-- Posted Sunday, 9 November 2008 | Digg This Article
| Source: GoldSeek.com
Rick’s Picks
Saturday, November 8, 2008
“Phenomenally accurate forecasts”
Beginning next Saturday, Rick’s Picks will answer questions from readers in a weekend edition. Meanwhile, the letter below, from subscriber, trader and Calgary-based consultant Glenn Hermanson, is filled with interesting and provocative observations that I’d like to share with you. Glenn writes as follows.
Hello Rick. Great comments. I like to think of Bob Prechter's DJIA target of 400 more in terms of DJIA/Gold. If gold is $5000/oz, then the Dow will bottom at 5000; if gold is $400/oz, then the Dow will be 400, and thus the infinite range of potential bottoms in- between. Trying to pick any one number will make you go insane, like predicting the weather, and it will get your mental focus tied to a target that may be moving daily. Not healthy.
GOLD & SILVER: Our charts are showing patterns that are historically reliable, putting silver at $3 /oz, gold at $450/oz and the HMU (Canadian mining EFT) at 1.50. HMU was $35 six months ago, and if this latest bottom is a wave 3 terminal sequence and wave 5 is extended like it often is in commodity prices/equities, it is possible that there is a 68% loss ahead for people going long today at 4.78. For instance, according to our Elliott Wave analysis, the bottoming number for that great silver miner, Pan American Silver (PAAS, currently trading for US $12.54 US) is 0.90. You may laugh at that number, but most of the Eldorado and Bema Gold share I bought in 2002 were at prices between 0.65 to 90 cents in 2002, and they were $10 stocks in the mid 90s. It has been very advantageous to be a former miner, then geotechnical engineer, and finally petroleum engineer who has seen $13/bbl oil four times since 1981, been through three career changes and 10 M/A-bankruptcies events.
Financial Follies
CHOPPED LIVER: In September, I was short, short, short and making great profits. In October if I had stayed short I would be no worse than +10 %. However in two accounts I tried to get cute, went fishing and ended up down 15 % per cent for the month. There were days and days of manic trading -- 61 trades in one day, with a significant amount of down time when my discount broker’s platform became unstable. We now trade at four firms with non-correlating vehicles. I used to read about this kind of stuff after the 1987 crash and did not 'get it,' but now I do. What a joke this whole financial sector has become. Yesterday my life insurance provider, a 90-year-old firm from Winnipeg, phoned me to try and get me to bring over all my accounts to their discount brokerage division. I asked him what will happen to my whole-life insurance policy when they go broke. Dumb and Dumber. Writing for Saturday Night Live must be the easiest job in the world.
MAIN STREET: Based on my general observation of the people around Calgary, they are still playing for a bounce and averaging down like crazy. We think they are going to get their wiped out, maybe by Christmas, along with a major hiccup for the resource-heavy brokers and boutiques -- GMP, Canaccord and ARC to name just a few. The Canadian Banks so far have not broken but I am building short positions in the insurance and minor banks. The charts look sick. The locals still 'believe' banks to be an absolute core holding to any portfolio and the brainwashing of the last 20 years is so deep in Canadian mindset that the move down could be incredible. CIBC will likely be the first. Each day I reckon my net worth in terms of gold and college tuition, as I have three teenagers on the go. To be honest, in terms of gold, our NPV (Net Present Value ) has been constant over the last few years, with very little volatility. (ps: I loved your comments on Princeton University and the supply/demand shift. I asked my oldest, who is in grade 12, a type-A honors student, to apply to five Ivy League schools to test your theory. I will let you know the results.)
‘Easy Money’ Shorting T-Bonds
IDEAS THAT ARE WORKING FOR ME: Short the 30-year T-bond. It is a position that is tradable as the bond price rises and hits a (so far) dependable overhead resistance line. I use the ETFs, TBT or PST as proxies for charting the bond, since I get a headache whenever I look at bond price curves. I hate bonds. The 30-year US price rises into resistance nicely and also slightly leads (by a couple of hours) into the next wave down in NASDAQ and the TSX (Canada). However, the correlation is not good enough to trade on overnight positions. It makes a nice confirmation for adding to the index shorts. The other low-stress trade is buying puts -- deep in-the-moneys on companies that are bouncing up into 18-, 50-, or 200-DMA. This is not an Elliot trade but one that has been really consistent in terms of paying little or no time premium. My latest one is the 75 Dec GIS Puts which I bid and got at 7.75. Look at the Dec 90 puts of MLM. I missed this trade cause I bid 4.50, which was really getting greedy, then it broke nicely lower. I have been targeting companies that have held up well but have a negative 9 or 18 day ma trend and are just off a 52 week high and breaking the 50 day ma. I respect your opinion and I am not an options trader (as you can probably tell) so if you see a problem with these ideas SHOUT AT ME. thanks.
OTHER STUFF: I keep my own charts on many things (as I distrust public or free data especially derivative indicators, so I crunch my own) including staples and commodities in YEN and Euro as well as USD and I just do not see the mess on the charts that I see in the USD-based charts. All the press is full of the Euro problems/YEN strength blah blah blah, but I do not see it on the charts. Raw material inputs are relatively stable and have been since 2005. For instance, in terms of Brent crude pricing and Russian Nat gas the EU energy costs have been somewhat flat since 2005 and are now slightly lower sub 50 Euro/boe similar to the mid 90s price decks. If these outfits are not generating NPV it is because they are lousy companies not because they are trapped into exchanging good and services with a messed up currency. These EU business' went through major adjustments in the 2000-2004 period and since then, which is now five years and nearly one investment cycle old, the companies simply have not had the same input cost variables that US un-hedged companies are dealing with. In Northern Europe, ex Ireland, Britain, Iceland, real estate has been dropping since 2004. (READ DEFLATION). I know because I have been looking for an acreage or farm in Sweden or Germany and a beach place in Portugal since April of 2003 when I left my job in big oil. The prices have been falling steadily and the selection has been getting better and better, so we continue to rent vacation homes. Right now I can buy a 10,000 sq ft renovated heritage house on four acres on the southern coast of Sweden for about 330,000 Euro, which is the same price as a scabby condo in Calgary or half the price of a ski-in, ski-out condo at Fernie or in Canmore, our local resort towns. Ditto the Algarve. Prices on 'things' have a lot further to drop in the North America market before there is any sense of balance. I can buy a lot of fuel or plane tickets for the difference.
December Hidden Pivot Seminar
I have really enjoyed your website these last two weeks. Do you run courses or speak at money/investment shows? I would like to learn more about your PIVOT work and we are also looking for any excuse to grab the kids and visit somewhere new. Glenn Hermanson. (Rick’s Picks Note: Because the November 5-6 Hidden Pivot Seminar was full, we will be offering the class again on December 3-4. For more information, click here.)
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Sunday, 9 November 2008 | Digg This Article | Source: GoldSeek.com
