General Stock Ideas

[bigworld]

gfp: It looks to me like the drop in gold is due to a "paper" gold sell off. Paulson's hedge fund is the largest shareholder of GLD. The fund was down almost 30% this year. I'm sure they have been getting hit hard by redemptions. Paulson and other like minded hedge funds bet against the Dollar and doubled down on precious metals. They got burned as the Dollar has stayed unusually strong thanks to the turmoil in Europe. I view this sell off as a short term to intermediate term buying opportunity. I added more GDXJ today. I think this is yet another example of why technical charting during a secular bear market is the wrong approach. The breach of the 200 DMA is more likely a false breakout that will burn traders who are chart slaves. Once enough investors are induced to sell GLD or any other PM investments we'll probably have a strong snap back rally. Remember, the markets are diabolical during secular bear markets. Every move they make is contrary to the popular wisdom because that is the way the market is able to take the most amount of money from the largest possible number of investors. As we ride all the markets down the eventual slope of this very severe bear market this kind of market action will confound almost all investors who will sell at the worst times and buy at the worst times. When we hit a market nadir it will be because frustrated investors have given up on the capital markets. In 1982 after 16 years of a bear market only 13% of US households held any equity investments. We'll see something similar again sometime next year.

As far as equities I look at the VIX. When the market was tumbling in early August and again in October the VIX rose above 40. Even after today's weakness the VIX is only up to the $27.50 range. This tells me that a lot of potential sellers of equities have already sold or have gone short.