Does this mean The Miners are about to move much higher to catch up to the price of gold?
Or is the price of gold going to move much lower to catch up to The Miners?
Or that the ratio will continue to rise for who knows how long?
AdamA, your point is well taken.
Good thing these type of investments are in a VP with money we can afford to lose.
Speaking of ratios, the present oil to nat gas ratio is about 52:1. Should we be buying nat gas now? Good thing we didn't buy at the historic low of 25:1 in 2009.
I'm glad I got out of GDX at around 55 which was pretty much break even for me after holding it for a year. Personally I can't take the volatility... if the equity market does recover and continue to grow over the next few years, gold will probably underperform, which can only be bad for the miners. If we do see QE3 and 2000 gold prices, the XAU trend might reverse and gold miners might be a very good play.
Personally I just can't handle the volatility.
"I came here for financial advice, but I've ended up with a bunch of shave soaps and apparently am about to start eating sardines. Not that I'm complaining, of course." -ZedThou
Given that either gold is too high or the miners are too low, it would be interesting to explore the profitability of some sort of options setup. You could use puts on gold and calls on some mine stocks. I guess the main challenge is the time factor. I don't have any money I can afford to lose, so I won't be digging into it, but it's an interesting thought.
hoost wrote:
Given that either gold is too high or the miners are too low, it would be interesting to explore the profitability of some sort of options setup. You could use puts on gold and calls on some mine stocks. I guess the main challenge is the time factor. I don't have any money I can afford to lose, so I won't be digging into it, but it's an interesting thought.
The problem with options (one of them anyway) is that it's really difficult to figure out when to exit your trade. What if you bought GDX calls and it rallied 10% tomorrow. Would you get out?
"All men's miseries derive from not being able to sit in a quiet room alone."
BugMan wrote:
IMHO shares are just too cheap relative to the price of the metals.
Bought equal amounts of GDX, GDXJ, DBP and VGPMX. So far, so good. I am using tight stops though. Let's see how this plays out...
dualstow wrote:
BugMan wrote:
MY VP just went 100% long mining stocks.
Which companies are your favorites?
Or did you just buy a huge basket with even amounts.
I have found out over the years just how difficult it is to beat the market. When a trade looks promising like the miners, you can establish an entry and exit position, follow your plan, and maybe you win. In the long run, it is just too difficult.
When I finally realized that I was really going up against professional traders, investors, speculators, institutions, etc. that could move the market with a single trade and spent their entire day analyzing the trades, I knew that it was virtually impossible to win in the long run.
I still speculate with a very small amount of VP funds. Why, I'm not really sure. Probably need therapy to find the real answer.
It's like taking a trip to Vegas and setting aside funds for gambling. When it's all gone you quit. You hope that you can win but deep down you know that the house odds are stacked against you.
I understand your points and actually agree with most of them. However I am only trading a "minimal" amount here. I am not a fund manager with millions of dollars to get invested. My trades will not move the market. One of my strong points is I can get in and get out without making a big wave. Analogy...I am driving a speedboat and the money managers are driving the Titanic. Thoughts??
In my VP I invest in people or themes. This (mining stocks ETFs and funds) is a theme investment. "People" investments are always individual stocks. Companies that I am very familiar with for some reason or there are people attached to the company in some aspect that I want to "go into business with" (think Warren Buffett).
But like you said this isn't easy. Sometimes it works out but sometimes it doesn't and I try to learn why (either way). That said, if I didn't like doing this I would invest everything in the PP (and have no VP) or hide all the cash under my mattress.
Alanw wrote:
BugMan wrote:
IMHO shares are just too cheap relative to the price of the metals.
Bought equal amounts of GDX, GDXJ, DBP and VGPMX. So far, so good. I am using tight stops though. Let's see how this plays out...
dualstow wrote:
Which companies are your favorites?
Or did you just buy a huge basket with even amounts.
I have found out over the years just how difficult it is to beat the market. When a trade looks promising like the miners, you can establish an entry and exit position, follow your plan, and maybe you win. In the long run, it is just too difficult.
