Gold and China. Powerbuys
1. Bank of Montreal has come up with a juniors ETF of their own, which just started trading at about $13 on the Toronto market. For those of you who are looking for a lower priced version of the GDXJ that trades in Canadian dollars, well, it's here.
2. Are the stocks in there going to all be your favourites? Not necessarily. But since this is the time of the juniors as a group, not the time of the juniors as "the next big find", I urge you not to over-focus on your particular situations, but instead focus on the group. I saw the same thing in the 1990s with the internet/tech stocks. I can't tell you how many investors swore up and down that it was so important that their personal stocks were the big winners, that "sure there could be a correction, but these are quality companies that I've selected, and they will outperform in a correction". What the peabrains got instead was an across the board obliteration. So much for that logic. There was no logic. There was exchanging of the mirror for a picture of Paul Tudor. "That's me, really it is!" Sure.
3. With the gold juniors, it will be the reverse: Investors will take themselves out of the group as they overfocus on particular issues. Some will find their particular situation "impossibly" fails and they are left standing there while the group rises many many times in price. Don't do that. Focus on the pricing of the group. Right now, GDXJ shows price weakness. Price weakness must be bought, and bought aggressively. Don't confuse aggression with trade size, with backing up the truck. Aggression means you stick with your pre-set buy points without fail. If you could buy GDXJ at 28, and are buying zero now, that is a major error.
4. Good news for the gold bears on Mars: Money Mart is now allowing you to sell all your gold there. I'm sure the buy/sell spread is very reasonable. If you hurry, you can still sell everything before gold crashes to zero this morning. Quick, dig up the comex 100 oz bar you took delivery of, and rush down to money mart. I'm sure they'll give all the gold sellers.exactly what they deserve. As gold soars, the public will rush back to MoneyMart, back to the mobster pawnbrokers and hotel rooms to buy back their gold as it soars, and find the total spread works out to about $500 an ounce in commission. Maybe $1000. I'm serious. The price-chasing losers will pay it anyways. Maybe there will be a Pawnbrokers' ETF/gold certificate for sale, sponsored by the mafia. The mobsters sell them a paper certificate promising they'll get the gold. I bet the public buys it anyways. Sadly, I'm not joking. Then again, doesn't that exist already?
5. This is the Gold Neckline Play. And I'm afraid it's going to hang many gold bulls by the neck if they continue to play their game of trying to pick the bottom of this sell-off. Think back to the initial blast to 1225. Think back to the rise from 905 to 1033. Think of the fear at 905. Then think of the complacency you experienced from 1033 to 1225.
6. That complacency is returning . I'm seeing analysts and investors waiting for 1033 to buy. While the perfection of the head and shoulders pattern on the gold weekly chart suggests such a textbook pullback is highly likely, this is the gold market, run by the banksters. Anything is possible, anything can happen. Gold has fallen from 1225. If you felt light at 1225, but have some wet noodle idea of calling the turn, I suggest you dump that "strategy" asap. Just buy the weakness professionally with a pyramid series of buy points. Gold could turn here and now, or go far lower. You or I don't know what's coming, and nor do those pretending they do.
7. Add substantial magnification to the picture of how light you felt at 1225, and you have a picture of how you will feel on the next run if you are not buying into this weakness professionally. Calling the turn will be the death of many gold traders, very soon. My personal opinion is that 1225 marks the line in the sand, where those playing trader with their charts for peanuts, those out of gold now, will see their short gold trading accounts permanently obliterated, as gold moves above that point. The volatility is likely to become like what you saw on Tanzanian Royalty yesterday, in gold bullion, as price moves thru 1225.
8. Yes, what of Tanzanian Royalty, the least followed junior stock in the gold community, and the only junior that I own personally? Yesterday was another monster day for Tanzanian Royalty. In the end, our report cards are measured by price. Not drill reports, or lack of them, on the websites that suggest the situation is mediocre at best. Don't get carried away with what information is available on company websites. That may or may not give you the actual picture of what is going on. Sorry. Flash update: My juniors stock report card just arrived in the mail: Seems I got an A: TRE-amex has skyrocketed over the past few trading sessions. A feat all the more remarkable because the gold juniors as a group has sunk. While I own the group thru GDXJ in a pyramid formation of buys and sells, TRE is the only individual juniors stock I own. And I must say, it's been quite the party for the past 48 hrs. Quite the profit-booking party, that is. Sell strength, buy weakness. I won't say anymore about the company other than to suggest you take a look at who the Chairman is. You can't sell maximum strength if you don't buy maximum weakness. The key is responding to both professionally. In a pyramid formation of buys and sells. I felt like a day trader yesterday, as price blasted to 5.15 on the Toronto mkt, then back to 4.65, then up to 4.98. A golden rainstorm of buy and sell fills!
9. Let's leave my cash register party aside for a moment, and get back to you building one for you. The point for you is this: Many studies have been done showing the majority of any market's rise or fall comes often in very short bursts of price. You can't predict those bursts of up and down price action consistently, but you can respond to them. When a stock moves like TRE just did, you may feel like a day trader as your buys and sells are triggered like a machine gun, but you are not. The reality is there are very few days like yesterday, and it is all-critical that you are absolutely and completely prepared for them. It may be many weeks before price moves to a sell point after declining lower into your buy points that seems "possible", or just a few minutes after you bought. You can't know what the market will do, but you can prepare to respond to all it does professionally.
