently in that regard. They've been increasing the money supply at a much faster rate than people realize, near a 15% annual rate of increase in M3 [a broad measure of the money supply].

What would be more typical growth in M3?

Five percent, maybe. Increasing the money supply kept the situation from getting worse faster than it would have otherwise." Interview with Joseph McNay, Chairman, Essex Investment Management (Barron's Monday Feb 4.0)

This rapidly increasing money supply coupled with declining interest rates virtually guarantees inflation accelerating and is bullish long term for gold stocks and oil.

Saturday, February 2, 2008

New Gold Stock Sell Signal

My Gold Stock indicators issued a new sell signal Friday. Gold Bullion is entering a correction mode. The metal has outperformed the mining companies in the last three years, but that relationship is in the process of switching and mining companies will be the best investment. But they will both be good investments. There are two ETFs that are convenient for most people: streetTracks Gold Trust [ticker: GLD] tracks the gold and Market Vector Gold Miners [GDX] tracks the mining companies. I currently own a basket of junior mining companies and major gold producers and a few silver miners. Otherwise I am 80% T-Bills.

Where are we in the Broad Stock Markets? I think that this is only a bounce in a bear market and the bear market will be a savage beast that will reassert itself in another few weeks. "My setup for the Dow Jones industrials has now turned bearish. This setup has no trade delay, which means execution is for the open on Monday. The Dow Jones signal is based on fading the "dumb money" large speculators when they get super-bullish or bearish. They've been reducing their huge net short position steadily for several weeks and are now nearly net long." Alex Roslin see COT link

Friday, February 1, 2008

The worst market crisis in 60 years

These are the words of George Soros--see link below