Pundit's Perspectives – Thu 15 Aug, 2013

Gold and conventional market comments from Gary Savage

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Al KorelinGary SavageCory Fleck

  1. On August 15, 2013 at 10:30 am,
    Dai Uy says:

    Silver supply in my small corner of the world continues to shrink significantly as my dealer has gone down from moving about 10,000 oz weekly to about 1000. Premiums ironically actually down a bit. AU more available. My gut feeling is that more of us little guys are coming into the market due to massive TV advertising and a better informed public. Just my humble opinion of course………………

    • On August 15, 2013 at 11:03 am,
      Big Al says:

      Probably true, but I hate some of the TV advertising. Don’t you?

      • On August 15, 2013 at 11:34 am,
        Dai Uy says:

        YES….Am surprised that the SEC has not clamped down a bit on TV dealers for essentially selling a security given the way that these dealers are advertising. Having said that however, the dealers probably have good attorneys advising them when they get to close to the line.

        These dealers with their advertising however have been educating the public and I believe that this bodes well for future PM markets with more participants and should PM’s continue to go up, their credibility will be further enhanced and validated.

        My only question for the TV dealers is why, except for cash flow, they would continue to sell rather than accumulate if they really believed that PM’s are heading for the stratosphere?

        • On August 15, 2013 at 11:51 am,
          Big Al says:

          Your last paragraph raises a very good point.

          Simple answer would be they do both!

  2. On August 15, 2013 at 10:34 am,
    Dai Uy says:

    China and India of course are fueling AG demand as it is becoming as much an industrial metal as well as a PM.

    • On August 15, 2013 at 11:03 am,
      Big Al says:


  3. On August 15, 2013 at 10:41 am,
    Gary says:

    My thoughts on what drove the manipulation in the metals over the last 8 months.

    • On August 15, 2013 at 11:05 am,
      Fred says:


      You have talked about NUGT in the past. Some months ago, they did a huge Reverse split, and next week it will do another 10 for 1 Reverse split.

      Hasn’t this been a ‘fraudulent’ vehicle set up?
      Do you think the SEC will do anything?

      • On August 15, 2013 at 11:18 am,
        Gary says:

        When the underlying is going against a leveraged ETF there is significant decay. That is what has happened to NUGT. Once the trend reverses there is significant outperformance as daily rebalancing happens.

  4. On August 15, 2013 at 10:49 am,
    franky says:

    tanks GARY

  5. On August 15, 2013 at 12:15 pm,
    Matthew says:

    Cory, central bankers say one thing then do another. They won’t be discussing expanding QE publicly, they will just spring it on the market like they did in 2010 after Jackson Hole. Misdirection is second only to money printing when it comes to the Fed’s favorite “tools.”

  6. On August 15, 2013 at 7:14 pm,
    Hal says:

    NUGT and DUST

    since the end of June, hui is up 21.22% and nugt is up 68.11%

    absolute stock price has some meaning to some but the % change in price is whats important.

    DUST hit 166 ish 6/26 and closed thursday at 46-
    down 72%

    These are momentum vehicles. Same as using options, sort of. You do not want to be in these leveraged etfs when its going the wrong way, period.

    there has to be some slippage, but basically if you used say nugt, you are outsourcing and will pay for it, vs you buying say calls or puts on gdx yourself. And when you buy options you get decay in premium.

    This should be common sense for people with market knowledge-if you do not have market knowledge,don’t use them.

  7. On August 16, 2013 at 10:07 am,
    Brian says:

    “When the underlying is going against a leveraged ETF there is significant decay. That is what has happened to NUGT. Once the trend reverses there is significant outperformance as daily rebalancing happens.”

    There is no “rebalancing” after an ETF decay” Look at what had happened to USO -compare that to the price of oil-: Reverse splits are usually a bad sign for any stock or ETF vehicle.


    • On August 16, 2013 at 10:30 am,
      Big Al says:

      Thanks Brian

    • On August 16, 2013 at 12:04 pm,
      Matthew says:

      A reverse split tends to get punished because no one likes to see the number of shares they own get dramatically reduced just because some CEO wants to get the share price up (possibly to hide, or worse, to maintain, his serial share printing). In and of itself, a share consolidation is neutral — not good, not bad. The reason for it is what matters. GDXJ is doing just fine after its recent 4 for 1 reverse split. Since ETFs are designed to track an index, and are not companies themselves, a reverse split doesn’t have the same negative implications. ETFs are not all created equal, but reverse splits are the least of the bad ones’ problems, in my opinion.

      • On August 16, 2013 at 12:27 pm,
        Big Al says:

        Could not agree with you more, Matthew!

