LEON's weekly COT report analysis

[Ronnie 666]

B

I cannot understand your idea that if it goes up and your short position is destroyed its not a problem because it will go down again. That is the strangest comment I have heard.

I'm not sure how to explain it any clearer but let me try. If spot is at $15US and the long term expectation is $12US and I think we are heading for a dip and I want to make money on that dip I take a short position. If my timing is right and the dip happens I make money. If my timing is wrong and spot goes up, because I am confident that that the bottom is yet to come, all I have to do is wait to close my position at a time when I don't lose any money, i.e. the safety net. Hope this clears things up...

I understand but there are 2 issues

1. Costs to keep your short position if prices move up - in the short or intermediate term

2. You conviction that prices will move down to $12 is not fact at this time, only supposition. What happens if they turn around and rally and we never see $12 ? How much is your short position worth?,

In reality you are making a bet no different to a casino.

 

[Ronnie 666]

I cannot understand your idea that if it goes up and your short position is destroyed its not a problem because it will go down again. That is the strangest comment I have heard.

I'm not sure how to explain it any clearer but let me try. If spot is at $15US and the long term expectation is $12US and I think we are heading for a dip and I want to make money on that dip I take a short position. If my timing is right and the dip happens I make money. If my timing is wrong and spot goes up, because I am confident that that the bottom is yet to come, all I have to do is wait to close my position at a time when I don't lose any money, i.e. the safety net. Hope this clears things up...

The notion of "it doesn't lose value until you sell it" is present. I think what Niveka is talking about is called hedging your bets. So in a sideways market you are making money. Ronnie's version is buy at certain time intervals and hold until the time is right, which is also a form of gambling, since you need to know what to buy. Some people don't understand that you can use paper to hedge your physical to make money in any direction and make even more on the way up. And a short protects the floor on the way down.

We saw a 3rdor 4th test of $16 yesterday before this drop down. Sucks, but it happens. I also believe Ronnie when he says phsyical won't go below a certain point as premiums will take that up or retail supply is bought up. Ronnie paper can be bought for spot unlike physical. Unless you think the actual market is going to go away and you are an actual investor, paper CAN hold value as well, maybe not as much as physical, but its the only place you can buy PM for spot ALL the time.

Yes you pay spot but you are not buying metal. You are buying a paper derivative which is as far removed from the metal as if you were buying peanuts. You also have counterparty risk and a promise to pay. As I already pointed out holding your short position if prices move up is not a free arrangement. In that situation when do you close the position ? Please understand I have been in these markets for over a decade and understand what you are saying. The issue is that buying a short position because you think we are going lower is only a bet. It has nothing to do with buying metal. Yes you can use paper derivatives to hedge your metal purchases. Again the same applies. It is just a bet and while I understand bullion dealers protecting their purchases it is less clear why long term stackers need to get involved in hedging with paper shorts?

 

[Silverpv]

Yes you pay spot but you are not buying metal. You are buying a paper derivative which is as far removed from the metal as if you were buying peanuts. You also have counterparty risk and a promise to pay. As I already pointed out holding your short position if prices move up is not a free arrangement. In that situation when do you close the position ? Please understand I have been in these markets for over a decade and understand what you are saying. The issue is that buying a short position because you think we are going lower is only a bet. It has nothing to do with buying metal. Yes you can use paper derivatives to hedge your metal purchases. Again the same applies. It is just a bet and while I understand bullion dealers protecting their purchases it is less clear why long term stackers need to get involved in hedging with paper shorts?

While I understand your reasoning. Isn't buying physical a bet that the currency will fail? After all, you cannot use said currency right now. I look at paper trading as another layer stacking. If you are only stacking PM's and not stocks/bonds/real estate, then I understand your position. I never said it was free, its insurance. Buying a short with your physical creates a spread. There has to be a target to close the short if it fails or if its reached. Personally, I don't short, but all things considered I'm considering it. If you use online banking or online trading, its all the same thing. If you use cash for everything, no problem. There's risk in physical and in the market. The market will rise some day and the comex will rise along with it. I don't know about you, but i'm buying some physical around the paper price and selling at the paper price. Only when there's a disconnect, I stop. Otherwise, even though the ratio is out of whack, people still buy and sell according to that figure. I don't see that going away, like physical, paper will go up as well. which there are more buyers of.

