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thinking about shorting gold this is perhaps the funniest thing scott adams has ever done posted by: horsebeater 11:30 6.17.10 maybe we should all just read more dilbert... posted by: publius 23:06 6.16.10 http://online.wsj.com/article/SB10001424052748704025304575285000265955016.html you may be right posted by: rabble-rouser 19:35 5.19.10 But if we accept that the values of dollar and gold have an inverse relationship, and that a rising U.S. economy helps our short, doesn’t a weak euro and crashing economies in Greece, Spain, and Italy provide relative strength to our position? Sure the U.S. has its economic problems, but relative to other countries we’re doing reasonably well (even accepting the detrimental impact of other nations’ woes), no? I listened to an economist for the Mortgage Bankers Association address this issue recently; he compared the U.S.’s situation to two guys walking in the woods and running into a ferocious bear. The first guy bends down to tighten his shoelaces, and the second guy says “c’mon, you can’t outrun a bear.” First guy replies, “I don’t need to outrun the bear.” i'm not buying it... posted by: simplicissimus 12:36 5.19.10 hb is my co-pilot, always. and his word is the final one. but with the stock market acting *very, very, very* wonky these last two weeks, and the euro looking worse with every passing day ... it seems to me that gold isn't going anywhere down anytime soon. i'm now convinced it's way more likely going up in the next year or two. say when posted by: rabble-rouser 23:04 5.18.10 HB, you have more in this than the rest of us, so I'm perfectly happy to defer to you on when to pull the plug. Seems to me that the longer we stay in the better off we are, because there just has to be a decline from these levels eventually. On the other hand, I've already realized some value in talking smack about shorting gold, as if I purchased credit default swaps on synthetic collateralized debt obligations in 2007 or some shit like that. In any event, whenever you're ready. . . . Can we short the short yet? posted by: camdolphin 11:24 5.8.10 i can happily say posted by: publius 10:06 4.22.10 that i haven't thought about this once since the last time this thread popped to the top... it's 4 things, right? posted by: horsebeater 09:55 4.22.10 (1) currency exchange rates (when the dollar's value falls, the price of gold rises, so the short falls) (2) people fearing market crashes (so when the market goes up, gold tends to fall as more people get back into the market and out of precious metals, so the short goes up) (3) gold supply (4) gold demand, either for industrial uses or being held by central banks. *********** I don't know much about (3) and (4). My one hesitation jumping into this project was that I feared that the impact of (3) and (4) would skew gold's pricing in ways I would have no way to anticipate. (4) in particular seems to be subject to fluctuation based upon the political whims of all kinds of crackpot third world leaders (i.e., what is the impact if cameroon wants to return to the gold standard) in semi-frightening ways. every single day... posted by: simplicissimus 17:15 4.21.10 i check the quote, and think: this needs to be discussed. what the fuck is the deal with shorting gold? there is precious (pun! ha!) little about the day-to-day movement that makes any sense to me. dow goes up, fund goes down. dow goes down, fund goes down. and then -- seemingly out of nowhere -- it pops up a point or two. there has to be some driver here of which i'm not aware. some economic indicator or something that i'm not savvy enough to be eyeing. because otherwise, all i know is that the quote has been trading between extremly high 11s and extrmely low 14s (and 95% of the time somewhere in the 12s and 13s) since last fall. stuck at 12.76 ... sigh posted by: horsebeater 17:00 4.21.10 i'm staying in for another month or two, but then will be using the investor's trick of stepping back and asking myself the question "would I put money into shorting gold if I didn't have any money in it before?" and, if the answer is no, getting out. congrats everyone! posted by: simplicissimus 13:00 1.29.10 for the first time since the days following our foray in november, the hb gold short fund is in POSITIVE territory. It's currently trading at 14.45 (+.10 or somewhere along the lines of 1.5%). i think this means -- accounting for the fact that 1% does not equal a 1% return, as hb set out above -- for everyone that put $100 in they know have $101! woo hoo posted by: horsebeater 10:49 12.22.09 gold scared me for a while, and we were down 15% at one point, but now we got uncle mo on our side. http://www.youtube.com/watch?v=tXaZmY52gHM looks like we picked the wrong week to start shorting gold posted by: horsebeater 09:26 11.18.09 http://www.youtube.com/watch?v=ZIAUbPDgaAg&feature=related Down nearly a $1.00. no margin calls today, ok? posted by: simplicissimus 16:57 11.13.09 rough day to be shorting gold. allright... fucking rabble is in for $200, but NOW WE'RE REALLY CLOSED posted by: horsebeater 13:43 11.12.09 simpli: $100 publius: $100 hlk-rumsey: $200 camdolphin: $100 rabble: $200 hb: $4319 We're up to $14.68 (2% a day, baby) publius is in for $100 posted by: horsebeater 12:16 11.12.09 ... and I am