Subtitle: Otto & Gary: A Love Story, Part 2
With friends like this... ?
Actually, what I appreciate about Otto is that in my view he can be something of a surly prick; a malcontent who does not suffer stupidity or worse, evil making, well. He is also a fair bit judgmental. Why do I like the guy and consider myself lucky to have 'met' and become friends with him? Well, it is not because of his stock picks, because while some of those have been downright excellent, I have means to do my own stock and market (ETF) picking. This is a casino after all and I do not take these stock games overly seriously, when real life value is what is really important.
I like him and understand him because I am all of the descriptors noted above; generally malcontented, prickly, intolerant of sloth and stupidity and pretty judgmental. This in spite of my many faults, so yeh, that last one is something I continually try to work on.
That's the setup. Otto and I 'met' several years ago and from my perspective at least, felt a kindred spirit kind of thing in trying to promote integrity among the dung heap that is the greater financial market news, commentary and analysis sphere. He came from the point of view of the analyst of individual stocks and I from my charts and a macro viewpoint.
So speaking of charts, Otto opened up a subject yesterday with his little snipe at me, the gold-silver ratio and charting in general. I think he is way off base because he misses the key point that just because something is presented in the form of a chart, it does not mean that it does not have fundamental merit. Quite the contrary.
I could generally give fuck all about the stocks of individual companies - really, if it came down to it and I did not have the confidence in my core holdings that I do, I'd just by GDX and/or other ETFs or Closed End Funds of any sectors or markets in which I am interested - because that is what I have done for the majority of my working life, dealt with companies. I come from the real world, doing real business, interacting with real people. In comparison, dealing with the stocks associated with these companies is an abstraction.
And standard technical analysis helps quiet the noise in this abstract world. Yes, I understand that going deep into balance sheets, studying a company's assets and with particular respect to Otto, vetting management are critical to successful investment in individual companies. But again, my thing is the macro; get it right and then go forth and cast your investments from that analysis.
So every time my pal casts me as a simple 'charty twiddler' (really, 'chart twittler' is my term for what I do) and exhibits a dismissive attitude, I think 'hey, to each his own'. I would say that at least 60% of the charts I do are directly related to macro economic fundamentals, having squat to do with standard TA. Otto does a lot of reading, including my work. In fact, he knows that there is a lot more there than just charts and I actually think he just likes to wind me up once in a while. That's fine. But I do not care for the easy 'chart guy' label, if it omits all the complex work that I actually do.
My newsletter is all about macro fundamentals, and to a degree the blog hints that way as well. When I am talking about gold's ratio to silver for instance, I am talking about - hat tip to Bob Hoye - credit spreads on the global economy and the availability of market liquidity. IKN has judged that the GSR means nothing right now, but I am doing my job in highlighting its status and trying to define what this rally - which NFTRH definitely saw coming and made note of for its subscribers - is. The conclusion is that the current state of the GSR, if it remains within the parameters noted yesterday, implies that it is a counter trend rally. When the GSR and other tools indicate otherwise, as happened in 2010, NFTRH will be on that.
Market management is really pretty easy if you use the correct tools to take your hopes, wants and biases out of the equation. I will let others chase around every god damn fact flying around out there in the macro and simply distill the messages of what I consider the most important tools to maintain a living, breathing and ongoing analytical dialogue. Au-Ag, Au-Cu, Au-Stock Market, junk bonds - investment grade bonds and of course the state of US Treasury bonds are all ECONOMIC indicators and macro fundamental tools. They keep me on the right side, and that includes during times when I may be on an incorrect course, because these things tell me early enough to adjust.
But standard TA adds yet another layer to the work. For instance, I have certain ratio tools (highlighted weekly in NFTRH) that have told me that gold mining fundamentals are improving and NFTRH163 showed in detail why 2011 is not like 2008 with respect to the gold-silver ratio and took pains to illustrate why the sector is considered bullish. Again, I could not care less about what company XYZ is drilling in the ground. I want to know why I am investing where I am investing with respect to the sector and the macro backdrop that empowers it.
Anyway, as to standard TA, this simple chart showed a parameter that NFTRH has been working with for many, many months. Premier gold stocks are above an epic breakout point and in stark out performance mode to the broad SPX (lower panel). While the process can be painful, NFTRH has provided analysis for its subscribers every step of the way that has allowed us to remain right sided throughout the turmoil and more importantly, know WHY we are on that side.
As noted last week:
"Here again, I cannot apologize for being bullish just as I would not for being bearish if
need be. We have an HUI chart that is above support and gold bug sentiment stinks.
