Insanity is Prevalent
by Sol
Tactical Investor
November 17, 2003

We will begin with a little philosophy and then head straight into the markets.

What do I mean by this?

Well, look at us... we have kids, we put them through school and college only to instill one principle in their head: make as much money as possible and be successful. The irony is that instead of spending time teaching them the value of hard money (money backed by Gold), we teach them to embrace this system based on fraudulent, funny, fiat money.

To make things worse, we then put this money into the stock market, which in all reality, is a mental asylum. Think about it for a second. We sit transfixed in front of screens studying stock patterns and charts and looking for teacups, head and shoulders, triangles etc. It's truly funny some of the terms we come up with to describe chart patterns, for example, Head and Shoulders. IF we really had a good head on our shoulders, would we be wasting time like crack heads trying to figure out patterns in a market? And, if we don’t understand or want to waste time studying those patterns, we pay some analyst for his views on the market and then invest based on his isolated, and possibly warped perspective of the situation!

Look at the average Joe. He spends anywhere from 15-20 years educating himself to get a good job (Again what is a good job or how can it be a good job, if one is paid for ones labor with bad money) and then reads a book or two on the stock market and in weeks he is a professor on the subject of investing. He then risks all this money for which he has worked extremely hard in an area where his knowledge could be compared to that of a twit on acid. Why? Because he is investing in this market based on warped and distorted views as to what his returns will be. Imagine it has taken you anywhere from 5-10 years to accumulate the money that you have put aside for investing, and yet, you can let that money fall into a deep hole, of which the chances of your seeing it are worse than if you went Vegas and just gambled it.

How is it that we can be so stupid to take our hard earned money and just dump into an area in which we have no prior knowledge? Why is it that we don’t take 2-4 years to study this field? After all, we spent about the same time trying to get our degrees. It comes down to a secret desire to lose, a programmed desire to lose. We, as individuals, are taught to forego everything and try to work in groups. Very few people have the capacity to stand on their own and say “I am going to do this on my own."  This is one of the reasons why Gold has been buried and why the Powers-That-Be have been so successful at almost eradicating it from our system. To believe in Gold, you have to fight this secret programmed desire to lose and break away from the crowds and state that yes “Gold is freedom; it is salvation; it is the key to peace and the only way to have a fair level playing ground where the greedy politicians and central bankers can never ever have a strangle hold on your life from the day you are born.”

The modern education system is slowly but surely stripping our self-identity. We don’t know who we are, what we are capable of doing and what it is we really want. All we know now are values that are being force fed through subtle means via so-called higher-level education systems. It's truly sad that very few young people have any idea about the concept of money management. It is even sadder to find out that "saving" is an alien term to them. When I reference young people, I am talking about everyone in the age bracket from 12-40. We are very close to having a generation of super retards if we don’t do something very quickly to stop this insidious (but highly effective) process of dummying down the nation.

How can I make such assertions?

1. Very few people save today; it is viewed as an alien concept.

2. Money management is another concept that is hardly known anymore.

3. Fewer than 5% of the population really knows the true significance of Gold; to them Gold is just a precious metal.

4. We spend years and years studying concepts in college that are truly immaterial, irrelevant and most of the time down right fraudulent and useless in most cases. We have something called the printing press, so employment can be provided to all these individuals with this nonsensical data in their heads. Economics is a misnomer. It should be called crackonomics or junkonomics.

5. We spend our whole lifetimes trying to make more worthless paper, so that we can supposedly retire on this junk. We use insane vehicles such as the stock market to try to make the big one.

6. We have two divisions now, the young generation who have no idea of what the concept of savings is and the older generation who know the concept, but have nothing to save.

7. The U.S. Government ( Social Security Administration ) reports 95% of Americans retiring with less than $13,000 per year income. In addition they have less than $3,000 in savings. Now isn’t this a crying shame for a nation that is so rich? Very few people realize and understand middle-income earners are actually poor people that pay the most income tax. The tragic part is, they spend and live the lifestyle of the rich, using credit to help sustain this Illusion.

Some random thoughts...

Work is when you have to do something you hate to just get a fraudulent pay check to put food on the table. Work is the process where by which we kill our minds and souls. If you like what you do, it cannot be called work; it's called being alive and having a purpose.

Chris Temple makes a good point, one of the few analysts to suggest that the Gold share markets might be getting ahead of themselves.