I.E. which is Easier to buy&sell $100k gld ETF or physical bullion? Granted us small people don't deal with those kinda large numbers, but it is easy to move up or down and exit. The same cannot be said about the physical market.

 

[Ronnie 666]

Yes you pay spot but you are not buying metal. You are buying a paper derivative which is as far removed from the metal as if you were buying peanuts. You also have counterparty risk and a promise to pay. As I already pointed out holding your short position if prices move up is not a free arrangement. In that situation when do you close the position ? Please understand I have been in these markets for over a decade and understand what you are saying. The issue is that buying a short position because you think we are going lower is only a bet. It has nothing to do with buying metal. Yes you can use paper derivatives to hedge your metal purchases. Again the same applies. It is just a bet and while I understand bullion dealers protecting their purchases it is less clear why long term stackers need to get involved in hedging with paper shorts?

While I understand your reasoning. Isn't buying physical a bet that the currency will fail? After all, you cannot use said currency right now. I look at paper trading as another layer stacking. If you are only stacking PM's and not stocks/bonds/real estate, then I understand your position. I never said it was free, its insurance. Buying a short with your physical creates a spread. There has to be a target to close the short if it fails or if its reached. Personally, I don't short, but all things considered I'm considering it. If you use online banking or online trading, its all the same thing. If you use cash for everything, no problem. There's risk in physical and in the market. The market will rise some day and the comex will rise along with it. I don't know about you, but i'm buying some physical around the paper price and selling at the paper price. Only when there's a disconnect, I stop. Otherwise, even though the ratio is out of whack, people still buy and sell according to that figure. I don't see that going away, like physical, paper will go up as well. which there are more buyers of.

I.E. which is Easier to buy&sell $100k gld ETF or physical bullion? Granted us small people don't deal with those kinda large numbers, but it is easy to move up or down and exit. The same cannot be said about the physical market.

Likewise I understand what you are saying. It does depend on your timeline. It is difficult to put myself into the shoes of a first time PM buyer. If you have been buying physical coins over the last 15+ years in Au$ you are way ahead. One can argue that there have been other possibly better investments, but not to many. As such I am not concerned if metal prices dip 5% in the short term and don't feel compelled to hedge against that move. It is different if you bought all your metal in silver 100oz bars at the peak when they were $4000+ each. In that situation yes hedging would have been good. Now its a different world. However, if you had bought PM lunar dragons instead your losses would be very small. That is why you need to diversify your metal purchases across the 4 PM (Au,Ag,Pt,Pd) and also across bars and coins. Try and identify which coins are going to attract good premiums in the future. Its not that hard and gives you a better hedge than paper derivatives (in my opinion)

With regards currency failing - yes it is failing all the time. Again you need to step back and look over the past 5-10-20 years and tell me what has fallen in price. I am not talking about technology but real things needed for living. Food, shelter, energy, health, insurance, education all up ++ ! I don't need to wait for a sudden crash in the value of the AU$ or some doomsday event, it is going on all the time. 15 years ago when you drew cash from an ATM you got $20 and $10. Now its all $50. Soon $100 ? Devaluation is a slow insidious process and it only becomes obvious as the end approaches.

 

[Silverpv]

Likewise I understand what you are saying. It does depend on your timeline. It is difficult to put myself into the shoes of a first time PM buyer. If you have been buying physical coins over the last 15+ years in Au$ you are way ahead. One can argue that there have been other possibly better investments, but not to many. As such I am not concerned if metal prices dip 5% in the short term and don't feel compelled to hedge against that move. It is different if you bought all your metal in silver 100oz bars at the peak when they were $4000+ each. In that situation yes hedging would have been good. Now its a different world. However, if you had bought PM lunar dragons instead your losses would be very small. That is why you need to diversify your metal purchases across the 4 PM (Au,Ag,Pt,Pd) and also across bars and coins. Try and identify which coins are going to attract good premiums in the future. Its not that hard and gives you a better hedge than paper derivatives (in my opinion)

With regards currency failing - yes it is failing all the time. Again you need to step back and look over the past 5-10-20 years and tell me what has fallen in price. I am not talking about technology but real things needed for living. Food, shelter, energy, health, insurance, education all up ++ ! I don't need to wait for a sudden crash in the value of the AU$ or some doomsday event, it is going on all the time. 15 years ago when you drew cash from an ATM you got $20 and $10. Now its all $50. Soon $100 ? Devaluation is a slow insidious process and it only becomes obvious as the end approaches.

