As you can see, gold has already come to or nearly to support in ratio to these items. The gold-silver ratio has likewise corrected quite a bit. This has happened more quickly than anticipated.
The upshot? Most of the bull potentials have already been expressed in the short term, in my opinion. Hence, as noted on the blog yesterday I have already begun to guard core gold miner positions with the existing junk bond bear (SJB), an outright short on SPY (in the preservation portfolio, where I can short) and SDS in the 'spec' port where I cannot. Also, ZSL (silver bear) has been bought back.
If gold finds support and rises again in ratio to these and other positively correlated (to the global economy) items, the contraction/deflation play will be back on. I would, in this scenario, sell anything not considered core and protect the rest of the positions. Gold can and probably would remain weak in the face of a deflationary episode so if you own it, know why and do not get emotional.
The USD looks like a candidate to resume its uptrend in and around here, with the theater in Europe providing some noise and delay.
We have an end of month and end of quarter upon us this week. Perhaps the markets will levitate into the Q end, but my plan continues to be one of scaling back into short positions. The plan for most people should be 'have cash and await opportunity'.
I would much rather be wrong in my caution and have helped prevent subscribers from 'making coin' then show an unbridled confidence and help them get ground up in any coming liquidations. The plan continues to be that October can be very challenging. We have had a good year thus far, on a relative basis. I believe it is best to let the clouds pass before leaning heavily to any bull side.
Just to keep making the point that capital preservation is JOB 1 and also the point that NFTRH is about much more than a weekly newsletter.
Edit (4:01) Current short/bear roster:
Regular brokerage (cap. preservation account)
Silver bear fund ZSL
Energy bear fund DUG
Junk Bond bear fund SBJ
IRA (NFTRH speculative portfolio)
SPX bear fund SDS
NDX bear fund QID
Energy bear fund DUG
Crude Oil bear fund SCO
Junk Bond bear fund SJB
I tried to get too cute on base metals and emerging markets. Will watch those, but also try not to get out of balance. My gold stocks got hammered of course. This is about protecting them more than anything else. I have never been a particularly good bear.
Oh and please... no recommendations above people. The cat is out of the bag now.