-- Posted Thursday, 22 June 2006 | Digg This Article
I joked last week about someone having the vision to hold a gold show aboard a cruise ship. Now a combination gold show and cruise would definitely attract a greater number of retail investors.
But mark my words well because investor involvement in resource stocks will only grow and grow over time. Pay attention today to China. China is presently attempting to get their hands on every major mine and resource in North America.
Dave,
“Two years ago I bought gold, silver and other metal stocks. I started with 500.00 dollars and a no fee credit card for 6 months. I bought stocks at very low prices. At times I seemed to be the only one buying and now I have 175,000 shares of stock worth $150,000 and that’s after my stocks went down $45,000 in the recent correction. I did not know much about the stock market until two years ago when my wife taught me how to run a computer. I have been reading your editorials in XXXX and other sites and it has been good for me and hope it has for others.”
Anonymous email from a reader.
I am excited!
I continue to see nothing but opportunity in the years to come from investing in precious metals, base metals and rare earth metals. Now if you think I am wrong in this thinking then tell me so. And the key to this growth I believe will continue to be the growing expansion in Asia and China. China today is building an empire. I really do not think that the average folks or analysts comprehend this fact or what this really means.
David,
“Isn't it nice so many people are sure the metals bubble is over? I bought my first HUI today and plan to add more as time and cash allow. I already have some OIX buy have to move up date.” “I am old but new to this and I agree with you 100%, 45 trillion dollars worth of debt in the hands of our competitors does not bode well for us. What else is there to say? I understand Mr. Bush has ordered 300 million pairs of Ruby Slippers. I think a nice collection of commodity options to back up my Canadian oil Trusts and Central Fund gold and silver trusts will help smooth the rest of my time. Thanks, I will watch for more of your stuff. You know you are the third article I have read this week that comes out and says the world has changed and its time you changed to, the alternative will be most unpleasant.”
AR
I recently talked to a neighbor of mine who just retired from Fluor Daniel as an engineer a couple of years ago. He spent over 12 years in China supervising various engineering projects. And during these 12 years in China he worked very close with the Chinese political and industrial infrastructure. I asked him if he thought this present tremendous growth China is experiencing today is just a short term and unsustainable rally doomed to expire soon.
He looked at me very seriously and said with conviction that the Chinese do nothing short term as there is a vision and long term plan in every thing they do. And I believe this too. China and Asia are growing their wealth exponentially and in their plans this empirical growth will come with or without the USA as part of the equation.
David-
“I see Lundin, Sinclair, Russell, Casey regularly and invest totally in oil and gas, uranium, and the metals. Try to do my DD (due diligence) and appreciate being able to talk on a first name basis with many in the smaller companies. Several IR people are good personal friends which helps sort wheat from chaff. A trip to Vancouver in Sept. 2004 allowed me to visit a dozen or more junior companies as well as meet my broker there.” “Go to PDAC when I can or NY Gold Show, want to return to BC when I can and even fly fish! The more you learn the more you are then able to learn. If you can unlock a good mining entrepreneur's enthusiasm, you are in for a most rewarding experience.” “Thanks for your perspective.”
A reader
The U.S. is really very arrogant in believing that the world is solely and totally dependent on their consumer based market. These usually have been the last rallying cries of any empire on its last legs. Arrogance always precedes a fall. What is growing and developing in Asia will eventually surpass anything the United States can imagine. Refuse to believe this at your own peril. In
every age there is always one empire on its way up while another empire is on its way down.
And after 9-11 it became evident to the world that the United States is no longer invulnerable to world wide terrorism. In the worlds eyes the destruction of the World Trade Towers marked the end of an era of total U.S. supremacy. And those are the facts and views as perceived by the rest of the world.
David,
“Enjoyed the read and was glad to hear that you enjoyed yourself in our fair city of Vancouver....if you think Vancouver is nice, plan an extra few day's next time your out this way and visit our fair Capital city of Victoria, Vancouver Island.... definitely worth the trip over.”
