Bullish Information

[Jim Nickerson]

Re: Bullish Information Re. Gold and Silver-Aden Sisters

The Aden sisters, Mary Anne and Pamela, are considered by some to be experts on gold and silver.


Their thoughts are at http://www.safehaven.com/article-6303.htm

November 14, 2006
Renewed Rise Has Begun
by Mary Anne & Pamela Aden

"The main point is, these metals are strong and they're bullish. Renewed rises are now underway and gold and silver are both set to move higher."

It's difficult for me to run across any comments that are negative on gold and silver right now, and to me that is negative.

[Finster]

Re: Bullish Information

i've never been able to make much sense out of elliot waves, but i like prechter's notions about social mood moving the market. certainly, psychology matters, A LOT, at least in the short run. but, as buffett likes to say, in the short run the market is a voting machine, but in the long run it is a weighing machine. that is, value ultimately determines price. but then there's that saying of keynes about being dead in the long run, and another about the market staying irrational [staying a voting machine] for long enough to break you. enough quotes!?!?#&**...

Pay no attention to Prechter's psychology and social mood voodoo. Prechter basically brought out the socionomic stuff because he was a failure in market forecasting.

The trouble with the manic-depressive model of market behavior is similar to that that plagues a lot of other market theories: it reduces a multidimemsional reality to a one-dimensional theory. Assets go up in value when mood is high, they go down when mood is low. So you want to be getting out of investments when mood is euphoric, and getting into them when it's in despair.

This seems to make sense when the asset class is question is the stock market. But what about the bond market? Sometimes it moves opposite the stock market, other times it moves in parallel. How about gold? Usually it does best when people think the economy is going down the tubes. What about cash? Prechter seems to assume it is not an asset, so if mood is really bad, they pile into cash.

Despite these objections, I think Prechter is brilliant and his books are a treaure trove of market insights. But forget the psych junk and the Elliott arcana.

[jk]

Re: Bullish Information

i've never been able to make much sense out of elliot waves, but i like prechter's notions about social mood moving the market. certainly, psychology matters, A LOT, at least in the short run. but, as buffett likes to say, in the short run the market is a voting machine, but in the long run it is a weighing machine. that is, value ultimately determines price. but then there's that saying of keynes about being dead in the long run, and another about the market staying irrational [staying a voting machine] for long enough to break you. enough quotes!?!?#&**

fwiw, i agree with casey's assessment of the gold market. it's still early days. we are in the transition from stage 1 to stage 2 of what will be a 3 stage process. gold has been accumulated by the early adopters, and is building a base as it is accumulated by institutions, especially cb's, "diversifying" their reserves. stage 2 will be characterized by the legitimization of gold and commodities as asset classes to be included in every investor's properly diversified portfolio. the model for the masses will go from 60/40 equity/bonds to, perhaps, 55/30/15 equity/bonds/gold-commodities. this period will coincide with an "orderly" decline in the dollar vis a vis other currencies, and moderate inflation. in stage 3 the decline of the dollar becomes disorderly, and a gold bubble develops. richard russell has said that the 3rd stage in a gold bubble is different than any other asset bubble, because it is motivated not just by greed, but also by fear. something to look forward to, huh?

[for more, see the recent piece from minyanville on china, the dollar and gold, posted in the "got gold?" thread]

[Jim Nickerson]

Re: Bullish Information Re. Mining stocks.

http://www.safehaven.com/article-6274.htm

November 10, 2006
Mining and The Markets
by Doug Casey

Casey writes, "All great bull markets end in a mania. It's interesting to contemplate why this is; books have been written on it. In essence, however, it's a matter of psychology and economics. Psychologically, when people see others making a killing, they can't help but join the party. Especially if there's a credible reason why it's a good idea. The nice thing about this gold bull market is that the story of why gold is going up not only tells very well, but very few investors (in today's world) have actually heard it. That means almost nobody owns gold. And that's good, because it means the only thing they can do is buy it."

Among the many things about which I know little are "psychology" and "Elliot wave analysis." I've never done any serious reading on either subject. From time to time I encounter Elliot wave counts that seem to me to be intelligible, and it is to me amazing that such counts can apparently at times be applied to so many different charts. It strikes me that the only way to explain such repetitive patterns is there is an underlying psychology that makes participants buy and sell as they do in order to produce the undulations in these patterns. I note all this just to put forth a perspective on how psychology appears to me to move markets. Possibly Casey is correct in his sense of what will move mining stocks higher.

