Monday, August 22, 2011

The sheep, the mentality, the game, the warning

I have been having a playful conversation today because a friend of mine's wife is now in a very interesting predicament. She bought BAC and Citi a while back thinking it was the buy of a lifetime, most likely because of cheerleading on CNBC, and the monotonous game of investing that it is, as to hold it forever.

If you are puking in your mouth, I did too. The sad thing is I told her to get the fuck out on the bounce at $42, and then transfer everything into silver and gold. Now I'm getting those infamous questions, that sheep ask: "How long till it comes back? When will it come back? If I hold it for 5 years will it be even, because $50K is a lot to loose right now....etc."

I'm not going to lie I didnt tell her to sell at $42. I told her in 12 different emails to sell at $42. And I'm still getting the same questions.

This has taught me something today, as everyday, I urn to learn something new. It has taught me that the sheep might enjoy getting slaughtered. I may not be saying it right, so I'll tie it back into the fear of success. If you dont know most people have an inordinate fear of success, albeit clinical. And most middle class really dont have much to lose, and lose they always will, so I'm beginning to extrapolate from these different conversations that sheep love to lose. It might almost be a new phenomenon. I mean I'll put it in simple terms. If you were standing on a train track, and you heard the horn, looked at the train, turned and asked me if you should get off the tracks, and then sat there and got pancaked by the train, most "psychologists" (in quotes because I feel there is no need for that profession) would call that suicidal. I would say NO ITS NOT. Its the new normal. There is no difference between the train and the question being asked. None.

Moving on to more important things, if you were heading past 44 King St. W. in Toronto today and peeked in Scotia's Head Office, this line up for PM's was okay.


See, in a metropolis of Toronto being lets call it 5 Million, you would think more than 20 people would want pm's right? This is just the beginning, soon there will be no line up, b/c there wont be any metal. Already we are seeing Gold bars dwindle as Scotia Maccotta is sold OUT of 1 oz and 5 oz gold bars. HUmmmmmmmm.


I would now like to warn of the possible multiple rate hikes that are coming. This will be a repeat of the Silver slam of May 1st. If they do not raise Gold margin, we will see $2000 on Jackson Hole day, if it continues north to $2100, I will start hedging with GLD PUTS. Dont say I didn't tell you so when this corrects back as its vertical now. It will be healthy, I just hope it doesnt effect POS. But hey, there are some still waiting to pull the trigger right? Sigh....

Thank me lots, cant wait for the new site! Programmer needs more loot, you know what to do!

32 comments:

  1. Hi,

    If I want to hedge my gold supply with GLD PUTS, how do I determine the number of PUTS to make based on how much gold I have?

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  2. I saw some tool on twitter going off about gold saying "the authorities" ought to raise margins 100% because THAT will drive money back into S&P. I think people who aren't in gold and silver are extremely jealous types who are pissed because they don't think gold and silver should be going up in price and don't want to understand why it's happening. When these morons suddenly start to "get religion" we'll know we're headed into the bubble phase. It's amazing to me how people always start lining up for bullion when the price is going up... What the fuck. That's exactly the opposite behavior people exhibit when shopping. If something is cheap they'll buy two instead of one. If something is twice as expensive as it was yesterday they'll buy half as much or none at all. Nobody wants gold or silver when they're going down.

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  3. One thing I never understood about most retail investors is the mentality of "it will climb back up."

    Now, it is true that stock indexes in the LOOOOOONG run always go up. But note the keyword "long", which might mean years or even decades.

    As for your example, I feel sorry for her because she should have sold it as soon as it was going down. If there is one thing I learned about the market...be impatient in the bear market, be patient with the bulls. If you start losing money off a stock purchase, cut it out and move on. You are supposed to buy low, not buy and watch it go low.

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  4. If the stocks go low enough they will eventually wake up, at least I did back in 2008. I hit a limit where I knew something was deeply wrong. Then I took matters into my own hands. When they all start waking up, I just hope it is not too late, but I'm not optimistic.

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  5. imo-at least 2 ways to go with GLD and SLV puts. 1 way is betting on an eventual "problem" with GLD and SLV. I have OTM leap puts to cover that and think I should make fiat money there to.

    I also buy put spreads-say on gld I buy for example the Sep 182 put and sell the 168 put. that covers me for about 7-8% drop in gold prices (and same process for SLV). Think of it as "insurance" and hope you do not need it.


    I am 95% in PM-1/3 in Phyz and compliment that with CEF and GTU and PHYS and PSLV, and the final 1/3 in miners. The fiat cash left is to live on for now.

    I say this because I have a recent concern. What if, I know its remote-but what if everything somehow turns out ok? What if congress actually balances the budget and does it starting the process soon.

    All of I sudden I think I need some sort of back up plan, just in case the unthinkable happens. (also what if, just what if, Ron Paul emerges as a front runner because people are fed up with what has been happening. (disclosure, I voted for RP in last election.

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  6. awsome commentary sgs. this post really reverberates with me.

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  7. I think I am afraid of success, I inherited 40 thousand two years ago and I bought only 20 ounces of silver with it, and bought a boat instead and squandered the rest on road trips. All the while, watching jim rogers videos on silver being the best investment of the next century. Now I only have my weekly paycheck to add to my silver cache.

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  8. I bought the boat so I could entertain hot chicks like the one in my photo, since sold it for pennies on the dollar

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  9. Dude, I'm your biggest fan but the begging's getting old!

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  10. Also, anyone see Bill Still's award winning "Secret of Oz" documentary? If so, share your thoughts. Someone posted about it here a few days ago and I watched all 2 hours. I've never seen a stronger argument for fiat currency created by the government, though we all know fiat currencies eventually end.

