Today was one of those days that if you were an investor in gold you might be able to remember where you were on this day even 20 years from now. When I say that, just to be clear, I mean 20 years in yen terms.
In fact, I remember where I was 30 years ago when the bottom fell out from under gold and silver. I actually was invested in futures at the time. Not quite as much as the Hunt Brothers, but for me, I was invested much more than I should have been by any measure of sanity.
Fast forward and imagine gold driving away in a white Bronco on the LA freeway. Maybe good advertising for Ford, but not so good for retaining the adjective “precious” in front of your metals holdings.
If you’re Mr. T your personal net worth plummeted today, but even if you could jump off the ship you would likely sink wih whatever holdings remained, unlike your Captain, who had the foresight to jump ship earlier, with the lone flotation device aboard, without alerting the crew and those that trusted him to guide them on their journey.
Metaphor? Not really.
Captain Gartman. Good move driving that Bronco and jumping that ship.
Did I mention that he took the map that also gave the location of all the sharks in the water?
I don’t own gold in any investment form, unless you count the potential value of my body if all of its component elements are sold upon my demise. I didn’t get those dental crowns as an investment. I got them because of bad habits.
Too bad there’s no market for cholesterol.
A few months ago while on CNBC, James Altucher raised some eyebrows, as he usually does anyway, when he pointed out the obvious.
“It’s a rock.”
Alright, in deference to my geologian readers, that’s not totally accurate, but even you you have to admit that you understand exactly what he was saying.
Yes, it’s precious, but how many times have you heard comments like “you can’t eat it, it won’t keep ypu warm, etc..’?
Usually, those kind of comments come from the likes of people that either can’t afford gold at its current price or by choice haven’t invested in any because they think it’s overpriced.
Those same people often discover that it can be eaten or keep you warm if it’s at the right price.
Forget the axiom that value is determined by whatever someone is willing to pay for the asset.
That’s only true when supply is well in excess of demand.
When it’s the other way around there’s no rational basis for price. Factor in fear, greed and the all too popular, FOMO.
The other day, Dennis Gartman, a noted investor, newsletter writer, talking head and whatever else he does announced that he had gotten out of gold.
Good for him.
It was actually indirectly good for me as well, as I own many shares of the ProShares UltraShort Silver ETF which goes up as the price of silver, another of those precious metals, goes down.
But what I really don’t understand is what Gartman was thinking.
In fact, he only sold gold from his personal account and very publicly proclaimed that fact. Reportedly, the managed accounts that he has for his clients preclude him from making such changes until the end of the month.
So it really was good for him.
His clients? Eh, not so much.
Now, if I was a Gartman client and a portion of my funds was tied up in gold, I don’t think that I’d be very happy to hear the steward of my account proclaiming to the world that he’s liquidated his personal gold holdings and I’m left with the bag.
Hey. What? He did what?
From my perspective and perhaps limited advantage, he sought to protect his reputation at the expense of his clients’ pockets.
Imagine, as an investor, there you are in a perfect position to watch the value of your portfolio plummet because the captain of the ship not only jumped, but let the world know that the ship was sinking before he let his crew know.
With captains like that you don’t need Somali pirates. Especially when the captain alerts the pirates to your exact coordinates, what assets you’re carrying and what meager defenses you maintain.
My guess is that Captain Gartman would sell immediate salvage rights on his way out.
As a captain, Gartman may defend himself and say he doesn’t know the meaning of the word “fear” and didn’t act out of such emotion.
I might add that he doesn’t know the meaning of the word “fiduciary” either and certainly didn’t act in that manner.
But back to those ProShares UltraShort Silver ETF shares..
I’ve droned on about them for a while. Even though my average cost is $13 and with yesterday and today’s big drop in silver prices, it is up to about $15, my profit is predominantly from its sweet options premiums, even though the ETF capital gains are looking good, too..
Slowly and against my better judgment, those shares have become about 15% of my portfolio, making them well out of proportion to any other single holding.
But the premiums have been so precious.
Happily, I’ll be losing about 20% of those shares at $13. I would be happier if they were going to be assigned at $15, but those shares were purchased at about $12 and have gotten more than their fair share of premiums.
In the meantime, if the shares do close above $15 by Friday’s bell, I lose all of my shares.
Normally, I’d be somewhat saddened at losing such a money maker, but I’m beginning to salivate at what appear to be some bargain prices right now for lots of my other favorites.
The situation happens with regularity, but what makes this different is that I may have lots of cash available to pick up those bargains on Monday.
Caterpillar, Halliburton and Freeport McMoRan are yelling to me. They may not be precious right now, but they will be once again.
And if it should happen that I lose my ProShares UltraShort Silver ETF shares, guess what?
Yeah, Silver will go back up again and the price of the inverse and leveraged ETF will go back down.
Been there and done that.
Although the value of assets can rise and fall, if there’s inherent value, they will rise again.
Just look at Gold and silver.
Sure, it may have taken nearly 30 years, but their precious status returned.
Reputation? That precious attribute that you can work a lifetime to attain? That’s not so easy to resurrect.
I’ve never had the “privilege” of being a Dennis Gartman client, but his reputation and credibility have lost whatever luster they had, at least in my eyes.
Not so precious, anymore.
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Copyright 2011 TheAcsMan