Haven’t we heard this pervasive plea before?  Why do we need to hear this again?  And again?  And yet again?   I got the following comment below from Roger and I have just got to respond to this one.

Dave,

“Since you wrote this article gold is down nearly $30.00. Please explain.”

Kindly,

Roger

So what?

Where I live it is raining right now.  Am I panicking and running scared up and down the road telling everyone that the sky is leaking and falling in?  I have seen this thing called rain before and I have discovered that generally after a good rain fall then the sun comes out. So what can I say about a temporary drop in the gold price?  History has shown that after every correction that the bull returns again to climb that much higher.

Hi David,

“…if every analyst were bullish on gold, that would, of itself, be bearish.”

“I have been steadfastly long-term bullish for five years (even during times when expressing a bullish opinion on gold immediately got me ostracized at parties), but I also know that nothing, except the money supply, goes straight up without downturns…”

George L. 

It never hurts to remind ourselves why we are in this game today.  So, we both come to the conclusion that gold is the best investment now and for the longer term.  So how do we profit from gold personally?  I guess we come back to that simple question of how to actually make money and how do we build capital and prosperity.

• Would you believe that it is a fact that most investors do not ever make money in a bull market?  How is that possible you ask if the stocks they are buying are going up?

• Did you know that no one can tell you when to sell a stock?  But you tell me your newsletter guru you are subscribed to tells you when to sell?  Did you sell?  Probably you did not sell.

• The point I am getting at is that it is easier to buy than to sell.  Emotion and or impulse may drive us to buy a stock.  And emotion and zero discipline keep us from selling a stock.

Let me share with you a secret here.  Now do not tell anyone what I am about to tell you.  This is a secret that very, very few folks understand.  What is this secret?

Well, I’ll tell you.  The secret is that no one makes money from the strategy of buying and holding onto a stock.  What?  I thought that was part of the strategy…to buy and hold for the long term?  No one ever made money off a portfolio that stayed inactive and never experienced any sales. 

• That’s right.  

• You’ve got it.  

• You only make money when you sell.

Now let me sum up the point I am driving home here.  You make money via trading and trading repetitively over time.  No one ever made a nickel that did not actively engage in the practice of “trading.”  You buy and then you sell.  No one ever made a penny simply by holding on for the long term.  Generally those whose strategy is to merely hold for the long term can never determine when that long term should end and when is the appropriate time to sell.

I bring this up because I continue to run across so many investors who are not trading, but instead they are holding.  These people buy a stock and it becomes a favorite friend of the family.  They fall in love with the company whose shares they are holding.  

• It may double in value but they do not sell.  

• It rises 10 fold and they still do not sell.  

• When do they sell?  They never do.  

• However high those shares rise they are waiting for it to rise just a “little” higher.

I want to make you think here.  Would you rather own one restaurant whose sales are out of this world?  Or would you rather be the owner of 50 restaurants and each of these sites is bringing in consistently a moderate income and perhaps even rising in value?

Now here is where mathematics and common sense step in.  The rules and principals of multiplication tell us immediately that owning the 50 restaurants may just be the better proposition.  And we can apply this principal to the speculation of gold stocks via continually using profits to reinvest in other recommended under valued mining stocks poised to rise.

So we are now at the starting gate.  How do we begin?

If we buy the right mining stocks recommended by the gold gurus it is possible to buy stocks that have the capacity of doubling every 6 or 12 months.  A good strategy is to start off in your portfolio with at least 6 different mining companies.

John Doody – “Never, never, never buy just one gold stock, 4 - 6 is a minimum…”

And as each mining stock doubles in value sell half and reinvest that half in another recommended speculation.

“…many people automatically sell half their holding in a stock that has doubled. From then on, they reason, there is no way they can sustain a loss…” John Dorfman, president of Thunderstorm Capital in Boston. 

So following this strategy can easily find our initial half a dozen companies becoming 12 companies.  And that 12 becoming 24.  And the 24 become 48.  This is how wealth is built.  Do successful and internationally well known professional investors support this practice of selling half a stock when it doubles?  Below, Doug Casey talks about the trading philosophy of the founder of the world’s most successful resource and precious metals investment company – Rick Rule.

Doug Casey - “One foundation of Rick’s remarkable success is his readiness to sell once he earns a good profit. He’s not tempted to risk everything by holding on for an ever bigger return... that may or may not materialize. In Rick’s view (which we share), if you’re going to err in this business, erring on the side of caution is the least painful mistake you can make.”

And while you are following this pre planned buying and “selling” strategy ole’ Joe continues holding onto his one single favorite gold stock waiting for it to climb to the moon.  And you know what?  Ole’ Joe’s favorite gold stock just might do that.  It just might climb literally to the stars in value.  

But think for a minute.  

While ole Joe waited years and years holding his one or 2 favorite stocks to climb to their peak you have been quietly selling when a company doubles and reinvesting in another opportunity and you have continually repeated this strategy selling when ever your company doubles again in value and selling and reinvesting that half in a new position.  

