The Long Gold And Short Stock Investment Strategy
Wednesday, 5. December 2007, 18:19:47
I. The Logic For The Investment Strategy
My investment conviction is "In a bull market be a bull, in a bear market be a bear. In a bull market a bull buys on dips, and in a bear market a bear sells into strengths."
The October 8th, 2007 Citicorp CDO Bust set in motion a credit crisis.
The December 11th, 2007 Federal Reserve lowering of interest rates and auction process clarified the Banks position as one of insolvency.
Richard Russell and Tim Wood have documented a bear market.
The stock market is now in an Elliott Wave 3 of 3 Down; I've chosen the ETF IVW to illustrate the 3-3 Down because it trades with such vigor -- there is a huge amount of trading volume on pivotal days in the S&P Growth shares. The October 31, 2007 price of 72.60 was the start of Major Wave 3 Down; and the December 10, 2007 price of 71.61 was Minor Wave 3 Down thus producing the 3-3 Wave Down.
Physical gold is in an Elliott Wave 3 Up, haven broken from a mid-Elliott Wave 3 Up resting price of 78.67 on December 22nd, 2007.
In as much as the Elliott Wave 3s are the most sweeping and dramatic of all waves, one should be on the gold Wave 3 Up; and short selling the Wave 3 Down in stocks.
In as much as trading activity since the Federal Reserve announcement of December 11, 2007, has initiated a global disolution of stock and bond wealth, as well as established an investment demand for gold: one should be long gold and short stocks, where one uses the gold ETF for the basis of one's portfolio, and uses margin credit to go short the market.
'Gold and gold alone' is now the means of accumulating and preserving wealth and gains from short selling are just frosting on the cake.
The investments chosen for shorting have been chosen based upon their high fall potentiality -- their likelihood to experience a fast and hard fall, greatly rewarding those who are short. Fall potential is highly subjective: it's simply a determination that comes from looking at the Stockcharts.com charts as well as reading the Yahoo Finance Headlines
II. The Long Gold And Short Stock Investment Strategy
The basis of this strategy is long gold -- long streetTracks Gold Shares, GLD, with a number of ETFs short purchased using maragin credit.
A suggested list of ETFs can be found by clicking here for a downloadable internet database listing of these ETFs as well as to see their current perfomance.
Here is the Google Finance Chart of my 'Top 5 Picks' for short selling in 2008.
III. Sound short selling caution comes from Blogger Elaine Meinel Supkis in her Boxing Day 2007 article who relates:
"Very little of this (appetite for capital and durable goods) is flowing into Japan. The US can't buy like crazy from Japan and then make up for this by selling stuff to China. First of all, our trade deficit with China is not shrinking. It is growing. The place where we are seeing fewer IMPORTS from is Europe! They are being bitten hard by all this. Most articles enthusing about trade avoid close examination of the circulation of trade on all levels. The dollar is most certainly weaker than the euro. But NOT the YEN! And it is only marginally stronger than the yuan."
"In conclusion, all I want from the mainstream media and our leaders is a simple examination of information without blinkers on. But then, this is a near-impossible task."
"Dear 'short sellers' who read news analysts like myself: do NOT underestimate the ability of the players in this game to keep it going for seemingly, forever. As a historian, I know that systems can run even when totally crippled, for the longest time. The end of this system will happen the day China decides they are ready for change. Up until that point, everyone else will move heaven and earth to keep this status quo going."
"This will lead to a global depression but it will arrive on cat's paws, nearly silently. The clue will be, 'Who are we imitating? Who are we following?' If the answer is, 'Japan', we will be in a bear market but buried within it will be many 'surges' just like we had in the Great Depression. Every time the short sellers thought they had things nailed down back then, stocks would surge and they would be wiped out."
"The true depressionary session really set in when short sellers gave up. Then the markets simply sat there like an old hen on a nest with no eggs. People looking to get rich moves onto other activities back then. Namely, war."
IV. Ms. Supkis' cautions are noteworthy
Below is a chart of the Russell 2000 ETF, IWM, on December 26, 2007, poised and ready to unleash Elliott Wave 3 of 3 Down, it's been primed like a spring, and it went on the next day to wipe out 3% of wealth.
One can see how from the Santa Clause Rally, (the green trading area) generated by the Federal Reserve promising to provide liquidity to the banks as well as to provide an auction process, adversely affected those who were short.
Chart is that of Tim Knight: the Russell 2000 ETF, IWM from his article Boxing Day Blues.
V. Portfolio Risk And Reward Management Considerations In Short Selling
Knowing that December 26, 2007 was the defining turning point for trading out of stocks and investing in gold and compels one to short sell
I recommend applying a min-max principle to ones investment efforts: to mininize the risks and mazimize rewards in short selling, I suggest that one's shorts be allocated
25% to the emerging market, specifically the Brazilian stocks.
25% to municipal bonds.
25% to the 20 to 30 year U.S Treasuries.
25% to stock ETFs.