That is usually a bullish setup. We must watch for the SPX to hold support at around
1120+. If the broad market heads down in earnest, the gold stocks will not be likely
to fight the outgoing tide.
We have plotted 520 and then the 480 to 500 zone as possible HUI supports. The gold
miners do not need a strong broad market rally in order to rally. They simply need the
broad construct to stop going down relentlessly."
Keep in mind that this was written as things were supposedly falling apart amidst the macro noise. People were mailing me about deflation and Prechter and derivative meltdowns and the imposition of US Marshall Law. In other words, all the nasty shit that comes down every time fear is maxed. I will let the info and fact chasers do their thing and I will continue to filter, weigh, measure and just get this casino right or when needed, be very quick to adjust to the correct course.
Screed - inspired by the dismissive attitude of a friend - ends now.
http://www.biiwii.blogspot.com
http://www.biiwii.com
With friends like this... ?
Actually, what I appreciate about Otto is that in my view he can be something of a surly prick; a malcontent who does not suffer stupidity or worse, evil making, well. He is also a fair bit judgmental. Why do I like the guy and consider myself lucky to have 'met' and become friends with him? Well, it is not because of his stock picks, because while some of those have been downright excellent, I have means to do my own stock and market (ETF) picking. This is a casino after all and I do not take these stock games overly seriously, when real life value is what is really important.
I like him and understand him because I am all of the descriptors noted above; generally malcontented, prickly, intolerant of sloth and stupidity and pretty judgmental. This in spite of my many faults, so yeh, that last one is something I continually try to work on.
That's the setup. Otto and I 'met' several years ago and from my perspective at least, felt a kindred spirit kind of thing in trying to promote integrity among the dung heap that is the greater financial market news, commentary and analysis sphere. He came from the point of view of the analyst of individual stocks and I from my charts and a macro viewpoint.
So speaking of charts, Otto opened up a subject yesterday with his little snipe at me, the gold-silver ratio and charting in general. I think he is way off base because he misses the key point that just because something is presented in the form of a chart, it does not mean that it does not have fundamental merit. Quite the contrary.
I could generally give fuck all about the stocks of individual companies - really, if it came down to it and I did not have the confidence in my core holdings that I do, I'd just by GDX and/or other ETFs or Closed End Funds of any sectors or markets in which I am interested - because that is what I have done for the majority of my working life, dealt with companies. I come from the real world, doing real business, interacting with real people. In comparison, dealing with the stocks associated with these companies is an abstraction.
And standard technical analysis helps quiet the noise in this abstract world. Yes, I understand that going deep into balance sheets, studying a company's assets and with particular respect to Otto, vetting management are critical to successful investment in individual companies. But again, my thing is the macro; get it right and then go forth and cast your investments from that analysis.
So every time my pal casts me as a simple 'charty twiddler' (really, 'chart twittler' is my term for what I do) and exhibits a dismissive attitude, I think 'hey, to each his own'. I would say that at least 60% of the charts I do are directly related to macro economic fundamentals, having squat to do with standard TA. Otto does a lot of reading, including my work. In fact, he knows that there is a lot more there than just charts and I actually think he just likes to wind me up once in a while. That's fine. But I do not care for the easy 'chart guy' label, if it omits all the complex work that I actually do.
My newsletter is all about macro fundamentals, and to a degree the blog hints that way as well. When I am talking about gold's ratio to silver for instance, I am talking about - hat tip to Bob Hoye - credit spreads on the global economy and the availability of market liquidity. IKN has judged that the GSR means nothing right now, but I am doing my job in highlighting its status and trying to define what this rally - which NFTRH definitely saw coming and made note of for its subscribers - is. The conclusion is that the current state of the GSR, if it remains within the parameters noted yesterday, implies that it is a counter trend rally. When the GSR and other tools indicate otherwise, as happened in 2010, NFTRH will be on that.
Market management is really pretty easy if you use the correct tools to take your hopes, wants and biases out of the equation. I will let others chase around every god damn fact flying around out there in the macro and simply distill the messages of what I consider the most important tools to maintain a living, breathing and ongoing analytical dialogue. Au-Ag, Au-Cu, Au-Stock Market, junk bonds - investment grade bonds and of course the state of US Treasury bonds are all ECONOMIC indicators and macro fundamental tools. They keep me on the right side, and that includes during times when I may be on an incorrect course, because these things tell me early enough to adjust.
But standard TA adds yet another layer to the work. For instance, I have certain ratio tools (highlighted weekly in NFTRH) that have told me that gold mining fundamentals are improving and NFTRH163 showed in detail why 2011 is not like 2008 with respect to the gold-silver ratio and took pains to illustrate why the sector is considered bullish. Again, I could not care less about what company XYZ is drilling in the ground. I want to know why I am investing where I am investing with respect to the sector and the macro backdrop that empowers it.