Understood. As a new buyer, it is a different world right now. Also, I'm in the US which is also different. Crazy times... I agree with you on devaluation which is what brought me here in the first place. What a perfect day to go Back to the Future!! Cheers. I can't argue with your logic, it make sense since you are in a much lower price point but very different for me and newbies. Keep Stacking Sir!

 

[Niveka]

I'm not sure how to explain it any clearer but let me try. If spot is at $15US and the long term expectation is $12US and I think we are heading for a dip and I want to make money on that dip I take a short position. If my timing is right and the dip happens I make money. If my timing is wrong and spot goes up, because I am confident that that the bottom is yet to come, all I have to do is wait to close my position at a time when I don't lose any money, i.e. the safety net. Hope this clears things up...

The notion of "it doesn't lose value until you sell it" is present. I think what Niveka is talking about is called hedging your bets. So in a sideways market you are making money. Ronnie's version is buy at certain time intervals and hold until the time is right, which is also a form of gambling, since you need to know what to buy. Some people don't understand that you can use paper to hedge your physical to make money in any direction and make even more on the way up. And a short protects the floor on the way down.

We saw a 3rdor 4th test of $16 yesterday before this drop down. Sucks, but it happens. I also believe Ronnie when he says phsyical won't go below a certain point as premiums will take that up or retail supply is bought up. Ronnie paper can be bought for spot unlike physical. Unless you think the actual market is going to go away and you are an actual investor, paper CAN hold value as well, maybe not as much as physical, but its the only place you can buy PM for spot ALL the time.

Yes you pay spot but you are not buying metal. You are buying a paper derivative which is as far removed from the metal as if you were buying peanuts. You also have counterparty risk and a promise to pay. As I already pointed out holding your short position if prices move up is not a free arrangement. In that situation when do you close the position ? Please understand I have been in these markets for over a decade and understand what you are saying. The issue is that buying a short position because you think we are going lower is only a bet. It has nothing to do with buying metal. Yes you can use paper derivatives to hedge your metal purchases. Again the same applies. It is just a bet and while I understand bullion dealers protecting their purchases it is less clear why long term stackers need to get involved in hedging with paper shorts?

Ronnie, you really couldn't be more wrong when you say it has nothing to do with buying physical metal. The last dip gave, yes *gave* me a monster box of ASE's. With all due respect, you don't know what you are talking about.

 

[Ronnie 666]

Niveka since buying gold beginning at $300/ oz how many monster boxes have I got for free lol. Unlike you my monster box equivalents exist in real form not a number in my head. When prices suddenly turn where will your boxes be ? I suggest you have no idea what you are talking about. By the way I don't buy monster boxes, there are far better items to buy at lower prices and with greater premiums in the future. Nice to see newbies in the market who know so much.

 

[Niveka]

Niveka since buying gold beginning at $300/ oz how many monster boxes have I got for free lol. Unlike you my monster box equivalents exist in real form not a number in my head. When prices suddenly turn where will your boxes be ? I suggest you have no idea what you are talking about. By the way I don't buy monster boxes, there are far better items to buy at lower prices and with greater premiums in the future. Nice to see newbies in the market who know so much.

Ronnie, you continue to get it wrong, read the words very slowly. I said nothing about numbers in my head, I was referring to the big-ass box of ASE's delivered to my front door, by a grunting, sweaty mailman. Free of charge, almost, thanks to the last dip we had. Do you need a diagram?

 

[Ronnie 666]

Niveka good for you. Next time you gamble in the market let us see what happens. When you bet on red sometimes red comes up ...sometimes it's black. I see you completely miss my point. Your short term view is unfortunately pervasive at this time. But fear not it will change. It always does.

Does mean I am wrong for buying gold at $300/$500/$800/$1000 etc etc. I think with the passage of time your monster box will be hauled out by your sweaty hands to be handed over to pay your paper debts. That is the nature of a casino, unless you are the house and you are not.

 

[Niveka]

Niveka good for you. Next time you gamble in the market let us see what happens. When you bet on red sometimes red comes up ...sometimes it's black. I see you completely miss my point. Your short term view is unfortunately pervasive at this time. But fear not it will change. It always does.

