Don't Miss the World's Greatest Bull Market

If you're willing to let Nouriel Roubini think you're "deluding" yourself, or have Charlie Munger call you a "jerk," there remains a precious path to investment gains that might just have your name on it.

In case you haven't noticed, this massive, decadelong bull market in gold and silver continues to march onward -- to the complete befuddlement of long-standing bubble-callers the world over.

One choice is to steer clear of the sector altogether, just as naysayers have advised at every step along the way. However, if gold easily surpasses $2,000 (and silver notches $50) over the next few years, then you will have missed out on an incredibly historic bull market in the miners and related equities.

The sour taste of victory
As an advocate for gold exposure during an era when the mere mention of the metal still draws dismissive ridicule, I have faced an uphill battle getting my outlook and perspective to reach those that I believe need it most. Undeterred, my unpopular macroeconomic outlook and predictions for precious metals has garnered a gradually expanding audience.

You might think I'd be dancing a celebratory jig now that $1,345 gold has vindicated my bullish commentary from the past several years, but nothing could be further from the truth. Gold's rise is for me a somber affair, marking as it does the grossly irresponsible stewardship of our free-floating paper currency.

No one wins when a delevering financial system -- perched as it still is atop a broken foundation of irreparably toxic derivatives -- triggers widespread impoverishment via the competitive debasement of currencies.

I believe we are witness to a tragic chapter of American history. Under the circumstances, dancing about because my investments have risen hardly seems appropriate.

My cards are on the table
While many onlookers have been stymied by each successive wave of rising precious metal prices, not everyone has been wrong about gold and silver.

I advocate a simple, long-term, buy-and-hold approach to precious metals exposure, and I recognize the inherent uncertainty in telegraphing near-term movements. But for investors who sought favorable entry points, I hope that these past assessments have proven valuable.

My relevant stock picks from as early as 2006 -- including 2007 noteworthy performers Agnico-Eagle Mines (NYSE: AEM  ) and Eldorado Gold (NYSE: EGO  ) -- are still active in my primary Motley Fool CAPS portfolio for all to see. 89% of the stock picks in my subsequent silver miner portfolio have outperformed the S&P 500. So I'm not accused of cherry-picking; all of my calls, good and bad, can be seen on those pages.

Although, stock picking can be relatively easy within a bullish trend of this magnitude, one runaway success -- the 950% appreciation of Silver Wheaton (NYSE: SLW  ) since I issued my value-oriented appeal at $2.51 per share -- has reportedly helped some of my readers to outsized gains within the sector.

In September 2009, after calling for a monster breakout to fresh all-time highs, gold surged 28% over the ensuing three months to reach $1,220 by early December. With gold above $1,200 per ounce, I expressed caution with respect to a potential correction. Over the next two months, gold dipped to beneath $1,060 per ounce. In August of this year, with gold hovering near $1,230, my position was that we were on the verge of a parabolic surge in gold. Here beneath $1,350 per ounce, the move doesn't count as parabolic -- yet.

Last call for the gold and silver rocket
There is a chorus of precious metal investors and commentators who have been on the correct side of this bull market to date, including names like Jim Rogers, Jim Sinclair, Eric Sprott, James Turk, Peter Schiff, John Paulson, and others. What do they all have in common? They each remain resolutely bullish regarding further remaining upside for precious metals.

To be sure, getting involved at this stage of the bull market will be scary, as volatility will be a constant. Absent confidence in the broader trend, gold and silver may still not be for you.

Feel free to go on swallowing all the bubblicious talk about gold being an overcrowded fear trade for a useless, barbarous relic that has no fundamental strength to its outlook. But before deciding not to dabble in straightforward value plays like Yamana Gold (NYSE: AUY  ) or Pan American Silver (Nasdaq: PAAS  ) on the basis of such perspectives, ask whether the weight of prior inaccuracy and persistent befuddlement hangs heavily upon the necks of the precious metal naysayers.

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.

Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns shares of Agnico-Eagle Mines, Eldorado Gold, IAMGOLD, Pan American Silver, Silver Wheaton, and Yamana Gold. The Motley Fool has a disclosure policy.


