Thursday, December 15, 2011

The Sentiment Toward Gold Today

Back in August when gold crossed over $1,900 an ounce, optimism in the gold market had reached a fever pitch.  The daily sentiment index clocked in at 98% gold bullish, a new all time record, as investors across the board were absolutely positive that gold was headed higher.  Here is what I wrote back in August when gold crossed $1,900.

Here is the consensus view of gold today streaming across the financial news wires:
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Gold was a safe haven, a hedge and a speculative trade all at the same time,” said Michael Murphy, CEO of Rosecliff Capital, a hedge fund. “Long gold has been a winning trade for years. We expect the selloff in gold to gain momentum into 2012. Traders are finding better hedges, better safe havens, and better speculative commodity plays than long gold.

CNBC: Gold Sheds "Can't Lose Status": No One Wants It

Gold, in the 11th year of its longest winning streak in at least nine decades, is poised to enter a bear market, according to Dennis Gartman.  He sold the last of his gold yesterday.

Bloomberg: Death Of Gold Bull Market Seen By Gartman

Gold bugs over the last two weeks have become even more discouraged than they were at the end of November. And that’s saying something, since they were already quite dejected. Consider the average recommended gold market exposure among a subset of the shortest-term gold market timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). Two weeks ago, when I last wrote in this space about a contrarian analysis of gold sentiment, this average stood at 13.7%. Today it stands at 0.3%, which means that the average gold timer is essentially keeping all of his gold-oriented portfolio out of the market.

MarketWatch: The Gold Bugs Are Throwing In The Towel
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Back in August at $1,900 investors could not get enough gold.  Today at $1,550 they are dumping it from their portfolio and have declared the bull market finished.  What has changed? 

Nothing.

The European Union, Japan, the UK, and the United States are bankrupt.  Their banking system is insolvent.  The entire world's debt to GDP has crossed over 330% and is rising by the hour.  Everything that made gold a strong buy back in August, the fundamentals, continue to improve by the day.  The only difference is that gold is now 20% cheaper.  It has gone on sale.

Now is the time to step in and begin accumulating a position.  Can gold fall further?  Yes.  You should buy more if it does.  We are in the early innings of a global sovereign debt crisis, currency wars, and when the game is over there will only be one currency standing.




Bearish Enough

My Mom and I when I go home for Christmas:

Wednesday, December 14, 2011

Howard Davidowitz: Retail Reality Check

Quick Bio for attorney Howard Davidowitz, one of the most respected names in retail consulting:

Davidowitz & Associates is one of the most successful firms in its niche providing consulting and investment banking services to the retail industry since 1981. Their focus is on strategic management, acquisitions and divestitures, restructuring and ownership transactions.  Howard Davidowitz, Chairman and sole stockholder, has extensive experience as a representative of buyers and sellers, and as a principal, in upper and middle market transactions.

Precious Metals Liquidation

The commodities markets have been hammered today due to a stronger dollar (weaker euro) and what I believe will soon emerge as liquidity problems and liquidations in the European banking system.

Precious metals in particular have been clobbered with gold trading close to $1550 and silver falling near $28.50 as of this writing.  As I try and do during every major sell off, I want to remind those holding the metals to take a deep breath and remember that we are in a secular bull market.  During a long term secular market you experience massive pull backs.  Nothing moves in a straight line and pull backs should be welcomed and embraced.

This is why you raise cash when prices run higher and invest funds when prices fall.  I made a purchase in the silver market today as prices fell below $29.

It is human nature to feel great about silver when it was priced at $43 just weeks ago and feel terrible about it today when it is priced at $28.50, but as an investor you must try and think the opposite.  For a review on the long term fundamentals of the silver market please see:

Silver Fundamentals In Review: Supply and Demand

Silver Supply: The Coming Squeeze

Kyle Bass: European Deposit Runs

The man who needs no introduction, as I have spent the past few months posting and talking about him endlessly (see Kyle Bass Discusses What Comes Next), spent some time speaking with David Faber today on CNBC.

Tuesday, December 13, 2011

Harry Dent: 2012 Outlook

Harry Dent, author of The Great Crash Ahead (one of the best books of 2011), discusses what he seeing coming in 2012.

His speciality is demographics and the importance of the peak spending years of the baby boomers (1990's - 2008) and the subsequent importance of their retirement years (2008 - 2022). 

92 million baby boomers are at the point where they want to pay down debt, save for retirement, and pull money from their 401k every month in order to finance their living costs.  What does pulling money from their 401k mean? 

Selling Stocks



Sunday, December 11, 2011

Silver Supply: The Coming Squeeze

Great video from the people over at Future Money Trends discussing the supply and demand components of the silver story.  They finish the dramatic video with the idea that silver could fall sharply due to a liquidity crisis stemming from the European debt crisis followed by a rush to physical silver that would dwarf the 2008 buying spree.  I agree completely. Keep some dry powder ready.