A Risk Manager Speaks

carriageOtto at IKN heads upped me to an exchange he had with a subscriber (who, from what I gather is a former subscriber to NFTRH).  I want to highlight and parse their interaction here since I became intimately involved in it.

Otto wrote a post about his views on mining stocks (to his credit, he has been firm on his bullish view on the sector, but has never been anything even remotely like the perma pompoms now holding sway over transfixed gold bugs):

The only thing you need to know about the mining stocks bull market

This prompted a response by a former NFTRH subscriber or NFTRH.com reader and an update to the post by Otto:

UPDATE: Reader T mails in with this (very slightly edited to brush up and a link added, but really as-is):

“I like the chart you just put up on IKN….nuff said! The hardcore technicians are still waiting for confirmation of the bull market in PM mining shares. I stopped reading Gary T(anashian of Notes From The Rabbit Hole) a few months back.  I know everyone’s situation is different but is he still underinvested and waiting for a sizable correction after the run up from Dec/Jan? He did help me keep my port mostly intact during the bear, but aren’t the technicians going to be left in the dust during the bull phase, in your humble opinion?”

I have noticed all too much of this “left in the dust” or ‘train is leaving the station’ talk in the gold “community” of late.  These kinds of ideas will always be entrenched at turning points.  It doesn’t mean they have to be in place, but that they will always be in place at significant turns.

Otto responded with some much appreciated, Gary-friendly comments but here I would like to add a few more, which are not so much Gary-friendly as they are just… Gary.

First off, I am not a hard core technician.  I mean, do you think I write all those ‘Gold’s Macrocosm’ posts to show how I can take a cute image (the solar system) and make cute little fundamental associations with it?  I wrote those posts in order for NFTRH and to a degree, NFTRH.com to be the first on the spot to a new fundamentally backed bull phase in the gold sector.  Period.  Nowhere in the Macrocosm was there a planet called ‘Technical Analysis’.  Here is the Macrocosm post from February, just before the best of the gold stock up phase kicked in:  Macrocosm: The Planets Align.

Secondly, I have not been under invested.  I have been invested to the point where both my personal situation and market views dictate (and as noted to subscribers, trading this thing until I can get some good gold bug pukage).  I do not run some hypothetical portfolio.  I show my own real life situation in NFTRH and in real life I am not pumping people into gold stocks because I am not pumping myself into them.  As it stands now I am a little over 30% to the positive side in 2016 with funds I have chosen to put at risk (not including a 14 year old and counting gold position).

I did not call a “bull market” in gold or gold stocks at or even near the bottom because there simply was not a fully aligned macro-fundamental backdrop, nor a confirmed technical situation.  What’s more, during the bear market days when NFTRH was imploring people to manage risk and helping to preserve their capital I often wrote things along the lines of ‘NFTRH will not be the first to call a new bull market because that can only be verified in hindsight.  We will leave it to those who called, called and called ‘bull!’ some more all through the bear market to finally be right and take the glory’.

On Tuesday, when the bugz were good ‘n bullish, I wrote this post including…

“Over in precious metals land… yay, gold bugs who waited years to finally be right are having their day!  I am long there (quality miners) and I am short there (vs. silver), I have a lot of cash there and I really don’t care there.  The thing is running on momentum with only the dumbest of the dumb bidding higher.  HUI’s got a target of 251 to attain, after all, and somebody’s got to get it there I guess.”

251 is the next technical target for HUI.  But guess what folks, lose 210 and especially 200 and that target is out the window.  That’s what “hard core” TA’s do, you know.  They make grand statements and then they err… revise.  I am not a hard core TA.  I use charts to tell me one thing and fundamentals to tell me another.  Often they tell me the same thing.  Like for instance, if HUI follows through to the downside they will be be telling me that the dumbest of the dumb, the inflationist gold bugs, are puking [edit] and in Q4 2008 they told me – in a rare instance – to pound the table ‘buy buy buy!’

Any real bull market will give plenty of opportunity to get more heavily involved.  That opportunity comes when the perma-promoters and their followers suddenly realize that the carriage they took to the ball has turned back into a pumpkin.  Wash, rinse… repeat.

Now if you will excuse me, I have to go cover my shorts on silver.

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