Friday, December 5, 2014
The problem with the "long Nikkei short gold" story
Well, I did say it was a pile of Zerohedgery....
IKN - long Nikkei short gold.
The author of the article linked to has a misunderstanding of what GOFO is, is ignorant about the Japanese economy and depression economics generally, doesn't bother (or know how) to calculate actual correlations, and lovingly quotes Zerohedge (a Russian disinformation site) every two pages.
So it's no wonder that the article got reprinted at Turd Ferguson's site!
Turd Ferguson - Paul Mylchreest details the gold Nikkei link.
And, of course, now it's also made it to Zerohedge:
Zerohedge - an inside look at the shocking new normal.
And, most distressingly, everyone in the comments section is calling his paper a breathtaking work of staggering genius.
God no. Please god no.
This is a beautiful example of one of my most cherished benefits of being a sociopath: I always get an uneasy feeling when I see a herd of dumb chimps jumping up and down, shouting oogity-boogity. The most perfunctory research then proves that, indeed, the dumb chimps are dangerously fixated on something irrational, and I should stay away.
This really makes me want to short gold right here. If a bunch of clueless Zerohedgers are oogity-boogitying about the imminent collapse of the Nikkei-gold pair, then you damn well know the trade is going to continue.
As for Mylchreest, I have even further criticism:
1. Identifying an overextended pair isn't good enough. You have to be able to tell me when it will break. Otherwise, the banksters can continue making money on long-Nikkei-short-gold forever, and any attempt to get in the way is just like stepping in front of a steamroller. My gold ex-USD chart is meant to be a vague, amateurish, beginner's attempt to identify a turning point; what did you offer? Commentary on GOFO without comprehension of what GOFO is.
2. The long-DM-short-gold trade in general is exactly what the banksters do in a secular DM bull market. It can go on forever because they have more money than us, and their position is always perfectly hedged so they'll never break a sweat.
I'm not saying there's no turning point coming, and I've not given up that the bottom for gold has been/will be right around here somewhere. (Check out the V-bottom reaction to the BLS chokeslam this morning! Fuck Blythe Masters indeed!) What I am saying is I don't ever consider it wise to be in the same trade as a bunch of ZHers and a guy who doesn't know what GOFO is.