Subject: Golden Bull alive and well!!!
Date: Thu, 15 May 2008 01:06:24 -0700
Several of you recieving this email have personally expressed disgust, frustration, and/or downright fear to me in the last 3 weeks over the health of the 21st century Golden Bull. The contrarian in me says that is a good thing. A scant 2 years ago $860 gold was percieved as outrageously high. Yet, here we are at $860 today and most of the people I know in this market are ready to throw in the towel. I feel your pain. What follows are the 10 reasons I look upon times like this, as an opportunity to buy Precious Metals(PM) on the cheap.
1. There is still no interest in the PM market from the general public. At the end of bull
markets everyone and their brother is either in, or wants in. Take housing for example.
My plumber has 4 homes, my dentist 3. Even Vegas cabbies are getting in the act -
last xmas I listened all the way to the airport about the cab drivers "rental Properties".
It is a sure sign of a market top when people with no connection to an industry,
(housing in this case) like dentists, plumbers, and cabbies - just to name a few - are
clamoring to get in - and doing it with leverage. Take my word for it, we are
nowhere near that day in PM's.
markets everyone and their brother is either in, or wants in. Take housing for example.
My plumber has 4 homes, my dentist 3. Even Vegas cabbies are getting in the act -
last xmas I listened all the way to the airport about the cab drivers "rental Properties".
It is a sure sign of a market top when people with no connection to an industry,
(housing in this case) like dentists, plumbers, and cabbies - just to name a few - are
clamoring to get in - and doing it with leverage. Take my word for it, we are
nowhere near that day in PM's.
2. There is no fever - like Gold fever. We live in a bubble world. Tech bubble,
housing bubble, bond bubble are all going to look like childs play next to the
upcoming gold bubble. No worries, you will be able to spot the gold bubble yourself.
Cab drivers will be pimping the merits of bullion. Barborshops will have the
"gold channel" on every time you visit. People like Oprah, will be hosting
prime-time specials about PM's, in fact she will probably give some gold bars away
to her rabid fans. Atleast 2 miners (my guess is newmont & Barrick) will be added
to the Dow Jones Index. Almost all gold and silver mines on the planet not located
in strong "rule of law" countries will be nationalized. 90% of high school graduates
will know what a kruggerand is (that number today might be 10%).
housing bubble, bond bubble are all going to look like childs play next to the
upcoming gold bubble. No worries, you will be able to spot the gold bubble yourself.
Cab drivers will be pimping the merits of bullion. Barborshops will have the
"gold channel" on every time you visit. People like Oprah, will be hosting
prime-time specials about PM's, in fact she will probably give some gold bars away
to her rabid fans. Atleast 2 miners (my guess is newmont & Barrick) will be added
to the Dow Jones Index. Almost all gold and silver mines on the planet not located
in strong "rule of law" countries will be nationalized. 90% of high school graduates
will know what a kruggerand is (that number today might be 10%).
3. The great game!! The rich have been doing it to the poor since the dawn of time.
Stock markets, bond markets, commodity markets, etc are the playgrounds of three
distinct groups. The rich, the well connected, and the wise. The rest of us, as they
say, are just guessing. I am going to let you in on a secret - The rich, well
connected wiseguy doesn't want you to know. These markets, and the sheep that
trade in them, are best sheared in a "generational manner". The people who run
these markets know this. The people who run these markets aregreedy bastards,
just like you and me. So guess what, Big moves in these markets tend to last
Stock markets, bond markets, commodity markets, etc are the playgrounds of three
distinct groups. The rich, the well connected, and the wise. The rest of us, as they
say, are just guessing. I am going to let you in on a secret - The rich, well
connected wiseguy doesn't want you to know. These markets, and the sheep that
trade in them, are best sheared in a "generational manner". The people who run
these markets know this. The people who run these markets aregreedy bastards,
just like you and me. So guess what, Big moves in these markets tend to last
a generation. This bull market in PM's is only 6 years old - still plenty of time to
get aboard this generational Golden Bull!!
get aboard this generational Golden Bull!!
4. Bull markets die with a wimper - not with a bang!! Anyone who thinks the
commodity bubble has been popped and the PM's are crashing back to earth,
is sorely mistaken. Bull market tops roll-over and die slowly down a "slope of
hope". Think of what the buyers in tech stocks have experienced the last 8
years. Tech stocks have largely slid down that very slope for 8 straight
years. Good news is they probably only have another 12 years or so down the slope
of hope to meet the generational requirement of a completed bear market. Sometime
around then,tech stocks will be a buy! In the meantime the Gold bull rages on! Gold
has basically shed 20% off its high in only 6 weeks.That is a nice "buck" by this bull
- but its not shaking me out. I've seen worse, several times. A friend of mine
(former floor trader) once told me "it is the Bulls job to shake out non-believers".
