Silver & Tan Story

Silver bugs and gold bugs hate me when I say they are NOT safe. They are just a commodity like all other commodities and are just as volatile. (That’s also part of why they are not the best currency either… having your fundamental measure of ‘value’ being volatile is a bit rough on the rest of things).

Well, this is a chart of SLV the Sliver ETF. That big spike up was when I called it a “bubble” and said it was not safe and time to head for the exits (and sold out most of my metals positions – keeping some Platinum and Palladium that I sold on a different schedule). Also on this chart are a section of ‘middling’ ETFs. SPY for the S&P 500, IYT for transports, XLU Utilities, IYJ for industrials. Then, finally, TAN. TAN is a fund that focuses on the Renewable Energy Sector. It was “hot” leading into the crash, and as AGW Mythology fell apart and as the Ponzi aspect of flaky schemes was surfaced in the crash, their shares took a beating.

It makes for a fascinating perspective.

Silver and TAN 5 year weekly

Silver and TAN 5 year weekly

Live chart at Bigcharts.com

The thing to keep in mind when reading charts is that it is a window into the collective emotional state of millions of people.

So with that in mind, we can see that in the “plunge” of 2008 folks were dumping everything for cash. Even gold takes a dip, though silver drops more, even a bit more than the overall stock market. That’s because silver is an ‘industrial metal’ too, so a recession cuts buying demand. TAN just gets whacked, down harder than the basic core sectors by quite a lot.

From 2009 to early 2010, TAN is more or less flat with some sideways wobble. Silver is rising at a darned good clip. Folks are scared and worried. Scared worried folks buy gold and silver. Not solar panels and windmills.

About 2010 to 2011 it became clear that AGW was not happening. Just not. At the same time, it was seen that the Subsidy Racket was a scheme and that the whole “solar and wind” thing was just not cutting it in cold weather. “The Story” starts to fall apart. At the same time, the Silver Story “has issues” too. Summer of 2011 everything takes a tumble.

Since then, some have recovered. The broad market, for example. But TAN keeps on driving right on down to below -90% headed toward a “near zero”. Silver and Gold both go into a bit of a ‘wobbly sideways’ for a couple of years, then at the right edge, start a new plunge. Silver more volatile than gold, but neither one of them ‘great shakes’ in the ‘growth’ department. Nice volatility for rapid trades if you watch it every day, but otherwise, not much you can do with it.

Makes the volatility of the stock market look like a flat line in comparison…

Now look at those stock lines. Utilities lagged, transports lead, industrials and SPY near the middle. Until that right margin.

There’s a curious alternation between the utilities and cold. The utlities line tends to have small rises when SLV and GLD drop. Now, at the right margin, XLU is rising nicely just as SLV and GLD start their rollover again. Like folks looking for ‘safety’ have figured out they didn’t get any in GLD and SLV for the last couple of years and utilities have a dividend…

It does look like there is still room for utilities to ‘catch up’ to the other S&P stocks, especially as the others have gone a bit flat. CNBC News Flow is about good earnings, but weak ‘top line’ growth ( under 2% likely perhaps as low as 0% when reporting is done) and failure of consumer durables to sell well. Several companies having a ‘miss’ on sales volume. Even ‘staid’ companies like Procter & Gamble. . (As I’ve said a few times already, folks with no money can’t buy more stuff).

Until real employment and real wages pick up, and cost of living (i.e. that “food and fuel” that CPI and The Fed like to ignore) come down relative to wages, there just isn’t going to be much improvement in that top line.

In an environment of weak top line growth, Utilities become more interesting. Perhaps that part of what’s making this move happen.

If we zoom in on the last year on a daily basis, TAN becomes much more volatile. (That ‘flat line’ in the long term chart reflects the major value loss more than the daily wiggle in what is left).

It’s presently shooting up, but it’s a trade vehicle only, please… Silver is whacked. Utilities holding up very well and rising nicely even while the industrials and transports are rolled flat to falling.

SLV vs TAN and broad market 1 year daily live chart

SLV vs TAN and broad market 1 year daily live chart

So, what to do?

Well, I’d not be investing in TAN (or KWT or the related). They look like viable trade vehicles with lots of volatility.

I’d not be jumping on Consumer stocks (durable or not). I’d not be looking for Transports to help out.

I can see a case for moving into Utilities (with safe dividends). I’ve not seen any case for holding gold or silver for a while now… (Though I ought to add that with RSI at 20, all we need is ‘higher lows’ on RSI and an upward crossover on MACD to follow. But wait for it. The Dead Cat Bounce of shorts exiting needs to happen, then a return to the SMA stack from above that fails to penetrate it. Only after the DCB / retest does it become a new confirmed bull status positive market.)

In related news, while Tesla stock TSLA rises nicely, the way they are partnered with the folks at Fisker on some issues is likely to eventually cause them some grief. Fisker is presently handing a tiny bit of money back to the US Govt after burning through $Billions in Yet Another Green Scheme for, in this case, electric cars.

Live chart of TSLA vs F and GM and others

http://venturebeat.com/2013/04/17/the-sad-long-story-of-fisker-automotive-the-most-tragic-vc-backed-debacle-in-recent-history/

In January 2005, legendary car designer Henrik Fisker founded a company to bring innovative new thinking to the automobile industry.

Between that date and today, Fisker Automotive would create perhaps the most beautiful car ever made, raise almost $1.4 billion dollars from investors as diverse as Leonardo di Caprio and Kleiner Perkins, obtain a $528 million loan from the U.S. Department of Energy, balloon to 600+ employees, default on loans or investment conditions at least four separate times, spend $535,000 on a website, get sued by its own employees, get evicted from its primary business location, and be investigated by the government — apparently for its incredible ability to burn a billion dollars while delivering only a few thousand actual completed cars.

What a wild, crazy ride it’s been.

“Fisker spent a stunning $900,000 for each vehicle it produced,” PrivCo chief executive Sam Hamadeh told me. “Then they sold them to dealers for an invoice price of just $70,000.”

Why Crony Capitalism, Subsidy Slush Funds, and Government “investment” are incredibly dumb ideas…

Works great, right up until it implodes…

Some years back I owned a bit of QTWW that holds a position in Fisker (on the chart in the link above). Sold it years back when it ‘turned’ / topped. Now it’s selling in penny stock ranges. Maybe Tesla will do better. One can always ‘hope’ ;-)

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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3 Responses to Silver & Tan Story

  1. graeme says:

    remember de Lorean! This is Back to the Future all over again.

  2. adolfogiurfa says:

    These as other physical items are GOODS, not PAPER, papers, beautifully designed and sealed can be faked and multiplied as currency (also paper) when being traded by “magicians” as those who Jesus himself whipped away from the temple…..We eat bread and our stomachs cannot digest paper.

  3. E.M.Smith says:

    @Adolfo:

    If you have too little fiber you “have problems”, not the least of which is colon cancer, so paper is good to eat.
    ;-)

    What is a “good” depends on who will pay for it, and how much. Folks were not willing to pay for Fisker cars in any significant number, so it’s not much of a ‘good’… Lots of folks will pay for things like bonds and stock certificates, also “paper”. The value is in what it represents, not the material from which it is made…

    @Graeme:

    Now all we need is a ‘coke deal’ to keep them funded and running ;-)

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