A New Adventure Awaits -- Exiting Open Trades

On Monday, I'll be launching my new resource trading service for Oxford Club -- Gold & Resource Trader.  Oxford Club has strict rules that analysts can't own the stocks they recommend. So, it's time to exit the remaining positions in my own portfolio.

From now on, in my own portfolio, I'll stick to trading mutual funds and ETFs. It's not nearly as much fun, but I need to follow the rules.

I started this portfolio of tracked trades in September, with Guggenheim Solar (TAN). I took two rounds of profits on that. In fact, most of my trades were profitable -- even the gold trades. I took a string of gold profits just last week. And some trades, like TAN, were very profitable. 

But the big winner has to be Parker Drilling (PKD).  It's up 43.5% in less than a month (I added it October 10th). Dad-blammet, I hate to sell that one.

But then, I also hate to exit Primero Mining (PPP). Its good news is just beginning. And it's not even the gold miner I like the most right now!

Just as important as banking gains is keeping your losses small. And I did that, too, with a policy of trailing "close only" stops, along with prudent exits when I saw fit.

If you're one of my readers who followed me from Weiss Research, you'll find more of the same in Gold & Resource Trader.  You'll remember that I beat the pants off my benchmark in the first half of this year when gold was on a slippery slope. 

That's because I'm smart enough to know that gold isn't the end of the story. It's just the beginning, a signpost on the road to riches in all sorts of natural resources and the companies that deal in them.

The funny thing is, the traffic on this blog shows that while people are interested in good ideas, they are REALLY interested in gold.

Changes to This Blog

I'm going to use this blog a bit differently going forward. From now on, it will be for items that don't fit in the issues of Gold & Resource Trader or my regular Thursday column at Investment U.  That will include ...

• Historical stories, like the Ancient Empire of Oil.
• Personal stories, like a list of my favorite online video reviewers or how I woke to the sound of Charles Durning wheezing in my Las Vegas hotel bathroom.
• Natural resource stories or economic analysis that doesn't quite fit with whatever we're currently focusing on in Gold & Resource Trader.

Specifically, anything I think will make subscribers money will go into Gold & Resource Trader.  So, I probably won't be posting as much here on the blog. I hope you'll forgive that, and keep checking back now and then to see what wild thing I'm talking about next.

One final note: I'm very bullish on America's future.  I think the 21st Century is going to be AMAZING for America and its people. I wish you all the best in your next great adventure. I'm going to aim to have a lot of fun in mine.

All the best,
Sean

Exited Two Positions at the Open; Gold Update

Yesterday's action generated some sell signals for two of my positions. Per my system, I sold them today at the open.

• I exited the second half of Guggenheim Solar (TAN) at $36.81. That's a 22% gain on that half of the position, and an even bigger gain on the whole thing. What a great run for TAN!
• I also exited all of my PowerShares DB Agriculture (DBA) at $25.32, a 1.4% loss. It's a shame, but the breakdown became apparent yesterday.

What About Gold?

Gold gave back its gains yesterday, which is worrisome. It didn't generate any sell signals on my positions yet.  And of my six precious metals positions, only one is in the red. I'm watching to see if gold rallies after the Fed meeting this week. Many Fed watchers are now saying the Fed will start tapering is QE program on March 14. Sure, sure it will. You do know we're going to have another budget battle in Washington between now and then, don't you?

Certainly the sentiment in the mainstream media remains profoundly bearish on gold.For example, if you follow that link, you'll see that the Wall Street Journal reports that Thompson-Reuters GFMS says that "Central banks are on track to cut back their gold-buying by 34% in 2013." At first glance, that looks bad.  But GFMS really means that Central Banks are still forecasted to buy gold, just at a lower pace.

In fact, Central-bank purchases may total 350 tons in 2013, the World Gold Council predicts, after they added 534.6 tons last year, the most since 1964.

Now, doesn't that sound more honest than what the Wall Street Journal wrote? And anyway, these are predictions about what the Central Banks will do. The proof will be in the pudding.

It would be paranoid (probably) to think that the Wall Street Journal is deliberately misleading readers. Instead, I believe that the mainstream media has settled on a negative narrative for gold, and they report facts in a way that suits that narrative.

