The writer of this article is firmly of the view that HUI is manipulated (e.g. "In fact, now that the GOVERNMENT COMPUTERS have taken over, algorithms are built into the market ensuring that the HUI falls anytime the Dow is falling (by at least a 2x rate), any time oil is falling, any time copper is falling, any time the Euro is falling, etc., etc., etc..")
He also takes a shot at you (but not by name).
Although I would understand if you don't want to take the time to respond, I would be very interested to hear any comment you might have.
Here is part of the article where he disagrees with your ratio trade view:
"Before ending this RANT, I have one more topic to address, one that has drawn my ire for years now, but has finally motivated me to write (much as my Warren Buffet RANT last week). And that topic is the ridiculous notion that "hedge funds" are buying gold and silver (likely via GLD and SLV) and shorting mining shares. I hope I don't ruffle any feather with this, but that has got to be the most ridiculous thing I've ever heard, for many reasons. This silly hypothesis, which seems to gain traction in PM land every time the PM stocks are hit, is a perfect example of "analysts" refusing to address the most important issue in the market - MANIPULATION. Thus, they feel the need to make up silly theories to explain why the market did what it did - in other words, MARKET ACTION MAKES COMMENTARY!
Let's think about this a bit. To start, who are these "hedge funds", given that PM's still represent only 1% of all global financial assets, and are they really powerful enough to take down the entire PM mining sector for weeks (or months) at a time? Really?
If so, I think I'd have heard by now of these amazing hedge funds that are making so much money at the expense of 99% of PM investors. If, for instance, Silver Wheaton is trading 17 million shares, or $750 million a day in the U.S. and Canada, in an environment of SOARING silver prices, am I really to believe that some "hedge funds" are selling that much stock EVERY DAY in a frenzy of shorting, not to mention two dozen other major PM stocks?
And in all my years of investing in commodity markets (I was an oilfield service analyst for nine years prior to my nine years in PMs), I have never heard of such a ludicrous concept of a trade as shorting commodity stocks against the commodity. Oilfield service stocks have outperformed the price of oil since the beginning of the oil bull market in 1995, and I'll bet anything that copper and agricultural stocks have outperformed the underlying commodities, respectively, in their bull markets as well."
It is only ridiculous to him because he does not understand how to trade spreads. I make my living doing this and know the trade when I see it. It is a tool of professionals to limit risk while opening profit potential. Contrary to his assertions that he "never heard shorting commodity stocks against the commodity, it is done all the time.
Not only that, in the actual commodity markets themselves, the same commodity is spread against itself by those who know and understand basis trades and the distinction between new crop and old crop. There are also trades done between various cattle and hog months, and the list goes on and on... I wouldn't concern myself too much with this. Some guys just have not been around the markets long enough to understand anything besides a basic long or short position.
Some of us right now have been trading the natural gas markets and spreading it off against the gas producers. It's been a terrific trade only in this case we have been buying the shares and selling the futures.
One can accept the fact that the government constantly interferes with the gold market without having to attribute everything to manipulation. Such a blanket statement hurts the cause of truth as it labels those of us who accept the basic premise of official sector interference as nut jobs if we are looking for manipulation under every rock and in every cranny.
Don't worry about it - hopefully the writer will survive in the markets long enough to learn how foolish and inexperienced he is.
Dan,
ReplyDeletehttp://www.silverbearcafe.com/private/04.11/occam.html
The writer of this article is firmly of the view that HUI is manipulated (e.g. "In fact, now that the GOVERNMENT COMPUTERS have taken over, algorithms are built into the market ensuring that the HUI falls anytime the Dow is falling (by at least a 2x rate), any time oil is falling, any time copper is falling, any time the Euro is falling, etc., etc., etc..")
He also takes a shot at you (but not by name).
Although I would understand if you don't want to take the time to respond, I would be very interested to hear any comment you might have.
Here is part of the article where he disagrees with your ratio trade view:
ReplyDelete"Before ending this RANT, I have one more topic to address, one that has drawn my ire for years now, but has finally motivated me to write (much as my Warren Buffet RANT last week). And that topic is the ridiculous notion that "hedge funds" are buying gold and silver (likely via GLD and SLV) and shorting mining shares. I hope I don't ruffle any feather with this, but that has got to be the most ridiculous thing I've ever heard, for many reasons. This silly hypothesis, which seems to gain traction in PM land every time the PM stocks are hit, is a perfect example of "analysts" refusing to address the most important issue in the market - MANIPULATION. Thus, they feel the need to make up silly theories to explain why the market did what it did - in other words, MARKET ACTION MAKES COMMENTARY!
Let's think about this a bit. To start, who are these "hedge funds", given that PM's still represent only 1% of all global financial assets, and are they really powerful enough to take down the entire PM mining sector for weeks (or months) at a time? Really?
If so, I think I'd have heard by now of these amazing hedge funds that are making so much money at the expense of 99% of PM investors. If, for instance, Silver Wheaton is trading 17 million shares, or $750 million a day in the U.S. and Canada, in an environment of SOARING silver prices, am I really to believe that some "hedge funds" are selling that much stock EVERY DAY in a frenzy of shorting, not to mention two dozen other major PM stocks?
And in all my years of investing in commodity markets (I was an oilfield service analyst for nine years prior to my nine years in PMs), I have never heard of such a ludicrous concept of a trade as shorting commodity stocks against the commodity. Oilfield service stocks have outperformed the price of oil since the beginning of the oil bull market in 1995, and I'll bet anything that copper and agricultural stocks have outperformed the underlying commodities, respectively, in their bull markets as well."
Turdle;
ReplyDeleteIt is only ridiculous to him because he does not understand how to trade spreads. I make my living doing this and know the trade when I see it. It is a tool of professionals to limit risk while opening profit potential. Contrary to his assertions that he "never heard shorting commodity stocks against the commodity, it is done all the time.
Not only that, in the actual commodity markets themselves, the same commodity is spread against itself by those who know and understand basis trades and the distinction between new crop and old crop. There are also trades done between various cattle and hog months, and the list goes on and on... I wouldn't concern myself too much with this. Some guys just have not been around the markets long enough to understand anything besides a basic long or short position.
Some of us right now have been trading the natural gas markets and spreading it off against the gas producers. It's been a terrific trade only in this case we have been buying the shares and selling the futures.
One can accept the fact that the government constantly interferes with the gold market without having to attribute everything to manipulation. Such a blanket statement hurts the cause of truth as it labels those of us who accept the basic premise of official sector interference as nut jobs if we are looking for manipulation under every rock and in every cranny.
Don't worry about it - hopefully the writer will survive in the markets long enough to learn how foolish and inexperienced he is.
Thank you very much Dan. I knew you would be able to dismantle his "argument".
ReplyDelete