Monday, November 29, 2010

Hedging Time (If you have a lot at risk)

Predictability of these markets is completely skewed by POMO and other printing related activity in Europe. The stock market should have taken some hard lumps already (logically speaking) but remains in a fairly tight trading range. There is no logic to these markets. What appears to defy sense and sensibility is the rule in the financial markets. Are we going to see a rally in stocks Monday on a bailout of the Irish bankers even with Spain and Portugal waiting in the wings? Futures appear to be saying 'yes' this morning.

Insurance will cost you a bit but is still wise. Being net flat and immune from volatility might not be so bad. Anyway, we know the sobering reality of outperformance - mostly accomplished though access to inside info networks. No access? You're nothing more than a follower of those who have the real edge and access (people who get in before everyone else at cheaper cost basis). Sure, you could have some tried and true methodologies, and to that I will always say, 'go with what has worked'. But in general, as if this were a surprise, the secret sauce of some of the masters of the universe is to rig up a system where they and a few friends can get the info in order to get an edge. I told you "social' networking is useful. You never know who's going to fly into your web especially when taken to the extreme. lol. Now, some these networks are coming undone and there will be some chaos. It's like taking the bag of chips away from the fat kid without warning. Suddenly the blind man is told not to use his cane. Angst ensues on what to do next. All the more reason to be well hedged. 

The insiders have been making a bee line for the exits, but they can be as wrong as anyone else especially when it starts to look like a herd of insiders, or anything on the move. Yes, it could be one giant head fake, but I wouldn't be completely dismissive of activity that sees insider selling at all time highs. Still, no dramatic short calls here, no calls to be in 99% cash. Hedge. No contrarian calls to go net long and buy into weakness (at this point). This even applies to metals holdings whether physical or paper. Hedge.

Maybe if gold were to take a big dump, it would be the buying opportunity of a lifetime. Could you imagine what would happen to existing gold markets if a shortage of physical emerged if the paper price went up in flames to the point that buyers stepped in to buy by the ton? rofl. Talk about paradigm shifts.

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