fickletrader journal

Trading bot results for today: 0%
(S&P 500: -0.97%)

Today I want to note that last week had the biggest weekly volume for both $GOLD and GLD according to stockcharts.com. It also was a major breakout above a 3 year upper channel line. This is no coincidence. My view is that gold is just beginning a major parabolic move. If this is true, silver won't be on ice for much longer. I might enter a small position in FSG tomorrow (2x long gold, short s&p 500).

It is really important to monitor these kinds of developments, and certainly not easy to spot them as they happen. Harder still to make the right adjustments. I remember an interview where Dan Zanger talked about noting on his website the breakdown of the parabolic up move in the nasdaq in 2000, but gave back a lot of his fortune over the next couple of years despite seeing the writing on the wall. The climate changed dramatically and he didn't make enough adjustments. Realizing the implications of paradigm shifting observations like that can make or save fortunes.

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Trading bot results for today: -0.15%
(S&P 500: +0.1%)

I bought 32 shares of FSG this morning at $42.75 based on my analysis from last night. Since I trade at IB, I got comp'ed the commission thanks to a deal FactorShares struck with IB. I know it was only a dollar saved today, but I need those things :D

I also just noticed that FactorShares has applied to launch a bunch more etf's. I couldn't find the product list, but I'm really excited about them. The news I read said we might have to wait up to a year for the new etf's to be available for trading unfortunately.

This afternoon we got some interesting news that validates my parabolic gold view: Hugo Chavez is nationalizing the entire Venezuelan gold industry and taking physical delivery of Venezuela's gold stored abroad. As I've mentioned before in this journal, during cyclical peaks for gold the central banks all become big buyers, and today's news is consistent with that premise. Other cyclical top ingredients are sorely missing, most notably the one factor most likely to lure me out of bullion: tight monetary policy via sky high interest rates. The S&P downgrade of US treasuries is a first step in that direction though. If the bankers want to defend the dollar, they will be forced to raise interest rates or else hyper inflation will happen. It might not seem like it right now because all the majors are being devalued in concert, but realize that the low price for gasoline is probably happening right now and may come close to doubling from here by election time. Most people will be caught off guard by this because in early 2009 gas fell to $1.35 due to the economic chaos. The difference this time is that foreigners will be pricing us out of the oil market as their central banks divest their massive dollar reserves.

I reserve the right to revise my views in light of new information :p
 
Trading bot results for today: -2.21%
(S&P 500: -4.45%)

Well I was wrong about the bottom in gas prices. Gasoline at the pump will be going lower after today's rout in oil. Oil only has a little further to go to achieve the extremely low oil valuation we experienced in the beginning of 2009. I like oil right now, I think it is one of the best things to be accumulating via the royalty trusts (they are now technically classified as "grantor trust"). The reason for the royalty trusts as my chosen oil vehicle is that you avoid contango from rolling contracts, and you also get a great cashflow, which I add to what I can save from my paycheck to buy whatever is the low valuation at that time. This scheme comes from the wonderful book "The Richest Man In Babylon" by George S. Classon. I especially like the audio book version narrated by Richard Ferone. My copy's CD envelope has nearly fallen apart from so much use.

A great valuation doesn't mean oil won't go lower. One of the big problems facing value investors is that sometimes a good value can become an even better value when the price continues lower. This is a problem for the leveraged carry traders and the unhedged outright long-on-margin guys much more so that for the cash buyers. I am all 3 at different times (fickle trader, right?). Currently my oil shares are slightly hedged with the small FSG long and small KIE short. Just as a reminder, this is all happening in a different account than the trading bot that I report on every day, which does all its own things without my intervention.

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After long deliberations and analysis all day today, I have no revisions to make for my market views, discretionary positions, and limit orders at this time. The past few weeks' decline in the S&P 500 priced in terms of gold is now truly epic. I've been posting these SPY/GLD charts every week or two, so I'll post another updated one here for convenience. I will note that Friday's big breakout in silver is following through tonight as the spot market opened up more than 1% higher. I view this silver breakout as a final confirmation that the gold price is in fact in a parabolic rise.

It is likely that the gold price rise will continue all the way to the 2012 election, over a year away! The idea might sound fantastic, but a historic context that is familiar to everyone that I think is appropriately similar to precious metals today is tech stocks in late 1998. At that time we needed the boom to finance building the internet. Once it was built, we didn't need the high market caps anymore and the bad businesses fell by the wayside. Today we need much higher precious metals prices to finance the return to sound money. There is more than enough metal in existence for sound money, it just won't happen at today's low precious metal valuations.

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Trading bot results for today: +0.15%
(S&P 500: +0.03%)

Rolling out a small new addition to the trading bot's system portfolio tomorrow. Been working on it for about a week, and we've settled on an implementation for phase 1 of this idea. It shouldn't have a noticeable impact on the day to day results, only the long term equity graph should show a noticeable improvement. We add automated edges like a minimalist song, one instrument at a time until a symphony is roaring.
 
Trading bot results for today: +1.04%
(S&P 500: +3.43%)

It might seem like under performance days like today are hard to stomach, but that isn't the case for me. What does get me is when something is broken. The bot is cruising along doing what it should like clockwork, so I'm happy.

I pre-ordered the new game Deus Ex: Human Revolution on the On-Live game service, and it just became available to play today. I've been working hard lately, really hard, so I think I'll just take this evening off :cool:
 
Trading bot results for today: +0.83%
(S&P 500: +1.32%)

My discretionary trades in AGQ and FSG have taken a major beating over the last 2 days. I will note that I do not have stops on any of my discretionary positions, instead opting to carry them based on conditions, relative value, and portfolio hedging considerations. I realize this goes against the group-think on this site.

The widely anticipated gold margin hike was announced this evening, which caused a lot of unwinding by the highly levered guys carrying the GC/ES pair trade. If gold falls one more day I will probably go buy a 1 oz coin to give to my unborn son in December when he is born. I'm in no hurry and can be a patient buyer.

Here's an updated SPY/GLD chart to keep a perspective on things:

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