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Friday, February 18, 2011

Long Babies. Short Silver and Santa

My wife is 9 days late for our first child today.  The house is very tense as we wait yet another day for something we have waited so long for already.  While I am going crazy in anticipation for the little one, the sheer mania of suggestions we have gotten to start labor is maddening.
A few of the sure fire suggestions include:

Peanut Butter, Swimming, using swings in a park, jump-rope, spicy food, walking up hill, heavy metal music, love-making, wine, scary movies, walking stairs, bumpy car rides, creamy soups, 2 glasses of champagne, Wii fit video games, chicken parmesan,  moving furniture, massages, evening primrose oil, mopping the floor, raspberry leaf tea, laughing, castor oil, go outside in the rain… the list goes on.

What I have determined from all of this is that people are fixated on one thing that they perceive ‘started’ their individual labor process.  The majority of the stories go in this fashion—‘I did XYZ event and in XZY time I had the baby.’  The event could be ANYTHING (literally—one person told us they ate a Monte Cristo sandwich and labor followed promptly after the powdered sugar was licked off her lips), but the time frame is a constant—24-72 hours after the event the baby was born.  All the stories, labor suggestions and ‘miracle’ induction methods create a baby in 24-72 hours time.  

Amazing really!... or is it…
I am guessing that you have figured out the purpose of this posting—people will convince themselves of ANYTHING to connect one event to the next.  In the labor situation, many of these women were past their due dates and probably uncomfortable.  When they did one event that failed to produce labor, they tried another, and another, and another… until ‘POOF’ baby arrives.  I am guessing that somewhere out there, a pregnant couple drank 2 glasses of champagne and made love on a swing-set after jump-roping in the park while listening to heavy metal music while mopping the floor on a bumpy car ride, and if you asked them what caused labor they would tell you with 100% certainty that the combination of these events was the ABSOLUTE reason that 24-72 hours later the kid arrived.

The facts of pregnancy are:  Normal term for delivery is between 37 weeks and 42 weeks.

There is no factual evidence for Peanut Butter, Wii video games or scary movies (though making my pregnant wife laugh and seeing her belly bounce up and down is one of the greatest joys I have ever experienced in life!)

Interestingly enough, the same can be said about investing.  When an investment gets on fire there are thousands of reasons why it is a BUY, even if the stock/fund/commodity being discussed has run up 100-200% in less than a year and it is trading WAY outside of historical norms.  ANYTHING can be used to connect the investment with a never ending upside.

We saw this last with oil in 2008.  Oil screamed from $70 in the summer of 2007 to $140 in the summer of 2008, only to crash below $40 in 2009.  While crude has recovered somewhat today, the zenith of $140+ a barrel wasn’t been attempted again, though the same reasons why crude was going to $300 a barrel are prevalent today—2008 story:  Financial Times July 2008 Oil to $300

Here are the ABSOLUTE TRUTH events that were sending oil to the moon in 2008

1.    Alternative energy sources are poor in comparison and supply
2.    Political unrest will raise prices
3.    There are no new oil fields out there
4.    World economies are growing and thirsty for oil.

Have any of these changed?  No.  No they have not. 

If these ABSOLUTE events have not changed why isn’t oil at $500 today? 

Or $900?

I have asked people this question and they tell me—“it is because we had a recession, duh!”

Ah yes… a recession:  An economic contraction that (a) makes alternative energy sources better alternatives to oil, (b) stops political unrest, (c) creates new oil fields and (d) stops the growing world need for oil.  If you spin it hard enough you can almost make a point for stopping the growing world need for oil, but you would need a good spin doctor for that one as most of the growing world economies have not abated their need for crude what-so-ever, but have instead increased their needs and consumption. 

It is all a Ponzi scheme at some point. 

The price of XYZ can raise as long as someone (investor or fool albeit) is convinced that it will go higher.  Sooner or later though, there are no buyers… and the only way for the AMAZING, ABSOLUTE & UNSTOPPABLE investment to go is down.

Of course all of the reasons listed above are reasons why oil cannot trade at $0, but none of them support a case for $300 either.  Once an investment is on fire, generalizations tend to become the ABSOLUTE TRUTH on why XYZ investment is in demand, despite the lack of factual evidence to support these claims. 

When you were a kid Santa Claus came and brought you presents.  If you were never told that Kris Kringle was a hoax, you would have thought that one year Santa must have died or retired (or turned to the bottle).  It would be tragic really—you, a 14 year-old, sitting in your Pooh Bear pajamas, alongside the Christmas tree with no presents.  After time however, you would find out that the ABSOLUTE TRUTH that Santa was real, was really a lie.  Over time you would do some research on these claims to realize that a 400 year fat old man that lives on the North Pole in an undisclosed location, who is living with thousands of asexual toy-making elves, with no electric power in a gigantic toy-making factory, with no food source what-so-ever to feed his army, who once a year, on the same day every year, delivers toys and gifts (the rich kids get better gifts because they are better people!) in a flying sleigh that is powered by talking, red-nosed reindeer that also have the ability to fly… IS JUST RIDICULOUS.

You would think to yourself, ‘Why was I so stupid to believe all of this?’  Easy answer—Because everyone you knew and trusted told you that Santa was real.  Investment mania is just the same—at some point almost everyone believes the Ponzi scheme BUY reasons, and despite all the evidence that reindeers don’t fly or that we are not running dry of oil in the next 5 months, people pile on without reason.  At this point they will believe ANYTHING to support the claims of the investment to go higher. 

I’m firm on saying SILVER is 2011’s crude story.  I see no reason why it has risen 100% in the last year, or 75% in the last 5 month,  no reason what-so-ever, other than Ponzi style speculation.  I have heard almost ANYTHING on why silver will go higher—XYZ bank is manipulating the market, world resources are scarce, it is an inflation hedge… etc… all of these reasons are Ponzi scheme BUY reasons, but I have a hard time justifying them as factual reasons to buy silver today.  This bubble forming reminds me too much of people believing in flying reindeer and asexual elves.

Sure, Silver can go to $33 or $38… or $40.  Silver is going completely Berserk today!  Remember though, oil was overpriced at $100 in 2008 and screamed higher, despite fundamentals, because EVERYONE was still buying.  I have met many an investor who bought $100 oil (or oil stocks/funds in summer 08), but did not sell $140 oil (most sold at $60-$70 on the way down, while others who held are almost even a little over 2 and 1/2 years later).  If you were buying USO USO CHART in July of 2008 at $110, today that ABSOLUTE investment would be down 66%, worth a cool $36 and change.      

Regardless of the ‘upside breakout’ mumbo jumbo from your favorite 24 year-old investment panelist on Cavuto, if it looks like a grossly inflated bubble and smells like a bubble— sell (or be prepared to sell-- Boy Scouts honor) that hot silver skinned potato and stand back!—It may not be this Monday or next Monday, but sooner or later that puppy is about to pop! 

While it is impossible to call the exact date and time of a market event, you can plan accordingly for when it happens.  9 months ago I knew I would have a baby in February… and no matter what I do, what she eats, or how many walks we go on uphill in the rain, the baby is coming… in 24 to 72 hours. 

That I would put money on.

Silver I would short. 

R and R Feb 18th
PS—I CAN’T WAIT to tell my kido about the magical Santa Claus!

1 comment:

  1. boatman says:

    silver to $100 in 2-4 yrs. then pop.

    back away from the keys til you can think clearer.