ARCHIVED COMMENTARY
No Cheerleading
To Buoy Goldbugs
For edition of July 12, 2006
One thing I’ve always promised my gold-bug subscribers is that I would avoid serving up hope by the dollop whenever gold was in the doldrums, as it surely is now. My guiding principle is that subscribers will be better served by rigidly objective technical analysis, even when the charts have little to say, than by forecasts buttressed by constant cheerleading. As you know, my long-term outlook for gold is extremely bullish – as how could it not be, given that the world is awash in bogus money that literally is worth no more than the paper it is printed on. But as we keep seeing over and over, that simple fact is not enough to drive gold quotes endlessly higher, nor even to temper investors’ craving for paper assets in the meantime. While we can recognize that craving for what it is – a form of mass insanity – it is sometimes wise to act as though we do not see it at all. The late John Kenneth Galbraith, quoted in Bob Hoye’s most recent ruminations, had this to say about speculative blowouts of the kind we are currently witnessing in financial assets:
"The euphoric episode is protected and sustained by the will of those who are involved, in order to justify the circumstances that are making them rich. And it is equally protected by the will to ignore, exorcize or condemn those who express doubt."
So what’s the sane investor supposed to do while the current euphoric episode runs its spectacularly misguided course? My advice is to work your portfolio so that you are taking profits on perhaps a third of it near the tops of significant rallies such as the one that culminated on May 10. To have done so would have left you with buying power now that could have cushioned the nasty decline in gold prices since then. And even those with ammo to buy at these levels should keep in mind that the correction may still have further to go. You should be asking yourself how would you fare if the price of gold were to fall to $475 an ounce from a current $643. That’s the most bearish prediction I’ve heard from a long-term gold bull, Chris Laird, and it is backed by technical logic and speculative reasoning that I find quite compelling.
Summer Muck
For my part, I’ll continue to call ‘em exactly as I see ‘em, one hidden pivot at a time. The breach of these pivots yields the most dependable and accurate information I know of concerning the trend. I learned long ago that instincts can fail at the worst times, and that’s why I’ve spent the last twelve years honing a forecasting system that can keep me on the right side of the market most of the time. Subscribers should have come to appreciate by now the coldly mechanical objectivity I bring to my analysis, even when it conflicts at times with their bullish hopes for gold.
In the meantime, with bullion threatening to muck around for the rest of the summer, I would suggest tuning to my daily trading recommendations. They are designed for all levels of traders, with the goal of making Rick’s Picks pay for itself, even when there are few compelling opportunities.
A Winner in Beazer
For instance, I recently provided a very bearish target for Beazer Homes but couldn't come up with a low-risk way to short it. Yesterday, however, I received a note that would warm any guru's cockles from a subscriber, Stephen M., who evidently improvised on my dour theme and came away with a rather substantial profit. He wrote as follows: "{Bought] 300 BZH November 40 puts @ $2.07 average, out at $2.82 average. Net: $22,000, 35%, 11 days."
By the way, Beazer dropped like a stone yesterday, presumably bound for my original target at 41.08. I am so confident it will get there, and that it will yield a tradable bounce when it does, that I’ve provided a strategy for bottom-fishing with relatively risk. So check it out in Wednesday’s Touts!
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San Francisco Seminar
The Hidden Pivot Seminar in San Francisco is a “go,” with only a firm date remaining to be set. As of now, it looks like it will be held in early February, so please let me know via-email if you’re interested in attending.
The two-day class is geared to teaching traders of all skill levels the rudiments of my proprietary Hidden Pivot System. Post-grad mentoring in a chat-room is included so that students can master the techniques learned in the classroom in a real-time setting.
A Student’s Experience
Here is what one of my grads, Hunter Reynolds, had to say recently about the chat room:
"We have all come a long way. I think everyone here is making a little $$, or we would be doing something else by now. I can honestly say I am up about ten percent, maybe a little more, since your class. I am pretty conservative. I just trade from the long side, but I'm getting really good at picking the hidden-pivot reversal points for the uptrend!"
Dates are not yet firm for a fourth seminar to be held in Sydney, Australia, but it looks like it will take place either in November 2006 or February 2007. The class is filling up, so do let me know soon if you’d like to attend.