Even in the 1970's gold bull, they wacked gold in half over a 2 year period. That
tested the very soul of every gold bull around in the 70's. Those that passed the
test, and bought after gold was cut in half were rewarded with an 8 fold runup in
less than 3 years. Somewhere in here, gold will find a bottom. Maybe $600, maybe
$700, or maybe it has already found it. Judging by the pessimism in the market at
present - I think we are close to that bottom.
commodity bubble has been popped and the PM's are crashing back to earth,
is sorely mistaken. Bull market tops roll-over and die slowly down a "slope of
hope". Think of what the buyers in tech stocks have experienced the last 8
years. Tech stocks have largely slid down that very slope for 8 straight
years. Good news is they probably only have another 12 years or so down the slope
of hope to meet the generational requirement of a completed bear market. Sometime
around then,tech stocks will be a buy! In the meantime the Gold bull rages on! Gold
has basically shed 20% off its high in only 6 weeks.That is a nice "buck" by this bull
- but its not shaking me out. I've seen worse, several times. A friend of mine
(former floor trader) once told me "it is the Bulls job to shake out non-believers".
Even in the 1970's gold bull, they wacked gold in half over a 2 year period. That
tested the very soul of every gold bull around in the 70's. Those that passed the
test, and bought after gold was cut in half were rewarded with an 8 fold runup in
less than 3 years. Somewhere in here, gold will find a bottom. Maybe $600, maybe
$700, or maybe it has already found it. Judging by the pessimism in the market at
present - I think we are close to that bottom.
5. The microscopic size of the PM markets ensures that when even a modest amount
of capital starts to flow their way, The price will go parabolic. The most important
word in that sentence is "microscopic". When the day arrives and the public wants in
there will be, as my dear departed dad would say "2 kinds of people in the world,
son". There will be those that have gold (and can name their price) and those who
don't (and will pay dearly to get it). Which one are you?
of capital starts to flow their way, The price will go parabolic. The most important
word in that sentence is "microscopic". When the day arrives and the public wants in
there will be, as my dear departed dad would say "2 kinds of people in the world,
son". There will be those that have gold (and can name their price) and those who
don't (and will pay dearly to get it). Which one are you?
6. The Dollar - what a joke. Listen People. Americans take a great many things for
granted. Chief among them would be the stability of their currency, aka the
"dollar". To most, its continued supremacy & stability is expected along with the
arrival of daylight each morning. It is an embarassment to our educational system
that not 1 person in 100 in this country comprehends what an anachronism
the idea of a stable, universally accepted paper "FIAT" currency is in the history
of the planet. Here is some wisdom for you: some ideas sound so good in theory,
that they can fail 100 consecutive times in practice and people are still willing to
try it. At the same time there are ideas that may sound bad, but work every time
they are tried - yet many people still refuse to try it. FIAT currencies and
socialism are examples of the former, excercise is an example of the latter.
granted. Chief among them would be the stability of their currency, aka the
"dollar". To most, its continued supremacy & stability is expected along with the
arrival of daylight each morning. It is an embarassment to our educational system
that not 1 person in 100 in this country comprehends what an anachronism
the idea of a stable, universally accepted paper "FIAT" currency is in the history
of the planet. Here is some wisdom for you: some ideas sound so good in theory,
that they can fail 100 consecutive times in practice and people are still willing to
try it. At the same time there are ideas that may sound bad, but work every time
they are tried - yet many people still refuse to try it. FIAT currencies and
socialism are examples of the former, excercise is an example of the latter.
7. Warren Buffet, Bill gates, Robert Kiyosaki among others have all picked up
large silver positions in the last decade. There is a reason these are some of the
richest men on the planet. They get it. 28 years ago some oil boys (the Hunt's)
tried to corner the silver market. At the time, the U.S. alone had a 3 billion
Ounce stockpile - which along with some timely rule changes regarding
margin requirements was used to defeat the Hunts. Nowadays, there are no
large silver positions in the last decade. There is a reason these are some of the
richest men on the planet. They get it. 28 years ago some oil boys (the Hunt's)
tried to corner the silver market. At the time, the U.S. alone had a 3 billion
Ounce stockpile - which along with some timely rule changes regarding
margin requirements was used to defeat the Hunts. Nowadays, there are no
government stockpiles to draw down on. In fact, as of last year the US mint is
buying silver of the open market just so they can issue silver eagle coins. The
problem is, as a planet we use roughly 300 mil Ounces more silver than we
mine every year. This has been going on for decades. Now that the stockpiles
are gone, price has begun moving up to rebalance supply and demand. Problem
is most of the demand for silver is inelastic - and thus not responsive to price.
One more thing those rich well-connected wiseguys know that John Q public
doesn't, is this: Above ground, silver is rarer than gold. Most of the rest of the
public is going to learn that fact over the next decade as Silver adds a couple
zeros to its price.
8. Countries around the world, one by one are delinking their currencies from
the Dollar. More and More Oil producing nations are demanding to be paid
in something other than "dollars". Although you will never hear it from the
mouth of our leaders this is why we invaded Iraq. Saddam said no more dollars
for oil - game was on. It is no coincidence that you are hearing what an evil
the Dollar. More and More Oil producing nations are demanding to be paid
in something other than "dollars". Although you will never hear it from the
mouth of our leaders this is why we invaded Iraq. Saddam said no more dollars
for oil - game was on. It is no coincidence that you are hearing what an evil
empire Iran is now. They too are threatening no more dollars for oil. Let's see
what happens if they cross that Rubicon. This is putting tremendous
downward pressure on the purchasing power of our beloved dollar. This is
already happening - why do you think Gas costs triple what it did 3 years
ago? You see "dollars" are nothing more than governmental iou's. China is
sitting on a trillion of the damn things.That's right - we owe them trillions. In
any typical debtor/lender relationship (believe me , i know about those) there
can come a point where the lender won't take anymore Iou's. We are there now.
