This week I’m on vacation so getting to do this has been nearly impossible. I write and do videos because I enjoy it, and make no money off of any of it. This is FUN for me. You have to take what I say much differently than the pros, as these guys are paid to do this and may be doing it 16 hours a day. That being said, I think there’s a place out there for us amateurs to make observations and at least potentially raise some interesting questions. I like Twitter because there’s a lot of voices, and I can pick and choose who I follow and block some that just cause me troubles. I don’t have time for endless debates, but I do like a back and forth from time to time in the interest of finding truth.

Miner weakness

Below, I’m going to go over how I’m getting decimated in my options plays, but I wanted to dig in to a lot of what I’m seeing from my Twitter crowd. Capitulation. If I had just gotten into this, I’d probably be upset too. But I’ve seen it all in such a short time – the endless excuses for why metals go down despite all indicators pointing it to go up. First it’s the 10yr. Then the DXY, then now everything is going our way, and stocks take a sneeze and metals retreat.

The past week or so, you have seen gold inching up. I can’t remember who it was on Kitco about 10 days ago, but they were like, “if gold spikes up to $1800 now, it’s not a great sign. I’m short, but if I saw gold stair step its way to $1800, that’s a healthy sign”. Well, stair step accomplished. Edit – in my notes it was Bubba Horowitz. I’d be interested to see if he changed his mind on gold now that we stair stepped over $1800?

At the same time, India’s chains have been unleashed. Russia announced $4b in buying gold and FX. It is pretty clear to anyone paying attention that the East is acquiring gold when Macron is trying to tell the G20 to sell their gold to help Africa combat COVID. Reading between the lines, these paper funny money countries want to advocate selling of gold to go to endless paper.

I fear this will not end well for those nations. We have 5,000 years of history which sorts all of this out for us.

That all being said, some people like to say that “the miners lead the metals”. This is not always true. This is one of those…”it depends” things. Many in the juniors right now are getting torched on low volume sales showing lots of red in their balance. I’m getting crushed on GDX options at the moment.

I think many who invest in miners need to be chess players and not checkers players. You need to understand your risk tolerance and the bigger game at play. Too many of you came in to this like you were wannabe crypto millionaires asking “where lambo” after a week being invested in a gold stock. I have news for you. It won’t end well for you either if this is how you invest in miners.

Next week when I’m back to the grind and have some lunch time writing ahead, I want to dig deep into the 1975 50% retracement in gold. I want to see if I can scour the headlines, check oil prices and RSIs, and just try and understand the issues that led to the 50% draw back. I know, I know, some of you posted the auctions. I get it. But I want to look at all of the macro conditions – why? If Hunter is calling for a 45% or so pull back in gold when everything else pulls back 65-80%, I’m wondering if there is some rhyming in macro conditions that can give us some more indicator lights when this house of cards pops.

My vote is on the population as a whole getting the clue that inflation is really here to stay. When that happens, the days of 1.2% for the 10 yr end instantly. I believe THAT is the catalyst for the bust. Many of these deflationists are talking about the bust and a severe correction, and even the DXY hitting 120-140, but none seem to be able to pinpoint a reason. It is pretty easy to just throw a black swan out there or another COVID lock down on delta, but the truth is, I believe the debt bomb is what takes all of this down.

If you really think about it, you have seen the 10yr go down for 40 years. Artificially, based on lies of inflation. This increased the value of them. Artificially. I believe if inflation is known, and widely, I believe that is then a catalyst to force people to chase yields. One would think this has them running to the stock market and it would increase the market, but at the same time rates skyrocket, the value of these companies decreases significantly overnight. Perhaps initially we see roll into stocks in this blow off top – and if you start seeing the 10 yr going up rapidly, while the stock market is still melting faces off, that might be a sign the end is nigh.

With miners, I feel there will be a strong recovery as gold and silver start to move here. It seems there was a washout, perhaps on low volume. Not too worried.