As we know from past experience, the Fed has significant means at its disposal to do this. As for the others, one possible means to take some wind out of gold's sails could be an earlier-than-expected announcement of a renewing of the 1999 Washington Agreement. Previously, reports were that no such announcement (which is anticipated to bump up annual sales/leasing limits from 400 metric tons per year to 500-600) would be forthcoming until after the beginning of 2004. However, among other things, central banks are petrified of a new breakdown in the dollar's value. That could be postponed for a while if gold is held in check: after all, these folks fully realize that a surge in gold well above the $400 level could just as easily cause a dollar plunge as be the result of one.

Longer term, the evidence remains solidly in favor of a continued bull market for gold. For now, if we don't see a fairly quick follow-through to today's seeming break-out (or if we do, but it's followed by some central bank "sabotage") new highs and additional momentum might be harder to come by.

Full article available here http://www.gold-eagle.com/editorials_03/temple111403.html

Many of you, who have just joined are stunned when you receive the market updates for the last few months and see almost no new Gold positions being taken.

Let me explain our philosophy here at the tactical investor.

We look to buy into sectors that are extremely beaten down.

The sector must be despised.

Some negative campaigns should be mounted. Though this is not a necessity, it adds even more value to taking a position in that sector.

The sector should have formed a bottom and either have started to move up or is in the process of changing its trend. (We use a variety of tools to help us determine this.)

Finally a host of TA and mass psychology tests are done. The number of TA tests keeps changing. It used to be 50, however I have found a way to blend some of the indicators together so the number now fluctuates from 20-40.

Finally, our new tool esoteric cycle analysis is used as the final filter.

Therefore in order for us to consider a sector or stock, it needs to pass every single one of these tests. Should it even fail one, we will not take a position in that stock or sector.

We are not just momentum traders that get up in the morning and say let's chase this garbage. No, we plan every move. We sit down with cold calculating eyes. No emotions and no personal bias involved. We only look at the facts and if the facts say buy, we buy. I they say wait, we wait and if they say sell, we sell.

So what are indicators saying now as far as Gold is concerned? Well they certainly are not saying buy, nor are they screaming sell yet, but they are flashing huge warning signals, which to us means wait before committing new money to this sector.

Remember, no market ever just goes up in a straight line. Once again, to see how we invest in gold, you can request the Feb VIP update and you will see how we patiently took positions in Gold, and we sat through some very acidic times and finally we were rewarded.

Right now our indicators have been flashing a buy in the Natural gas sector, natural gas exploration and drilling, oil and oil service sector (By the way, these are all commodities based sectors). So we will not play against them. They have always been true to us. In the end is it not better to wait for a perfect set up than jump in at the wrong time and end up having a perfect funeral?

If you read my earlier article on Financial Sense, The Dirty Secrets Behind the Gold Market, you will realize that not many people know about gold. I performed a search on the overture search engine, the results of which you can find here. But all the contrarians know about gold, so we in a catch 22 situation. The normal people or the twits or whatever you chose to call them have no idea as to what gold really is. Now in the market only 5-10% of the players walk away with the spoils. So if between 70-100% of the contrarians have positions in the Gold market and the other players don’t care about it all, does this not alter the situation? It then becomes war amongst contrarians and not contrarians against the rest. Which means when the battle is over, 90% will be left bleeding to death? So right now the market is saturated and it's becoming a momentum game and slowly leading to feeding frenzy type situation. Everyone thinks this is war against the cartel and inadvertently they are just as guilty as the cartel because they are using this battle to push gold share prices higher, which is equivalent to a subtle form of rigging the markets.

How can I say this? Look at Gold bullion. It has done nada, Zippo, when measured in stronger currencies and in fact against the Rand, it is in a strong down trend line and has been losing value since Feb. 2003. So while Gold bullion is still undervalued, we have a crack attack occurring in the Gold share market. I will get into this in more detail in my next essay the Central bankers and the War on Gold.

And let me just clarify one thing, Gold and Silver bullion are the Ultimate investments of a lifetime. The rest is just paper. And even though it's better paper than the other garbage, it is still junk paper. And you don’t ever hear people saying oh well this is good junk and that is bad junk, let's buy some good junk today.

However even though this is junk, I want to play in this area, because I know that there is huge amount of greed that will produce spectacular profits in the long term. But remember, the corrections can be equally brutal. Remember what happened last year when gold corrected and did nothing till about April of this year. It was a gut wrenching correction.