One significant bearish fact remains:  Holdings in exchange-traded products (ETPs) have contracted every month this year, sending assets down 29%, according to data compiled by Bloomberg. However, it is also true that the selling seems to have ebbed.  We will see what November brings.

Why I Bought Junior Gold Miners This Morning -- & Banked Nice Gains

This morning, I took nice half-gains in the Guggenheim Solar ETF (TAN). 

Why? TAN is down while the market is up, always a warning sign.  I'm out on the first half of the trade with 28% gains -- not bad for a trade I entered in September. I've moved up my close-only stop a lot, too. 

Meanwhile, my India position seemed to have stalled. So, I exited all of my WisdomTree India Earnings (CPI) at a nickel-a-share loss, and HALF of my WisdomTree Dreyfus Emerging Currency (CEW) at a decent 5.75% gain. I moved up the stop on CEW, too.

Bottom line: Taking gains before the weekend makes me happy, and I have less to worry about. AND I'll have money to put to work next week, if I want to. I traded more than I wanted to this week, but the opportunities were there. We'll see what happens next week.

I also added a new position this morning. After yesterday's action in gold, I'd made up my mind to buy something in precious metals if we got a pullback. I was leaning more toward an ETF than a single stock, for reasons I'll get to.

First, some news and charts. Specifically, let's start with these charts from Mark O'Byrne at Goldcore.com. Mark writes ...

A deeper look into China's gold holdings warrants attention (see charts).
Its last reported gold holdings in April 2009 were 1,054 metric tons. After adjusting for net imports from Hong Kong and domestic output, the figure is closer to 5,086 metric tons. If one were to take away gold uses for jewelry, industrial, and other categories and only add implied bar demand to central bank holdings, the figure is likely closer to 2,710 metric tons according to Bloomberg Industries’ Andrew Cosgrove and Kenneth Hoffman.
In just 10 years, China’s gold holdings could catch up to the U.S., based on adjusted Chinese consumption for jewelry, industrial and other uses and using implied bar demand as the primary driver of incremental central bank additions. 

Some other interesting news ...

• Gold premiums in India, the world's biggest buyer of the metal, stayed at a record high of $120 per ounce. Thailand has now slapped a 15% import tax on gold and jewelry being shipped to India, as India's government cracks down on importation loopholes. I'm sure the gold smugglers applauded.
• Bloomberg reports that gold holdings in exchange-traded products fell 3 metric tons to 1,886.2 tons yesterday. So far this year, gold assets held by ETPs have dropped 28% reaching the lowest since April 2010 on Oct. 21. This reverses the build we saw on Tuesday. Gold holdings in exchange-traded products rose by 6.5 metric tons on Oct. 22, the most since October 2012, according to data compiled by Bloomberg. So, if fund demand for gold is bottoming, it's a bumpy bottom. 
• And The U.S. Mint sold 39,000 ounces of American Eagle coins so far this month, triple September’s total, data on its website show. Don't get too excited -- 39,000 ounces is only 1.21 metric tonnes. But this may be indicative of sentiment. In fact, we may be seeing a bottom in sentiment.

Now, let's look at one of the major drivers of the gold price -- the US dollar.  The US dollar index is heading down to test that support I talked about previously ...

(updated chart)

I put #3 on there because someone sent me a note trying to say that was a trend (and potential support). Good luck with that. Maybe you'll luck out.

Anyway, What happens when the US Dollar Index tests support #2 is anybody's guess, but the trend is your friend, and the trend is lower.

And as we know, the recent trend is lower dollar = higher gold + higher miners.

This brings me to my next pick. I was considering adding the Global X Gold Explorers (GLDX), because it popped hard yesterday.

But it worries me that a stock like Pretium (PVG) was one of the big gainers.

You can read Pretium's sad story HERE. Basically, the big deposit they were developing may not turn out to have nearly the gold they thought it did. In fact, a geologist hired to assay it said the Valley of the Kings deposit at the Brucejack Project has "no valid gold mineral resources."

