Palladium - Better Than Gold!

I already mentioned how I tragically dumped by palladium position at $226 in May!

And look, it's gone up another 100 points in the last few weeks. Oh well...

Someone asked me about shorting this metal.

NO WAY. I told him a quick look at a rhodium chart ought to scare him out of that trade. That rare metal went from $350 to $10,000 an ounce a couple of years ago!

A better play, for the insistent palladium bear would be to short the mining stocks - SWC and PAL. Miners across all metals have lagged the underlying commodities, badly at that over the past decade. You watch, palladium will downtick a little and the miners will come in 30%. It took me a long, long time and thousands upon thousands of dollars to learn that miners are real POS.

And within that learning process I learned to get long the commodity, as I did with palladium last year. Only I got in too late and out too early. Timing is beyond everything!

Personally, I won't be touching any of those trades short or long at these levels. I just wanted to say that for insistent shorts, miners have historically been a much better play than futures contracts.

Trading Update - January 2010

Yesterday I bought some Jan 20 puts in Wells Fargo. I bought the 2012s for 2.10 or so.

That stock was 7.80 10 months ago, it could easily get slammed again.

If it does, I'll buy stock one-to-one against my puts and turn them into synthetic calls for a ride back up. I have TWO FREAKIN' YEARS.

I really like this purchase.

I knew a guy in on the Philly Stock Exchange who made a boatload, maybe $1 million or so, during the '87 stock market crash.

He had *3/8s puts in Solomon Brothers*. Ironically, maybe a 20 strike as well. I think the stock blew through it something fierce, he similarly turned the puts into *synthetics* and was long for the violent retrace.

Remember, Wells Fargo is bankrupt. A lot can happen in two years: terrorist attacks, dollar crash, Treasury crash, etc. And my risk is a mere 2 pts!

Say WFC drops to $11 where I buy stock, and then retraces to $24 where I sell. In that case, I'll have made 13 dollars on a 2 dollar bet, PLUS I'll still own the original put for more possible flipping! This type of strategy would be called trading *long volatility* or *long gamma*.

Allow my broke-a$$ to dream, will ya?

Side Note - Yesterday I parted with my shares of Stillwater Mining, the palladium play. I sold it for 13.77 a share; I had purchased it at 3.31 last February. Watch it go to 50.00 now!

Palladium Soaring!

About now I'm starting to get miffed that I dumped my palladium in May!

Obviously, it was a much better rebound play than gold - on a percentage basis.

The trick was, of course, *entry point* - and maybe *patience*.

A Single Shiny Spot...

....In my portfolio:



With precious metals soaring, palladium miner SWC is trying to break out of its recent range.

Last year I made nice coin in this stock; however this year has been a different story. I'm up on my most recent purchase (3.31 basis?) but lost a bunch buying palladium futures at $390 or so. They tanked right after I got long, all the way to nearly $170 before rising steadily back to around $370 today. Unfortunately, I dumped mine at $226 or so and went with an ill-advised short S&P 500 position in my futures account this summer. Oh well.

The bull argument for palladium is simple - with gold making historic highs, palladium remains relatively cheap, still some 35% off its 2008 high of $579.

Whatever. I'm all but burned out from trying to apply rational analysis to financial securities. I was drawn initially to the economic nature of stock markets, but have concluded that they are nothing but pure casinos - at least now anyways.

I think I have some Jan 15 SWC calls buried in my account. Hey, I still have two months left....one just never knows.

Though anywhere near $15.00 a share and I turn those puppies into synthetic puts in a heartbeat.

Palladium Update

Last year I bought palladium at $390 right before it dropped to around $170. I still have it and it's hanging out near $220 at the moment.

Palladium is Jim Rogers favorite metal - fundamentally. And it's also the favorite of the blogger who writes Stockology.

For a good update on the palladium market see his recent post The True Rationale of Commodities Supply And Demand and also be sure to poke around on his blog and hit some of his numerous hyperlinks.

Palladium might become an alternative energy play from *cold fusion* - see link above.

And there are some investment products about to make the metal easier to manipulate buy.

Basically, just read this guy's other posts:

The Russian Checkmate On Platinum And Palladium Is Looming and The Latest On Precious Metals And Commodities.

Also read this story - Getting in Platinum and Palladium Ahead of the ETF Launch.

What's interesting about that article its mention of industrial opponents to palladium ETFs - in particular Big Auto. If that doesn't tell you to get long, I don't know what would!

I really wish I had free capital at the moment. If I did, I'd buy a whole lot more palladium and sock it away for the long haul.

Angry Trades

While I ride out big losers in DXO, OIH, TBT, SRS, and SKF....



I took profits in my last remaining *longs* today.

I sold Stillwater Mining at 5.14 today. I had bought it two months ago (way too soon) at 3.87.



And I also dumped my Suntech Power Hlds at 10.81 this afternoon. I had bought it about a month ago for for 5.80.

The Suntech was easy to let out. It had almost doubled and I have plenty of *long oil* exposure in DXO and OIH.

The same goes for Stillwater Mining. I am still long palladium in my futures account so I can afford to let it go. Palladium is trading at near $175 an ounce a multiyear low (I got long around $390 or so). Methinks SWC is only rallying with gold miners as its fundamentals (i.e. spot price) are lagging the yellow metal's.

I messed up on these metals. I, like more than a few others, was discouraged by gold's reluctant, slow drift up in the runaway commodity bull market. So, when commodities weakened, I nibbled on palladium instead of gold or silver. Palladium, though possessing better supply/demand fundamentals, is proving to be a very *industrial* metal. It sold off hard with the collapse of the auto industry.

Meanwhile, gold has held up really well relative to the entire basket of commodities in this *deflationary* environment. Gold's probably going to go a lot higher considering the fact that after 12 years of being a goldbug....I have no exposure whatsoever to gold.

Is $800 Gold A Falling Knife OR An Opportunity?

"Higher demand"?

The above notice just was posted on kitco.com, a popular *goldbug* website. It seems that all the end-of-the-world types are feverishly rushing to buy more precious metals at these lower prices. I guess I should have waited a few weeks before buying palladium. It's down from $390 to $285 in a month! If some of the banks I am short start to roll over, perhaps I'll buy more.

I don't have any strong feelings about gold. I see it as a tough call. It could very well take a two year break before resuming its uptrend.

UPDATE - It seems I am not the only one to have noticed strong investor demand for the metals. Read this piece here, particularly if you have a proclivity for government conspiracy theories:

The Disconnect Between Supply and Demand in Gold & Silver Markets

Buy A Little Palladium

It might very well be time to get long some palladium - read the basics on Wikipedia.

Though I've been trading gold and silver I haven't ever done much trading of palladium - or any of the other so-called PGM - Platium Group Metals: platinum, palladium, rhodium, ruthenium, iridium, and osmium.

Jim Rogers is bullish on it. AND, it's got a healthy chart:



If you read this blog post, there's a 73% chance you'll get all bulled up as well.

On the commodities exchanges, the minimum increment is 100 ounces. In other words, one futures contract gets you that much of the metal. With palladium trading around $400, that makes the smallest possible investment about a $40,000 commitment. (Though, margin for that is just less than $4,000).

One could play Stillwater Mining Company or North American Palladium Ltd as equity plays on a palladium run. I bought a little of both - stock in PAL and Jan 2010 15-strike calls in SWC.

Now that I am long some palladium (bought December delivery at $394) I can daydream about it doing what rhodium has done over the past few years.



Yeah, you're reading that correctly. Today, rhodium trades for 30 times what it did 5 years ago!