A few years ago - in the 2004-2005 time frame - I was quite intimate with a few other traders (hi guys, I know some of you check in here) and man did we have the yips. For global readers not acquainted with that word, it means we were spooked - BIG TIME. What were we afraid of? 'El Hyper' as my friend Mark calls it. How would it manifest itself? Try Dow 13,000 to 15,000. Remember, this was when the pig was around 10,500. I referred to these levels in some articles I wrote back then.
Now what would a bunch of bears be doing talking about Dow 15,000? It is simply the effects of desperate, accelerated and possibly covert inflation - the Fed monetizing the debt. Now this theory was posited by our 'guru' and some of you guys know who I mean. This was a fellow who had a group of intelligent, successful grown men scared sh**less - at the prospect of a coming hyperinflation. So much so that I put all my energy into paying off ALL of my company's debt, paying down my personal debt and above all eliminating all vestiges of casino mentality residing within my psyche. I trade, I enjoy but I always remain grounded. Today is no different. Yes, the party line holds that "it is good to have debt during inflation" but what about when it ends? Not so good as the resulting collapse will eat you alive.
Remember the '3 Peaks and a Domed House' theory? Well, that was the model we used for the phenomenon we are witnessing at this moment and it always held open the possibility of a strong market rise in the face of desperately inflated money supplies. BTW, here is an article I wrote in 2004 on hyperinflation; Sind Wir Die Weimarer?
I am a business person and a trader doing his best to navigate this mess just like you. I do not have the grand answers as to the how's and why's. My guess is that this thing is more organically fated to happen vs. the result of shady PTB men in back rooms engineering it all, but I just don't know and frankly don't really care. The result is what it is and I want to trade it correctly and live a life that is in sync with it as best as possible.
Anyway, gold & 'da minahs' were always to be an intimate part of this process. When fears of El Hyper start to bust out of their cages they will be gone man, gone. Is this the moment when a sleeping public finally wakes up? I for one doubt it, but you never know. This process has already taught me that perceptions can hang on for a lot longer than rational people may think. I remember being reluctantly bullish in 2003 and then actively not bearish (against my personal bias) since. I have blow off targets for the Dow and Chinese stock markets and we are getting there. Whether or not I have the conviction to short at those levels remains yet to be seen.
Believe it or not, this started out as a quick acknowledgment to the bullish side, including and especially where the gold miners are concerned. My doubts remain concerning reversals in the currency markets (USD up from falling wedge and Euro down from rising wedge) but given the structure of the bond markets and given the furious nature of the global rallies, it makes sense to increase exposure here to my favorite asset class, gold (which I believe has a chance to continue bullishly - we have watched all along for counter-cyclical gold to detach from everything else, have we not? - after major markets reverse scarily and painfully from their respective blow-offs). Of course that may come after an initial decline as the casino implodes but given the sentiment in the gold market (including me, your friendly contrary indicator) just how much spec gaming is left in the sector?
As such I want to put up daily & weekly charts of a stock I consider a 'bottom feeder special' at the moment, Gammon Gold (GRS). Fundamentally, the stock had been considered a jewel (and was valued as such) until it Missed its Own Guidance and grossed out the market in May. For a fundamental look, see Trey Wasser's unfortunately timed, but insightful look into the company. Me? I am a chart guy and I fall head over heels for NO stock - EVER. That said I do try to keep up on stories and major fundamental themes and as such have found no reason not to try bottom feeding GRS. I have been nibbling this one in and around the 12's and 13's with the idea of a longer term hold. That is my disclaimer: I own the stock and I want to see it do well. I don't believe a young miner with the assets of GRS should be judged and summarily executed based on one lousy Q of production. That said, it could be a long wait before the market regains any kind of confidence in these guys. The stock has been incredibly weak and can't seem to get out of its own way. You know I am a bottom feeder and you know I like these kind of set ups. Do not consider buying this stock unless you can handle some pain until such time that GRS' new management proves it is not the Keystone Cops and can actually run an efficient mine. Of course, it is possible that time may never come, but that is a risk I am willing to take. Whether or not you are interested in such risks is entirely up to you. In fact, don't buy it - it's a POS! ;-)
PS: I realize this is written informally and may even sound a bit lunatic and disjointed to some. But sometimes I like to just write... as opposed to compose.