By The Gold Report
Sector expert Michael Ballanger muses on lessons learned and profits to be gained in silver trades.
“Even a broken clock is right twice a day.”
― Stephen Hunt, The Court of the Air
There are times when every investor has to look long and deep into a mirror and determine whether a well-thought-out strategy is actionable or whether it is simply an ad hoc “hunch,” barely worth chasing. With regard to silver, this is just one of those times.
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In 2003-2004, I was stopped out four times under $5 per ounce trying to establish a 10-lot futures position in silver (50,000 ounces), which, at the time, demanded US$18,000 in maintenance margin. When I finally threw in the towel, my $18 grand worth of “dead presidents” was worth slightly less than $6,000.
At the time of my decision to abandon the trade, I remember a sense of impending doom as, with great regret, I returned the funds to the (joint) bank account. Days later, when the losses were detected by an appropriately suspicious spouse, one could hear the screaming of insults miles (if not counties) away. As embarrassing and emasculating as that was, the addition of insult to injury was aided and abetted by the cost of a chiropractor due to weeks of punishing couch-sleeping.
Further exacerbating my agony was silver, almost immediately upon my departure (and as if it had eyes), deciding to break out through $5 and proceeding to triple. Staring at the quote screen, slack-jawed and near-comatose, I watched with the same sense of disbelief one has when observing a slow-motion train wreck as silvermy precious silvertapped $50 in 2011. Without including the possibility of parlaying the 10-lot to something larger, the original position would have generated a $500,000 profit or something close to a 2,700% ROR. Risk management at its very worst or stepping over a $50 bill to pick up a nickel.
Speaking of crypto and cannabis, my investment thesis for silver lies in the addictive behaviours of these largely Millennial and GenY-er-type investors, who I see as logical heirs to the throne of “speculation of choice” once it becomes necessary for them to replace the rush of rapidly rising momentum plays. In a throwback to a kinder, gentler time, the speculation of choice in the first decade of the New Millennium was silver, which outperformed all other assets by a wide margin. As you can see from the chart posted below, silver outperformed the S&P, the TSE300, and the TSX Venture spectacularly from 2003 to 2011. and it is my opinion that it will do the same in 2019 and beyond.
But ten times as bad as that is the propensity and willingness of the entire U.S.-dominated banking cartelto “join in” and one-up their respective trading desks at every turn and all dips. Equities were “ordered” higher from 2009 until Jerome Powell arrived under new “orders” and directed 33 Liberty Street to “stand down.” Since the arrival of “QT” (quantitative tightening), the global markets gradually, at first, then suddenly (Hemingway, anyone?) entered into an involuntary Chapter 11, the recognition of which can only be described as refreshing (by me) and “not fair and not my f—ing fault!” by legions of smug little 30-somethings who are just now experiencing their first “correction.” Repeat: a correction. Not a crash (1929, 1987), nor an economic collapse (1931-1933), or even a “deep correction” (1998)but merely a mild hiccup in the long-term trend of the S&P500.
To generate truly new “wealth,” human labor must be applied to human ingenuity with the goal of pure financial profitability. If, as, and when that achievement occurs, truly new “wealth” has arrived, and with it, the security of a strong, labor-intensive society of working fathers and working mothers whose children grow up wishing with great alacrity the arrival of politicians capable of defining the meaning of the term “leadership.”
Financial reporting has now taken over the role of the lobbyist, using the power and influence of cable and satellite TV and the Internet to attempt to sway Federal Reserve Board policy. The S&P is barely 10% off the all-time high print for 2018 but still up 279.4% since the 2009 crash lows, thanks largely to the money-printing and credit-creation mission statements of the global central banks and treasuries. Yet all we read or hear about is “the Fed is making a mistake!”
One has to wonder what the response will be when this global bear really begins to growl and snarl and gets the GenY-ers and Millennials in his crosshairs. As I have printed before, the countless interventions and manipulations have served to excessively starve this bear to the point of savage desperation and the result of failing to allow the beast to feed with normal regularity has today created an aberration of nature that will devour all in its path.
The chart posted below of the Morgan Stanley Total International Stock ETF (IXUS) has collapsed from the February peak and is now a thread away from entering full-blown bear market status thus confirming the global trend of equities and its attendant risk.
For these reason, I am adding the SLV April $13 @ $1.15 calls to the trading account and will open a 50% position. I will refrain from trading this position and instead set a $10 target by expiry. I will also be ready at the drop of a hat to jettison the position on a two-day close for SLV below the 52-week low of $13.11, at which point I’ll be taking a sledge hammer to the quote screen, the liquor cabinet and the medicine chest.
Broken clock be damned.
I concluded my missive with the following: “I am adding the SLV April $13 @ $1.15 calls to the trading account and will open a 50% position this morning.” Since U.S. markets were closed for Thanksgiving, I had to wait until Friday morning to execute the trade.
Silver opened weaker on Friday on China weakness fears and a slightly stronger USD, with the SLV down $0.17 to $13.43, thus enabling the April $13 calls to open at $1.03. I am changing the limit on the call options to $1.00 and increasing the order size to a 100% position.
I like the precious metals in here for one very important reason as to timing. Everyone is fearful of a 2007- or 1987-type crash that will suck liquidity out of the precious metals along with all other risk assets. That logic is flawed because if, in fact, the U.S. markets collapse, the Fed will have no choice but to terminate its efforts at quantitative tightening, which would evoke a violent downside reaction in the USD, which in turn would put a strong bid into the precious metals. Any way you cut it, the precious metals are going to rally hard due to ideal conditions that include the very favorable COT set-up in both silver and gold.
Buy the SLV April $13 calls for $1.00 with a target price at $10 by expiry.
1) Statements and opinions expressed are the opinions of Michael Ballanger and not of Streetwise Reports or its officers. Michael Ballanger is wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the article preparation. Michael Ballanger was not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the author to publish or syndicate this article.
3) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.
Charts provided by the author.
Michael Ballanger Disclaimer:
This letter makes no guarantee or warranty on the accuracy or completeness of the data provided. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This letter represents my views and replicates trades that I am making but nothing more than that. Always consult your registered advisor to assist you with your investments. I accept no liability for any loss arising from the use of the data contained on this letter. Options and junior mining stocks contain a high level of risk that may result in the loss of part or all invested capital and therefore are suitable for experienced and professional investors and traders only. One should be familiar with the risks involved in junior mining and options trading and we recommend consulting a financial adviser if you feel you do not understand the risks involved.