So let's not beat our heads like some junkies and keep saying buy gold shares, buy gold shares. Even Mr. Schultz who is very well known and respected has stated that Gold is not a buy and hold, but a re-buy and re-sell situation.

It's for that reason that we have two portfolios. One is the hold till the trend is over and the other is the trading portfolio. And we only take long term positions when the sector is in a screaming buy zone and it is not there now. Those who were with us early this year are sitting on huge gains, GSS alone is up over 300% from our entry. CDE is up almost 300% too.

However take a look at our non-gold portfolio. We have two stocks right now in it that have just set new 52-week highs and host of others that are very close to breaking their 52-weeks highs. So in the words of a wise investor, you buy high you die poor, you buy low you smile long time.

Having said that, I think bullion will not correct much and one should use every drop in bullion prices to buy more. Watch gold in terms of the South African Rand.  When it breaks out, there we are going to some serious fire works. How can you check for the break? Two ways: one way is to join our free newsletter (if you are not a paid subscriber) where we will warn you when such an event occurs, the other is to do the work yourself.

Go to www.stockcharts.com  then in the box where you enter the symbol, type the following symbols exactly as I am doing now $GOLD:$ZAR

And press enter, a chart pricing gold in South African Rands will appear. Then get your ruler and pencil out and draw down trend line from Feb 03 to the present day, as soon as that down trend line is broken, watch gold explode and rally in every major currency of this world and we will be entering the true super bull stage, where it will be normal to see gold jump up 20-50 dollars a day in price.

Source www.wallstreetcourier.com 

If you look at this table, even though the VIX is at unheard of levels, you still notice that the new highs are seriously outpacing the new lows and even today when we closed lower, the new highs pummeled the new lows. This is definitely not a sign that this market wants to correct seriously. The market internals still appear to be very healthy. So shorting is not something that is recommended at this point in time. I personally believe the market should crash and burn, but my personal bias is worth nothing so I won't listen to it at all.

We don’t see much change in the numbers above. Yes a small reshuffling here and there, but nothing significant, adding further confusion as to where this market is going to head. We think the best philosophy is look for great buys or extreme sells and try not to get too fixated on the indices.

One has to learn to put ones bias in a vault and seal it there. Do not let your bias dictate the way you trade. What you think should happen never does and what you think should not happen usually transpires.

Conclusion

Remember right now everyone other than mostly gold bugs and some astute investors, do not really know what Gold is and what it represents. Since 90% of the people lose who invest the markets, it remains that 90% of the gold bugs are going to be handed their heads on a platter sooner or later, when it comes to gold shares in the interim until the other players jump as they did with the internet stocks. If you look at the internet era, we had many a gut wrenching corrections, where many internet bugs were squashed beyond financial recognition. Right now the playing field is very concentrated with just a people who really know what Gold truly represents. I mean if it's just the gold bugs buying right now, and if in order to win you have to take the 1 dollar from someone else, it remains that the smart bugs who decided to take profits off the table will be the ones who walk away with real profits. In the end it’s a battle between you and every bug you know. The color of money is green. The color of blood is red. In this instance, green is thicker than red and buys a lot more.

However, I want to make it extremely clear that I am not bearish on Gold. So don’t quote me out of context. What I have and will keep saying is it is only prudent to take some money off the table and don’t even think about selling the mother load now.

Gold bullion is extremely undervalued still. However one cannot say the same thing for many of the Gold shares. That does not mean you should dump every single share, but rather than chasing and buying more or holding your whole portfolio like a pig for maximum gains, take a bit off the table and sell into strength rather than into weakness. And remember bears and bulls make money sometimes, pigs always get slaughtered.

Some extra info:

Here is what a one time investment of $5,000 can do with a 20% interest rate compounded annually:

$10,000 in 3.6 years

$20,000 in 7.2 years

$40,000 in 10.8 years

$80,000 in 14.4 years

$160,000 in 18 years

$320,000 in 21.6 years

$640,000 in 25.2 years

$1.28 Million in 28.8 years

$2.56 million in 32.4 years

Save early and buy some Gold and silver bullion.

CONTACT INFORMATION
Sol Palha
Tactical Investor
38-11 Ditmars Blvd.
Astoria, NY, 11105
Email  l Website