"History repeats itself all the time in Wall Street." Edwin Lefevre
I think some of you on this thread do not understand what a mania is and how it ends. First let me define for you what a mania is: A mania is a period of insanity marked by incredible excitement, delusional speculation, and a violent, and usually ruinous climax. The insanity infects almost everyone. Trading is aggressive, frenetic, and euphoric. The Crowd loses all concern for the intrinsic value of their investments.
A Mania shows how easy it is to be seduced by greed and to succumb to the psychology of the crowd. Understanding crowd psychology, and knowing when to bet against it, are the paths to great profits.
Let's talk about Gold here. I'm extremely bullish on Gold at the moment. Why? For many reasons ( some of which I cannot get into here ): Market Vane has a current bullish sentiment of 13% for Gold, which is the lowest in over a decade. In Contrast, the US dollar has a current bullish sentiment of 87%, the exact mirror image of Gold. Secondly, the news is just great for a contrarian like myself: A Gold Mining Company has recently closed its operations and has become an internet company. Commentary is feverishly bearish with the New York Times and Business Week referring to Gold recently as " Dead " and an "outdated" form of investment. As I read daily how Gold will fall to $190 an ounce, I come to realize that this Market is washed out. Moreover, the XAU is presently 30% above its August 31, 1998 low as the price of gold hovers around 20 year lows. I know many of you have no respect for history and feel that we are in a new paradigm of investing. But I also know that he or she who ignores history is doomed to repeat its tragic lessons. The XAU has almost always led the Shiny Yellow Metal into the stratosphere and it is presently signaling a Bull Market in Gold through its price divergence. Most of you on this thread don't even know how Bull Markets are born: They arise from the deepest despair and utter hopelessness. The great Wall of Worry of further central bank and IMF sales will propel the controversial Shiny Yellow Metal to astronomical heights as the Over-Valued Greenback plunges. The Whole Universe has their money in the dollar, the reserve currency of the world at present. Do You really expect Asia and Europe to continue to support our currency as their economies strengthen?
I begin with a very simple premise. If everyone believes something and believes in it strongly enough to have acted on it, there is great profit to be made in taking the opposite position. If everyone has bought into the bullish prospects for a particular stock, who is left to buy the stock and push it higher? The path of least resistance is now down. This path of least resistance is fertile ground for ME!
Here are a few other examples: In 1993, the pharmaceutical companies were proclaimed finished and dead thanks to Clinton's health care plans. PFE tanked big time on this news. Guess who was buying with open arms? A year ago at this time, the tobacco companies were under threat of extinction as a result of the McCain Bill. There was hardly a day that went by in June that Clinton did not go on the War Path against Big Tobacco. Guess who was buying Big MO almost every day throughout the month of June ( You can check my posts on the MO thread )? In the spring of 97, one of the greatest and most successful shortseller ever in regard to Cube decided that enough was enough and went long. Cube pre-announced an earnings shortfall and the stock tanked 40%. The thread became a funeral parlor during the month of June as everyone threw in the towel. Guess who was buying Cube in the midst of this despair? I could go on and on here but it would be futile.
My indicators point to an 80% probability that the top is in on this great bull market. I see a 20% probability that the S@P will run to the 1600-1800 level before a 50%-60% decline sets in. If you listen to Patsy here you will lose a fortune on paper by buying the dips. I also see an international currency crisis developing over the next year( which is the subject of another essay ) and that is primarily why I am so bullish on Gold. I have 25% of my portfolio in a variety of Gold Mining Stocks. I am primarily a short-seller, however. I pick my spots very carefully. I've done quite well this year. I stay away from hot stocks like BRCM. |
