Some will not like the tone of this post, or of most of this blog. We don't make any apologies for it. We see it as the best way to get through to people who most need to get the message. If instead we repeat the same rose-coloured rubbish available everywhere else, it is a waste of our time and yours.
The largest amount of mail comes in to us after a market storm. After the recent gold plunge, the usual trickling stream of doubt and derision changed to a steadier flow of "I'm in trouble, what do I do now?" and a few along the lines of "thank you, your blog saved/made me a lot of money."
Those in trouble, in some cases have lost significant personal wealth and even retirement funds.
Retirement monies should never be put at any market risk. That most certainly and especially includes ultra-volatile and unstable equities such as those relating to mining. More simply, never think your money is safe if you're invested in something that has the investment world buzzing.
To those wondering what to do next, we give the same reply: "1. Don't lose money, and 2. Don't risk more than you can afford to lose. It's not too late for #2."
In today's post we'll expand on that, and assess the risk. First the reader must put in some effort to truly understand that cycles happen, with illogical swings up and down, no matter what you think or want the facts or fundamentals to be. A good primer is to read the posts from the past three months in this blog.
Precious metals holders are almost certainly on the wrong side of the peak shown here:
Those rushing to dismiss it as "just an opinion" should be reminded of this first - the chart above is not a chart depicting opinion, it is a chart depicting the sad fact of human nature repeated time and again for centuries and not just in speculations.
The above chart is all that matters, because human nature is all that matters not wild conspiracy theories, waiting for a "final blow-off" (arguably happened in 2011), make-believe accountings of how much gold the U.S. holds, or silly ideas that only "paper" gold has gone down or simply that it's different this time. In fact, history repeats.
The same spewage [sic] that resulted in many portfolios now being destroyed doesn't matter either. Surely you're tired of hearing "buy the dips" or "miners are cheap" by now? If not, how many more losses will it take? When will you realize those same touts said the same thing all the way down in every other bubble of the past dozen years, and there have been many touts and bubbles.
Sadly, many reading this have been through it all before. Perhaps with real estate, rare earths, oil, uranium, tech stocks, etc. etc. Those who blame others, and make or propagate wild excuses, will repeat the cycle again. They don't take responsibility and they trust the same broker or newsletter that urged them to rush to buy, or keep buying, at the top. It makes no sense, but in fear and panic people will thrash about clutching at straws while still drowning ... in red ink.
Consider this - did those sources ever offer an exit strategy, and did they ever even suggest the things we've been repeating in this blog about manias? No, because they really have no idea how to make money in investing or speculating. That's why they're brokers (salesmen) or publishing newsletters for a living. They tell you that "no one could see this coming", yet we've been correct all along. Sometimes you don't get what you pay for.
There are some good ones out there - brokers and newsletters - but you probably don't have access to them. Anyone taking your calls, much less calling you with an investment idea, probably isn't getting rich in the market are they? They're probably not rotting in a cubicle at 5:30 AM getting ready to make the day's cold calls, or manning a sales or "investor relations" booth down some dusty corridor of an "investment conference", if they can reliably score in the market.
Fact is though, that even the very best make mistakes. The most storied and successful investors or speculators have caused, or will cause, portfolios to implode. Just look at some of the household names and rock-star hedge fund managers who were long gold while it plunged. They probably aren't "all in" though, but if they were then their names will soon be forgotten and mocked. Most will survive and come back, as they are first and foremost professional hustlers & hucksters with plenty of contacts in the business and much of their income comes from fees and commissions. You will probably not land as softly.
Along the theme of even the best making grave errors at times, may we suggest reading some books on mountaineering? "
Into Thin Air" is a excellent and highly entertaining one. True story, hard to put down and you'll never forget it. By contrast this book is dry but perfectly apropos, "
Extraordinary Popular Delusions and the Madness of Crowds", especially the first 100 pages. These books are virtually all you need to understand markets and manias. No scholastic degree or hotline to the head of Goldman Sachs will help you more than getting a grip on human nature.
