Random Musings...U.S. and Global Finance... An update on the (In/De)flation trade... and even an evil plan.

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An Evil Plan
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I was thinking of starting an Internet rumor... "Worries about U.S. Default cause Canada to declare BANK HOLIDAY...markets closed Monday!" ...and of course anyone who doesn't know about the civic holiday long weekend would go to any bank website only to find all the banks closed. Anyone wishing to promote the rumor is welcome to leave alarmist "OMG we're all going to die!!" style comments below.

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An Update on the (In/De)flation Trade
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The (in/de)flation trade I outlined in several previous posts...

http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=118178
http://www.stockhouse.com/Blogs/ViewDetailedPost.aspx?p=118415

...has been going quite well. So far, I made two purchases, an oil and gas ex-income trust with a yeild in the 6%
range at the time and a bullion ETF. At his point, dividends from the blue-chips have paid off roughly one quarter
of the ETF shares and at this rate will own them outright in about six months. Note here that the payback time is
fast since I only used a small amount of margin. More margin means more risk and slower payback times. Note that I only plan on using enough margin as I have cash reserves in the juniors account.

One other risk that I have not outlined is the margin interest rate. If this rate rises too quickly the trade will
become unprofitable and I will need to unwind. Mind you, for the moment, this rate is tied to the prime rate which
in turn is based on the Bank of Canada. Given that Canadian economy actually shrank in May...
 
(see: http://www.theglobeandmail.com/report-on-business/economy/soaring-loonie-us-debt-threaten-hiring-expansion/article2114971/
and: http://www.theglobeandmail.com/report-on-business/canadas-recovery-rests-on-shaky-global-economy/article2113969/)

...I don't think those rates will rise any time soon. (Note to self... is it time to start thinking about an extended Canadian recession?)

For those who have no idea of what the (In/De)flation Trade is... check out the posts I mentioned above.

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U.S. and Global Finance
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The media has written so much on this topic that I'm not sure there is much I can add. I will say this... personally
I suspect that the U.S. debt ceiling will get raised and a deal made. Like Europe it will only be a temporary fix
even if it is hailed as something else. Look for gold to sell off on sentiment. If that happens I will add to my
bullion ETF positions in the trade outlined above.

I did come accross an interesting article that describes how China and Iran are going to barter for oil as opposed to settling in U.S. dollars. Yes it is primarily intended to get around monitary sanctions but it also adds to a growing number of bilateral trade deals being done in non-USD denominated currencies.

(Note: I would like to use the original article but you need to sign up for an ft.com account to get it... your choice!)


http://peakoil.com/bussiness/china-and-iran-to-bypass-dollar-plan-oil-barter-system-and-a-deeper-dive-into-the-iranian-oil-bourse/


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Random Musings
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I've been having a somewhat one sided conversation with someone via the SH Inbox system. I don't want to sound nasty but I don't prepare full blown research reports for people. I write and comment about a number of junior mining stocks but I can't devine the future nor explain every single fluctuation of the markets. Mostly this blog helps me practice my writing.

That said a few comments are in order...

If you have a position that is keeping you up at night... you probably took on more shares than you should have. It is always a good idea to track the value of stock positions that make you queezy and stay below that. It always makes for a good night sleep.

By the time a stock tip hits my inbox it is likely too late to take advantage of. Especially if multiple groups are sending it to me. Chasing hot tips on average never appears to end well.

Good junior mining investing takes time and research. I personally like to be positioned in things most people have never heard of or aren't being over promoted. If you don't want to do hard research then the next best thing is likely a good paid newsletter. I don't subscribe to any so I can't give any good names... but consider this... paying $1000 a year for a newsletter is equal to 100 hours of reasearch at $10 dollars per hour. Are you spending this amount of time doing hard core DD on positions?

Inbox questions I don't answer... anything about my position sizes, personal information, or specific trades. Also, if a question can be answered by going to the company website... I'll likely tell you to go to the website.

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Closing and Disclosure
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Anyhow... I think I've said enough so good luck and happy hunting.

A.

Do your own DD from reliable third party sources. Don't trust my words as if they were Gospel... while I like to
think I am an honest Cephalopod, I am not a fiduciary (relative to you the dear reader) and thus you should not
act solely on my advice. Take anything I say 'with a grain of salt'.

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