declaring the fund closed. shares are: simpli: $100 publius: $100 hlk-rumsey: $200 camdolphin: $100 hb: $4519 To cover the $20 brokerage fee, I'm pricing the shares at $14.40 instead of the $14.35 purchase price, so your profits will be based upon a $14.40 share price. for the mathematically challenged, to figure out your cash, take the price of DZZ, divide by $14.40 and multiply by the amount of cash you put in above. i've ready what i could find on dzz and ETFs... posted by: simplicissimus 12:09 11.12.09 but i'm now more confused than when i began. any help? (and we're now at 14.61 ... so we're basically minting money. forever. i'm thinking about quitting now and living off the inevitable riches ... premature?) my goal is... posted by: simplicissimus 11:54 11.12.09 to say "we're shorting the short" everyday of my life. oh hell... posted by: publius 11:53 11.12.09 i'll go in for $100 as well...i love investing in things i only partially understand... my goal is... posted by: simplicissimus 11:48 11.12.09 to say "we're shorting the short" everyday of my life. hlk is in for $200 posted by: horsebeater 11:45 11.12.09 at 14.35 (we're at 14.60 now) no need to send checks. 90% chance we're going to make money, but in almost unthinkable situation where we don't, i will allocate the losses and advise how much you need to send in. and simpli, we are NOT shorting the short yet. I need to figure out how to fucking do that, but we aren't there yet. my goal is... posted by: simplicissimus 11:39 11.12.09 to say "we're shorting the short" everyday of my life. if it's not too late, posted by: hlk_rumsey 11:36 11.12.09 I'm in for $200 let me know, ill send a check my goal is... posted by: simplicissimus 11:15 11.12.09 to say "we're shorting the short" everyday of my life. dzz is at 14.50 posted by: horsebeater 11:11 11.12.09 We're up 1% !!! my goal this weekend is to be able to say "I'm shorting gold" posted by: horsebeater 11:07 11.12.09 at least 10 times in casual conversation camdolphin is in for $100 posted by: horsebeater 10:26 11.12.09 Can I get in... posted by: camdolphin 23:53 11.11.09 for $100? And I approve a six pack of Christmas ale as expenses. absent surprise developments, i plan to liquidate by... posted by: horsebeater 18:11 11.11.09 ...June 2010. as 2% owner of HBNDF, i say short the short! posted by: simplicissimus 18:00 11.11.09 HBNDF = horsebeater nondecay fund. and, like donny, i am completely out of my element at this point. short the short! short the short! short the short! --- in all seriousness, i have to believe that - for starters - you want to get an idea of when certain large announcements (the fed, G20, etc.) are coming out. these are the things that, at least nominally, seem to impact prices. though this won't get really interesting until the spring/summer when governments start raising rates and withdrawing stimulus from the economy. decay...mmmm.....decay.... posted by: publius 17:24 11.11.09 there are tons of lawsuits on this decay stuff... pretty cool posted by: horsebeater 16:54 11.11.09 http://direxion-faz-lawsuit.com/ http://www.businessinsider.com/lawsuits-piling-up-against-the-short-and-leveraged-etfs-2009-10 discussion on message boards of motley fool on shorting the short posted by: horsebeater 16:40 11.11.09 http://caps.fool.com/Blogs/ViewPost.aspx?bpid=196113&t=01009137708954838515 holy fuck posted by: horsebeater 16:34 11.11.09 the more i think about this, shorting the short seems like guaranteed money. is there a way to do this? publius... posted by: horsebeater 16:27 11.11.09 ... fundamentally, it is because the seller of the ETF is flat out fucking you over due to the way they do the calculations. It's the same problem kids start running into 7th grade math: If you go from 100 to 120, that's a 20% increase. But if you go from 120 to 100, that's a 16% decrease. The way they run the short, they give you a 20% decrease (let's say $5000, so they it goes down to $4000) and then they give you a 16% increase (so the $4000 goes up by 16% to $4640). So while the index ended up at the same place, the short lost money. Double shorts have twice the problem. So the ETF sellers are totally fucking you, since the security is basically destined to go down to zero, but so long as you just hold long enough to let something drop or rise (without a lot of bumps in the road), you should be ok. The beauty here is that since you KNOW DZZ will drop over time if there is any volatility in the price of gold, what you REALLY should do is short DZZ (i.e., short the short). Is there a way to do that? posted by: horsebeater 15:52 11.11.09 i am assuming simpli is in for $100 of what i'm in for, btw, and that he has ceded complete control to me as hedge fund manager regarding when we will cash out. i will mail out checks (or make capital calls) at appropriate times. anyone else that wants in, pls advise by end of the day i guess what i'm not getting... posted by: publius 15:50 11.11.09 is why holding it long differs substantially than a stock which doesn't pay dividends...if it goes up in a more or less inverse relationship to the db product it tracks, what's the difference? obviously it's a derivative so there is no underlying asset, but unless it crashes in a subprime mortgage sort of way and gold goes down...what's the difference? finance and i were clearly