When I finally realized that I was really going up against professional traders, investors, speculators, institutions, etc. that could move the market with a single trade and spent their entire day analyzing the trades, I knew that it was virtually impossible to win in the long run.
I still speculate with a very small amount of VP funds. Why, I'm not really sure. Probably need therapy to find the real answer.
It's like taking a trip to Vegas and setting aside funds for gambling. When it's all gone you quit. You hope that you can win but deep down you know that the house odds are stacked against you.
[quote="BugMan"]
I understand your points and actually agree with most of them. However I am only trading a "minimal" amount here. I am not a fund manager with millions of dollars to get invested. My trades will not move the market. One of my strong points is I can get in and get out without making a big wave. Analogy...I am driving a speedboat and the money managers are driving the Titanic. Thoughts??
I was just trying to point out the disadvantage we, as individuals are at, when competing with the wall street professionals, high frequency trading computers, insider information accessible to a select few, etc. It just makes it very difficult to win in this environment. It is still fun to try, however and as long as we only play with a minimal amount of funds and keep our money that we cannot afford to lose in PP type investments, we should be okay.
Trading individual stocks or ETF's by a novice would be, in baseball terms, like going up to bat against Justin Verlander thinking you could hit a home run.
Ask a fund manager which they would rather be investing with...$100K or $100 million?
It is just easier to run a smaller amount of money. I have to come up with fewer good ideas and purchase less shares to make an impact on the investment. That's my advantage here. Are the money managers smarter than me, have more data, better traders...that remains to be seen long term. Yes, it is hard to "beat" the market because we as a group are the market. But if you can find those little opportunities and move on them quickly that a larger investor would overlook than it can work. So far the metal stock trades look good...stops are being moved up to protect the profit.
Using your analogy, I (as a smaller investor) am coming to bat against Justin Verlander with a bat that is 2 feet wide and corked...I think I would do okay.
Alanw wrote:
BugMan wrote:
I understand your points and actually agree with most of them. However I am only trading a "minimal" amount here. I am not a fund manager with millions of dollars to get invested. My trades will not move the market. One of my strong points is I can get in and get out without making a big wave. Analogy...I am driving a speedboat and the money managers are driving the Titanic. Thoughts??
I was just trying to point out the disadvantage we, as individuals are at, when competing with the wall street professionals, high frequency trading computers, insider information accessible to a select few, etc. It just makes it very difficult to win in this environment. It is still fun to try, however and as long as we only play with a minimal amount of funds and keep our money that we cannot afford to lose in PP type investments, we should be okay.
Trading individual stocks or ETF's by a novice would be, in baseball terms, like going up to bat against Justin Verlander thinking you could hit a home run.
Ask a fund manager which they would rather be investing with...$100K or $100 million?
It is just easier to run a smaller amount of money. I have to come up with fewer good ideas and purchase less shares to make an impact on the investment. That's my advantage here. Are the money managers smarter than me, have more data, better traders...that remains to be seen long term. Yes, it is hard to "beat" the market because we as a group are the market. But if you can find those little opportunities and move on them quickly that a larger investor would overlook than it can work. So far the metal stock trades look good...stops are being moved up to protect the profit.
Using your analogy, I (as a smaller investor) am coming to bat against Justin Verlander with a bat that is 2 feet wide and corked...I think I would do okay.
Alanw wrote:
BugMan wrote:
I understand your points and actually agree with most of them. However I am only trading a "minimal" amount here. I am not a fund manager with millions of dollars to get invested. My trades will not move the market. One of my strong points is I can get in and get out without making a big wave. Analogy...I am driving a speedboat and the money managers are driving the Titanic. Thoughts??
I was just trying to point out the disadvantage we, as individuals are at, when competing with the wall street professionals, high frequency trading computers, insider information accessible to a select few, etc. It just makes it very difficult to win in this environment. It is still fun to try, however and as long as we only play with a minimal amount of funds and keep our money that we cannot afford to lose in PP type investments, we should be okay.