10. When the juniors as a group begin a parabolic rise, it will be too late to buy. You have to face the music, here and now. On the buy side for the group. Speaking of here and now:
11. The Chinese stock market has sold off significantly over the past week. The question you need to ask yourself when committing to a market, is: do you have a big picture view, or are you really just responding to some news reports or some market hamburger flipper, with actions that are nothing more than the flavour of the day? If you are prepared to fight to win, the Chinese stock market offers a phenomenal opportunity for the gold community. Here's why:
12. It's an open secret that the two most loved market actions in the gold community are: a. Buying gold juniors. B. Shorting the Dow.
13. Consider this strategy: Short the Dow into strength with smaller risk capital to satisfy what I term your "maniacal obsession" with shorting it, while at the same buying the Chinese stock market into price weakness with larger risk capital, 3 times larger.
14. The Chinese stock market has fallen about 15%, from 46 to 39 basis the FXI-nyse ETF. Ask yourself if you think you are Paul Tudor or not. (Check your trading account if you are not sure. If there are nine digits before the decimal point, you might be Paul). If the answer is yes, then don't buy any Chinese stk market here, but pull out your crystal ball and prepare to the call the turn. The banksters would laugh their heads off at that approach, but hey, who are they are anyways, just the richest people in the world, what do they do about buying and selling, nothing, right?
15. Wrong. Buy weakness and buy the Chinese stock market in a pyramid formation. I've bought and sold the ETF profitably and - slowly but surely - continue to build a core position. That is an absolutely critical part of wealth building, accumulating a core position on weakness while trading out a trading position, so your core is paid for by your market opponents, not by you. Don't expect to get that bill paid for in a couple of weeks. Anything worthwhile takes real time. The ETF is priced at $39. Hands up everyone who doesn't have 39 dollars. If you don't, try standing at a street corner with a sign that says, "I need 39 dollars to invest in China, please help me." After you get back, you can buy your one share.
16. Some of you are thinking, "what an arrogant jerk". Really? Who is actually arrogant, me, or the investor who refuses to invest even 39 dollars in China now on a 15% price drop (7 more of those and we're at zero, and China shuts down, is that likely?), but has no issue with investing tens of thousands, hundreds of thousands, or even millions at their turning point, a point where they have decided to play God and announce to the Universe that from that exact point China is a super buy.
17. So the gloves are off. I say, a bird in the hand is worth 10 billion in the bush, so let's see who in the gold community can invest a real 39 dollars today in the Chinese stock market, in the greatest re-industrialization of all time, and who promises to invest ten zillion wet noodles "in the future", "when it looks better".
18. Think in terms of building an empire for your family's coming generations, or the charity of your choice if you have no family. I'm serious. Think back to the Dow in 1890. That is China today. I've been making money buying and selling the Chinese market in a pyramid formation that extends to zero, and doing the same in the US market. I wonder how the price ploppers have done, the top callers, the wedge-obsessed bears. The flippers, the floppers. Granny in the grocery, sorry to say, has beat you all. And right now, Granny is staring at the Chinese stock market that is on sale for 15% off.
19. If we fall to 38, I buy more. More than I bought in the 39 area, which is more than I bought at 40. The Chinese stock market is an asset class. And it's yours for 39 bucks. What will the price of that asset be in 10, 20, 50, 100 years? If you want to know how the banksters made their trillions, the answer is they made that money by asking themselves that question. And answering it by pressing the buy button into any and all price weakness.
20. The question is: Can you do the same, yes or no?
21. While I listen to the bears tell me how the Dow could fall down, the fact is I've spoken repeatedly of my range pyramid of shorting the Dow from 9,000 to 11,500, from the time I prepared and started it, and yesterday was another day of profit booking, another day of ringing the cash register. The Dow has fallen 500 points. There are only three actions to take: Book profit on shorts, initiate longs, or do both. Everything else is nonsense.
22. Most of you realize I don't care where a market is going so much as I care about making money in it, consistently. I hate losing. I'm not here to "play" the Chinese market. Each dollar that the Chinese market moves lower, is a step that eliminates risk. The closer a major market trades to zero, the less risk exists in it.
23. Where many of you get caught is trying to build Rome in 24 hrs. Nothing is really what it appears in markets. Including opportunity. Opportunity presents itself all the time. But it wears a mask. And the banksters pride themselves in maintaining control of that mask. The Dow falls 500 points, and the banksters yell, "look down, look at the pavement, you're on the 10,000th floor, you might fall down and die! Quick, sell it all and buy junk bonds and t-bills and get back into real estate on leverage!" And the public responds to their yells like puppets dangled on a string. Then the banksters scream, "Gold is risky! Sell it all to the pawnbroker before it crashes, hurry! The recession is over, we fixed everything! Then the pawnbroker will sell it to the refiner and we'll buy it to save you! Imagine if we didn't buy it, you'd lose everything! Sell it now, sell it faster, hurry, go, go, go!" And the public surges forward, obeying the banksters' every word to the letter.
24. Bring a powerful commitment to the Chinese stock market. Not a powerful amount of dollars. A powerful commitment to buy any and all price weakness without wavering, without question. Number 39 is a soldier in your Chinese Market army. Don't shoot at your own soldier. He might be a better shot than you are, and he's armed too.
Graceland Updates Subscription Service: Note we are privacy oriented. We accept cheques. And credit cards thru PayPal only on our website. For your protection we don't see your credit card information. Only PayPal does.
Stewart Thomson is a retired Merrill Lynch broker. Stewart writes the Graceland Updates daily between 4am-7am. They are sent out around 8am. The newsletter is attractively priced and the format is a unique numbered point form; giving clarity to each point and saving valuable reading time.
Are You Prepared?