not destined to be on speaking terms... publius... posted by: horsebeater 15:45 11.11.09 ... check out DZZ vs. an actual gold index. It seems to perform inversely pretty well, but it is pretty clear that you shouldn't hold it overly long. http://tinyurl.com/ybu7lkq i understood the stuff publius describes vaguely, but not fully posted by: horsebeater 15:35 11.11.09 but after reading for 20 minutes, i'm not scared. And so ... ... I now own 350 shares of DZZ (which adjusts monthly instead of daily so to the extent it exhibits the problems publius flags, they should be limited). Purchased at $14.3482 per share (for $5,019 plus a $20 brokerage fee). FUCK GOLD! more info on ineverse etfs... posted by: publius 12:57 11.11.09 which i profess to understand only a small percentage of..eyes glazing over factor very high...but i do get that for financial voodooish reasons, horsebeater's strategy may not be as straightforward as it seems... http://www.tentfort.com/download_files/inverse_etf.pdf a few things... posted by: publius 12:42 11.11.09 which i understand only vaguely... as i understand it, you're not actually shorting gold per se. what you're doing is buying an exchange trade fund which through its strategy attempts to replicate the inverse of what gold is generally doing. that right? take symbol gll for an example... "The investment will seek to replicate, net of expenses, twice the inverse daily performance of gold bullion as measured by the U.S. Dollar p.m. fixing price for delivery in London. The fund normally invests assets in financial instruments with economic characteristics inverse to the index. It may employ leveraged investment techniques in seeking its investment objective." and etrade issues the following caveat emptor... "Exchange-traded funds (ETFs) that use leveraging strategies such as swaps or derivatives (“Leveraged ETFs”) or are designed to move inversely to an index (“Inverse ETFs”) typically are not suitable for investors who plan to hold positions for longer than one trading session. Leveraged and Inverse ETFs experience greater share price volatility than traditional ETFs, increasing the risk that you will lose money by investing. Typically, the longer you hold a Leveraged or Inverse ETF, the greater your potential loss. Please read the Prospectus carefully before making your final investment decision." granted, that warning can also be interpreted as boiler plate and can probably also be translated as "don't be a pussy"... my guess is that horsebeater understands these things better than me and has done more research...which i suppose is my way of saying i could have some interest if he's got some more info in the way of general strategy... the dollar is close to its lows from the last 20 years... posted by: horsebeater 11:47 11.11.09 ... it could fall, I just don't think it can fall that much more. I'm very close to dropping some cash onto this. Any other takers? this article just screams bubble posted by: horsebeater 11:39 11.11.09 http://www.bloomberg.com/apps/news?pid=20601082&sid=a6xZX59vB8k0 Gold rose for an eighth straight session in New York, the longest rally since early 2006, and reached a record as a decline in the dollar sparked demand for the precious metal as an alternative asset. Gold touched $1,119.10 an ounce, an all-time high, as the U.S. Dollar Index, a six-currency gauge of the greenback’s performance, fell as much as 0.3 percent to a 15-month low before erasing the loss. India’s central bank bought bullion last month to diversify its assets. Before today, gold jumped 6 percent this month while the currency index lost 1.8 percent. “The interest that central banks have shown for gold has really lit a fire under the market,” said Matt Zeman, a metals trader at LaSalle Futures Group Inc. in Chicago. “People are questioning the value of not only the U.S. currency but all paper currencies. Investors are more comfortable holding gold.” Gold futures for December delivery climbed $10.40, or 0.9 percent, to $1,112.90 an ounce at 11:10 a.m. on the New York Mercantile Exchange’s Comex division. Prices have gained every day this month, the longest advance since Jan. 4, 2006. In London, gold for immediate delivery jumped to a record $1,118.88 earlier and traded at $1,112.82 an ounce, up 0.6 percent. The dollar index was little changed after sliding earlier to 74.774, the lowest since Aug. 8, 2008. The greenback gauge has declined 7.7 percent since December, when the Federal Reserve cut U.S. benchmark lending rates to between zero percent and 0.25 percent to pull the U.S. economy out of recession. Dollar Outlook “The dollar is not going to get any firm footing with rates at zero,” Zeman said. “The dollar is going to continue to be the victim of the carry trade. People are selling dollars and putting it in higher-yielding assets. All commodities are going higher.” The Bank of England’s benchmark rate is at 0.5 percent while the European Central Bank’s key rate is at 1 percent. Governments in the U.S. and other nations have cut borrowing costs and boosted spending to fight the deepest recession since World War II, spurring some investors to buy bullion as a hedge against potential inflation and currency debasement. “What’s the value of paper money?” said John Hathaway, the managing director of New York-based Tocqueville Asset Management