  8. On August 16, 2013 at 4:46 pm,
    Mike says:

    Gary: “I think the manipulation is behaving us…..pretty “scientific” statement for a guy who said that he did not believe in manipulation. Your assumptions are based on what exactly?
    Bryan: Yes; you do NOT recover what has been lost due to ETF decay; what is lost is lost. Reverse splits are bad for company stocks; I am not 100% sure about ETFs.
    Matthew: GDXJ is a good example of decay and reverse splits (The decay for GDXJ has been more severe than GDX, that does not mean GDXJ is a bad investment; unlike USO). Let’s see how the reverse split plays out – it might not be a problem after all-.

  9. On August 16, 2013 at 8:06 pm,
    Matthew says:

    Mike, GDXJ has gone down more than GDX because it tracks junior miners that have gone down more than the senior miners that GDX tracks.
    Decay is not an issue for either GDXJ or GDX since neither employs any leverage. Both simply hold shares in mining companies. There are fees, but no decay.

  10. On August 16, 2013 at 9:28 pm,
    Mike says:

    Matthew: GDXJ has been re-balancing its portfolio often (i.e. adding, changing and taking out holdings), much more often than GDX. On top of that it pays “dividends” by selling parts of its holdings; therefore decreasing the NAV (of course it is money that you get in cash but it will be up to you to reinvest it; incurring into brokers fees). You are right about GDXJ not being leveraged but between the constant re-balancing, junior miners holdings and “dividends” coming out of the holdings it loses value much more rapidly that GDX. The reverse split was performed to make it more “attractive” since it went from $ 43 to $ 8. But yes; it is true you might not call that “decay” but just loss of value -I guess-.

  11. On August 19, 2013 at 8:40 am,
    Pibe says:

    Sold NUGT for a 35% profit. Now buying DUST. I keep using Gary as a contrarian indicator. He is super bullish now. Let’s see if I keep making money.

    • On August 19, 2013 at 10:29 am,
      Big Al says:

      Yep Pibe, let’s see.

      • On August 19, 2013 at 12:59 pm,
        Pibe says:

        Yup…so far so good; I don’t want to get overconfident (like Gary does) but 6% profit in a couple of hours is not bad at all. I have my stops but with the last 40% profit the stops do not have to be tight. I will sell my position when Gary becomes bearish again 😉 or when my stops are triggered.

        • On August 19, 2013 at 2:56 pm,
          Big Al says:

          Hope it goes well, Pibe!

  12. On August 19, 2013 at 1:33 pm,
    Pibe says:

    A good explanation of why stimulus DOES NOT create inflation:

    “QUESTION: Will the Fed still taper?

    ANSWER: The Fed ‘tapering’ will happen but it is not truly impacting the economy. That is the whole fallacy about what is going to happen. Buying the mortgage back securities does nothing for the economy. This has neither been inflationary nor stimulating. WHY? The theory is the Fed is actually injecting cash into the system. WRONG!!!!! The Fed is injecting cash into the banks buying shit they want to get rid of. They ASSUME the banks will increase their lending. HUGE MISTAKE #2. All the banks are doing is still requiring 110% collateral for a loan and instead have been investing the money and trading. There is no requirement if we buy this you lend that. It is INDIRECT like fining you wife for not making the guy next door put out the trash. You can fine her all day long. That will not force the next door neighbor to put out the trash. There is no DIRECT relationship between tapering and increasing consumer loans. There is absolutely no way for the Fed to “stimulate” or even create inflation absent direct controls.

    The Fed always acts indirectly. But the Fed is NOT going to taper because the economy is “too” strong or because we have “sustained core (wage) inflation”, or because we have “full” employment or sharply declining unemployment. Absolutely, none of these conditions will cause the Fed to actually react. The ONLY time I get questions on the Hill about economic direction is when the STOCK MARKET declines. That alone impacts the 401Ks of politicians. Not housing, unemployment, or inflation. When there is inflation, everyone is happy for they are making more money in nominal terms so the voters are happy and so are the politicians.

    The Fed is going to taper simply because they will see the stock market rise and will fear that their stimulation will cause excessive speculation creating a bubble top in assets. This is what the Fed really will watch and pay attention to the trend in the Dow.

    The Fed is getting very fearful that the stock market has been rising and all inside sources are confirming that is the issue most concerning. The Fed will react to a rally in the Dow and that will result in tapering. This is actually what they have been worried about all along and ONLY when the stock m with that.it is creating a number of significant and dangerous leverage driven speculative bubbles that could threaten the financial stability of the US. In central bank speak, the Fed has likely come to the point where it feels the costs now outweigh the benefits of more policy.”

    Source: http://armstrongeconomics.com/2013/08/

    Armstrong Economics