Dan ... everything has its time and place-- right now I'm seeing more and more volatility, which is always a precursor to a directional change in trends. One day in the distant future I promise to turn bullish on gold (again)-- just dunno when, yet...
Btw, the loonie-- our favorite commodity currency is being killed as we speak, not good for gold equities-- not good for gold.
Anyway,
Since I find writing as painful as a visit to a dentist I have to rely on the "wordsmiths" of this world to get my point of view across-- so whenever I see something that does reflect what I'm thinking I'll be darned sure to post it ... so here's an excerpt from the Taipan newsletter which I'm in total agreement with.
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Dear Friend,
Last night at the fencing club, as I was picking at a disconnected wire in my épée, my eyes fell on a book held by one of the fathers watching the xiphomachophiliac exploits of their offspring. It was Bill Bonner’s “Financial Reckoning Day.”
What are the chances, I thought quietly to myself, a tingle of Soft Depression blending in with the sense of déjà vu. Have bearish market views really become so mainstream that you now encounter them at your local gym? (Much like you encountered overexcited bullishness among busboys and sales clerks during the Internet stock mania…) Or is it just that fencing attracts people who like to think three steps ahead of their opponents?
While foresight and planning certainly are laudable in and of themselves, they can become quite dangerous if based mainly on assumptions about how markets and opponents SHOULD act. Typically, the execution of these elaborate plans is terminated quickly and resoundingly by an unforeseen (and seemingly irrational) counteraction.
Over the years, I have come to the conclusion that such dogmatic views on investing are not all they are cracked up to be. In fact, I’ll wager that during the five-year upsurge of the last big bull market, more money was lost by those embracing fundamentally bearish attitudes - with ill-timed short sales and put options, misplaced investments in precious metals, mining stocks, and plain missed opportunities - than was lost by all those chipper, bright-eyed irrational exuberants combined.
Once a bubble pops, you may have the satisfaction of being able to say “I told you so” - and maybe even writing a book about it. But chances are that you, too, have gum all over your face at that point…
***Many years ago, I briefly served as the editorial director for The Colby Report, the private, small-circulation newsletter of the late ex-CIA director Bill Colby.
Up until his mysterious drowning death, Mr. Colby was a very proper and distinguished gentleman. And yet, he did not leave much of a lasting impression on me. I guess that was part of his strategy. Unfortunately, I found his letter equally unremarkable: I never really had the feeling that the content of his briefings exceeded the amount of intelligence you could gather from a middle-school geography atlas.
Maybe that part of the strategy as well. But it always made me itch for more: What does this information mean to me? What practical conclusions can I draw - and implement! - from these historical facts, assumptions, and opinions?
It is this same feeling that I have when reading Bill’s “Financial Reckoning Day”: Is “buy gold” really the only answer to burgeoning American household debt… a declining US dollar… the rise and fall of equity valuations? But if gold is really your best strategic defense against excessive market fluctuations and the decline of Western civilization, how come it is still at levels reflecting just a third of its “bubble” valuations in the seventies and eighties? And how come you still can lose twenty bucks on an ounce within a week or two, much like you can on a technology stock?
(I’m not even going to touch on the fact that in the case of rare coins, you typically buy at retail and sell at wholesale. Add in sales tax, and you’re down 20% in real terms before you cut the first check for your safe deposit box…)
***Now don’t get me wrong here: We actually like gold. We think it is part of a prudent diversification of assets to keep maybe 5% of your portfolio in bullion. We have also liked - and profited from! - select mining stocks, entered at the proper time. We love the gold index… which enables you to profit from upward and downward movements in the gold price.
But gold is just one asset out of many that can be harnessed to build wealth in the Dynamic Market environment. And the more asset groups you include in your view of the markets, the better your chances of having one (or several) working for you at any given time.
This is the principal insight of Dynamic Market Theory: Cast your nets wide enough, and you will be able to profit handsomely from the major and minor fluctuations - upward AND downward! - of equity markets, international indices, currencies, hard assets, real estate, and technologies. Supplement your short- and medium-term profiteering with long-term protective strategies - such as calls or puts on individual indices - don’t get overly enamored of any particular investing philosophy, and pay as much attention to your financial planning as you would to the maintenance of your car, and chances are you’ll come out ahead of the game.
Because the only credible advice a bear could give you is: Stay out of the markets.
And where would be the fun in that?
(And yes, I made up the word “xiphomachophilia” myself from scraps of ancient Greek I remember. It means “love of sword fighting.”)
Cordially yours,
J. Christoph Amberger
Publisher, The Taipan Group
FP........................................................
AI