Inflation “high double digits”

There’s a picture going around put out by Clif High which seems to be a chat room post somewhere claiming they work for the BLS. I know of Clif through watching Bix Weir. I love Bix Weir for entertainment purposes, but he also uses psychics – so you cannot exactly use this type of sourcing for investment analysis. Just interesting to watch with popcorn. I don’t put a lot of faith in that, as it talks “high double digits”. This, to me, says “95”, not “18”. Either way, housing prices are crazy, used cars are crazy. Everything is crazy. Could it be 10%? Doubt it, even from YoY.

However, I did post this yesterday. This COULD have been part of where this came from, or what the writer was referring to down the road.

Image

Now, IF they change the CPI formula to more accurately reflect any form of inflation, the 2% is gone, forever. Likewise, if this reveals “12%” like the Chapwood index, perhaps that gives cover for the Fed to raise rates earlier – which could take the stock market down. This can also be the catalyst to the bust. Let’s also not forget taxes on top of this, at which higher taxes are always discussed.

The trifecta of:

  1. Higher inflation recognized by everyone, forcing sales of debt
  2. Higher inflation now measured by CPI, sending up rates and officially recognizing this inflation
  3. Higher taxes on capital gains

These 3 items could be the punch that does the bidding of David Hunter. I know there’s criticism of his forecast, but there’s a large, LARGE list of deflationists now, and each one of them has a pretty telling story that I find very compelling.

Options Updates

My options are getting killed. I BEGGED you all not to do what I did, so hopefully I gave myself some cover. I have found some company with others owning my GDX call options of misery, but this was a probability play for me. Most of the gamble I have is in 3 month options with GDX and WPM, but I have a large grouping of SILJ for January which gave me a lot of runway if $50 silver is coming – or Hunter’s $32 SILJ projection. So, I may lose my ass on the Sep 17th options, but clean house on the 1/17/2022 SILJ options. IF the 2H turns out as most are anticipating.

The problem is, metals don’t move because I want them to.

In a parallel universe, I probably would have sold a lot of these at a 50% loss for risk management. When I bought them, I mentioned I could see some downside yet. If you look closely, my SILJ are the ones most damaged, and I have 6+ months on them yet. So, not worried about them, at all. Many of them were bought at horrific times. $40-$50 silver is going to make a lot of this paid go away.

My biggest risk right now appears to be my GDX $38 and $39 options. Total put in was about $3500. So in the grand scheme of all of these, I will do ok as long as gold/silver pick up in the next 4 weeks.

One thing I put into this was the possibility that 2nd qtr reporting should be coming out in July, and yet another stellar quarter for all of these miners should continue to attract more and more institutional back to the sector. I believe several now in GDX are offering dividends.

As I’ve been led to believe, big money first hits the big gold miners, then trickles down. My bet here was more than charts. It was also predicated on some sort of rollover from big tech could find its way into gold miners as these guys have cleaned up their balance sheets since 2011 or so.

Yesterday was painful for my options, but when silver crossed $30, my portfolio was up like 25% in a day, then crashed 25% back down the next day when price was smashed.

If we get a good next six months for silver, the SILJ options are going to scream.

Remember, I did all of this for an education to others. I’m not a super trader or genius on this, but it was a demonstration of how options can move up a lot – and perhaps down a lot. Pick your poison, but part of this was also to show where I bought them, and why. No one knows if that was the bottom, or if there’s more pain to come, but I felt pretty strongly that with an RSI at 27 for gold, I had a good entry point statistically. Now, miners shit the bed this week, but it doesn’t mean they also can’t turn around if gold hits $1840 and they roar back to life.

Sentiment indicator update

I don’t have any “updates” per se for this, but this is more of an awareness thing. I get a few thousand to read these posts so it might be of use to put this in there. If there’s any guys out there I missed, let me know.

So far, I think Gary Wagner has the best prediction. David Brady put out 3 different scenarios that could happen, and I usually find his analysis pretty close when looking in the rear view mirror. Wagner also discussed how his thinks it would pick up in August.