“When a stock doubles…sell half of the position. If it doubles again…sell half of the remaining half.” - Larry Abraham 

And by the time Joe’s stock has reached his peak your portfolio is holding perhaps 50 companies with a combined value many, many  times greater than ole Joe’s single one or two stocks.

John Doody – “If a stock has had a good move, consider taking initial investment “off the table” and letting the profits run.” 

I know, I know this is a very simplified idea that assumes that it is easy to purchase quality shares in companies that continually effectively double over a short time.  But this is occurring every day.  And how do you discover these companies?  You follow the likes of gold gurus such as Doug Casey, John Doody, James Dine, the “Great Bob Bishop”, and other financial veterans who have proven the value of their analysis by making literally millions of dollars for those who have followed their advice for years and years.  Follow the right gurus who know the resource market well like the back of their palms and you also will have the potential to achieve these types of gains.

The key here is following the best newsletter writers and practicing a “disciplined” buying and selling TRADING strategy.

Trading - “The act or an instance of buying or selling…” 

So I have just laid out here a plan where by you can grow wealth.  Will you do it?  Most folks won’t.  Number one most folks are too cheap to pay for worth while quality information.  What is that old saying?  You get what you pay for?  Or you don’t get what you are unwilling to pay for.

And the number 2 principal necessary to build wealth?  Know when to buy and know when to sell.  Know when to hold em’ and when to fold em.’

And the night got deathly quiet, and his face lost all expression.
Said, if you’re gonna play the game, boy, ya gotta learn to play it right.
You got to know when to hold em, know when to fold em,
Know when to walk away and know when to run. 

Let’s not forget the best and most important part of the song.

You never count your money when youre sittin at the table.
Therell be time enough for countin when the dealins done. 

In other words don’t count your gains until after you’ve sold thereby locking in your gains.  You are not going to do well in this market if you are unwilling to pay for quality research, invest time in study and apply a disciplined approach to buying and selling. 

"Lazy People Don't Get Rich…" Robert Kiyosaki

Believe me, in no way am I trying to lay out success in investing and/or speculation as an easy route.  Actually, I am attempting to do the opposite here.  Those individuals who do pursue success and wealth discover that they do not achieve these goals easily.  Number one it takes an investment of time, money and discipline.  

And most importantly, you do not 

reach these goals on your own

The precious metals sector is blessed by some brilliant and exceptional financial professionals who do make their followers and students tons of money.  This is a fact.  I bring all this up because it disgusts me to no end when I see people trying to walk the path of success by making every attempt to save a buck and being a cheap skate.  

It aint goin’ ta happen.

Yes, there is a lot of money to be made investing and speculating in resource and gold stocks.  Yes, it will require time, money and discipline on your part.  Nothing really comes easy in this world.  If your goal is to save a buck along this path by taking a short cut you will wander off the narrow path and be lost in the wilderness of failure and wanna be has bens.

Is the bull market in commodities and gold stocks history?  Not according to Citibank.

“Citigroup upgraded copper and gold mining stocks, predicting that increased demand from China and potential supply constraints could keep metal prices relatively high.” 

The US dollar is headed lower and mining production is falling.  It is principally these two factors that will continue to drive the price of gold yet higher still.  Subscribe to Gold Letter to receive emailed alerts of under valued gold, silver and resource stocks. When you order you will receive a report covering 21 gold and silver mining stocks to consider buying now.  

Dave,

“…the Bank of China head honcho has learned very well from Greenspan and Euro Central Bankers to print money like crazy and they are printing the Yuan 10 times 24/7 and buying up all the world's energy and mineral resources.”  “What do you think of the BOC printing Yuan’s or Renminbis like crazy especially when Bush and his Treasury Secretary say the Yuan is undervalued?  What a surprise in 2008 after the Olympics when the dollar is no longer the world's reserve currency and China takes over with another overvalued currency. As Bill O'Reilly says-What say you?” 

Regards, 

Arnold H.

Forgive me folks!  Last week I referred to the Israelis as “Jews.”  No disrespect intended here.

David:

“For the sake of accuracy, (very important for those of us that look forward to your commentaries) the conflict is between the Arabs & Israelis!!  To say Arabs and Jews would imply a worldwide religious conflict between Muslims & Jews and while probably true, is certainly not limited to the "Middle East".

Thanks,

Eddie G

Have you emailed me recently?  

Click that email address below and send me a few words.  If you write me I often give a free newsletter subscription if I like what you write.  But don’t push me on this because I literally don’t have the time to give every reader a subscription.  My secretary has left me for the goldfields so I am on my own in the office.

“…one of the biggest lies people tell themselves about investing is that it's risky. Investing isn't risky -- being incompetent is risky.” Robert Kiyosaki

David Vaughn

Gold Letter, Inc.

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