Does mean I am wrong for buying gold at $300/$500/$800/$1000 etc etc. I think with the passage of time your monster box will be hauled out by your sweaty hands to be handed over to pay your paper debts. That is the nature of a casino, unless you are the house and you are not.

I have to wonder if you are capable of writing post that does not contain at least one baseless assumption about someone else. I have no paper debts, I invest what I have and either make money or lose money, thankfully the former more often than not. I don't invest money I don't have.

I am a stacker just as you are, I just fund my stacking by playing the market. Especially now when it' fairly easy to make the right calls. Here is the diagram I promised you:
Short Paper Silver, Make Money, Buy Physical Silver, Stick Physical Silver Somewhere Safe.....

 

[Ronnie 666]

Niveka you are right I meant paper assets not debt. So hard these days to separate these terms. When you buy a short position I presume you don't sell you new monster box ? So you buy a paper debt or in your view an asset. The problem is that debt and asset in the paper world is so hard to seperate. So next time encouraged by your success of a new monster box you buy a bigger short position. You may cash in again but eventually you will lose and it's likely to be a big one....understand?

 

[Niveka]

I'm guessing your point is that I could lose money playing the market. This is not a revelation, it is a fact. Three weeks ago I lost money, however, what I am doing is working very well for me, I have no complaints. I will keep doing what I am doing, and keep stacking the whole time I'm doing it. I am no genious, but this period of time, the market the way it is right now, is a gift we may never see again. I'm happy to be here right now.

 

[Niveka]

I'm not sure how to explain it any clearer but let me try. If spot is at $15US and the long term expectation is $12US and I think we are heading for a dip and I want to make money on that dip I take a short position. If my timing is right and the dip happens I make money. If my timing is wrong and spot goes up, because I am confident that that the bottom is yet to come, all I have to do is wait to close my position at a time when I don't lose any money, i.e. the safety net. Hope this clears things up...

Maybe I've misunderstood Niveka, but are you suggesting that your belief Silver's bottom is not in is a 'safety net'?

I hope you're trading with stops...

Yes, correct on both counts.

 

[Ronnie 666]

Good as long as you understand it's a belief not a fact. I can't tell you how many times I have seen opinion presented as fact. Consensus is opinion not fact.

 

[Eliassamaha]

True that Ronnie

If you can actually and accurately predict the precocious metal Market everyone will be doing it

 

[Ronnie 666]

COT report is very negative for PM especially silver, but prices are not moving down? Something has changed? What happens to all those shorts if PM prices rocket up. This price action is not typical of the last few years when prices were constantly dropping ? So few believe the botton is already in? This may be the clean out of the shorts that is long needed. Let's see what happens after the FOMC meeting. Maybe, the bottom is in and you can hold onto your short position forever or until you are broke ?

 

[SpacePete]

True that Ronnie

If you can actually and accurately predict the precocious metal Market everyone will be doing it

You know that quote "the best way to predict the future is to invent it"? The equivalent for precious metals would be: "the best way to predict the market is to manipulate it", and those people are keeping their mouth shut about future prices.

But if markets are manipulated then it leaves open the possibility that someone independently may work out the timing and signals that indicate upcoming manipulated moves.

 

[aleks]

COT report is very negative for PM especially silver, but prices are not moving down? Something has changed? What happens to all those shorts if PM prices rocket up. This price action is not typical of the last few years when prices were constantly dropping ? So few believe the botton is already in? This may be the clean out of the shorts that is long needed. Let's see what happens after the FOMC meeting. Maybe, the bottom is in and you can hold onto your short position forever or until you are broke ?

Ronnie have you not thought for a moment, the experts and commentators you keep referring to and nonsense which you keep regurgitating, TMF metals, silverdoctors probably have zero idea within the domain of market price action on a short to medium term basis compared to people who make a living operating in these markets.

Shit in, shit out

 

[Ronnie 666]

Clearly Aleks I am not the only one not thinking. The commentator I was talking about is none of the ones you mention. Clearly you have no idea as TF metals are predicting a drop based on COT report just like Leon. I have news for you that no one knows that is why I am totally opposed to buying paper positions.

Your comment aptly describes your position.

 

[aleks]

Well then please enlighten me to the guru you speak of