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One of Rick’s Picks’ specialties is introducing relative novices to seemingly sophisticated option strategies that work. If you don’t think you’re capable of doing “butterfly spreads” in an $800 stock like Google, click here for a free seven-day pass that will allow you to talk to some Rick’s Picks subscribers, including some options rookies, who have done it.  We can tell you right now, however, that multi-sided positions such as butterflies, verticals and calendars have a far better chance of succeeding than simply buying puts or calls, as retail customers are wont to do. Here’s the straight skinny: In the forty or so years we’ve been trading options, we’ve yet to come across anyone who has made money consistently by buying options on a bullish or bearish hunch.  Because options are so knowledgeably priced, that’s akin to betting against the house. And any bettor who thinks he’s smarter than his bookie is bound to come out a loser. [continue reading…]

The Dow was up 116 points yesterday – all of them presumably gratuitous — recouping about half of the previous day’s losses.  This was in odd contrast to an S&P 500 index that barely got off the launching pad  Take a look at the 60-minute chart below if you want to see how S&P buyers spent the day head-butting their way modestly higher. Our guess is that they were outmatched by fresh supply coaxed forth by Monday’s semi-fearsome selloff. Recall that it was attributed by the news media to worries about Italy’s election results. Are the rabble about to seize power in Rome?  It would seem not. Italy didn’t even rate a mention on the Google news page yesterday, unless you count a story about the Pope that had a Vatican dateline. We can only surmise that the panic over Italy’s would-be descent into anarchy that had engulfed newsrooms has not spread to the general populace, let alone to Wall Street. [continue reading…]

[With the global economy being kept afloat on a sea of lies, deceptions and delusions, Rick’s Picks has tried to tell it like it is. Unfortunately, in addition to the looming financial crisis there is yet another threat that would overshadow even the collapse of the banking system. In the guest commentary below, Erich Simon asserts that the U.S. is unprepared for an outbreak of bird flu and  that many millions of lives could be lost as a result. Although we had asked Erich how one might prepare for a pandemic, his response was grimmer than we had expected. To begin with, if you think you’ll be able to safeguard yourself and family by wearing face masks and practicing “social distancing,” you may be gravely mistaken. Read on to learn why. RA]

Back in 2005, following the discovery of a highly pathogenic virus that had jumped the species barrier, Ted Kopple hosted a Nightline panel of health and emergency response officials. The subject was almost too scary to talk about, but an impassioned Kopple pressed his reluctant entourage. He learned little, but the lack of details was telling. The panel agreed unanimously that the time had come to start stockpiling water, “but not yet food.”  Shortly thereafter, in April 2006, the White House called a meeting to create a national response plan. Included were public disclosure guidelines and a pre-fab sound byte for the news media: “Officials fear that bird flu could [continue reading…]

[Sean Rakhimov, editor of SilverStrategies.com, is one of the savviest precious-metals commentators we know – not to mention, an early graduate of the Hidden Pivot Course that we offer each month to traders of stocks, options and commodities. In the article below, he explains why investable quantities of silver are shrinking. Mainly, it’s because some key South American countries have been nationalizing mines more and more aggressively, crimping supplies and scaring away outside investors.  What can we do about it?  With some specific suggestions, Sean advises watching the silver pros and putting our money where they have been putting theirs. RA]

For a while, we’ve had a nagging feeling that we’ve been witnessing something profound that the markets have yet to grasp.  We are not talking about a global smorgasbord of events that has been amply covered elsewhere.  As readers might know, our particular interest is in silver, and that is where we see an elephant in the room that has yet to attract any headlines. No doubt most readers are aware of the recent developments in countries like Argentina, Bolivia, Peru and others, with respect to what can be broadly classified as “resource nationalism.” Our general views on the subject were detailed a few years ago.  As discussed by this writer and others, such developments are not new and certainly not limited to silver or even the mining sector.  However, in our opinion, it is in the silver space that these events are likely to have the most profound effect. [continue reading…]

Without intending it, Rick’s Picks may have become an oasis for gold and silver bulls who are at the point of despair over the mining sector’s relentless, and presumably unjust, plunge. We have good news for you:  Using technical tools to tweak your timing and risk management, it’s possible to buy “crap” stocks all the way down without getting hurt if you’re early. We use the word “crap” ironically, of course, since it is only when stocks have been beaten down as badly as those in the mining sector that they become screaming bargains. And that pretty much sums up the situation as far as we’re concerned. Not that the blighters who have been doing the selling couldn’t bludgeon bullion shares even lower before they relent. In the meantime, wouldn’t it be lovely to take all that stock from their undeserving hands — and to do so without penalty or punishment if we are premature? [continue reading…]

[It was nearly a year ago that our good friend Doug Behnfield, a financial advisor based in Boulder, Colorado, lucidly described here how America was headed  into an economic coma that would last for many years. With the financial phase of the crisis winding down, says Doug, we are about to enter a prolonged period of asset deflation, high joblessness and stagnant-to-negative GDP growth. A chief cause of this will be by-now-unavoidable, drastic cutbacks baby boomers must make in their retirement plans. For a close-up look at what to expect, read Doug’s essay, below. RA]

Now, let’s get this straight. We are in the early stages of a secular credit collapse following the biggest credit bubble in human history. The credit expansion that began in the late 1930s finally became a bubble as a result of a universal, irrational and linear belief in real asset appreciation that developed in the 1990s and reached its glorious peak in 2007. The credit collapse began with the financial crisis of 2008. That was followed by all the king’s horses and all the king’s men brandishing marvelous new tools trying, but failing to put Humpty Dumpty back together again. We got a pause in the collapse and a spectacular bear market rally, but now we are rolling back into contraction. Six months into the transition, it is time to deliver a forecast for the next stage in the new paradigm that began with the inflection of the secular credit cycle. The First Stage was the Financial Crisis. The Second Stage is the Economic Crisis, with all its attendant deflation and GDP contraction. [continue reading…]

[With debt spinning wildly out of control and the States threatening to revolt against the tyranny of Washington, we asked some frequent contributors to the Rick’s Picks forum how they thought the nation would look five years from now.  In the essay below, Roger Erickson eschews predictions, asserting instead that we will all have to pull together to meet whatever challenges and disruptions the future might bring.  The task can only be accomplished, he says, if we rise above the squabbling of nation states, ideological factions and other vested interests. A model for this behavior, he notes, can be found in doctrines espoused by, among others, the United States Marine Corps. RA] 

In what condition will our markets be in, say, five years? 

According to the super computer DeepThought (and probably Larry Summers too), the answer is 42. But seriously, in five years, we’ll either be back to investing in national Selection Markets, not just financial markets – or we’ll have chaos.  How to do that would require a separate essay, so I’ll just develop the premise for now. 

If it’s not obvious, here’s an intro to “group selection.”  Individuals tend to forget that we currently survive as a social species divided into nation states. In this setting, group context provides full-spectrum group selection pressure, expressed through group goals/policies/strategies/tactics/outcomes. Sub-markets for tactical diversity, such as ideology or fiat finance, only serve one tiny aspect of the overall selection process – something we relearn whenever national security comes up. (In a previous comment here, one reader reminded us that we’re toast if neighbors don’t have our back.) Since group data are meaningless without group context, it follows that finance markets are meaningless without group goals and campaign strategies. That’s no more mysterious than the dual strategies of Marines: get promoted to where you’ll be personally happy, but only once your group survives! Those dual strategies are inseparable.  [continue reading…]