G-Day

43
Tue, Jun 21, 2011 - 9:43am

With the looming "confidence" vote in Greece, I expect the PMs to be rather quiet again today. Greece, however, will not likely be quiet. Here are three articles to consider.

First, Gonzalo Lira sums up the situation quite nicely:

https://gonzalolira.blogspot.com/2011/06/if-greece-defaults-what-happens-to.html

Next, the BBC questions whether the Greeks will make a move for outright revolt:

https://www.bbc.co.uk/news/world-europe-13830466

And if you think that sounds crazy, read this:

https://www.smh.com.au/world/greek-austerity-protests-arouse-fury-from-the-man-in-the-street-20110619-1g9xi.html

Two quick charts to start your day. First, here's an updated silver. For the past 3 or 4 expirations, we've had great fun and made quite a bit of money trading options. This time...not so much. Maybe the fun and games will begin anew in August, as we move toward September delivery.

As we discussed yesterday, I think it's going to be tough for the PMs to get any real traction until/unless crude gets back above $96. Unfortunately, this will be no easy task. It looks a lot better than yesterday but still has quite a bit of work to do.

OK, that's it for now. As I finish, the metals are rallying so we'll see if they can continue to catch a bid. Be sure to watch how gold acts as it approaches 1550. TF

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  43 Comments

SilverTree
Jun 21, 2011 - 9:50am
benoit
Jun 21, 2011 - 9:50am

Questions Regarding Ratio Trade Theory

1) Is there any evidence that this is what's actually taking place? Can anybody point to a specific hedge fund who is participating and/or leading this trade?

2) Is this trade solely profit-motivated?

3) If this is indeed profit-motivated, would somebody care to explain why haven't we seen:

a) Long oil short oil producers trade?

b) Long grains short AG producers trade?

Thank you for your consideration.

Tesla
Jun 21, 2011 - 9:51am

Morning Turd

Thanks Turd!

Sterling
Jun 21, 2011 - 9:51am

Ass, gas, or grass?  Nobody

Ass, gas, or grass? Nobody rides for free

Sterling
Jun 21, 2011 - 9:52am

SilverTree

SilverTree said "Fist" lol!

SilverTree
Jun 21, 2011 - 9:54am
tmosley
Jun 21, 2011 - 10:11am

I am expecting a great deal

I am expecting a great deal of wild shenanigans to take place during this months PM expiry. Next month has a 50% chance of being the end of the EE, at least in the metals markets, and the chances only go up from there. And when I say 50%, I don't mean "I don't know", I mean there is a very strong possibility that it will happen.

Don't get caught without physical gold and silver after June 27th. You might use this opportunity to pick some more up on the cheap, but don't sell your physical stash to try to pick it up again for cheaper later, for God's sake.

Sterling
Jun 21, 2011 - 10:14am

Shenanigans!

Shenanigans!

pforth
Jun 21, 2011 - 10:19am

Ratio Trade?

I can see two possible explanations as to why the miners have lagged the metal so badly:

1) The public can no longer be bothered buying miners, now that they have ETFs. You don't have to worry about windfall profits taxes, nationalization of assets, corrupt boards, dilution of assets or just plan old not finding the metal in the ground. There's even options for those (like me) that think the mainstream ETF's are fraudulent: CEF and PSLV etc.

2) There is a ratio trade where big hedge funds (backed by banks?) short the miners and go long the metal. For the EE, this has the benefit of demoralizing a lot of the hardcore gold bugs and helps to defuse excitement in the PM's.

If #1 is the primary reason, it is a systemic problem and points to the miners never really ever catching up (as long as the main ETF's aren't publicly disclosed as frauds). If #2 is the primary reason, then it stands to reason that one day the trade will be unwound. PM stocks will soar while the bullion stays constant or falls.

Number 2 is a good hypothesis and a fair number of newsletter writers have mentioned it, but I've yet to see anything indicating that it is anything more than a guess. Before I can believe in it, I'd love to see at least one example of a hedge fund who is doing this.

speconomist
Jun 21, 2011 - 10:20am

  Turd, what implications on

Turd, what implications on the price of silver can we expect from the fact that options expire on Monday? Another smash on the price by the EE??

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