THE LONG GOLD AND SHORT STOCK 
ETF INVESTMENT STRATEGY
by Richard Gorton
December 17, 2007

A Credit Crisis Bear Market Investment Strategy
Presented below is a 'long gold, GLD, and short stock ETF investment strategy' by six asset categories.

I. Short precious metal stocks because they are disconnecting from the price of gold.

1) GDX Precious metal mining stocks are disconnecting from the price of gold.

The fall of GDX, a tradeable investment of the HUI indexed precious metal mining shares, will be gradual at first, as it tenaciously struggles to hold on to the price of gold; but capitulation is now inevitable; and one will profit greatly from the fall of these tremendously highly run-up and greatly over-priced stocks, many of which, such as Barrick Gold, ABX, have a P.E. in excess of 33.

Beginning in 2001, there were only a few visionaries such as Adam Hamilton, who were recommending the HUI Indexed gold mining shares, which have produced fabulous wealth for people; he said: "Unfortunately, for the financial world at large the XAU is considered the definition of gold stocks, so until that misguided perception changes far superior gold indices, like the unhedged HUI, continue to be overlooked by most market participants."

Now, those who invested low, are selling high, one can profit greatly by selling the HUI ETF, GDX.

II. Short the winners because when they fall, short sellers will reap great reward.
Several things are truly stunning about these charts: the fantastic rise in value since August, and then the recent completion; and then bearish engulfing candlesticks, and then the lollipop, hanging man candlestick reflecting change from bull to bear.

1) SLX Steel

2) PZD Alternative Energy

3) MOO Agriculture

4) INP India

5) EWZ Brazil

III. Short the losers as they loose more one will reap from their losses.

1) RZV Small Cap Pure Value

2) XRT Retail

3) SMH Semiconductor

4) UVT Ultra Russell2000 Value ProShares

5) HHG Infectious Disease - Pharmaceuticals

IV. Short utilities and semiconductors because this is a balanced low risk portfolio.

1) Utilities XLU

2) Semiconductors SMH

V. Short the emerging markets because they have seen terrific growth.EEM

VI. Short the insured debt companies as when they fail in will be a terrific windfall of profits.
Economist Mike "Mish" Shedlock reports these were recently recapitalized this assures their value will stay up for a while providing time to jump in on the down sellers wagon.

1) Ambac ABK
2) MBIA MBI
3) PZA Municipal insured debt PZA
4) Goldman Sachs 
It's an excellent time to short sell Goldman Sachs as it's a ticking time bomb GS
5) Canadian Imperial Bank of Commerce 
Mike Mish Sheldon questions what happens if guarantors go bust? CM.TO
6) Banks IAT

Conclusion
Just yesterday I wrote, Broadening Top Pattern Means The Days Of Financial Safety In Select Stock Groups Are Numbered.

Well it was just one day, as can be seen in the charts above.

Presented below are the charts of the total stock market ETF VTI showing the 'broadening top pattern'; Today's slip away will be into "the Bear Market Of All Time", which is going to result in the total elimination of fiat wealth several years out.

Gold and gold alone, has become the defacto means of garnering and accumulating wealth.

One should be very careful shorting and then only with small amounts.

I present the information above for insight into those investments that are going to deteriorate the fastest; they are the ones one should be selling.

One should be liquid to invest one's retirement assets in the ETF GLD and one's investment wealth in BullionVault.com; I recommend that one establish a small account with $2,000 at BullionVaultcom immediately and become experienced at buying gold there.

Only a small amount of volatility sent the stock market off today; there will be days when it will be substantially higher, greatly eroding the wealth of those who are still invested long stocks.

© 2007 Richard Gorton
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Richard Gorton
Washington, USA
Email  |  The Resourceful Bear Blog

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