Instead the lender starts buying anything he can get of value with those Iou's.
On a national scale, a country like china might trade those Iou's for our wheat,
grain, or our PMs! You think there is inflation now, wait til china starts bidding
up commodities with those trillions. Those days are coming.
what happens if they cross that Rubicon. This is putting tremendous
downward pressure on the purchasing power of our beloved dollar. This is
already happening - why do you think Gas costs triple what it did 3 years
ago? You see "dollars" are nothing more than governmental iou's. China is
sitting on a trillion of the damn things.That's right - we owe them trillions. In
any typical debtor/lender relationship (believe me , i know about those) there
can come a point where the lender won't take anymore Iou's. We are there now.
Instead the lender starts buying anything he can get of value with those Iou's.
On a national scale, a country like china might trade those Iou's for our wheat,
grain, or our PMs! You think there is inflation now, wait til china starts bidding
up commodities with those trillions. Those days are coming.
9. The great game is played best in a generational manner. That's true, in the
short term however there are tactical tricks those in the know use repeatedly.
The trick is simple, Market makers do everything in their power to get the
retail investors leaning one way - and then they take the market the other
way - shearing the retail sheeople in the process. If you are looking for it,
short term however there are tactical tricks those in the know use repeatedly.
The trick is simple, Market makers do everything in their power to get the
retail investors leaning one way - and then they take the market the other
way - shearing the retail sheeople in the process. If you are looking for it,
you see it played over and over an over ad nauseum. Do you know anyone
who wasn't getting long tech stocks 8 years ago? Or real estate 2 years ago?
I don't. It is no coincidence that with everyone piling on the long side of
the trade that they are now taking those markets the other way. Thats how the
game works. 20 years ago when I got into the gold business - we used to buy
gold from refiners and sell it to the public. Yep, back in the eighties it was cash
who wasn't getting long tech stocks 8 years ago? Or real estate 2 years ago?
I don't. It is no coincidence that with everyone piling on the long side of
the trade that they are now taking those markets the other way. Thats how the
game works. 20 years ago when I got into the gold business - we used to buy
gold from refiners and sell it to the public. Yep, back in the eighties it was cash
going up from the public to us and on to the refiners, while PMs went downhill.
Then about 1990 with gold and silver at record lows, business changed.
We became net buyers. In fact we have been net buyers ever since.
The public has been selling relentlessly for 18 years. Nowadays, Metal is flowing
up from the public into stronger hands while fiat cash is rolling downhill.
The exact opposite of 20 years ago!! If there is one thing I have learned in
my decades of investment experience its this: The public is always on the wrong
side of the trade. That by itself should be enough to convince even the most
hardened skeptic that this bull has a long way to go.
Then about 1990 with gold and silver at record lows, business changed.
We became net buyers. In fact we have been net buyers ever since.
The public has been selling relentlessly for 18 years. Nowadays, Metal is flowing
up from the public into stronger hands while fiat cash is rolling downhill.
The exact opposite of 20 years ago!! If there is one thing I have learned in
my decades of investment experience its this: The public is always on the wrong
side of the trade. That by itself should be enough to convince even the most
hardened skeptic that this bull has a long way to go.
10. Last, but certainly not least is the manner in which Bull markets progress.
This is the real beauty. Price accelerates at an increasingly faster rate as bulls
mature. Look at the stock bull from 1980's. The dow jones was at 800 in 1979.
It doubled roughly 4 times in the next 20 years. Notice the first double took
8 years, the second double only 6 years, third double only 4, and the last
double in less than 3 years. Pretty textbook stuff. Turning to gold we see the first
This is the real beauty. Price accelerates at an increasingly faster rate as bulls
mature. Look at the stock bull from 1980's. The dow jones was at 800 in 1979.
It doubled roughly 4 times in the next 20 years. Notice the first double took
8 years, the second double only 6 years, third double only 4, and the last
double in less than 3 years. Pretty textbook stuff. Turning to gold we see the first
double (from $260 to $520) of its bull took 5 years, the 2nd double (from $500
to $1000) was less than 3 years. With Gold at $860 today and the next
double due in about 2 years - sounds a lot like opportunity today.
to $1000) was less than 3 years. With Gold at $860 today and the next
double due in about 2 years - sounds a lot like opportunity today.
As for the Haircut given to the PM's and the mining shares over the last 2 months, I am not happy about it - but I have seen it before in Both July 06 and Aug 07. They were both tremendous buying opportunities. Perhaps we are near another one now. Like my dad used to say "there are 2 kinds of people in the world, son". He was right. There are those who are long PM's and those who aren't. Put another way, there are those who believe and those who don't. Put me in the former
camp.
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