VI. Note: This page was originally created December 5, 2007; and was finalized on January 11, 2007.
My investment conviction is "In a bull market be a bull, in a bear market be a bear. In a bull market a bull buys on dips, and in a bear market a bear sells into strengths."
The October 8th, 2007 Citicorp CDO Bust set in motion a credit crisis.
The December 11th, 2007 Federal Reserve lowering of interest rates and auction process clarified the Banks position as one of insolvency.
Richard Russell and Tim Wood have documented a bear market.
The stock market is now in an Elliott Wave 3 of 3 Down; I've chosen the ETF IVW to illustrate the 3-3 Down because it trades with such vigor -- there is a huge amount of trading volume on pivotal days in the S&P Growth shares. The October 31, 2007 price of 72.60 was the start of Major Wave 3 Down; and the December 10, 2007 price of 71.61 was Minor Wave 3 Down thus producing the 3-3 Wave Down.
Physical gold is in an Elliott Wave 3 Up, haven broken from a mid-Elliott Wave 3 Up resting price of 78.67 on December 22nd, 2007.
In as much as the Elliott Wave 3s are the most sweeping and dramatic of all waves, one should be on the gold Wave 3 Up; and short selling the Wave 3 Down in stocks.
In as much as trading activity since the Federal Reserve announcement of December 11, 2007, has initiated a global disolution of stock and bond wealth, as well as established an investment demand for gold: one should be long gold and short stocks, where one uses the gold ETF for the basis of one's portfolio, and uses margin credit to go short the market.
'Gold and gold alone' is now the means of accumulating and preserving wealth and gains from short selling are just frosting on the cake.
The investments chosen for shorting have been chosen based upon their high fall potentiality -- their likelihood to experience a fast and hard fall, greatly rewarding those who are short. Fall potential is highly subjective: it's simply a determination that comes from looking at the Stockcharts.com charts as well as reading the Yahoo Finance Headlines
II. The Long Gold And Short Stock Investment Strategy
The basis of this strategy is long gold -- long streetTracks Gold Shares, GLD, with a number of ETFs short purchased using maragin credit.
A suggested list of ETFs can be found by clicking here for a downloadable internet database listing of these ETFs as well as to see their current perfomance.
Here is the Google Finance Chart of my 'Top 5 Picks' for short selling in 2008.
III. Sound short selling caution comes from Blogger Elaine Meinel Supkis in her Boxing Day 2007 article who relates:
"Very little of this (appetite for capital and durable goods) is flowing into Japan. The US can't buy like crazy from Japan and then make up for this by selling stuff to China. First of all, our trade deficit with China is not shrinking. It is growing. The place where we are seeing fewer IMPORTS from is Europe! They are being bitten hard by all this. Most articles enthusing about trade avoid close examination of the circulation of trade on all levels. The dollar is most certainly weaker than the euro. But NOT the YEN! And it is only marginally stronger than the yuan."
"In conclusion, all I want from the mainstream media and our leaders is a simple examination of information without blinkers on. But then, this is a near-impossible task."
"Dear 'short sellers' who read news analysts like myself: do NOT underestimate the ability of the players in this game to keep it going for seemingly, forever. As a historian, I know that systems can run even when totally crippled, for the longest time. The end of this system will happen the day China decides they are ready for change. Up until that point, everyone else will move heaven and earth to keep this status quo going."
"This will lead to a global depression but it will arrive on cat's paws, nearly silently. The clue will be, 'Who are we imitating? Who are we following?' If the answer is, 'Japan', we will be in a bear market but buried within it will be many 'surges' just like we had in the Great Depression. Every time the short sellers thought they had things nailed down back then, stocks would surge and they would be wiped out."
"The true depressionary session really set in when short sellers gave up. Then the markets simply sat there like an old hen on a nest with no eggs. People looking to get rich moves onto other activities back then. Namely, war."
IV. Ms. Supkis' cautions are noteworthy
Below is a chart of the Russell 2000 ETF, IWM, on December 26, 2007, poised and ready to unleash Elliott Wave 3 of 3 Down, it's been primed like a spring, and it went on the next day to wipe out 3% of wealth.
One can see how from the Santa Clause Rally, (the green trading area) generated by the Federal Reserve promising to provide liquidity to the banks as well as to provide an auction process, adversely affected those who were short.
Chart is that of Tim Knight: the Russell 2000 ETF, IWM from his article Boxing Day Blues.
V. Portfolio Risk And Reward Management Considerations In Short Selling
Knowing that December 26, 2007 was the defining turning point for trading out of stocks and investing in gold and compels one to short sell
I recommend applying a min-max principle to ones investment efforts: to mininize the risks and mazimize rewards in short selling, I suggest that one's shorts be allocated
25% to the emerging market, specifically the Brazilian stocks.
25% to municipal bonds.
25% to the 20 to 30 year U.S Treasuries.
25% to stock ETFs.
VI. Note: This page was originally created December 5, 2007; and was finalized on January 11, 2007.
WIDGETIZE