Do You Want To Win The Battle Or The War?

Maybe you look at the last four months in the miners as a war. Well its not. Its only a battle. This war began in 2002 when gold broke out of a long term decades long bear market after peaking in 1981 at 800. Since 2002 there have been a remarkable number of battles as key technical resistances are defended and ultimately, broken. Some of these battles have been uniquely horrendous for the gold longs. I’ll lump gold and silver together, since for practical purposes (for now) they have been similar.

In hindsight its easy to see where some of these battles were going to end, but as is the case in any war, some of the battles were less obvious to their outcome. Churchill once said, that if I knew how the battle was going to conclude I would have stayed in my bed and drank my port and jerked off. Churchill knew that subterfuge was always a significant determinant for any victor to posses when facing a strong opponent. 

Many of us are looking at this war in the rear view mirror of the last battle we fought. In 2008 when the prices of gold were pushed into the toilet in a 5 month bear market, most precious metals traders were so severely traumatized, they had to be institutionalized. Leveraged traders were carried off the battle field in body bags. However those who stayed in physical, although damaged not only would recover but within a few years would see their physical double in fiat price. 

The battles within the miner’s shares was actually a massive profit maker for those that jumped into shares like SLW, GORO etc that had been beaten to a pulp in October of 2008, only to rise 10 and 20 fold. Had you taken even half your position off during the rise in 2012, you could have gone to Caymans and ridden out the remainder of this war.

Lessons learned in the war so for is don’t expose your flank. In other words don’t use leverage. Don’t use time decaying options. 

Don’t commit your reserves unless you have complete blood in the streets. In 2012 they had painted the tape on miners, just enough to keep the retail money in the trade while they closed out of their long positions and accumulated massive short positions. Churchill often noted that just as the Germans were about to spring a trap, his balls would start to hurt. My balls were hurting when gold did a death cross in 2012 but I refused to pull back my reserves and raise cash. 

Eventually the battle turned in 2016 with a massive victory, but again the counter attack brought unexpected losses for two more years. No clear victory in any battle was seen again until gold crossed 1350 and held. That battle was significant if you have suffered as many of us have over the past 10 years as the gold paper shorts beat us at critical skirmishes and battles with regularity if we were miner share holders.

Churchill knew that most people don’t have the stomach for a protracted war, even commenting that he could eat a steaming pile of shit if it meant beating the Nazis. Unfortunately I’m growing sick of eating hot, steaming, shit, but that’s the price of this war. Its been a long time, but when you crossed 1350……it would only be a matter of time before the next massive price resistance would be crossed and that was 1925 and it did just that in 2020. Next will be 2500 and miners will begin to smell a lot better. Who knows, maybe they will even shock us.