[Jim Nickerson]

Re: Bullish Information. RE. Gold & Silver

Clive Maund puts up a note about every two weeks on Safehaven.com. Today, he is saying gold and silver look good, and that mining stock may be turning.

http://www.safehaven.com/article-6226.htm

These are followup notes from 11/8/06 by Maund. Got gold?

http://www.safehaven.com/article-6261.htm

http://www.safehaven.com/article-6260.htm

[Finster]

Re: Bullish Information.

This is why I like equities. Very rarely in this day and age can you take gold and buy a house with it, or food, or water, or whatever. You usually have to turn it into some form of paper currency. So why not just play the equities with that in mind, if you are bullish on gold?

Which is why I'd prefer to buy stocks of gold producing companies, OR, stocks in companies from countries who are net exporters of commodities, especially oil, and when I mean net exporters, I mean Canada.

And I'll reiterate what I said in another post, you don't earn a dividend or interest on gold bullion while it sits there. I like having the power of compounding interest in my corner as much as I can while I'm investing.

I know this is more basic and not so "macro-philosophical" as it gets around here, but it's easy, and just as well.

Maybe it's time I asked a different question..

FWIW, DemonD, I totally agree with JK's comments above. If you're bullish on gold, buy gold. There is nothing wrong with owning some mining stock, but that requires being bullish on mining stock. If it's individual mining stocks you're looking at, you need to do some substantial additional homework, including assessing reserves and production profiles, political and management risk, and analyzing financial statements and balance sheets.

[jk]

Re: Bullish Information.

why not just play the equities with that in mind, if you are bullish on gold?

Which is why I'd prefer to buy stocks of gold producing companies, OR, stocks in companies from countries who are net exporters of commodities, especially oil, and when I mean net exporters, I mean Canada.

And I'll reiterate what I said in another post, you don't earn a dividend or interest on gold bullion while it sits there. I like having the power of compounding interest in my corner as much as I can while I'm investing.

mining stocks have somewhat different characteristics than pm's themselves. i own some of both. mining stocks are, first and foremost, stocks, and tend to get drawn down by significant equity sell-offs. also what's bad for the miner is good for the metal. flooding, environmental protests, nationalization, tend to lower the value of the miner but make the metal more scarce and so more valuable. the mines, on the other hand, offer leverage on a rising metal price.

re dividends and commodity exporters- i have a significant position in canadian income trusts, mostly oil/gas. ouch! on the last few days, but the dividend stream, in canadian dollars, is nice.

[Finster]

Re: Bullish Information.

one approach is to have a specific target allocation with a range around it. e.g. a target of 25% and a range of 20-35%. [the range need not be symmetric] a pullback below 20% triggers a buy. a rise above 35% triggers a sale.

Exactly. In this light, my exhortation to Jim should not have been to totally "ignore it", but perhaps to factor it into his allocation targets. If I am convinced of the validity of "bullish information" - especially longer-term bullish information - then my target range is higher than what it would have been if I'd had no opinion.

i am so deeply skeptical of the dollar however, that i'm not sure, going forward, under what conditions i'd sell. i'm hoping, like the supreme court and pornography, i'll know it when i see it.

Ditto. I just look at equities (including real estate) and commodities (including gold) as the principle alternative to currency and bonds. So my allocation to dollars and dollar-denominated bonds is low. Due to my (lesser) skepticism about equities, they get a just a slight underweight, and commodities a strong overweight.

As far as selling goes, I'd stick with my discipline. I don't want to get tooo heavy into a volatile area like commodities and gold. An alternative is to part of one's cash/bond allocation into foriegn currency denominated bonds. This can allow you to lower your USD exposure without risking so much volatility.

[DemonD]

Re: Bullish Information.

i am so deeply skeptical of the dollar however, that i'm not sure, going forward, under what conditions i'd sell. i'm hoping, like the supreme court and pornography, i'll know it when i see it.

This is why I like equities. Very rarely in this day and age can you take gold and buy a house with it, or food, or water, or whatever. You usually have to turn it into some form of paper currency. So why not just play the equities with that in mind, if you are bullish on gold?

Which is why I'd prefer to buy stocks of gold producing companies, OR, stocks in companies from countries who are net exporters of commodities, especially oil, and when I mean net exporters, I mean Canada.