LD
But getting to the title of this article is it time now to buy or sell?
What intrigues me always is how people consider their investments including the individual companies they invest in. If the truth were really told most investors look at their individual share holdings as trophies they line their living room wall with.
So much thought and personal reflection is often put into the selection of just one single stock. And of course there is nothing wrong with this. But the one single fact that always fails to escape me is that most folks become so in love with their stocks that they never think of selling the beloved things.
I observed this back in the late 1990s when so many share holders refused to sell even a single share as they watched their stock portfolio climb to over a million dollars. These folks thought of their stock portfolio as a bank account which most definitely a portfolio is not.
The vagaries of the market are such that a stock can oscillate up and down and back up again and even back down again. Woe unto the investor who buys even a single share with out a prearranged selling strategy.
While it is a great deal of fun participating in this great bull market in resource stocks remember that you cannot really lay claim to any profit until you sell.
And that is a “secret” I am sharing here. The secret that no investor ever wants to hear. “You mean I have to sell my beloved shares before I make any money?” Yes. Those are the facts.
Bottom line is this.
Have a selling strategy before you purchase even your first share. If you don’t then when you do see your share holdings rise you will become overcome with greed and ride the wave all the way to the top and then still be holding on all the way back to the bottom. A simple formula is to sell half when the value doubles. But the point I am trying to make is that your eventual goal is to sell at least a portion of your shares on the way up to lock in and capture your profit.
I commented in last weeks ravings that the institutional funds were driving the price of gold as evidenced by the fact that so many of the Vancouver attendees had a very significant percentage of their shares held by professionally managed funds. A couple of years ago Rob McEwen made the comment that only 1% of the total equity investment dollars in the world goes into gold stocks. And I don’t think this number has risen very much even in the last couple of years of this gold bull market.
Why is this?
I still do not see any significant number of retail dollars going into the precious metals stocks or resource sector in general. And presently folks are nervous about the present gold correction. But summer is always a slow time for the gold market as everyone is on vacation. But I am still confident that we will see gold climb again this fall and back to the 700 dollar an ounce level before the end of 2006.
David,
“I have been reading your columns for quite some time and appreciate the insight. I have followed Gold from $250 all the way up to its recent top. What I have heard all along is Gold is the ultimate inflation hedge and safe haven investment. Everyone agrees that inflation is out of control and that the dollar is supposedly dead. Yet it looks to me as if Bernake and the Fed are killing Gold and the bull is over. How can gold win when raising interest rates simply makes Gold a less desirable investment?”
Rates down - Gold Up.
Rates up - Gold Down.
“I don’t see it any more complicated than that. If Gold truly is the inflation protecting investment, then all that needs to happen is raise rates to fight inflation and Gold tanks. Everyone is worried about inflation right? So why is Gold going down big time? Its supposed to be the best thing to have in times like this.”
Thanks
JN
Asst. Vice President, IT
JN, the fed is loosing control of its battle against inflation. We will continue to see inflation become a factor weighing down our economy more and more as time passes. And remember the following time proven fact below.
Rising Inflation = Higher Gold Price
Yes, we will see oscillations with the price going up and down but let’s just wait for this fall and see where gold goes to by the end of the year. I still believe we will see a solid 700 base by year end. Shoot me if I am wrong but I believe this will come to pass.
There are just too many solid fundamentals weighing against our economy presently and I do not see these problems going away. Sure, we may observe a shot in the arm on occasion as everyone momentarily rallies around the dollar, but these US dollar rallies will only grow weaker and weaker with time.
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Send me an email with your comment. If it’s a good comment I’ll post it next week. If it stinks I don’t know what I’ll do with it. By your sending me your comment you are agreeing that you don’t mind my posting it. If you want me to post it anonymously or posthumously please let me know. Gold Letter, Inc. Commentary is carried only on the best websites. If I am not there then maybe you shouldn’t be either.
David Vaughn
Gold Letter, Inc.
David4054@charter.net
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-- Posted Thursday, 22 June 2006 | Digg This Article
