Global Macro Trading Journal
- Thread starter Daal
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Quote from Debaser82:
I always said I would sell my gold when the ratio hit 3.
Let's hope I dont get greedy...
Yeah I think it depends on what the world looks like (if and) when the ratio hits 3.
For example:
> At that time, how much money printing is happening in Europe?
> At that time, how much money printing is happening in US?
> Is peak oil an issue? And if so, is this giving additional support to the strategy of long gold versus short equities?
For the record in my journal I stated that I am targetting a gold / S&P 500 ratio of 2.0. This is approximately equivalent to a Dow/gold ratio of 4.75. But I might reassess this number (if and) when we get there.
We hit somewhere around 6 during the worst of the 08/09 crisis...which perhaps only on a shorter timeframe turned out to be a great time to buy stocks.
But indeed as you say how will the world look like when it goes past that and the crisis hits deeper on a wide area of levels.
Either way I think as you rightfully point out should it drop below 5 the prudent should start at least considering alternatives.
Should it come from 43 to 5 that was basically it and the obviousness of being long gold based on a historical perspective becomes less pronounced and caution should take it's place.
Yes, and also as with all "when to exit?" questions, it doesn't have to be a black-or-white / all-or-nothing prospect.
Eg. I could exit some at dow/gold 5, some more at 4.75 ... etc. etc. so gradually exiting as it goes further and further below 5.
However as I have outlined numerous times on this web site, the action of oil in the last year or so (check out a chart of brent oil versus S&P 500) suggests that peak oil may be a reality. In which case this is ultra bearish for airlines, and very bullish for (gold and oil) versus equities.
Daal,
haven´t been for a while in the Journals thread. So, apologies for my late "intrusion". Returns are one part of the coin, yet you should also mention the risk part: how much of your equity is actually invested in % terms during your active investment holding periods? I guess, as you are diversifiying via several financial instruments, you will also have an allocation matrix implemented?
Personally, I would welcome the resurrection of Deutsche Mark.
My risk was high. The leverage numbers(which are a bit misleading) were at 50-1 or something. But that was because the Fed futures contract are worth $400K so it doesn't take much to get the leverage going. But its one thing $400K worth of FFF and $400K worth of oil or S&P500, the FFF don't move much(I don't think I ever saw a move above 0.60%)
I use another measure of risk to see how much I'm risking, I call it 'reasonable risk' and 'unlikely risk'. The reasonable risk was some hiking scenarios that could happen if I was wrong, the 'unlike risk' was really unlikely stuff(fed going in a hiking rampage)
I believe the most I ever risked in the reasonable risks area was something like 25% of my networth(And even then I was calling 'reasonable' scenarios I thought were quite unlikely). The unlikely ones I believe passed 50% of my networth
This year I didn't risk all that much compared to previous years
There's a huge difference between 6 and 3. At 3 you can buy twice as much DOW as at 6. The difference between 3, 2, and 1 is HUGE
You are correct that we cannot know where it will go to and it will be difficult to pick the bottom of the ratio. My plan is to let monetary policy and credit spreads be my guide. Extremely tight monetary policy and wide credit spreads will convince me that I'm getting good value for the PM's (mostly silver for me).
Another thing to consider is rolling physical gold and silver into physical platinum under the conditions described above because platinum has a much higher correlation to oil and stocks than does gold or silver and you can still "keep it physical".
Another great article from AEP:
http://www.telegraph.co.uk/finance/...e-as-crisis-escalates-in-Italy-and-Spain.html
"The EU summit accord in late July has clearly failed to reassure investors. It gave the EFSF bail-out fund powers to buy Spanish and Italian bond pre-emptively but this has to be ratified by all parliaments, which may take four months. Willem Buiter from Citigroup said the â¬440bn fund is far too small to cope with Italy and Spain, and requires immediate firepower of â¬2.5 trillion. Such demands risk setting off a political crisis in Berlin. "
http://www.telegraph.co.uk/finance/...e-as-crisis-escalates-in-Italy-and-Spain.html
"The EU summit accord in late July has clearly failed to reassure investors. It gave the EFSF bail-out fund powers to buy Spanish and Italian bond pre-emptively but this has to be ratified by all parliaments, which may take four months. Willem Buiter from Citigroup said the â¬440bn fund is far too small to cope with Italy and Spain, and requires immediate firepower of â¬2.5 trillion. Such demands risk setting off a political crisis in Berlin. "