gold stocks versus the world

below are some charts of $GDM (the index underlying the GDX ETF) relative to world equity indexes -- Dow Jones World, S&P 500, MSCI Emerging Markets, and MSCI EAFE.

yesterday I bought in-the-money calls on GDX, thinking the miners are set up for a good countertrend bounce. (maybe to ~50.) now looking at these long-term ratios I see that potential even if (especially if?) the broader markets continue to falter. I don't even think bullion pricing matters much here.

realize, I've been skeptical of gold mining stocks for quite some time (somewhat justified by the relative price action lately), and after the forecasted rally I'm likely to move back into the neutral or bearish camp, but countertrend rallies make for good trades; they offer large percentage returns over short holding periods.

^ 19.03%

at the beginning of 2011 I started contributing to my company's 401(k) plan. first time I've ever participated in one of these schemes. In the beginning it frustrated me how few real options the fund offered. a number of different stock funds, but all of the general variety, no sector or industry specific funds, or anything like that. and then a handful of bond funds, but the only thing I really wanted -- a long duration treasury fund -- was, of course, not offered. so I just signed up to put everything in the Pimco Total Return fund.

so I left everything with Pimco until October 4, when I transfered it all into a small-cap fund. then I put it back into Pimco on October 24.

according to the retirement fund website my rate of return for the year (adjusting somehow for contributions) was 19.03 percent. meanwhile, the Pimco fund returned 3.64% for the year, and the stock market was flat at best.

by comparison, the best performing mutal fund (according to Bloomberg) gained 12.1 percent in 2011.

so my retirement account outperforms the best mutual funds and yet had exposure to stocks for all of three weeks in the entire year. call it luck, but to me it demonstrates that a disciplined approach to market timing may actually have a place in long-only, 401(k) type investment planning. thoughts?

who got a match?

Mr Market has been holding it for oh so long but looks just about ready to take a piss worthy of the history books. huge deterioration in breadth today, particularly considering the relatively mild percentage declines on the major indicies. one prerequisite I've had for a real bear market has always been a sustained underperformance of gold, and we've finally seen that. this isn't a call on gold, merely an observation. but an observation with great implication.

my bearishness grows for a whole host of reasons, which I may end up cataloging here, but aside from my puts on oil, I'm still on the sidelines. just listening to some good music for now.



no visible means of support and you have not seen nothin' yet
...everything's stuck together

$OSX:$OIX again

it is always dangerous to place too much emphasis on a single indicator, but the persistent deterioration of the $OSX:$OIX ratio cannot be ignored. plus, oil (along with all else) has been rebounding on paltry volume.

I bought deep-out-of-the-money puts on December 2012 WTI late last week. pretty speculative as a trade, but I prefer to view it as a hedge to our future income (my employment and Lisa's mineral rights).

VT - world stock ETF

pretty awesome triangle here. great trading setup, if you are clairvoyant. me, I like being all in cash, minus the Christmas gifts.

USO

so I got out of the USO short prematurely today. but I have been making solid gains by closing positions well before targets are reached.

right now the account sits completely in cash, waiting for the next 'reactionary' opportunity.

and by the way, I'd like to thank Gary at biiwii for establishing the initial crude oil upside target a while back.

Sony

you know, I had written a whole piece on why I bought Sony (SNE) but then never posted it. thought I would refine it more or whatever. then this morning I notice the stock up 4 or 5% and I'm like, "shit, I'll take that money!" and closed the trade. so now y'all will never know all the reasons that SNE is (was?) a great buy for the holidays.

the drawback in closing out the position is that I no longer have any long positions to balance my short of USO, the crude oil ETF. but at least I have more cash available to take advantage of the next opportunity.