About Me

Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!

Saturday, October 09, 2010

Gold Price -- Looking To Short

I have gold in a price bubble. Gold closed out the week at $1345 oz. From my study of
financial bubbles, I can make a case for a bubble top in gold of $1500. There is sound
empirical evidence for this view and I would submit that arguments for a much higher
gold price rest on flimsy evidence. So, I am ok with a further run of gold up to $1500,
and I would have to say that calling for a further dramatic upmove above $1500 is more
guesswork than anything else.

My plan going forward is to use a small part of my trading capital to gradually initiate
a position in a leveraged gold short fund such as DZZ. I will primarily use technical
analysis to help me follow through on the plan, and expect to complete most of the
purchase over the next six months or so. I am not at all proud of getting chased out of
the position from time to time which you must do when you are short and the asset you
are shorting is as volatile as the gold price.

I believe there is large, fast money on the long side of gold and that the uncertain
financial / economic environment may well draw more fast money in. I also think
that when folks start to turn negative on gold, you can easily see a 50 - 70% decline
over a 12 month period.

I do not think most players out there should even contemplate such a strategy as I
am going to deploy. Too risky and tough to execute particularly in the early going
when gold is attracting so much positive attention.

Here is the DZZ chart. I shall keep you posted periodically.

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