Complex as it isn’t, my bankroll is positioned all over the world and the only one who really understands it is me. In reference to the public markets of late, we are approaching an important juncture. A turn is at hand. Given my data points, I need determine the best allocation of my capital to the assets that will gain in value most rapidly–I need appreciation and velocity.

Libertarian

In order to execute my trading model, I must stay true to it. In doing so, It is essential that I have no obligation to other people’s money (OPM). Since I am not paid by anyone to manage their money, my emotions are not tied to the performance of any monies but my own.

With sole trading discretion, I can take whatever risks I choose. As my model is not hindered by diversification, I can allocate all my capital to one thing, and I can go all in whenever I want. Nobody else has a say. With no limited partners, I am able to exercise my beliefs in Objectivism. I am held down by no management. My decision are derived like those of a machine: a robot with a heart.

Tony and I

Don’t ask the question—I already know what it is. It is sitting on the tip of your tongue, and you want it to hang in the sky so you can watch my reaction. But I’m not even going to let you ask. I am going to explain before you can claim your smug satisfaction.

“What about back in September when you wrote about running money for Tony Stark? What’s that all about? In some circles it is rumored that you are a money manager to superheroes and now up above you are claiming that you are not running OPM.”

Indeed, I do communicate with Tony as to how to allocate some of his assets. However, I am not paid a dime to manage anyone’s money—just my own—and I must keep it that way. Because I must stay true to my model.

What Does the Model Say Now?

Keep in mind that the trading model is not one of profit regularity and predictability. My model is one of relatively inconsistent bouts of extreme capital expansion. The dime bets that go to $50—tail events. Yeah, I’m that guy.

It is still my opinion that the largest opportunity in the years ahead will be trading gold. Gold is going to make an extremely rare and large move higher, and when it happens, it is going to happen very quickly. I have seen this movie before. Monetary policy has grown out of control on a global scale and gold is the ultimate risk aversion trade.

In my post the other day, I spoke of some tells that lead me to believe that there is a large move brewing in the markets. The situation remains the same. In fact, Dubai risk has widened even more.

The Currency Market

From my view of the money flows in the currency markets, I am seeing the carry trade moving away from the US Dollar and into the Japanese Yen. The Yen is the new carry trade.

Yes, the dollar has strengthened of late (chart below), but the recent strength in the mighty US Dollar is more related to carry traders re-arranging. Sovereign swaps on the US have widened enough to signal that the dollar will grow weaker as opposed to stronger in the not so distant future.

All Roads Lead to Rome—Again and Again

So here is the triangulation: there is a large move brewing in the market and the move is connected to a sovereign related event. Therefore, we should look to buy the asset that will appreciate most during a time of governmental stress.

During the crash of 2008, the best asset to own was the US Dollar. The dollar was the risk aversion trade. However, during the crash of 2010, the US dollar will not be the risk aversion trade. Let me explain. The stress on the horizon is sovereign related, but the demand we have seen in the US dollar lately is temporary. The asset, therefore, to own is going to be the ultimate safety trade, the one to which we always return: gold. (Silver will tag along.)

There is a large dislocation set up, and it is the opinion of Vincent M. Vega, editor-in-chief of Volatility News dot com, that the asset class to appreciate the most and with the most velocity is gold. Like the the Jackie O. trade of the 1970’s, it is time again. The gold trade is on. Be a part of it. History is in the making. Will I see you there?

And the beat goes on.

The Dollar Strength Will Fade

On The Errol Flynn
I fly sky high. Too fast to
live. Too young to die.

I was long gold last year. Recently, I noted the yellow metal in a range. Now, I am a raging bull on gold. The new high in gold is akin to the new high internet stocks–EBAY, YHOO, AMZN, et.al. circa 1997.

In the years to come someone will ask me, “what about 2009-2019, what was the hot market then?”

To which I will reply, “Yes. The decade where all that glittered was gold.”

It was just like the 70’s.

And the beat goes on.

Trader Art - Gold - Oil on canvas surrounded by silver frame

The S&P moved higher out of the gate. About midway through the session, it sold off about 10 points and found support at yesterday’s high. The pit was quiet all day, save a few minutes before and after the Fed beige book was released.

S&P Futures - 15 Minute

On the daily chart, the market has rebounded from it’s (ever so slight) sell off last week. Over the last four sessions, there has been a relative increase in volume in the pit traded contract. Any time volume veers from it’s average, it is worth noting.

S&P Pit Contract - Daily

All eyes are still on gold, which is consolidating after last week’s ascent.

Spot Gold

I am flying home from Singapore and will be back tomorrow.

And that’s a rap.

The markets move like the ocean, and I am but a drifting trader weaving in and out of the waves. Sometimes the sets come in with such poetic, rhythmic motion that the probabilities within almost chant like a lucid, soothing mantra. Other times, there is so little visibility and the tides are so variant that there is no predicting the next swell or crest. Some find it reassuring to believe that Mother Nature is predictable, but it truth, she is not. She simply beats to a rhythm.

The charge of the trader is to know that you won’t prevail in every attempt–you can’t catch every wave. You can be riding the most picture perfect trend, and it can fall apart without any warning at all, like a tunnel turned breaker. We can take solitude in the fact that a new wave will always takes it’s place. Opportunity always abounds in places where buyers meet sellers and vice versa.

As a journalist of finance, I must understand one thing for certain: there is no such thing as Objective Journalism. I am not pretending to be objective here in these pages. That would be a joke. I think Hunter Thompson summed up the theory of Objective Journalism when he covered the campaign trail in 1972.

“The only thing that I ever saw that came close to Objective Journalism was a closed-circuit TV setup that watched shoplifters in the General Store at Woody Creek, Colorado. I always admired that machine, but I noticed that nobody paid much attention to it until one of those known, heavy, out-front shoplifters came into the place…but when that happened everybody got so excited that the thief had to do something quick, like buy a green popsicle or a can of Coors and get out of the place immediately.

So much for Objective Journalism. Don’t bother to look for it here–not under any byline of mine; or anyone else I can think of. With the possible exception of things like box scores, race results, and stock market tabulations, there is no such thing as Objective Journalism. The phrase itself is a pompous contradiction in terms.”

I attempt to paint a picture of my particular vision of probabilities, and it is a perception that will not be replicated in mass prints. As the subject, I can’t possibly be objective. The mere fact that someone may read these pages will make this trader potentially observed. As Heisenberg states, “the observer changes the thing observed.”

By writing about things I contemplate, it is possible that I become observed. In becoming observed, I will change. The observer changes the thing observed. So why write? Why invite observation? Because it will make me better. Because it is time. Because it will challenge me more. My “read” on the markets will have more clarity. The more I benefit others, the more I am observed, and the better that will make me.

All along, I have the good fortune to chronicle for the world the thoughts of a speculator who thinks about winning not in terms of frequency of correctness, but by magnitude of rightness.

Peace

The Impersonator