Silver And Gold, Silver And Gold

Burl Icle Ivanhoe Ives recorded the song in 1964 for the CBS TV stop motion special Rudolph The Red Nose Reindeer.  We had the day off today so I got to spend quality time with my contractors.  Imagine my surprise when they asked me for yet another check.  I hadn't given them one in hours.  C'est la vie. 

As I mentioned a few post ago, we got nearly all of the portfolios out of silver and gold.  The commodities did collapse as maybe we expected.  We really wanted to know why.  Ironically, we have been reading John Maudlin's book Endgame:The End of the Debt SuperCycle and How It Changes Everything.  Very good economic based book about the history of debt cycles.  I have one coming for you Hanna.  Not Dave Hanna, but young lady new reader who loves Economics.)  In the book, Maudlin references another book by Mark Buchanan called "Ubiquity: Why catastrophes happen?".  Buchanan attempts to explain chaos theory and non-equilibrium physics.  (Not as funny as inept contractor stories, huh?)  Anyway the ideas explained go along way towards explaining the unexplainable in the market place.

Now back to Gold and Silver and other commodities.  If you take the ideas pontificated about by Maudlin or Buchanan, you might extrapolate that one trade, by one investor, was the last grain of sand before the mountain of commodity speculation began to avalanche.  Interesting theory and while there is undeniable evidence that at the end of the day, one trade did start the fall, it is important to keep in mind that behind the scenes The CME (Chicago Mercantile Exchange) raised its margin limits on Silver twice this week.  I will try and get this right, but I know a couple of readers have much better grasp on the commodities market than I so feel free to correct me.  If I have a CME marginable account I can control $100,000 dollars worth of Silver for let's say $10,000.  That would be a 10 to 1 margin account.  This week, CME contacted silver holders and said you have 48 hours to adjust your margins to 5 to 1.  So in order for me to keep control of my 100,000 worth of silver, I have to come up with another $10,000 in cash.  I can go to my bank and write them a check OR, I can take some profits because that $100,000 I bought in January for an investment of $10,000 is now worth $127,300 dollars.  (Silver had a 27.3% run from the first of the year till last week.)  That's right they made 27,300 dollars on a 10,000 dollar investment.  Guess what people chose to do.  They sold off their profit.  So why did gold, corn, sugar, platinum and all the other commodities take a hit this week?  Well if you get a margin call (That what it is called when they mess with your margin ratio.) on one commodity, you start thinking they might call other commodities so it is a good time to take a profit.  Sell, sell, sell.  Hopefully that helps explain some of the reason for the huge sell off this week.  It looks as though we may be seeing some support at the levels we finished the week out.  We are not back in gold or silver YET.

We were working with one of our readers on their recent picks and they had CMG Chipotle Grille on their list.  (Think they like Cramer?)  Anyway we really liked what we saw and last night out it on a watch list.  This mornings positive job news provided what we thought a good catalyst for this retail food stock so we bought in and added it to several portfolios.  Of course we put an 8% stop after getting in.  We are looking for a 15% pop by third quarter this year.

Proud is Where The Heart Is

By now you figured out that this note was meant to go out yesterday May 6^th, the anniversary of the Flash Crash.  We took a lot of profits that day and paid a lot of taxes as well.  Well yesterday was significant for our family as well.

We did not post the note because we did not return from Los Angeles till quite late.  Ya see our daughter, Kristin, had her accolades ceremony as she will graduate from St. Mary's College with her Master's In Family Therapy.  She has accomplished this feat while attending to her full time job, Co-Producer for the WB networks Television Show Supernatural.  Not only is she graduating, she received special honors for achieving a 3.9 or better GPA while attending to her job that often requires 11 hour days.  She was also chosen by her 23 other graduates to present the class appreciation speech. 

It was a very special moment for Devin, Jack, Myself and her fiancé Ryan.  It was clear to see she came from my genetic pool as I to had a 3 in my GPA when I graduated from College.  Needless to say it was very special evening followed up by a long poorly serviced meal at Wolfgang Puck's across from the LA Staples Center.  I was the driver for the night, but did have a sip of the white wine I picked out for the night.  It was a 2008 Kistler's Vine Hill Chardonnay.  Pale straw colored, apples and apricots on the tongue, just a bit this side of being ready to get buttery, but a fine fine pour.  It is available retail in the 50-60 range, but Wolfgang was quite proud of this wine so it was 2.5 above retail.  You can do the math.

Anyway if you missed the post last night you have it now.  I was just too tired to get it out.  We are very proud of our little girl.  Having entered an MBA program a hubdred years ago in Las Vegas, I am amazed that she was able to complete the degree with honors.  A special moment for sure.

Salve Lucrum