Here is an illustration of a fringe benefit I receive from being a newsletter writer. No real explanation necessary I think:
"Gary
Just read you latest blog entry, the one that relates to people who don't get the investment case for gold........
Well, gee, that one brought back memories. Late 1979. I was a commodities broker with xxxxx xxxxx xxxxx xxxxx (on Gold Street, NY, no less!). Had a client, George. He was East European, had a radio talk show. Nice guy. Started buying Gold. Slowly, building a chunky position. And it was because the case for Gold was "lock tight" (his words. Still remember). The Dollar was dead. The US was finished. Inflation would eat us up, the trade deficit, Govt deficit, weak politicians, etc. (kinda like today's headlines).
Well, I don't have to continue, do I? You see, come January 1980, the market pooped (being polite). Old George said it was nothing. He would not sell. People just "did not get the case for gold".
Know where I'm going? He held, and his huge gain became a huge margin loss. The account was pulled from me (it's what they did to a kid broker with client margin problems). I remember his wife calling me, asking if there was something we could do. Well Gary, there wasn't. Not me, anyway.
So yes, I did not get the investment case for gold. Obviously, few others did back in early 1980. Or for 20 years after
You are too smart to believe in that shit. The biggest losses I ever took were when I thought people didn't get what I knew about markets. Or, at least believed. Sorta like all the folks who dumped US dollars and bought Euro's two years ago. Or Oil at $125 'cause it was going to $500. Or a split level house in Arizona.
I don't know what Gold will do next year (let alone next month). And, you don't either. Old George didn't. Yes, he was right. Just at the wrong time. And it destroyed his account. And probably his life
You do tremendously insightful work. Very creative analytical stuff. I like it a lot. As I do you. It's just that when you begin to think that the market, or people, or something is wrong, I think of George. And I shake my head.
Gary, there ain't nothing new under the sun. Not markets, problems, or human emotion.
Best regards,
Jeff"
*****
"Jeff,
I hear you and have heard you since day one. In writing a blog day after day, I am going to write some bonehead things, make screw ups or generally sound like an a-hole once in a while.
But you know that I try not to speak in absolutes, and here in that post I did not do that. But if I do analysis that leads me to the conclusion that there may be a great opportunity upcoming in the gold mining sector (the "investment case" mentioned was about gold mining, not gold), I have got to make a stand behind it as well. I see an investment case for gold miners... a potentially compelling one. That does not mean it will definitely fulfill what I see just because I have some kind of claim to the ability to always be right; I wish. The work I am doing - and I work very damn hard at this - leads me to the conclusion. How many people with how many opinions out there work as hard as I do? My guess? Not a lot percentage wise. I'll take my own conclusions born of hard work (much of it mental) and live or die with them - and if proven wrong, adjust. I have been looking over my own shoulder at my own perceptions since 2002. So far, so good although I know that the worm turns; it always does at some point.
I was relatively (relative to now w/ the above referenced "investment case") bearish the gold stocks from 2004-2008, as I have tried to illustrate by noting the long flat/decline in the hui-gold ratio that resolved into an epic crash. All through those years the 'inflationist' goldbugs held sway. The kind of people who pumped gold, copper, euro, oil... as if it's all one big inflationary theme park. You know I have been belaboring a deflation 'event' in the newsletter since half way through the strong rebound coming out of the 2008 disaster. I belabor it still and it is integral to the investment theme on the gold miners - PENDING RESOLUTION, whether it brings the miners down hard or mildly. That would be the opportunity I also belabor.
So I am in agreement with the deflationists on a lot of issues, but as long as I 'think' gold will decline less (in a deflationary event) than miner cost inputs ('real' POG rises), due to its being a haven in the world of money, and as long as I 'think' that policy makers will not help themselves from taking the easy way out once again in fighting economic contraction, then the case for gold mining as leveraged instrument to gold remains intact, very much unlike 2004-2008, but very much like 2001-2003.
Beyond this, I would like to get on to themes of a renewed US manufacturing sector (I believe it is in early progress), an ascending Asia, along with other emerging and even frontier markets. I would like to get onto a theme that says the world is not ending as the deflationists believe. But first things first. My horizon tends to be intermediate, but you notice that I have been keeping an eye on the big pic as well in the letter.
I love that people like yourself keep an eye on me. It's sort of like dad keeping tabs on junior, who shows some good ability but needs a kick in the butt once in a while. I say this with all due respect and affection toward your thoughtfulness. Again, with respect (for your experience) I would note that you seem to have had defining moments in the 70's. I remember that the subject of gold was a really bad subject [when I was younger - chronological error corrected. It's early and coffee not yet kicked in]. My parents bought into the hype in 1980 at the behest of a friend/stock broker. For years I'd ask them "hey ma, hey dad, does the gold investment still stink?" as they invariably muttered an answer in disgust. That was my only experience about gold until the changes that visited the macro in and around 2001, and to this day I am well aware of it.
Jeff, you notice that I have enabled the blog with the Disqus comment feature. It is rich, easy to use and really cool. Check it out.
Regards,
Gary"
