Sole Survivor

November 9, 2012

• Last asset standing: The one golden survivor of this week’s post-election pummeling…
• Down, but not out: silver on the rise… and the best way to play it…
• The historical anomaly good for stocks during Bush’s fourth… er, Obama’s second term…
• “Charity begins at — oh hell, never mind”…mayor Bloomberg’s Orwellian head-scratcher…
• A wager takes shape between The 5 and two of its technical traders… readers threaten expatriation (again)… one justifies voting, feels good about it (but makes little sense)… and more!

  We begin today with a welcome outlier. At $1,733, gold is higher than it was when it got whacked for $40 bucks last week. And it’s the only asset class to hold up after the election.

Go figure.

  Yesterday “Tyler Durden” stepped out of character at Zero Hedge. He suspended his paranoia, stopped trying so hard to be hip and furnished something useful — a chart of gold, the S&P, a commodity index, 10-year Treasuries and the dollar index.

  Don’t be too quick to chalk up gold’s rise to a falling dollar. As Ed Steer from Casey Research points out, the dollar index is at 81 this morning — exactly where it was in early 2005. At that time, gold was quite the bargain at $425.

“There is fresh safe-haven demand for gold hitting the marketplace late this week,” writes Jim Wyckoff at Kitco, “amid concerns about the approaching U.S. ‘fiscal cliff’ and about the European Union sovereign debt crisis.”

Yawn.

  Still, all that glitters is not necessarily gold. “From a technical standpoint,” adds Jonas Elmerraji, “even if you don’t really care about gold (gasp!), you should love silver right now.”

As evidence, he presents his own useful chart: SLV, the Big Kahuna of silver ETFs:

“It’s clear that silver has had some challenges lately,” says Jonas. “Silver prices are off considerably from their highs back in late September, but while prices are down, this metal is far from out. That’s because SLV hit support right at $30 late last week.”

Round numbers matter to traders.

What’s more, “$30 marks a 50% retracement from the high SLV made in late September to the low it made way back in June. After a big rally, it’s very common for stocks to correct (that is, give back some of those gains before making their next leg up), and when they do, 50% is typically a very reliable retracement level that’s been observed by traders.”

Jonas likes the movement in the Global X Silver Miners ETF (SIL) even more… and within that basket, he’s especially keen on Silver Wheaton (SLW). “A breakout above $41 is a solid buy signal for Silver Wheaton,” he advises.

  The big wager: You may be aware of a bet we have going with Jonas and Greg Guenthner. For months, they’ve been working out a trading “experiment” that will go live next Thursday. They’re looking for at least 75 people they claim can help turn $1,000 into $5,240… no matter what the market does.

In fact, they’re convinced market volatility caused by the looming fiscal cliff… and uncertainty over unemployment, the eurozone and an escalating war in the Middle East… are going to help them win their bet. Terms of the wager: They say they need only five days to prove you can conduct your first successful trade. Even if you have zilch experience. No matter what your formal education… or lack thereof. After that first successful trade, you’ll have the tools you need to turn $1,000 into $5,240.

We’ll see.

If they aren’t successful… who know knows what’s going to happen? (Ahem.) They’ve been building the apparatus for the experiment for months. Months. And months. The last formal meeting we had on it, in fact, was in December 2011. Since then, they’ve been very secretive about the details. But next Thursday, all will be revealed. Even to us, their publishers… er, employers. (Ahem.)

If you want to take part in the “Jonas and Gunner Experiment” — and learn how to turn “$1,000 into $5,240 within five days” — you can do so, free. Check it out right here.

  Stocks this morning are stabilizing. Of course, that’s what we said at this time yesterday, and the Dow wound up shedding another 120 points by day’s end.

The indexes opened down, then turned up after Reuters and the University of Michigan delivered their latest consumer confidence number — the highest since the “recovery” began in June 2009.

  Another barometer of consumer confidence sits at a “post-recession” high this morning.

The Gallup Poll people issue a daily (!) Economic Confidence Index — “based on the combined responses to two questions, the first asking Americans to rate economic conditions in this country today, and second, whether they think economic conditions in the country as a whole are getting better or getting worse.”

We’ve helpfully annotated the chart of this index with every major Federal Reserve action going back to March 2009, when the S&P bottomed at the infamous 666 level.

“I suspect,” quips Vancouver favorite Barry Ritholtz, “this chart’s improvement helped the incumbent quite a bit.”

  A footnote to the Dow’s 300-point tumble on Wednesday: Five times the Dow made a significant drop the day after a presidential election, and all five times came after a Democrat was elected.

“Of the four that preceded Wednesday’s,” says Jonas Elmerraji, back for another appearance today, “the following term ended up being excellent for investors.”

Indeed, buying and holding over those four spans of four years each — we’re going back to 1932 here — would have generated average annual gains of 15.04%. If you merely bought and held since 1932, the annual gains are less than half that — 6.95%.

  Because New York has solved all its other post-superstorm Sandy problems, Mayor Michael Bloomberg has banned food donations to the homeless.

“I can’t give you something that’s a supplement to the food you already have? Sorry that’s wrong,” says Glenn Richter, who gathered surplus bagels from a synagogue to drop off at a city-run homeless shelter.

Sorry, no-go. The city has no way to examine the salt, fat and fiber content of donated food.

Seriously.

Achtung: Verboten!“My father lived to 97,” Richter tells WCBS-TV “my grandfather lived to 97, and they all enjoyed it, and somehow, we’re being told that this is no good and I think there is a degree of management that becomes micromanagement, and when you cross that line simply, what you’re doing is wrong.”