Anyway, as to standard TA, this simple chart showed a parameter that NFTRH has been working with for many, many months. Premier gold stocks are above an epic breakout point and in stark out performance mode to the broad SPX (lower panel). While the process can be painful, NFTRH has provided analysis for its subscribers every step of the way that has allowed us to remain right sided throughout the turmoil and more importantly, know WHY we are on that side.
As noted last week:
"Here again, I cannot apologize for being bullish just as I would not for being bearish if
need be. We have an HUI chart that is above support and gold bug sentiment stinks.
That is usually a bullish setup. We must watch for the SPX to hold support at around
1120+. If the broad market heads down in earnest, the gold stocks will not be likely
to fight the outgoing tide.
We have plotted 520 and then the 480 to 500 zone as possible HUI supports. The gold
miners do not need a strong broad market rally in order to rally. They simply need the
broad construct to stop going down relentlessly."
Keep in mind that this was written as things were supposedly falling apart amidst the macro noise. People were mailing me about deflation and Prechter and derivative meltdowns and the imposition of US Marshall Law. In other words, all the nasty shit that comes down every time fear is maxed. I will let the info and fact chasers do their thing and I will continue to filter, weigh, measure and just get this casino right or when needed, be very quick to adjust to the correct course.
Screed - inspired by the dismissive attitude of a friend - ends now.
http://www.biiwii.blogspot.com
http://www.biiwii.com
A good post
ReplyDeleteGary,
ReplyDeletehe is correct in saying:
"It's charty twiddling that cannot and will never be able to predict the type of CenBank move we saw yesterday...y'know, the stuff that really matters."
as you can’t really predict it, but, the second best thing to predicting CenBank moves that totally distort the markets is to manage such moves without getting burned in the process, which is the thing you do so well.
Everybody is pissed off when being so powerless because some morons are given a total control of the printing press and it’s hard to remain calm.
I thought you'd appreciate it you prickly bastard.
ReplyDeleteJovan, I agree. The guru prediction people can have that territory. If we can just manage to well... manage these events I think that is a relative 'win'.
ReplyDeleteFor a sundry of reasons I no longer have the time to keep up with the markets like I used to. Back when I did, I took more of a fundamental approach and newbie technical analysis(TA) approach. Didn't work out so good for me. I've seen it all over the internet: a person can see what they want to see and will impose this filter on both charting AND fundamental analysis.
ReplyDeletePersonally, I don't think this was the big save by central banks, even the squid doesn't think so. I think it buys a few months at the most. Can't imagine the big guns coming out w/o a scare, but who knows. Am ready for whatever comes!
Shell Game sez
ReplyDelete"...a person can see what they want to see and will impose this filter on both charting AND fundamental analysis. ."
I absolutely agree. This is the point where Gary and I meet, as it's not the chart (or the balance sheet, but let's stick with the theme) that decides whether somebody makes or loses money on a trade, it's the way in which the chart is interpreted. This is why people pay Analyst XYZ umpteen squillion dollars a year, while analyst ABC gets paid a pittance....basically because analyst XYZ is better at guessing the direction of the market, or a compnay stock price, or the price of nickel...or whatever.
I choose the word "guessing" carefully too, as that's exactly what it is. Now, maybe one person's guesses are consistently better out of sheer luck, or maybe it's due to hard work and study, or maybe it's a knack s/he has....but it's still guessing, be the guess eventually correct or not.
The markets are not objective, never have been and never will be. Also, the markets will always reward people like Gary because he gets them right more than he gets them wrong.
Why do you choose to sidestep Gold:Oil. I feel this is just as powerful as an indicator as any. Comparing GOR to spot gold and spot oil charts seems to clearly indicate that gold is set to outperform oil. Perhaps a subject for future consideration. Cheers
ReplyDeletePamp, I do not choose to side step it. As noted, the blog is not comprehensive analysis. It is free and can be used FWIW. Gold-Oil is one of the keys to the gold mining investment case and is reviewed in NFTRH frequently.
ReplyDeleteI have been studying technicals extremely hard for about 3 years and have found them to be very useful - the main reason is I would take trades before that I should have run screaming from- everything was pointing down etc. The other main benefaction is that when the market is ready to take a crap for 11 months I can now see why that part of the cycle is coming which takes a lot of the stress out of things on a macro scale- I can realize we are all going to get skinned by the big boys so either learn to short or just sit back and watch......
ReplyDelete