But on Pretium's website, you can read that Valley of the Kings is "comprised of high-grade visible gold stringers within a lower grade gold quartz stockwork system. The Valley of the Kings hosts Probable mineral reserves of 6.6 million ounces of gold (15.1 million tonnes grading 13.6 grams per tonne gold)." 

To paraphrase the great Inigo Montoya, "I do not think the word 'Probable' means what you think it means."


  The scary thing -- for me -- is that Pretium's Brucejack Project was recognized earlier this year with a discovery award from the Prospectors and Developers Association of Canada.

That indicates to me that the single-stock risk -- in explorers anyway -- is higher than average right now, or at least, higher than I had realized.

So I can't see buying any single explorer at this time. The risk is just too great.

I say that, but did you see what happened yesterday? Pretium rallied hard! Sure, many stocks rallied -- miners, developers, explorers. But who's buying Pretium? ...

(Updated chart)

Maybe it was short-covering, maybe we're seeing the Greater Fool theory at work.

Obviously, if Pretium can get a bid, viable explorers should get bids. And sure enough, yesterday, everything went up. But then I ran this next chart, comparing the gains made by the GLDX in the last (June 26 to August 26) rally. I compared the GLDX's performance against junior miners (GDXJ), silver miners (SIL), big gold miners (GDX), silver (SLV) and gold (GLD) ...

(updated chart)

You can see that the explorers did not significantly outperform junior gold miners or silver miners in the last rally.

So why would I buy a basket of explorers when I can buy a basket of producing junior miners? It seems to me that's where a lot of the value is anyway.

Why not buy a single junior miner?  Well, that's what I already did with Silvercrest, Primero and B2Gold. And if my thesis is correct, and precious metals and miners are on the cusp of a big rally, then we're at one of those rare stages in the market where you don't need to be as picky as you might be other times.

So, I bought the GDXJ at $40.72, right after the open.  It wasn't the low of the day, but it seems like a good price. We'll see if I'm crying in my beer come Monday.

So far, buying the dips has turned out to be worthwhile. I'm not your investment adviser -- do your own due diligence, and do what is best for your own investments.

Good luck, good trades, and have a great weekend.

3 Red-Hot Investments -- Sun, Food, Water

Despite the fact that Congress seems to be doing its best to wreck the economy, I'm still bullish on stocks for the rest of the year. Pullbacks should be bought. Here are three I like.

Let's start with solar. On September 5, I explained why I liked solar in my post, "If I Had to Bet on One Resource Right Now." Since then, the leading solar ETF, Guggenheim Solar (TAN), has marched higher by 27% ...

(Updated chart)

My initial target on TAN is $44. It may go higher, but we'll see.

I also like the PowerShares DB Agriculture (DBA) ...

(updated chart)

I like this despite the fact that the USDA forecasts a significant global grain surplus for the current year. Not everyone is as fortunate as America; we are the OPEC of grain.

As a result, U.S. exports of major grains, wheat, corn, soybeans, etc., will rise in the 2013-14 crop year by more than 700 million tons, or more than 20%. U.S. agricultural exports in 2013 are estimated by the USDA to have been a record $140 billion.

Also, there's the fact that despite the log-jam in Washington, Democrats and Republicans can both agree on farm subsidies and oil & gas subsidies (most of the time).

Wall Street money is rotating into DBA. As they say on the street, "follow the money." 

Finally, I like water, in the form of the PowerShares Global Water Portfolio (PIO).

(Updated chart)

PIO invests its assets in companies in the global water industry that create products designed to conserve and purify water for homes, businesses and industries. The demand for water is only getting more dire, and old water systems are being replaced with new, more expensive versions.  That points to long-term profits for the companies tracked by PIO.

If it can break out through overhead resistance, I see a quick move to $24.  We'll see what happens then.

I mention these three because natural resource investors seem fixated on gold. I have made a strong case for gold trending lower in the short term. Therefore, you might want to look elsewhere, if you like natural resources.

If you have a broader investing scope, the strongest index right now is the Nasdaq-100, tracked by the Powershares QQQ Trust (QQQ).  Make of that what you will.

Opportunities abound, even in markets as weird as this one. When the markets pull back, have some buying targets in mind.

I'm not your investment adviser. These are not official recommendations. Do your own due diligence before buying anything.