Yesterday the werewolves we howling and as I remarked previously, for some odd reason actually a significant event for precious metal trades.
Closed my short silver (ZSL) paper for a 50% profit which was quite pleasurable. While I do think silver has more downside, this may not actually materialize given market action. Also with current gold prices I put silver fair value at around $35. So I’d say I milked that as much as safely possible. Part of the problem here is the euro is not declining as much as one would think it should. I am no currency expert except perhaps with the Swiss franc, and that’s primarily because of its (until recent SNB intervention) correlation with gold, so I cannot comment intelligently on euro movement, which is unfortunate because silver has a very clear relation with the euro. Also seasonal patterns are starting to turn against the short trade.
Closed my TZA for a 10% profit, again very pleasant. I see the RUT in a downward or sideways movement, but recent parabolic action was surprising and so I see quite some risk in a short position. As mentioned before, I anticipate a real bull to erupt late May or early June and am content to wait until then, when I will buy triple-weighted ETFs most likely.
I have been interested in rare earth producers. This is partly to diversify myself. You ask me what I KNOW and that would be gold, silver, and the RUT. Some others would be GE and the Swiss Franc. Looking to diversify.
Regarding rare earths. First of all a big part of the interest was the presidential order on 3-13-12. Second is the rising demand for rare earths particularly for batteries and etc, a demand which we can anticipate growing. Third China has made it clear they’re going to keep most of their rare earths and this means domestic production is important (hence the executive order). Now, the leader is Molycorp. The ETF REMX is not a good representative of rare earths and so MCP is my benchmark. First, rare earths have been in a big downtrend and this is not showing signs of reversing. Second, I am quite interested in Great Western Minerals (GWMGF) which is the only company firmly in supply, refinement, and production. However they have issued convertible bonds which are holding down the share price. Talk of political instability in South Africa (where they have a mine) is nonsense, South Africa is stable (I lived there for a while and compared to most places on earth, RSA is stable). LYSDY has a poor business track record and are having trouble with their Malaysian project. QREDF and UURAF are both interesting as speculative plays and are under accumulation. With all the above mentioned, it’s important to note that they have varying degrees of positive correlation with the SPX, and the SPX may be in a short term correction. Finally, rare earth prices are not transparent or easy like with silver or gold. I would prefer to invest in the rare earths themselves rather than mining companies, for the same reason that I don’t invest in silver or gold mining companies, namely, they are subject to a slew of other factors such as political risk, work unrest, environmental regulation, etc etc. I prefer to just deal in commodities themselves or a broad derivative such as the RUT, which is which it’s unfortunate that REMX is not a good basket ETF.