What’s the city worried about? Lawsuits? From homeless people who’ve been displaced by the superstorm? Over fat and salt content in the food?

They don’t accept donations “for the things that we run,” Mayor Bloomberg told puzzled reporters, “because of all sorts of safety reasons, we just have a policy, it is my understanding, of not taking donations.”

When reminded it was his minions who put this rule in place only recently, he upped the ante: “If they did [accept food] in the past, they shouldn’t have done it and we shouldn’t have accepted it.”

Let them eat cake, indeed. But only a vegan, unsalted, sugar-free cake, apparently… good lord.

  “Everyone who still breathes air,” reads the first entry in our ebullient, if confused, post-election mailbag, “is aware that Romney thought that roughly 47% of the electorate were ‘takers,’ rather than ‘makers.’

“The election results strongly suggest that Mr. Romney seriously underestimated the percentage of ‘takers’ and overestimated the percentage of ‘makers.’ Emigration is beginning to look increasingly attractive to this reader of The 5.”

The 5: “We need to remember,” wrote Laissez Faire’s Jeffrey Tucker the day after the election, “that the GOP represents a different set of takers: financial elites on the dole, the military-industrial complex and monopolistic corporations that live on patents, tariffs and state privileges. There are no angels in control of a two-party system. The parties exist to serve the special interests, not the general interest.”

Or as economist Paul Craig Roberts put it: “What the two parties fight over is not alternative political visions and different legislative agendas, but which party gets to be the whore for Wall Street, the military-security complex, the Israel lobby, agribusiness and energy, mining and timber interests.”

  “Vaya con Dios, USSA,” another future expatriate writes — in 36-point font to underscore his point. We spared you the insult.

“Let’s see now,” he goes on. The election took “two years and $2 billion. Now we have a… gridlocked Congress and a socialist president. The American people have once again proven just how stupid they are.

“First, they reelected George W. Bush and now they have done it again, and on top of that, we have a Congress incapable of tying their shoes without help. They are starting to make the Argentine people look intelligent, and that is one hell of an accomplishment.

“This election has changed nothing. Correction — what they have done is kick in the afterburners on the road to national oblivion. I hope they enjoy the ride.”

The 5: Hmmn… if you’re seriously thinking of expatriation – or simply want to explore some options for moving your assets outside the country (while you still have the chance) – you may find the next Rancho Santana Sessions useful.

Our majestic and peaceful new conference center on the Pacific frontier will host an expert panel ready to answer your questions about foreign real estate, foreign business opportunities and the ever important tax- and estate-planning issues. Your genial guide through the thickets will be The Daily Reckoning’s own Eric Fry.

The dates are creeping up quickly. We purposely keep this event small. It’s an intimate space, and during the event, we give you plenty of time to explore the ranch. Here’s your last-chance invitation.

  “Voting was fun,” writes a reader with a different, if less nuanced, take. “See what you’re missing?

“Pot legalization. Jerry Brown’s tax increase. Elizabeth Warren. Republicans failing to take the Senate because candidates make stupid comments about rape. You cannot fully enjoy all of that unless you participate in the process. I even got to vote for a libertarian for prez!

“If nothing else, you should be supporting the senators who voted against the NDAA last year — you know, the habeas corpus clause. I voted against my senator, Kirsten Gillibrand, because of that vote, and for her libertarian opponent. She still got like 70% of the vote, but at least I did my part. I’m happy about that. If memory serves, one of the 13 dissenters was from Maryland. You should be out there beating the bushes supporting that individual.

“I mentioned Jerry Brown because he is an honest politician. [Hah... isn't that an oxymoron?] You probably would quibble that tax increases for the wealthy won’t help. My response is that what matters is to support politicians who get it about serving the people, who aren’t on the take. That’s more important right now than whether their policies will do much good. Recall that Ron Paul floated the idea of naming Dennis Kucinich as his running mate.

[Uhhh... yeah?]

“Warren is another one. You don’t like her because she has a point. If you have ever driven on an interstate highway, then you are a zombie. If highways had been left to the private sector, we would have a whole lot of toll roads, some of them prohibitively expensive, concentrated in metropolitan areas, and nothing in rural areas. The Bakken would have been discovered, but exploitation would be awaiting completion of highways that could bring the trucks.

[That's a good circular argument. But we see what you mean... nothing good would happen if the government didn't do it first: the mantra of the political class. Love it.]

“Since I’m writing you, I’ll add my two cents about your product. Please don’t eliminate the graphs or the gratuitous cheesecake. I love the informational component of your daily letters. I would not have known about the NDAA if it weren’t for you, and knowing about it influenced my vote.”

The 5: So you voted. Among other (crazy) notions, you registered your protest against the NDAA. Good for you. You made yourself feel virtuous. We always liked longtime Baltimore radio host and Daily Reckoning champion Ron Smith. Last year, before his untimely death, he said: “If voting mattered, they wouldn’t let you.”

Have a good weekend,

Addison Wiggin

The 5 Min. Forecast

P.S. “We’re heading into a trader’s market,” Jonas writes in a third and final appearance today. “More volatility. And potentially more profits.”

“I believe,” Mr. Elmerraji states boldly, “that I can teach you not only to trade the markets for fun and gains, but also to protect yourself… and even see gains… from the looming fiscal cliff.”

After months (and months… and months…) of preparation, do Jonas and Gunner have what it takes?

Next Thursday, we will all find out for sure. If you want to take part in their experiment — and see if they can help you turn $1,000 into $5,240 — all you need to do is take a short quiz here. It’s free… because it has to be. Time is ticking. The wager is on.