Trading individual stocks or ETF's by a novice would be, in baseball terms, like going up to bat against Justin Verlander thinking you could hit a home run.
I agree with you that finding the little opportunities and moving on them quickly can be beneficial. Doing this consistently where we can make a profit is the difficult part. The money managers and wall street investors have much more data and software available to them that their ability to make investment decisions far exceeds that of the individual investor. Thus a level playing field is virtually impossible.
IMHO individual trading is for entertainment purposes only. Some will win, some will lose but in the long run the Wall Street Casino will come out on top.
And for analogy purposes, I don't believe that the ordinary ESPN viewer would be able to get around on a Verlander fastball no matter what the size of the bat.
hoost wrote:
Given that either gold is too high or the miners are too low, it would be interesting to explore the profitability of some sort of options setup. You could use puts on gold and calls on some mine stocks. I guess the main challenge is the time factor. I don't have any money I can afford to lose, so I won't be digging into it, but it's an interesting thought.
The problem with options (one of them anyway) is that it's really difficult to figure out when to exit your trade. What if you bought GDX calls and it rallied 10% tomorrow. Would you get out?
Agreed. That's what I was alluding to with the time factor. That's also why I'm not putting any money there, just throwing out ideas.
Ha! I got that little bugger packaged up and ready to go on craigslist. I've been busy with work and admittedly haven't been paying any attention to the markets recently. Looks like there's a lot of pessimism out there. Guess it's a good thing I don't need to liquidate my positions any time soon. Anyone want to trade a share of GDX for a 10 year old calico?
Call me crazy (or stupid). Just before the close bought into my miners VP trade again (equal parts - GDX, GDXJ, DBP and VGPMX). These things have gotten the crap beaten out of them lately (maybe a bottom...or close??). I feel like a teenager shopping at the mall.
I'm not suggesting that this ratio necessarily means anything in and of itself, but any time you get into an area that has very rarely happened at any time in history when it comes to the relationship between a producer and the value of their product, it's worth taking a closer look.
Q: “Do you have funny shaped balloons?”
A: “Not unless round is funny.”
I'm not suggesting that this ratio necessarily means anything in and of itself, but any time you get into an area that has very rarely happened at any time in history when it comes to the relationship between a producer and the value of their product, it's worth taking a closer look.
I think Craig mentioned in his last podcast that mining companies sometimes sell gold at a fixed price well before it's actually mined. Maybe that's what's causing the lag in performance.
"All men's miseries derive from not being able to sit in a quiet room alone."
I'm not suggesting that this ratio necessarily means anything in and of itself, but any time you get into an area that has very rarely happened at any time in history when it comes to the relationship between a producer and the value of their product, it's worth taking a closer look.
Looks like we're touching 11 again. Not to say it won't get any higher, but I don't see anything more compelling out there from a speculative risk perspective(aside from the metals themselves). The largest unhedged gold producer in the world selling at 7x earnings? I'll take that every day of the week and twice on Sundays. The cat is officially gone.
Take a look at the charts of GDX and GLD. GDX has been in a down trend for the past year. GLD has been consolidating in a tighter and tighter range for the past couple of months. Most technical analysts will speculate that the GLD chart supports a big move in prices. Not sure which way, however. OTOH, maybe GLD will continue to consolidate for some time. As for GDX, who knows. BTW, I am not a chart technician, just like to look at the patterns and see if I can learn anything.
It's incredible. I made a sizable move into GDX two weeks ago at $42. I thought it would hold. We are just under support here I think. Hopefully lots of shorts are piling in and getting trapped ina false breakdown. If people are still liquidating.....we could be in for a trip down to 30. The value investors have to get in some time, these stocks are selling at single digit forward PEs. I think Barraick is around 6 P/E! If we go to $30.....well I'll going on margin at that point and crossing my fingers.
A move by gold back up past $1,700 would really help.