LP and the manager of the Tocqueville Gold Fund. “Frankly, it depends on what happens in the next three years to the efforts of the Federal Reserve and other world central banks to bring about an economic recovery.” Indian Purchase “Would they be able to retract the liquidity they put into place?” Hathaway said today in a Bloomberg Television interview. “If they have a hard time doing it, I think we’ll see inflation, and gold will go much higher.” India’s central bank last month bought 200 metric tons of gold from the International Monetary Fund for $6.7 billion. Sri Lanka also said it has been buying gold. That prompted analysts at Bank of America Merrill Lynch, Societe Generale SA and Barclays Capital to forecast further purchases by central banks, already the biggest holders of gold. Vietnam will let some companies resume importing gold to stop prices from rising excessively, the country’s central bank said today. Domestic bullion prices have gained on concern that the government may be forced to devalue the dong. The Southeast Asian nation banned gold imports in June 2008 to help narrow the trade deficit. Holdings in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, were unchanged at 1,114.44 tons as of yesterday, after climbing the most in a month on Nov. 9. Silver futures for December delivery climbed 30.8 cents, or 1.8 percent, to $17.53 an ounce in New York. Before today, prices surged 52 percent this year after declining 24 percent in 2008. Gold is headed for a ninth-straight annual gain. the dollar's the thing... posted by: simplicissimus 16:42 11.9.09 the dollar keeps dropping. and i'm not sure that anyone care, or should care. it's easy to think of the "strong" dollar as a good thing, and the "weak" dollar as a bad thing. which is why people jump on it to make a political point. but when the dollar goes down, gold goes up. and today it kept rising past $1100. the concern i have is simply that i could see the policymakers letting the dollar drop because it would make imports more expensive and imports cheaper (and domestic goods "seem" cheaper). which would be good for job creation. i think. i'm not secure enough to be sure about it. in any event, if there's merit to that i think the dollar could fall further. also, interest rates should stay the same through the spring, another factor in weakening the dollar. finally, i have to ask: if chine ever stops pegging it's currency (which should continue for awhile), wouldn't that be further bad news for the dollar? i'm not sure if i'm confusing two things here, but if china ever let it's currency float, i have to believe it would go up and the dollar would go down further. i could be wrong about all of these points, but if i'm right i think it's bad news for shorting gold. shorting gold is not middleaged! posted by: horsebeater 10:40 11.6.09 SHORTING IS SEXY DAMMIT! All the New York I-bankers I hang out with swear it. I am certain not short anything. I probably went from a 75/25 stock (mutual fund) - bond split to 100% stocks in October 2008 (a little too early ... I started buying at Dow 11,000 or 10,000, so I'm about even on everything I bought then) and about 2 months ago I went back to 80/20 stocks/bond funds. Being LONG on gold is a useful hedge against a lower dollar, I agree, so by shorting gold I would be betting that the dollar isn't going to continue dropping precipiticely. roubini is with you... posted by: simplicissimus 18:57 11.5.09 i had just read this and now i see your post: http://www.bloomberg.com/apps/news?pid=20601087&sid=aOfwpkHV2clM&pos=4 well, actually, roubini is *not against* you. he seems to think that $1100 an ounce may be ok, but that all this talk of going long is absurd. i recognize that it's a useful hedge against a lower doller, no? which means that increased borrowing is going to hurt the dollar it will mean gold will be more attractive to more people, no? 23% in a year is a pretty big increase, so it seems like it's a good thing to short. but i gotta ask, if you're shorting gold are you long on the stock market? that would be part of it, too, right? put me down for $100 if you're doing it. and -- with my response -- officially rename it middleagefort.com fuck the gold standard posted by: horsebeater 10:24 11.5.09 i've never done any fancy kinds of investing, never bought an individual stock or a bond, much less any kind of option or deriviative. in part, at a big firm, you have to have all individual securities trades approved, so it's kind of a pain in the ass, plus i am a believer in mutual fund management and diversification, so I am loaded up on my value funds and that's what i do. I have always hated precious metals, however. people who load up on gold are the same nuts that stocked up on food prior to Y2K (i.e., my parents). i noticed today that gold is now at a record high. I've also learned that you can buy a simple exchange-traded fund via a brokerage account that will short gold at about 2 times leverage. The fund's price has dropped from $27 to $11 in the past year (with gold going from $750 to $1050). So I figure if I invest now, and gold drops down to $800 an ounce, I will double my money. Other than a spike in the early 1980's, gold was never above $500 an ounce until 2006. Should I short gold? Should Tentfort pool its money into a giant gold short?