It is said that history repeats itself, and, whether or not that's true, pundits seem to have a tendency to repeat themselves. I just stumbled over an interview with Jim Dines from July, 1996, that seemed to be commenting on current events, so,
For what it's worth:
worth.com
I had to keep checking the date on this one: it could almost have today's date on it: worth scanning all the way to the bottom if you are a history buff: caveat: I cut out a lot of it, hoping to avoid copyright infringement
07/17/96 -- James Dines, Editor of "The Dines Letter"
On Wednesday, July 17, 1996, James Dines joined Worth OnLine for a live chat. Dines, a stock-market prognosticator and editor of The Dines Letter, discussed market timing, mass psychology, and investing in precious metals.
DinesLtr: "Virgin bulls" who have never seen a bear market have lost their innocence, and the first tremors of Mass Fear are foretelling the OTC illliquidity; the next Downwave begins. Market drastically oversold, so probable Technical Rally will be last chance to get out. Challenge has shifted from capital gains to capital preseveration. Hold buying power for the next opportunity. Interest rates irrelevant to market, which is a function of dollar/yen ratio, not easy to envision, but yesterday's rally began when the yen rose against the dollar; 1995 bull market was because dollar crashed, and when dollar recovered market began to run out of gas. Few understand this relationship.
Worldwide Web foretells what we label "The Coming Death of the Middleman," in which entire industries will be replaced (from telephone to TV Guide). Pre-Paid Legal Plan, one of the few stocks we would buy here because it is the xx bullions. Golds are a hedge against a currency crisis (see crash in Mexican peso last year and crash of dollar against Japanese yen, followed by crash of yen afterwards). XAU average deceptive because heavily weighted by Barrick and Placer Dome, which were sold to help investors meet margin calls elsewhere. Conservative investors should buy Barrick, Placer and Stillwater Mining. For speculative accounts, we recommend Agnico-Eagle Mines (AEM), Gold Canyon Resources (GCU.V), Penoles (world's largest producer of refined silver, and virtually unknown).
My new book "Mass Psychology" my third and final business book, has already been called a classic, as have the first two books. High-tech mania idolized Fools and Beardstown Ladies, will be looked back on in wonderment. Book describes "profit inversion," wherein investors have changed their goal from profit-seeking to "getting out even." All gamblers secretly want to lose, which is why they keep gambling until they do lose, and "Mass Fear knows no price" so people will sell out at the lows "just for the money." We are now open for questions.
Question: Gold doesn't seem to be a hedge against anything anymore. Is it simply a commodity for the jewelry business?
DinesLtr: We are not bullish on gold which has been flat for many years. We are bullish on gold shares which are higher than any other group so far this year.
Question: What are your thoughts on technology mutual funds between now and year-end, and then into 1997?
DinesLtr: We are negative on all mutual funds because of illiquidity during selling panics, especially in hyperinflated technology groups.
If funds are 'negative' where do you think it should go?
DinesLtr: This is a dangerous time in the market and would remain in cash for the moment, except perhaps for an investment in Pre-Paid Legal here around 13.
Question: With the recent decline in stock values, what sector type stocks do you suggest for protecting value or rebounding back to former share values?
DinesLtr: Playing Technical Rallies in a new bear market is extremely dangerous and not for beginners. If you still hold stocks, protect them with stops and try to liquidate on strength. Market extraordinarily oversold, so powerful rally might begin, and if you wish to play it, the smart way would be with index call options to limit your risk.
Question: Do you feel that the stock market correction ended yesterday?
DinesLtr: Yes, temporarily only. This bull market is in deep trouble because the high-tech crash has changed Mass Psychology from profit- seeking to "getting out even. " And overhead supply will inhibit rallies. After the next rally -- unless we get into new all-time high ground -- we are looking for seriously lower prices.
Question: With small-cap stocks performing so well in recent years,why do you think it necessary for one to settle for the lower returns of the metals?
DinesLtr: Check your small-cap stocks, as many of them have crashed. There are times in the stock market to switch from seeking higher returns to capital preservation. Whippets running the mutual funds have never seen a serious bear market and it will be a religious experience. Buying depressed golds, with minimum downside risk, could yield the kind of explosive returns we saw in the late 1970s when many of them went up 20 times or more . This generation has no concept of Mass Fear driving investors to the safe haven of gold, making them "glamor stocks."
Question: Your comments on the direction of China in the next five years. How soon before we can buy shares of Chinese private companies, or is this a possibility?
DinesLtr: The Dines Letter was the first newsletter to turn bullish on China in 1979, and remained bullish until 1992 when we turned bearish, and still are. China is running the printing press and cannot figure out why they have ruinous inflation, and have had many such inflations in the past -- such as the 1949 inflation that ushered in communism. They desperately need a gold standard, but there is no voice to tell them that. When Chinese stocks begin to make new Upside Breakouts, we will consider going back in.
Question: What is your view on precious metals, with special reference to Silver's recent collapse. Are lows in?
DinesLtr: Your use of the word "collapse" demonstrates lack of perspective, as prices have been around these levels for a long time. I strongly recommend that you study our long-term charts in precious metals. In fact, we turned bullish on silver at $3.65, at which time we gave the only unconditional guarantee in our 36 year history when we guaranteed that silver was "within $4 of its absolute bottom." We are now in the base-building phase of silver's next bull market, which is always slow and designed to keep the public out until they can be let in at the top.