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  11. "Dude, I'm your biggest fan but the begging's getting old! "

    Whatever money is made in adwords and donations is going into the pot for the site. I'm looking at a $7500 site.

    I'll take the difference when the invoice come in ;)

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  12. S&P Board Fires CEO For Telling The Truth, To Be Replaced With COO Of Citibank

    http://www.zerohedge.com/news/sp-board-fires-ceo-telling-truth-be-replaced-coo-citibank

    Fuck.

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  13. Then you obviously aren't his biggest fan.

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  14. @SGS: I'm sure you have already showed her the charts, but even if you have, show them again to her. But, label them..who the hell cares, pick 3 letters. Ask her: is the stock going (1) up (2) down (3) sideways. Of course she will say down...that is her following her "gut instinct" AND believing what she is seeing, then show her the real symbols. Shouldn't need to go any further than that. THIS is why I say technical analysis is KING. Don't get me wrong, there are plenty out there, so pick what you understand & can follow. But, for me to buy a stock because it has thousands of branches..F that. The stock is going down for a reason...F CNBC and Fox Business.

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  15. @highrise408: and the crap keeps flowing down stream

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  16. @highrise thats the worst news I've heard all night, I'm so frustrated by that bullshit, there will be an upgrade of US debt now? we're at least guaranteed no more downgrades of anything, including muni bonds which I am currently betting strongly against, hopefully the ship has already sailed on the market and gold and bank runs though the s&p board moved too late.

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  17. Considering that SB counter is also for foreign exchange, most of the people in line aren't there for PMs anyhow.

    When I was there in July, the guy in line behind me actually asked them, incredulous, "do people really walk out of here with, like, real gold bars n'stuff???"

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  18. Check the gold chart - looks eerily similar to the April run-up in silver. Although I'd like the move to be sustained, who knows what the TPTB can do? If gold and silver get slammed hard, you can bet the people pictured above will immediately sell their metal. Though the PM markets have attracted a lot of new buyers, many still don't understand that it's fiat that's depreciating in value rather than PMs that are gaining in value. Until they understand this fundamental concept of PM investing, they'll continue to be the speculators that buy at the top and sell at the bottom. I was at that very desk buying when silver dipped to $26 at the beginning of the year. The woman beside me was selling all her silver to Scotia below spot. I was going to intervene, but she wanted a quick transaction. Oh well...

    Anyway, how's the new site coming along SGS? As I mentioned in a previous post, I work for a large bank that specializes in consumer credit (trust me, I'm not proud). I'm currently toying with the idea of opening my own blog discussing what these jackasses do to keep the masses as interest-paying debtors. I'm wondering if I could post something up on your site. Let me know.

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  19. FED audit shows $17 Trillion was loaned out secretly. Can someone confirm the dolar amount? Listen carefully at the 4 minute mark: http://www.youtube.com/watch?v=hB8P90WZRIY&feature=player_embedded#!

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  20. CALL THE DOCTOR! new forecast: Category 4 headed up chesapeake bay, SGS you have your catalyst.
    I love the weather

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  21. When my substaintal TK investment pans out I'll be sending you a nice cheque for services rendered sgs...in the meantime I'm stacking PHYZ and buying TK on dips...should make for a very nice donation by year end. :-)
    Continued success getting that website up...looking forward to it.

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  22. seriously people, I'm familiar with hurricane procedures for washington dc, and it is ACTUALLY DEFCON right now, mobilization of troops in anticipation of civil unrest

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  23. my last post for the night, this is going to be as fun as watching uconn win the ncaa tournament
    http://www.weather.com/weather/hurricanecentral/article/tropical-depression-nine-storm-hurricane-irene_2011-08-20

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  24. James Dines has done a lot of very interesting work with investor/gambler mass psychology and how it relates to the stock markets and markets/trading in general. Many people, especially gamblers, have a subconscious drive to fail of some sort.

    I'm hoping gold "corrects" big time so I can throw a bunch of Fiat at ounces and my GoldMoney account. If it doesn't...ho hum.

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  25. If you watch two for the money it explains the defect that gamblers have. They are w/o knowing looking for that feeling where they lose it all and realize they are still alive. It's a sick rush.

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  26. In the US people are selling all their gold jewelry at "cash for gold" stores. Saw a story on TV (here in San Fran) with people lined up out the door. Not only are they not buying gold, they're selling it. No bubble here.

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  27. The "sheep" are suffering from Stockholm syndrome. They have come to love their torturers: the governments and banks.

    As for your new site. I used to have Turd as my first port-of-call but he seemed to lose his edge when it became a subscriber thinga-me-bob.

    Just a thought from a free-spirit.

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  28. As someone said before, not all of us can be wolves - we need sheep, lots of them.

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  29. Sheep are per definition stupid and only follow the heard. If they step of they start to panic.

    http://www.youtube.com/watch?v=FL7yD-0pqZg

    Exaggerated sheep comedy.

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  30. i dont even bother to bring up gold and silver to friends or family, they just stare at you like your some kind of retard.

    people do not want to win. there is fear of success, its big and scuuuuury! stay with the herd sheep, safety in numbers.

    "oh i lost money again this quarter in my mutual funds! oh dear!"

    "thats too bad... get me a beer..."

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  31. Hey SGS,

    Your picture is very telling. I was in HK in February and everyone at the Bank of China was lining up to buy gold pandas. Everyone was holding a letter telling them to come in and get this etc. When I was at the counter they were all sold out of the 1 oz and the 1/2 oz.


    I hear you Maradv. I have been telling friends about gold and silver. They just make jokes about keeping silver since it helps keep vampires away. *sigh*

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