One last thought on "Buying and Holding."
If an "investor" chooses to allocate say 5% of
his portfolio to gold, as a non-correlated asset
class to his other investments, I have no arguement
with that.
That's a diversification hedge and/or portfolio insurance.
Or, if a "trader" decides to bury "X" dollars of
physical gold or silver in the back 40, and forget
about it... I have no arguement with that either.
I understand that... I support that...and I get it.
Nothing wrong with a little armageddon insurance.
I have a policy myself.
But, that is not the discussion, or the debate
that we are having here.
The debate we are having here, is whether "buy and hold"
is a legitimate trading/investing model for commodities.
I say it's not, because commodities are cyclicals.
And cyclicals are the antithesis of buy and hold,
(Maybe that's why they're called -- cyclicals! <vbg>)
Go find the next early developmental stage Microsoft,
or WalMart.
Find that, and yes -- buy and hold it.
But, do not confuse commodities with growth stocks.
Commodities may make major moves in 2 months, in 2 years,
or in a 20 year timeframe.
And the % moves can be the same within a 2 month timeframe
in commodities, as a 20 year timeframe within the broad
market.
There is no other sector in which "buy and hold" is virtually
guaranteed to turn into "buy and fold" than commodities.
Don't believe me?
Go ask the last generation of "this time it's different"
permabull gold bugs from the 1970's.
They rode the cycle up for 9 years from August 15th, 1971
when Nixon closed the gold window, and then 20 years down
until gold bottomed in 2000/2001.
And gold didn't surpass it's 1980 highs until March of this
year -- 28 long years later.
We just had a 50% collapse in gold shares and 30% in gold.
Now tell me with a straight face that you wouldn't laugh at
anyone else, in any other sector, that tried to sell you
on the reason why - they rode an investment, or an
"insurance" policy down 50% and we're still holding.
So let's quite BSing each other.
To survive and prosper - you are going to have to
do some trading.
At some point in time, all buy and holders must make a market
timing call... either an entry point, and/or an exit point.
They had to.. to have become a "buy and holder" at some
point in time, in the first place, right (vbg)?
So the only question that remains, is at what point they
will make their exit call, and why?
Will it be an exit on the next new all time high?
Kind of hard to do, when all the "buy and hold" gurus
seem to have never seen a rally that isn't going ever
higher?
Let gold hit $1000, and the $2000 targets pop up immediately
on Kitco & Gold-Eagle, and as headlines in the emails
jamming your in box the next day, as the permabull gurus
leap-frog over each other to make the most outlandish
call right?
There was no exit call on the all time highs for Gold &
the HUI index in March?
Why would there be on the next one?
And evidently a 50% correction in the HUI index, and 80%
corrections in the juniors & explorers wasn't enough here
in August and September?
So what will it take? A 90% correction like the dot.com
bubble stocks?
And when will it be?
After another 20 year bear market?
And what will determine their exit?
A reversal in the US Dollar?
A collapse in the economy?
A Fed that changes from cutting rates, to hiking them?
A Fed that changes from a loose money policy, to a tight one?
Inflation turning into deflation?
Didn't work so far... why would it work in the future?
Didn't work in 1980... and won't work in 2080.
Because it will always be determined by one thing,
and one thing only...
DNA.
The herd, will always be the herd.
And that is the only sure bet the market ever offers.
The ultimate arbitrage between greed and fear.
Understand that and you will need nothing else.
S.O.T.B. |
