-- Posted Friday, 9 February 2007 | Digg This Article
Take a real good look at the gold chart going into the weekend. This is a good picture of a bull market in action. Notice that no matter how far down gold is driven back it springs right back up.
I continue to lose my patience with those who buy and hold forever and never sell. And I am talking about those who truly never do sell. In Vancouver I talked with an investor who had 100 stocks in 100 different companies and was afraid to sell a one in fear of missing out on one more leg up in price. Another investor had 60 different stocks. Clearly that is a little bit too much to be able to manage appropriately. And a sign that someone doesn’t know when to sell.
Their reasoning is that if they hold on to everything they have long enough that they will all perhaps go to a million and they will be rich. And who knows? This might happen. But this game is all about odds and those odds are not reality.
But those investors who can truly figure out how to beat the odds are the ones who really strike it rich. And how do you beat the odds and play in their favor? What am I talking about? I am talking about the humble investor who learns to trade repeatedly and is happier with smaller and more attainable conservative gains. Am I nuts here? Let me illustrate below how simple averaging of small gains can build your portfolio considerably in value over time.
Consider starting with a humble $25,000 dollars at the beginning of the year and imagine that you could get only 30% return off of that principal yet duplicate this every month. While the time frame is stretching it a bit the reality is that 30% is not too difficult a return to achieve with regularity in this bull market.
Anyway, let’s play our math game here. In 3 months you would double your money. In 9 months your $25,000 dollars would be worth over a quarter of a million dollars. At the end of 12 months your original humble $25,000 dollars would have grown to over $582,000 dollars. That humble easy 30% appreciation you used to laugh and scoff at all of a sudden looks very attractive doesn’t it?
Sure, to achieve an even 30% each and every month may be stretching reality but the principal is valid even if you have to stretch this formula out by a few years. My point is do not scoff at 30, 40, 50% gains because even these smaller percentage gains may build wealth. We all want to score a touchdown with an Aurelian that climbed from 50 cents to 40 dollars but get real folks. You can still amass true wealth via trading with smaller gains. It is just wrong to think that the only way you are going to make real money is by scoring a 10 bagger. Sure those 10 and 20 baggers are nice but concentrate on the smaller gains to be won also. The present battles in Washington, DC will only bring about a stronger gold price. War is not going to go away but only intensify over the coming years.
“…early signs of bipartisan cooperation have all but evaporated on Capitol Hill, shattering Democrats' hopes for a smooth transition into power.” Click
Doesn’t it feel better to have both the democrats and the republicans at one another’s throats again? I always believe that justice is best served when both political factions are fighting one another. When they are preoccupied with battling one another they do not have the time to pass laws and we are left alone.
But all joking aside gold will be the ultimate beneficiary as the world tips further into the abyss that is the “Middle East.” There just will be too many folks competing for all that oil as our decade comes to a close and a new one begins. Oil is running out and the nations of the world know this. China receives most of its oil also from the Mid East so how China yet focuses on this situation will be interesting. I believe about everyone is dependent on that oil in that one tiny little strategic area. And 150 years ago who could have believed that the land then held by a bunch of Bedouin nomads would one day be the cause of World War III.
“…the resolution will force members of Congress to choose sides and thus will lay the groundwork for future battles…” “…an epic battle is unfolding in Washington with great dangers, enormous consequences…” “…there is a raging battle behind the scenes pitting advocates of a preemptive attack against Iran, led by the same civilian neoconservatives who advocated the Iraq War, against critics who view such an attack as catastrophically dangerous.” Click
As I said earlier, war is coming and the only beneficiary to this fact will be a higher gold price.
“The tectonic plates of Washington have shifted in powerful and historic ways.” “The greatest and gravest danger is that a desperate and isolated President with lame-duck status, a failed policy, no credibility, support collapsing to historic lows, and congressional Republicans who increasingly see him as a deadly danger might lash out with a new war against Iran.” “There is real danger here. The President has created hair-trigger tensions throughout a Middle East that is already a cauldron that seethes with chaos and carnage. ANY FORM OF PREEMPTIVE ATTACK AGAINST IRAN OR ANY OTHER COUNTRY COULD EXPLODE INTO A CASCADING WAR THAT COULD ENGULF THE ENTIRE REGION.” “…the epic battle of war and peace has finally begun in earnest.” Click
War with Iran? Yep. That’s what I see next on the agenda. Don’t sell those gold shares yet.
