from today's russell, wisdom and more wisdom, then astute wisdom
October 21, 2009 -- "For investors as a whole, returns decrease as motion increases." Warren Buffett.
Suppose they gave a bull market and nobody came? That's about what has happened to gold. Gold has closed higher for nine consecutive years. So far, it's been a great and huge bull market. All great bull markets come in three psychological phases. The first phase is the accumulation phase, during which sophisticated and value-oriented investors pick up what is generally being ignored. We saw that phase in gold back around 1999 and 2000. At that time I wrote that many gold stocks were selling so cheaply that they could be bought, "put away" and held as perpetual warrants just in case gold would "some day head higher."
The second phase of the gold bull market came around 2005 with gold priced around $400 an ounce. The second phase saw many old-time gold fans return and buy gold. They harbored memories of the 1970s and suspected that gold might be in another bull market. I believe the second phase of the great gold bull market is close to ending.
What's next? I've never seen a great bull market that didn't end with a third speculative phase. Often those who buy in the third phase will make as much in a shorter period of time as those who waited patiently through the entire first and second phase. [edit: i dwell in open secret, is it not our duty to try our very best to catch the best of the third phase, on super duper leverage, and navigate around the worst of the second phase with full complement of gains to date? further, if true, and had we caught the gain from 250 to 1050, and should we be rewarded with same magnitude of gain once more, does that not see gold at ... let me calculate scientifically ... 1,050/400 x 1,050 = 2,756 ... seems reasonable, and tallies well relative to official inflation adjusted gold price circa 1981, though conservative relative to john williams shadow stat adjusted of same, at 7k+ - reconciliation being that 2nd phase is hardly done, i my opinion and by my hope]
The second phase often ends with a severe secondary reaction that turns most people bearish on the item. We saw that in gold during the brutal correction that started in February 2009, a correction that ended when gold climbed decisively above $1000 an ounce in September. [edit: i fear, in sum total, what if we have yet to experience the brutally severe?!]
Will there be a third speculative phase for gold? I believe so. If I had to guess, I think we'll see it start some time next year. It should begin if or when gold closes above 1100.
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