Read/Post Comments (8) | Recommend This Article (38)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 12, 2010, at 6:21 PM, Flishiz wrote:

    The one single reason I'm outrageously bearish on gold is that while it may enjoy an extremely profitable run, when it stops, it's gonna crash, hard. Once it reaches the point where people realize gold isn't feasible as an investment, or the macroeconomic scene is stabilized, then what other purpose will people want gold for? Even those with actual use for gold will hardly be a butterfly holding up a massive price drop as the complete lack of buyers (because who will want an investment that people simply won't want/need?) allows prices to fall through the floor. It all seems like a game of riding the wave until one realizes that gold has "done enough." But with hundreds of billions poured into gold for speculative investment purposes, how many multibillion fingers do you think are going to be hovering over the "sell" button at the same time?

    I feel like gold is nothing more than market timing, and at The Motley Fool, shouldn't we be trying to avoid, not endorse, this kind of thing?

  • Report this Comment On October 12, 2010, at 7:20 PM, BillyTG wrote:

    @Flishiz,

    I can speak only for myself here. I have no freakin' clue what is going to happen to gold over the next 10 or 20 years. What I think I know, though, is that the "macroeconomic scene" is not even close to stabilized, and won't be for several years as more financial Weapons of Mass Destruction are unveiled in glorious fashion. That's why I can sleep fine at night, with no worries about gold---I don't think there will be a mad rush for the exit anytime soon.

    I also want to say that speculation is a matter of perspective. Your stereotypical "goldbug," that everyone jabbers about, might very well say that gold is the purest, most proven currency of all time. He might also say that having anything to do with a fiat currency is speculation. You can also find financial advisors that call any kind of stock market activity speculation.

    I'm glad Motley Fool has grown more sophisticated, to where various investment techniques and philosophies are accepted. They were once an anti-options, beware of foreign stocks, Foolish-Four, stock market pumping group.

  • Report this Comment On October 12, 2010, at 8:07 PM, XMFSinchiruna wrote:

    Flishiz,

    Thank you for your comments, and I understand your source of concern. There are, however, several factors to consider that suggest a dramatic reversal and free-fall like the one you describe is unlikely to occur over the next several years (in my opinion, of course).

    For starters, and this probably speaks to the heart of what draws many investors to gold, my analysis leads me to believe that the macroeconomic climate is nowhere even remotely close to approaching stabilization. It is here where philosophical divides -- like whether or not any amount of quantitative easing is capable of warding off the continued deleveraging of massive mountains of toxic derivatives and other assorted nightmares -- come into play. If one maintains faith in the efficacy and wisdom of the Federal Reserve's reflationary approach to crisis intervention, then they likely expect recovery in the economy and in the currency of the land to take hold in the medium term. I have opposed that reflationary strategy from the beginning, and rather believe that it has only made matters worse by forestalling an inevitable deleveraging event by further sacrificing the strength of the U.S. dollar. Of course, this is but one thread in a tapestry of interwoven issues, and indeeed -- although it remains arguably the most significant part of the equation -- gold responds to more than just the condition and outlook of the U.S. dollar.

    To that point, it must be pointed out that the industrywide average all-in (comprehensive) production cost for gold has reached an astounding $950-$1,000 per ounce according to AngloGold Ashanti CEO Mark Cutifani (link below). That seldom reported and seldom considered all-in cost metric represents another important source of a floor beneath gold prices. Incidentally, Mr. Cutifani, who no doubt studied the market very carefully before deciding to eliminate his company's gold hedges near $1,300 per ounce, contends that gold prices will increase by $70 to $100 per annum over the next five years based largely upon investment demand. I guess he doesn't see much strength in store for the dollar either.

    http://www.miningweekly.com/article/anglogold-sees-gold-pric...

    http://online.wsj.com/article/SB1000142405274870469630457553...

    There are countless other factors that inform my bullish outlook for the precious metals, and because I see scope for quite a few more years left to go in this multi-year secular bull market, I would say it is only a matter of market timing if adjusting one's portfolio to account for a generational trend of this magnitude complies with your definition of same. Furthermore, although profits can certainly be made in gold and silver, one key aspect that draws investors to them in times like this is for protection from wealth destruction. In other words, to the extent that one could apply the phrase "market timing" to a secular trend like this under a strict application of the term, one must also consider the potential consequences of holding zero exposure to gold and silver if folks like me turn out to be right.

