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Gold: Manic Parabolic Blow Off Time

October 5, 2010

As regular readers know, Rocky has held a bullish speculative position in gold  for many months.  If today’s behavior continues for a few more days, Rocky believes that gold may be finally entering the Manic Parabolic Blow-Off Phase “MPBOP.”

The MPBOP  is the most profitable phase of any bull market, and despite what experts on CNBC say,  it’s  impossible to know how long it will last — nor how high prices can go during the terminal stages of a MPBOP.  Rocky speaks from experience having been on the wrong side of the internet MPBOP. (He was an avowed hater of the Pets.Com puppet, but he got revenge when the stock eventually went to zero.)  This experience means Rocky wouldn’t scoff at $1500/oz or even $1800/oz  gold by year-end. 

Sadly, after the parabolic blow-off phase comes the “gravity still exists” phase, where people re-discover that gold is just a shiny piece of metal that makes an excellent dental crown. Which means prices will decline. By a lot.

Many people party on New Year’s Eve without worrying about how they feel on New Year’s Day.  But not Rocky! Rocky remains long gold, but he’s beginning to think about his ultimate exit strategy. Parachutes? Ejection seats? Hari Kari? Here’s his latest thinking (posted on the blog Daily Speculations): http://www.dailyspeculations.com/wordpress/?p=5344

[Disclosures: Rocky really has no clue what gold prices will do tomorrow or the days after tomorrow and his ruminations are not investment advice. He does, however, believe in the Laws of Gravity and the First Law of Rocky: In every “macro market” (indices, bonds, commodities), all prices WILL be seen at least twice. The only unknowns are: (1) how long it takes and (2) how far prices go, before the price is re-visited. Additionally, while Rocky currently remains long gold, he also owns hedges against the proven risk that he’s more-than-occasionally wrong.]

  1. masteroftheuniverse
    October 6, 2010 at 7:54 am

    I remember experiencing it in Silver in 1980l. A lesson I will never forget….A lesson I might repeat , but I certainly won’t forget.

  2. Tyler
    October 6, 2010 at 3:11 pm

    great post Rocky.

    I was on the wrong side of the housing MPBOP…I shorted various homebuilders in the spring of 2004 and then tried again in the spring of 2005.

    I wouldn’t scoff at your gold figures either, but I am content to be on the sidelines for this one.

  3. October 18, 2010 at 12:31 pm

    Parabolas are in many ways “unstable” solutions. For example giving a random bit of extra velocity in nearly any direction to an object on a parabolic orbit will turn it into an ellipse or a hyperbola. So while the growth of gold has a price history that might not by anything related to a parabola, parabolic is probably the right word for the phenomena you’re describing 🙂 Somewhere back in my days of youth I remember reading that you should think about an ellipse as something that stays finite, a parabola as something that goes to infinity, and a hyperbola as something that gets all the way to infinity and then comes back (which is why you get two pieces.) I always thought that description was kind of cute. Rocky’s first law then says that eventually all prices are elliptical.

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