December 3, 2017
December 3, 2017


hello Kuppy,
1) there are more n more talks about insufficient physical gold bullion backing up gold futures, paper gold n growing ETFs. (http://www.zerohedge.com/contributed/hoarding-physical-gold-voracious-global-demand-produce-undeliverable-gold-futures-parabo). do u foresee this happening in the future? if so, will this cause a huge sentiment destruction to financial instruments (eg gold etfs will trade at massive discounts)? do u own any physical gold bullion?
2) u mentioned before u would not sell silver around this level. silver performance was disappointing when gold reached new high last week. it seems people won’t treat it as inflation/ currency debasement hedge if central banks not accumulating it? (or they already started accumulation, secretly??!!)
3) altho all recent econ data pointed to slowdown, inflation expectation was not as low was last summer before QE2 (if u look at PCE deflator n TIPS-treasury yield spread). together with US credit rating downgrade, it seems fed is in a more difficult position to launch QE3 now. what do u think ?

apologies if too many questions here. highly appreciate if you can share your thoughts, which i find is amazingly logical, straightfwd, and not-so-common common sense (esp after reading tons of research pieces). thanks!

Please no 3 part questions. In summary;

1)At the right price, there’s all the gold that you need. These guys will just have to pay up to get it. I’m not worried.

2) I haven’t sold my core position. Not at these prices

3)QE3 is coming. We just don’t know the date.

i became aware that the VIX is in backwardation. i re-read your 4/28/2010 “designed to fail” re VXX short. does current volatility spike, VIX backwardation, short term SP500 support at 1100 supply at 1260, and VXX high volume spike to 34 make this a good time to short VXX?

I think it’s a good play, but keep it small. VXX can trade to any price in the short term.

While the yen feels somewhat overvalued to me, I’ve generally found NYC, the Bay Area and Seattle to be comparably priced to Tokyo, with Osaka a bit cheaper.
I’m wondering if I’m skewed, having lived in Japan for 18 years, but is there anything other than fresh fruits/vegetables in the supermarket and/or taxi fares that blows you away on cost?
I’m seeing take out lunch prices near our office in Tokyo at 5 USD, and eat-in at 10-12 USD, and know that the business hotels in CBD price at about 120 USD yen/night, with Westin etc normally coming in at 300 USD/night or so.
Thanks again for all of your writing, and recognize that my view is anecdotal, so may be off.

I found Japan to be interesting. Hotels are cheap, transport is less cheap, food is VERY expensive. In summary, while it’s more expensive than the US, I didn’t feel that it was quite as expensive as I thought when it came to some things. My hunch is that JPY is going higher, before it finally rolls over. I was hoping for more insight and didn’t quite find it while on vacation.

add on: another reader already asked your opinion on Prophey Coal in Mongolia, the interesting play now though is Prophecy Platinum, which you can own through Prophecy Coal practically for free. You probably alread know that:



I post this for readers who may have an interest in it. I know nothing really about Prophecy Platinum.

Dear Kuppy. With the strong cash flows being experienced at MERC, when do you think they will commence dividends? I always worry with these cyclical companies, that times turn hard before they reward investors for the good times through significant dividends. Comapnies like this have a tendency to retain profits when they should be paying them out.

At current prices, I’d much rather that they get agressive with the buyback. The stock trades at 2x cash flow. They can retire half of the stock this year if they get going at it…For disclosure purposes, I’ve made this a reasonably sized position in the past few weeks.

Kuppy (just to follow up on Foraco) understanding that in the most recent quarter Foraco posted utilization of over 80% with the weak water business accounting for just 5% of revenue. Presumably given utilization maxing out, this business is very much in Mining and not so much in Water. Which brings me to my question, the stock trades by appointment. I made some of the appointments in the past 10 days for good or ill. What are the things that you consider around extreme illiquidity? Thank you

I really try to avoid extreme illiquidity. I’ve had enough of these in my career where my fund owned more than I could possibly sell and I changed my mind on the position and could not get out. For now, I pretty much refuse to own more than a month of volume, unless I really trust management–which is rare. My advice is to own less than you’d want and retain your liquidity.

Hey Kuppy – I’ve done a lot of research on IVO / XIV the past few days. At first, I had also thought IVO may be the better play, but it seems XIV is likely the better bet (especially when you consider acceleration and termination events – ie. VZZ was recently terminated with an effective leverage of 3:5). I’ve included a few great blog posts I’ve come across on the subject.


Keep up the great work with the blog, your insights are appreciated by many.

I pass this along for readers who have an interest. These are all different products with different characteristics. Choose your poison well. It’s been a tough 2 weeks for the short VIX crowd…