Protection Of Wealth Is Peace Of Mind!
By Patrick MontesDeOca
Good morning and welcome to our premiere interview of Trading Talk. My name is Karl Schott. I will be today’s host of trading talk and an interview with Mr. Patrick MontesDeOca, President of Capital Metals Trading Group.
This segment is sponsored by Schott In The Dark Farms, a high-level riding academy in southern California.
The mission and purpose of trading talk is to bring our audience alternative market intelligence and information not found elsewhere.
And this leads me to the topic for today. Protection Of Wealth Is Peace Of Mind.
KS: Let’s move right in – Good morning Patrick. How are you?
PM: Good morning and thank you for having me here today Karl.
KS: Patrick, can you give us your opinion of gold and silver over the short-term intermediate and long-term.
PM: It would be my pleasure. The first thing I would like to do is just give you a little bit about disclosure in terms of the information that I am going to apply. I am primarily a technical analysis in the market. I have been in the business quite some time. I use the technical’s of the market primarily as opposed to the fundamentals and the opinions that I have are basically based on our own research and proprietary algorithms that we have created in affiliation with an Educational and Research Company called Electronic Wisdom Cycles. The work primarily is technical in nature and we use cyclical analysis in combination with Elliott Wave, Fibonacci, W.D. Gann, and we’ve integrated Vedic Mathematics to create our own proprietary algorithms which have been extremely helpful in identifying timing in the financial markets and in particular in precious metals
KS: Well that is great. Where do you think the metals are going to ongold and silver over the short-term, intermediate and long-term, can you give us a brief outlook?
PM: looking at the short term obviously we’ve been in a bit of a correction since the recent high in February 29th which essentially confirmed the first leg of this bull market for 2012. From a low of 1535 on December 29th we have made roughly a sixty to sixty two percent Fibonacci correction as the second wave in the past couple of weeks. We retested the low once again of 1613 last week and according to some reliable sources on the London Metal Exchange, it appears that we have massive orders buying the actual physical market at 1613 levels or in that vicinity which is why the market turned around from those levels with great volatility. The level of buying in the physical market in silver has been identified in near the 31 area. So, I think we are beginning to complete the second wave. If in fact we do close above 1680 based on the April contract on a weekly basis, it would confirm that the third leg is on the way and the projection for this third wave, it points to silver at about $54 dollars an ounce and gold at about $2,200 per ounce by July 15th of 2012.
The longer-term outlook, the yearly chart is in an uptrend. We are moving towards an ABC correction that we could see develop in 2013. We are looking for an uptrend for the rest of this year and then possibly a correction next year and from those levels, what fundamentally the market is trying to define is the economic value of gold. We were looking last year at $1,300. The negative energy of the market seems to have capitulated at about $1,535 per ounce, and now we’re looking at the $1,600 level. So the energy seems to be buying energy. You might say it seems to be making higher highs and… I’m not so sure that we are going to be able to get down to those $1,300 levels that were forecasted a couple of years ago. If for some chance you know, the market was to come down below $1,535, I think that the lower that it goes below that level it’s essentially setting the market up like a coil, like a spring board that I believe will be the basis for the next major leg up that’s going to take gold to over $3,200 over the next couple years.
KS: Well that is great! And as the title of our show talks about protection of wealth is peace of mind… what do you mean by that?
PM: Well, as you know there is a lot of fear in the market right now that has been precipitated by the powers to be whether they’re talking about the economic crisis in Europe or they’re talking about our own economic crisis. So that creates a high level of volatility particularly when we see a great deal of short selling being done in the futures markets. Which is essentially the paper markets, it is very difficult to see how they could manipulate the market by selling ten times the production of silver in the last hour of trading. This is what seems to happen every time Mr. Bernanke he opens his mouth. It is like a signal for the banks or these powers to be that are heavily short, leveraged to the downside they are fighting tremendously to maintain their position in keeping prices of metals artificially low. So the high level of volatility is going to cause even more uncertainty and even more panic. What we’re suggesting is to look back at gold since 1999, if you held that position the profits it’s showing you is better than 500% if you held it. We are implementing a strategy that’s called a basis trading strategy, which essentially is a strategy that allows you to manage the risk of the underlying asset in precious metals. Whether they be in stocks, ETFs or futures contracts by what we call… buying insurance through the options markets
KS: Brilliant! So, in order to benefit from these instead of being a victim of these manipulations, can you explain a little bit more on how we can use these technical strategies to take advantage of this and protect ourselves against downside risk?