Let's go with the mountaineering analogy for now. Most climbers get to the top, and most accidents happen on the way down. Of course some of those accidents are crippling or fatal. The chart above is the mountain, and when you're at the peak with your biggest holding all over the front pages and broadcasts of outlets not even related to investing, as were gold and silver, then your time at the peak is limited and it's all downhill from there. Descents happen faster than ascents, and they're perilous.
The expedition guide is your broker, newsletter or blog of choice. Is that a rookie giving you life-or-death advice, someone who's never even been up the peak? If he's been up there, did he learn anything? Has she even got a history of safe expeditions, ever guided on a successful team that made it back from a peak with everyone and everything intact? Has he warned you about the risks and given you clear instructions in case the regular happens - avalanche of snow or of sellers, stormy skies or markets, etc. The analogies are endless and we'll leave you to discover that, if you prefer awareness and understanding to ignorance and repeating costly mistakes.
Assessing the current risk,
we repeat that a bounce is due in gold and silver but there's a good chance of one more leg down before any material bounce. It could be a small drop, or massive with the resulting bounce not even making it back to today's levels. If you're not already a successful trader/speculator over many cycles, do not even think about trying to time the bounce if there is one. Anyone who tells you otherwise is irresponsible and reckless, and probably doesn't make their living via trading.
We can't see the future, but we can know the past. In addition to market and human history, you must know your own past. If you were long to begin with, and didn't sell before or during the plunge, and if you've been through all this before, probably dragging family and friends into it who are now at a loss, and following the same advice that led you down the loss column, do you really think you'll sell at the peak of a bounce?
Unless you change your approach to speculating (and that's exactly what it is if you're in gold and silver or related holdings such as mining shares), or exit the market entirely realizing it is not a place for you and your money, then even if you make some or all of the losses back you'll just lose that much and more down the road perhaps in the very next bubble with the same pattern and touts as this one.
There is some hope that gold and silver go much higher in time, possibly reaching new highs, though the chances are very low and if we had to put a percentage figure on it we'd be extremely generous in calling it 5%. Long before that happens though, we'll probably be long and will announce that in advance here.
If we were holding un-hedged related issues now, we'd sell and wait for a buy signal if we must get back in. Could be next month or in 5 years. Who knows? And more importantly, why care? The process, the discipline, of a reliably successful method and sources which accurately account for human nature and fear-greed cycles, is all that matters.
How many of these "
10 Steps To Building A Winning Trading Plan" did you forgo? What about "
The Importance Of Trading Psychology And Discipline"? Or these "
10 Timeless Rules For Investors"? If you've been long gold, silver or mining shares over the past few months the answer is probably "all of them".
While by law we cannot give individual investment advice to those who write us, we can and have certainly and repeatedly for years provided the tools necessary to "get it". For free! With respect we urge everyone, whether long or short, in the black or red, to self-assess and consider the rules and the facts as shown by human history and your own past, then do what feels right.
If you're anxious, sleepless, angry, arguing online, bragging, ego hurting, sending nasty emails, desperate, or anything of the kind, you're incorrectly positioned.
In closing, here's the simplest rule-of-thumb of all: Never hold or buy anything making a 52-week low. You can
find that information for free easily. The worst of the investor losses in virtually every bubble and bankruptcy ever would've been avoided if that simple rule were followed.
As we often write, it's not different this time. Both gold and silver recently collapsed after hitting their respective 52-week lows.
We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the positions we do, or for mentioning any positions or companies in this blog. If we hold existing positions we divulge the fact. This blog is merely a diary of some of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.
Please presume that we, she, he, I, it, them, they, us and you are purely fictional characters and that everything written in this blog is satire intended for comedic amusement only and not to be taken seriously in any way. Just like "real" analyst proclamations. Thank you.
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