“Iran is currently installing 3,000 centrifuges at a uranium enrichment plant, an Iranian lawmaker said today, a day after a senior U.S. diplomat warned that the country's plans to accelerate its nuclear program "would be a major miscalculation." “Large scale use of centrifuges is necessary to enrich enough uranium for use in a nuclear reactor. Highly enriched uranium is required to make nuclear weapons.” Click
The following below is a good question many would like to ask concerning these gold shows such as the one I just attended in Vancouver.
Dear Dave,
“Regarding your advice to go to the next Vancouver conference, I would really like to, but are those conventions really geared for small investors like me. (While I have shares in many companies, typically less than $10K in each.) Don't the presenters really want to talk to analysts, fund managers & large investors? What should I experience first-hand that would make the travel worth the effort? I would be grateful for your insights. I really wanted to go to the San Francisco Hard Asset conference recently because so many speakers were there I greatly admire (like James Dines). Again, because of my lingering questions, I didn't go.”
Sincerely,
Rose L.
Rose, ask yourself how important your money is to you. Sounds like you may have at least 30,000 invested in this market. Of course it would be worth your while to go. Where else are you going to have a chance to speak with these analysts and the companies also? They want to speak to you because you are in essence their customer. Also, your net worth makes up the broad average to boot. Those with 6 and 7 figures to invest are the minority.
David,
“It is the small investor that ultimately will drive the gold market and gold price to the moon." “I agree with you, and I am one of the small investors.” “Small investors need to begin to protect themselves TODAY, because the purchasing power of their paper "dollars" has been eroding over the past almost 100 years, and this erosion is in high gear today, accelerating faster than ever. Some say inflation is actually about 10%, which means in just over 7 years, a person's income will need to double, just to have the same purchasing power as it does today. Rather than getting another job or working longer hours, employ gold as your servant and chances are it will serve you very well.”
Best Wishes to All,
Jerry V.
The following below is an interesting comment from a reader in Italy.
Hi David,
“I like your commentaries, as I am an Italian small gold investor. I'm writing to emphasize the wide difference between the way the US and the Italian Gov'ts deal with their soldiers killed in Iraq (Italy has lately withdrawn them, though). While US soldiers fall by the thousands and even a hero as the American GI you mentioned dies in anonymity, disregarded by the mass of US citizens watching the TV program "American Idol", over here things go on the reverse run. As compared with your over 3,000 soldiers killed, we have had a scanty 20 something. And 17 of these 20 were not killed during a war action or in combat but because of a car-bomb crashed against the barracks where they were sleeping. This started a contest by all Gov't leaders to show up at State funerals, addressing flamboyant official speeches, granting rich monetary compensations to the families and even monuments (one has been erected even in my small country, where one of the soldiers was born). The same script was repeated recently when a couple of soldiers fell with their helicopter. I leave it to you to judge which scenario is worse, considering that all the guys enlisting for foreign fronts are volunteers and know very well they are not leaving on a pleasure trip.
The Iraq war has been a blatant error made by Bush and Cheney to put their hands on local oil, but the cost of the guerrilla following the war is far higher than any oil they can get, apart from the human lives lost on both sides (mainly civilians).I hope in November 2008 the US citizens will quit watching TV garbage programs and vote for the Democrats (although my all time favorite is Ralph Nader).”
Cheers,
Marco G. Pellifroni
And how goes the rest of the US economy?
“Sales of existing homes slid 8.4% last year, the steepest fall in 17 years, but the market probably hit bottom in September and is entering a slow recovery that will last until June, the National Association of Realtors said Thursday.” “Not everyone is ready to herald the end of the correction for existing homes. From November to December, they note, sales fell 0.8%, ending a two-month upward trend. December sales were off 7.9% from December 2005.” "It's very premature at this point to jump to the conclusion that we've turned the corner," says Brian Bethune of Global Insight.” Click
Do you really believe the housing market has hit its bottom? Its bottom isn’t even close. Can you say, “I don’t think so!” So you are debating selling your gold stocks and climbing back into conventional stocks, eh? How about the US auto market? Here is a bottom that will continue to drop until it crashes with the first Chinese introduced car to this US market.
“Ford Motor (F) vowed Thursday to become profitable again by 2009 as it reported its biggest annual loss ever — a whopping $12.7 billion last year.”
Click
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-- Posted Friday, 9 February 2007 | Digg This Article