PM: In terms of money management, which is what you are talking about, a risk management strategy using the gold bullion as an example. The basis of a futures contract that underwrites the contract is the actual bullion stored in the warehouse in the Commex Exchange in NY or the Chicago Board of Trade. This gold has specific requirements and criteria set by the exchange that legally has to be met in order to be approved and deposited in their warehouses. So it is 100oz gold bars 99.99 purity. Let’s say, you buy a futures contract on leverage for a ten percent margin, whatever the margin is, that is set by the exchange and purchase the futures contract. But theoretically your liability can be the full value of the futures contract in dollars or if you get out you run the risk that you can take a paper loss. These contracts also underwrite a derivatives which are called options. An option is simply the right but not the obligation for you to buy a set amount of time value at a fixed cost. The price is based on your option strike in relation to the market price. This is a limited risk transaction. In the application of it as a speculative investment, more than 90% percent of people wind up losing in trading options, because it has an element called Time Decay. When you are buying a call or when you are buying a put. But if you are using it as an insurance strategy for example, as an insurance risk management tool on the 100 ounces that you own in the cash bullion market; you can actually go into the futures markets and buy a put that is equivalent to a 100oz of gold and completely make the hedge thus eliminating the downside risk. So that if the market comes down your put premium would appreciate in value and you would make up the difference of the loss in the cash bullion position.
KS: I kind of understand that and I’m sure we do have out there a lot of neophyte investors, along with experienced investors. How can someone that is a new investor or a neophyte get information and get a little more help. Who should we go to get help with this… is something you can take care of?
PM: Well you are welcome to give me a call under no obligation. My direct line is 805-418-1744 . I would be very glad to give you very specific information regarding the application of this in your own account or assist you in custom building a strategy that would help you in protecting your bullion, stocks, ETFs or whatever precious metal asset you have. My point is that we’re moving into a high level of volatility in the market that is going to be unprecedented. We are going to be reaching daily levels that we would never dream of it before. I believe that you want to be prepared, especially if you caught this tremendous secular bull market. You should now use some risk management and intelligent money management applications to protect your wealth. In that sense you know you can have peace of mind by protecting your wealth. By knowing that regardless of what happens to the price of gold, if it collapses you can be protected.
KS: Now, this downward correction we’ve seen in the last couple weeks or few weeks in the metals markets, do you think that’s over at this point or do you think it will go up or down some more from this point?
PM: Well the basis of the corrections has been strictly paper selling by the massive short positions the banks like JP Morgan and HSBC have on the books. Essentially, it’s federal money behind it. I think based on the information I’m getting, that the real money, that is and not a paper market is moving sovereign money very aggressively into the actual physical bullion. As we have seen here, Utah is supporting moving into some kind of local currency backed by silver. We have a big momentum in Mexico headed by Hugo Salinas that fundamentally they should establish some kind of silver and gold backed currency. So, if the supply that we have runs into unprecedented demand, those short positions in the paper market stand to lose literally Billions of dollars. Just like everything else, they seem to feel comfortable with over leveraging their position whether it be in bonds the US debt or selling short futures contracts. I think this is simply an example of the kind of reckless economic policy that they have decided to implement, which is essentially to try to hide the inflation. Like a pressure cooker building up and at some point here, it could happen any day, you are going to wake-up and you are going to see gold up $300 to $400 dollars an ounce. You are going to see silver up $5, $8 dollars in two or three trading sessions and it is going to be unprecedented. You are not going to be able to hold it back and you’ll be left wondering when it’s going to be coming down. So you can get into it and it may be when silver is at $100 an ounce and gold at $5,000 an ounce.
KS: You are saying that most of this material, there are programs available at Electronic Wisdom Cycles is that correct?
PM: Yes, that is correct.
KR: You are more or less teaching people how to use this strategy. Can you as a last question here, can you explain to us what CMT group is all about and what it does?
PM: Let me explain to you that what we’re doing through Electronic Wisdom Cycles is essentially providing educational intelligence, market intelligence for individuals that are interested in alternative research outside of standard conventional channels. We provide a tremendous amount of proprietary information. So far, it’s been proven to be as accurate as the best out there and in some cases we’ve done a little better. So our mission is to educate individuals that are interested in finding alternative ways to protect wealth. To obtain information that is objective and that essentially is not found in conventional channels. Now, what you do with that information is up to you. And you can use your judgment as far as your portfolio is concerned in the application of that information.
Capital Metals Trading Group is a broker-dealer that specializes in the actual physical bullion. If you’re interested in obtaining bullion we can provide 99.99 certified silver or gold. We have a financial department that also can provide you some financing if you need to or want to finance your purchase if approved. And we can deliver the silver gold or platinum at any destination anywhere in the world. Capital Metals Trading, not only are we providing the product but we are also providing guidance and direction in terms of risk management and money management. In the application of this information, it is very important to take into consideration given the current environment in the marketplace.
KR: Again, protection of wealth is what we are trying to accomplish here. Well Patrick, I sincerely thank you for sharing your perspective, opinions, and wisdom with us and so that our audience has a choice in these matters and they can learn from you and your group. And again out there, be aware and prepare. Protection of wealth is truly peace of mind. This is Karl Schott and until next time.
Disclosure: I am long AG, AGQ, PSLV, GDX, GLD, SLW.
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