Jul 20/15 – More so called ‘paper selling’
2015-07-20 11am EDT | #gold #SAC #Steve Cohen
“Don’t use the West bathroom” the other clerk warned me with an sombreness that scared me.
“Why not?” I asked back timidly.
“There is a penny in the urinal,” he whispered so quietly that no one else in the CME currency pit could hear. From my reaction, he could tell I didn’t appreciate the seriousness of the situation, so he elaborated, “it’s like literally pissing away money…”
When I read Stevie Cohen was having trouble selling his 9,000 square foot Manhattan penthouse because of worries the place might be cursed, it did not surprise me one bit.
Given the price tag, I have about as much chance buying Cohen’s place as I do dating Kate Upton. But even if I could afford it, I wouldn’t step foot through the doorway even if it were trading for $100 a square foot. And I am not alone. From the Vanity Fair article titled Is this Billionaire’s Apartment Jinxed?:
“There’s still a feeling from some big-money guys that the place is still jinxed.” According to another source, “The lack of a buyer might be because some feel the place might have some bad karma or be jinxed because of his SAC troubles.”
Bad trading juju is not something you mess with. Either that, or you start a rumour about Cohen’s place being cursed to try to pick it up on the cheap…
More so called ‘paper selling’
Last night the so called ‘paper selling’ in the gold market hit new levels of absurdity. As soon as I heard about the near instantaneous $50 drop of the price of gold in the thin Sunday session, I shuddered to think about the gold bugs’ wailing about the supposed dislocation between the ‘real gold’ market and the ‘manipulated paper market.’
I have to admit, even I was taken aback by the out-of-the-blue nature of the selling. Gold opened down a dollar, drifted around aimlessly, and then WHAM! quicker than George Michael bolts from a police raid, gold is trading 50 handles lower.
It makes little sense. Why sell it so ugly? Why not try to work this order?
The answer is obvious. They sold it badly because the seller(s) wanted it lower. I will agree with the gold bugs on that point.
But where I differ from my tinfoil hat wearing friends is the reason for this aggressive selling. There are no Central Banks trying to manipulate the price of gold lower. It is not some bullion bank conspiracy.
It is going down because there is a lack of buyers. Full stop. Period. The sellers know the line of least resistance is lower. Yes, they are purposely driving it down in the most aggressive manner possible. But if the gold market was healthy, then buyers would be stepping in to take advantage of the lower price. Instead the weak longs are being forced to sell. Complaining about that fact only makes the gold bulls look all the more foolish.
Gold bulls should take a page out of Warren Buffett’s playbook. Warren doesn’t complain about short sellers in his stock. Instead he welcomes them because their selling allows him to buy his stock cheaper. And he knows eventually they will have to buy the stock back.
So instead of complaining about the ‘paper gold manipulators,’ let’s just take this opportunity to buy some gold on the cheap.
Late last week I noticed the gold bears were getting extremely cocky. Guys that don’t usually trade gold were tweeting about their big short positions, the coming break of the triple bottom and the lack of support below. They were almost counting their money.
Hats off to them. Gold has traded poorly. Most pink tickets have positive P&Ls. Every uptick has just been a chance to get shorter.
But I respectfully suggest the bears might be pushing their luck. Although I think the path of least resistance has been lower, all market moves reach a point where they run too far.
The gold sentiment is so lopsided I think the bottom is near. I have seen so many RIP Gold Bugs comments you would think gold had just been lowered into the ground and stopped trading due to bankruptcy.
I am hanging tough with my long positions and picking away at some new buys. I think we are due for a face ripping rally that will startle these new found gold bears.
During last night’s collapse, the gold bugs were strangely quiet. It is like they had finally given up. They could no longer defend their position. This silence might be the signal we have shaken out the last weak longs. Now, all we need is for them to join the short side in a final act of capitulation…
Thanks for reading,