And I'll reiterate what I said in another post, you don't earn a dividend or interest on gold bullion while it sits there. I like having the power of compounding interest in my corner as much as I can while I'm investing.

I know this is more basic and not so "macro-philosophical" as it gets around here, but it's easy, and just as well.

Maybe it's time I asked a different question..

[jk]

Re: Bullish Information.

In taking a similarly bullish position on gold as you do, I deal with your question by stipulating a generous weighting of gold in the portfolio. If prices were to rise and it were to exceed that weighting by more than a predetermined margin of comfort, then indeed I would sell. Not my entire position, but enough to restore my exposure to something approximating my target weighting.

one approach is to have a specific target allocation with a range around it. e.g. a target of 25% and a range of 20-35%. [the range need not be symmetric] a pullback below 20% triggers a buy. a rise above 35% triggers a sale.

i am so deeply skeptical of the dollar however, that i'm not sure, going forward, under what conditions i'd sell. i'm hoping, like the supreme court and pornography, i'll know it when i see it.

[Jim Nickerson]

Re: Bullish Information. RE. Gold & Silver

btw, jim, i'm not sure that articles positive about gold fit under "bullish information." i think most of the investment world would assume "bullish" applies to stocks, and see gold going up as a symptom of problems. how about "bullish" information about bonds? e.g. "recession starts"?

If I see what I think is a good article that has bullish implications on an investable asset or asset class, I've been putting it here, the same for bearishness with regard to that thread. At some point, it may be interesting to come back and re-read the thread.

[Jim Nickerson]

Re: Bullish Information. RE. Gold & Silver

Ignore it. Instead, ask yourself the question how much gold and silver you think you ought to have. 10%? 20%? 30%? Then check and see how much you actually have. If the amount of the latter is less than the former, then buy. If it's more, then sell. If it's about the same, then hold.

Maund's comments are decent generally when he writes on gold and silver. I personally have bought and sold gold and silver ETF's as they have waxed and waned. Maybe others have ridden it out. Perhaps some want or need to buy. Gold is going to $1000 just as the equity markets were going down in October. It might happpen; it might not.

If anyone has this all figured out why are they still reading so much?

[Finster]

Re: Bullish Information. RE. Gold & Silver

as obvious as that sounds, i think it warrants examination. the real issue is, having bought x% gold, what do you do as gold rises? [i'm going to assume it rises.] do you keep selling or allow it to ride until some other criteria are met?

Fair enough, JK. On the other, hand, all too many investors ignore it completely. They may have been sitting for the past five years with no gold at all in their portfolios, waiting for their favored guru to tell them it has finally hit bottom. Others may have 75% of their entire net worth in gold, solely on the premise that the price will be higher three months from now.

In my experience, this latter problem plagues many more investors than does the one you cite. In taking a similarly bullish position on gold as you do, I deal with your question by stipulating a generous weighting of gold in the portfolio. If prices were to rise and it were to exceed that weighting by more than a predetermined margin of comfort, then indeed I would sell. Not my entire position, but enough to restore my exposure to something approximating my target weighting. That way I can ensure that if indeed my bullish outlook is correct that I can benefit from it, but also that I do not inadvertently wind up staking my entire future on it.

[jk]

Re: Bullish Information. RE. Gold & Silver

Ignore it. Instead, ask yourself the question how much gold and silver you think you ought to have. 10%? 20%? 30%? Then check and see how much you actually have. If the amount of the latter is less than the former, then buy. If it's more, then sell. If it's about the same, then hold.

as obvious as that sounds, i think it warrants examination. the real issue is, having bought x% gold, what do you do as gold rises? [i'm going to assume it rises.] do you keep selling or allow it to ride until some other criteria are met?

btw, jim, i'm not sure that articles positive about gold fit under "bullish information." i think most of the investment world would assume "bullish" applies to stocks, and see gold going up as a symptom of problems. how about "bullish" information about bonds? e.g. "recession starts"?

[Finster]

Re: Bullish Information. RE. Gold & Silver

Clive Maund puts up a note about every two weeks on Safehaven.com. Today, he is saying gold and silver look good, and that mining stock may be turning.

http://www.safehaven.com/article-6226.htm

Ignore it. Instead, ask yourself the question how much gold and silver you think you ought to have. 10%? 20%? 30%? Then check and see how much you actually have. If the amount of the latter is less than the former, then buy. If it's more, then sell. If it's about the same, then hold.