Question: What companies do you see as strong in the near future in the chemicals industry?
DinesLtr: My favorite is Monsanto Chemical because they're the only ones bright enough to have moved heavily into the ag-biotech area, which has more promise than the Internet. One of the many prophecies in my "Mass Psychology" book is that all diseases will be eliminated from the earth within 20 years because computers will precisely design drugs engineered to block computerized representations of bugs. Monsanto has held up fairly well here, but we would leave a stop in at 26. Even still, in a general bear market, with estimated earnings of $1.75 next year, it is not cheap, although it has positive Relative/Strength. Personally, you would be better off holding cash and awaiting a possible buy at lower prices.
Question: When you say "we are in the early stages of discounting that" - do you just mean the prices are relatively low, for now?
DinesLtr: Stocks are barometric rather than thermometric, and discount the future. All stocks act based on the Mass Psychology of the people who tend to buy them, which is why bonds move sedately like the conservative people who buy them. Stocks and commodities move on entirely different cycles, discussed in the "Anomaly" section of my book. Commodities players are neutral on the metals, but stock buyers are anticipating bullions' upside upside breakouts later, which is according to our plan. We are still in a very early stage of the precious-metals' bull market based on our Major buy signal of 9 Nov 92, and we already have very substantial profits built up.
Question: What are the indications that we are now in a bear market. When did it start; and how deep and how long do you think it will last? Is Greenspan engineering this volitility?
DinesLtr: Bear market in high-techs began in July 1995 in semiconductor group, and was gradually joined by more groups in early 1996. Early June saw the bear show its fangs openly for anyone to see, and weakness is spreading in classic bear-market fashion. Last to fall will be DJI blue- chips, which is why OTC has gone down so much more than the DJI. Worse, huge number of inexperienced investors numbed to fear by dogma of "holding for the long-term," have yet to panic, which they will at the lows because all gamblers secretly desire to lose. When the stampede to get out of mutual funds forces redemptions, or when the whippets running mutual funds with too-little cash reserves finally panic and sell, who will buy? That is why recent Dines Letters have warned that the next bear market will be so steep and deep that investors will arrive at the bottom slightly younger. Fedhead Greenspan should be replaced by allowing interest rates to fluctuate in the free market and It is an outrage that the government pretends to know how to "fine tune" the economy better than capitalists. In any event, if there is a crash, they will pin it on Greenspan concocting a reason that he "created uncertainty."
Question: Business Week suggested that Natural Resources are going to be strong going into next year. How do you feel about this sector?
DinesLtr: Natural Resources: Bullish. Oil stocks are one of the few strong areas left in the market along with papers. Again, however, if the DJI goes below yesterday's lows, for a Confirmatory Downside Breakout, all bets are off and we would then expect only the precious metals to assume market leadership for the first time in two decades for a new generation of investors.
Question: If you had an extra $20,000 to put into the market at present where would you put it and why?
DinesLtr: I would put a small amount of it into Pre-Paid Legal (PPD), some of the previously mentioned gold-mining shares, and hold some cash for possibly better buying opportunities ahead in industrials.
Question: I've encountered numerous stock brokers soliciting my business. Many are between 29 and 36 years of age. They tell me that Bear markets are unlikely to ever occur again. Indeed they say they've always made money for their customers? Rude Awakenings?
DinesLtr: That opinion has always been said at market Tops, such as the famous prediction by Professor Fisher in 1929 that stocks had reached a permanent high plateau. Cycles are normal. As part of your stock-market education make a point of reading the great classic book "Extraordinary Popular Delusions and the Madness of Crowds" written in 1865, and also my third and final book "Mass Psychology." I didn't write them both. The first one was written by Mackay and should be in your local library, but is well worth owning.
Question: If we've been in it for the long term should we stay with our mutual funds?
DinesLtr: Mutual funds: Absolutely not. In a selling panic there will be no way for everyone to get out at the same time because they simply do not own enough cash for that, and frightened banks only lend umbrellas when the sun is shining. If you want to own stocks for the long term, stop being lazy and buy stocks yourself that you own, collect your own dividends on, and pay no annual fees. The only time we recommend mutual funds is for overseas markets, such as in India where buying local stocks is beyond most of us. You can buy a stock like Kodak and General Motors and hold it for the rest of your life.
Question: Mr. Dines, how do you think the market will perform till the end of the year?
DinesLtr: Near-term rally, followed by lower prices, possibly seriously so. Golds should outperform on upside.
Question: Jim-Why would gold stocks go up if price of gold stays flat?
DinesLtr: Your question has already been answered. Psychology of stocks buyers different from commodity buyers. Stock buyers anticipate a rise in the price of gold bullion, which has been postponed by suppressive gold sales of central bankers who know that people watch gold prices as a measure of inflation. By suppressing gold prices, governments conceal inflation, like sticking a fevered patient into ice water instead of curing him. US government gold at Ft Knox is priced at the ludicrious level of $42.50 but will not sell any at that price. Truly, denial can be more than merely a river in Egypt. |