    China has made its intentions very clear with respect to gold and silver. There is very real scope to the demand represented therein. The world's central banks, furthermore, have shifted into net buyers. There is discernible momentum behind such a shift.

    http://www.fool.com/investing/international/2010/08/05/china...

    I hope I have begun to address some of your concerns regarding gold, and stand by to assist you or anyone else with additional questions or concerns. I routinely field questions via e-mail as well, so feel free to send me an e-mail by linking on my name in the paragraph below the article.

    If you are interested in hearing more of my perspective on these important issues, please feel free to bookmark this link to a live feed of my most recent Motley Fool articles.

    Fool on!

  • Report this Comment On October 12, 2010, at 8:17 PM, XMFSinchiruna wrote:

    Sorry ... :) Here is that link to my Motley Fool article feed:

    http://www.fool.com/feeds/authorheadlines.aspx?author=1632&a...

  • Report this Comment On October 12, 2010, at 10:08 PM, Gonzhouse wrote:

    Every major macroeconomic trend supports TMFSinchiruna's position: 1) China and India believes in gold as well as other precious metals and will be drivers of demand, whether for investment or infrastructure 2) the Federal Reserve's response to deflation threats is to move money at virtually 0% (a classic you-get-what-you-pay-for scenario) to start new and hopefully less harmful asset bubbles, along with a 3) race-to-the-bottom international currency war (which we seem to be winning? or is it losing?).

    If you agree these trends scream avoid dollar-based investment and don't like gold, other metals like silver, copper, platinum, etc., may run even better as they have industrial demand, both in the US and fast growing countries.

    Still have trouble with metals as an investment? At least allocate money into stocks operating in currencies with a probability of appreciation and growth (like China and Brazil).

  • Report this Comment On October 13, 2010, at 10:26 AM, jamo101 wrote:

    Thank you so much for your continued coverage of precious metals. I put a portion of my portfolio in metals and have not been disappointed. What is your opinion on copper at this point? I have an oversized position in southern copper mainly due to it's outsized gains in the last year. Thanks again.

  • Report this Comment On October 13, 2010, at 11:52 AM, XMFSinchiruna wrote:

    jamo101,

    Thank you for commenting. I am delighted to hear that your metals exposure has worked out for you thus far.

    With respect to SCCO, I remain long-term bullish on copper, and demand growth has continued to outpace supply growth, with savvy observers like Joy Global management pointing to continued metrics along those lines over several years to come. Of course, QE2 is bullish for copper (and all commodities for that matter).

    But, and this is a big "but", I am increasingly wary of a broad-based near-term market disruption from major developments like this mortgage mess. QE would generally be very supportive of nominal equity prices, but if the leveraged securities built atop these uncertain mortgages begin to delever anew as I think they are likely to do, then we could be right back into a quasi-2008 setting of indiscriminate selling and potentially severe equity declines.

    I can't offer specific trading advice, but that is my broad outlook as it pertains to copper stocks at this time. A mixed bag, I'm aware, and I'm sorry not to offer something more concisely directional for you.

    Incidentally, I am aware that a new round of indiscriminate selling would likely affect precious metal stocks as well. Because equity exposure levels are down substantially from where they were 2 years ago, though, and with QE2 in the wings, I see limits to the downside risk. Given what I view as the precarious state of the Treasuries market, furthermore (I view the move into Treasuries as a safe haven instead of gold in 2008 as a major factor in the weakness of the pm sector during that correction), I believe that a broad equity decline would likely only impact precious metal equities in its beginning stages, by which point safe haven buying would be likely to kick in.

    These are merely my musings on a potential scenario based upon a potential scenario. :) Please weigh them among your myriad considerations accordingly.

    Thank you again for your readership. Please be careful out there.

  • Report this Comment On October 14, 2010, at 9:23 AM, jamo101 wrote:

    I've got a pretty diversified portfolio which includes some dividend payers, a few mutual funds and some high fliers, like Netflix. The scco and slw have become large and I cut back some on scco yesterday. Thanks for the words of caution...will keep that in mind.

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