Unfortunately, unlike gold there is no Powershares ETF for double leverage silver, so we're stuck with the Proshares family of levered ETFs... these are generally awful things to hold for any extended period of times due to their construction. However, as I backtrack the past 6 months on silver the Ultra Silver (AGQ) actually seems to work reasonably well at providing twice the return of the underlying index (silver in this case) - not sure why, maybe lack of volatility.
[click to enlarge]
I am not that familiar with this instrument since I have not been watching it day to day as I usually like to before I enter a position, to see how it trades - but since it "appears" to be doing the right thing, we'll give this a whirl. As you know if you have been reading along for any amount of time - the only trade these high powered computers that run Wall Street know nowadays is:
- "if dollar up, do not buy or sell"
- "if dollar down, buy anything".
So obviously if the dollar continues its oversold rally here all the precious metals will suffer. The irony is with the way HAL9000 has it set up all rallies in the US dollar mean markets must suffer, and vice versa. So to have a better stock market we need to root for the crash of the dollar. I wonder at what point a crash in the dollar would actually mean "bad" things to these computers. It's silly but that's how the PhD programmers have set it up.
The chart for AGQ is meaningless since its just a representation of another index (with mustard) but we see silver pulling back after a large run. If the dollar continues to strengthen in the near term I'd expect more weakness so we'll start small here with a 0.75% exposure around $55 - recall we also have some gold exposure. Silver has trounced gold in this latest run (21% gain vs 7% in the past few weeks) so I want to get more diversified here.
If the market really begins to correct, that will mean the dollar is rallying and silver could be headed back to $14. (AGQ = low $40s) Why? Because that's how the supercomputers are programmed. [Unless of course things get really really bad, and then precious metals would rally not on inflation, but on doomsday]
Long term, it is irrelevant as the US is committed to destroying its currency so that we can all .... prosper. The only question is if a deflationary spiral (due to overcapacity, slack demand, wage pressure and the like) gets here before "prosperity". Pure monetarists will vote inflation either way.
p.s. I am using the levered ETFs rather than the "straight up" ETF so I can create the same exposure with less cash allocated. I only wish this cash was not denominated in US pesos. Can anyone spare a loonie?
Long Ultra Silver in fund; no personal position
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