Gold And General Market Commentary
(Oct 12, 2003)
Gold has actually been declining in value when measured against strong currencies. Below l you will see two graphs labelled gold 1 and gold 2. The currency I am going to use is the ZAR (South African rand), a currency I was bullish on from October- November 2002 when it was trading 14 rands to the dollar now it is a t 7.10 to the dollar. It is in my opinion the best performing currency in the world it is up almost 100%, no other currency can make that claim. The reason is simple the South African economy is almost entirely a resource based one. It is the worlds largest gold producer, has the biggest diamond mines. It also one of the largest reserves of platinum and the list goes on and on.
One quick look here and you see the price of Gold has been dropping steadily since Feb 2003 from a peak of 3250 it is now in the 2600-2700 range. This action has been clearly reflected in the price of South African Gold mining shares.
What this means is that the so called price spike in Gold in terms of US dollars has been nothing but an illusion and is a simple adjustment where by gold is appreciating in terms of the dollar because of the extreme monetary inflation taking place in the US and because in the long term it is dead.
End result there is a lot more upside potential, we can truly get excited when Gold starts to rally seriously in all currencies, particularly in terms of the Rand.
A clue now will be to watch all major South African gold stocks if they start to break out nicely then we are in a universal currency Gold bull, until then Gold is just building a base. A very good point to remember is the longer the base the more explosive the upward action will be when it starts. Gold has still not started moving up seriously, this adjustment to weaker currencies is really the first step in the huge move, eventually the world will realize that every currency is nothing but garbage and that day will mark the first leg of the explosive upward movement that will dazzle even the most ardent of Gold bugs.
If you look at chart 2, which is gold in terms of the US dollars it actually looks pretty convincing and you could be fooled into believing the super bull stage is very close.
CHART 1
CHART 2
The next coming silent super bull market.
Nano technology is progressing at a very rapid rate. In a few years there will be almost no application that won’t have some aspect of nanotechnology in it. They have already produced a working car engine that can sit on a rice grain. As we speak many companies are coming out with tools that will be able to fix arteries, repair damaged tissue, clean the blood etc. In the area of computers they are working on computers that are the size of a button that have more power than 1000 of the faster computers today combined.
My statements here have nothing to do with the commodity market bull, in fact it is entirely possible that the nano technology boom could take place simultaneously with the Gold and silver bull, after all once nano technology is available, one could almost classify it as a commodity, since it will be something that will truly revolutionize the way we do everything and those that don’t use it will be wiped out like the dinosaurs. Keep this on your radar screens as times goes by I will talk more and more about this very interesting and ever expanding field.
I decided to monitor several nano tech companies to see if this was indeed something that could turn out into a new super bull market and to date the companies I have been following have more then doubled in price and have clear upward bullish trends. Once the cycles get oversold again I will issue our first nanotech plays.
General market commentary
Once again the bears were handed their heads on silver platter. The market keeps making new highs on a closing basis as well as on an intra day basis.The ppt, the fed, the current administration, the powers to be, or if u prefer to call them rats, whatever your favourite term is, do not want a normal correction to take hold. We seem to be in the mini correction stage, and this can only be seen if one use hourly charts or if you use SD points. Then you will notice that we seem to bounce of the mean or occasionally we are allowed to get to –2SD zone but never the –3Sd zone before bouncing up. If you are not familiar with Standard Deviation Analysis a rudimentary tool is to use a software program that allows you to adjust the Bollinger bands and set the SD levels at 2 and 3, this way you will get crude but pretty effective tool that allows you to see this mini corrections, which most people seem to miss. For the mean use a 30 day moving average.
Another very interesting factoid is that very soon it will be one year from r the lows we made last October and then every periodical and TV station will be screaming out like crack addicts about the new bull market we are in. A bull market is when an index climbs 20% in one year; the DOW is up over 30% and the NASDAQ significantly more.
These ranting and raving might finally stimulate Joe schmoe who has been hiding in a nuclear fallout shelter to take a peak and invest in the markets once again. Remember these all powerful and unknowing beasts pack a solid punch, they have parked almost 2 trillion dollars in money market accounts, if they decide to unleash those funds, this market could see a meteoric rise, which will probably stun even the most insane bull.
This will certainly have a huge dampening effect on the price of Gold Shares as the masses pile into technology and drive it up to extreme highs. Time will tell if this scenario will transpire. However if it should it will again provide another mouth-watering opportunity to load up on gold shares at rock bottom prices. More on this in future issues.
Very few put or short plays seem to work, that is why you will notice that we have not been actively issuing new put plays, when one looks at our record on the put plays they look pretty dismal as of right now. The only stellar winner we had was VZ, the rest are not doing so well but if you move over to our call and long plays they have been doing rather well.
Its not that we are supper bullish on the market, we are far from that, but one thing one learns over time, is that if one follows the logical and rational path to investing, one gets a truly spiritual experience when you look at your account balance at the end of the year, 90% of the time it will be in the red. If logic and reason and brains were key ingredients to make money in the market, then all the economic and mathematics professors for that matter an professor in the science field would be stinking rich and would not be wasting his or her time teaching in a University where half of the students don’t seem to give a dam.
As they say the road to hell is paved with good intentions to which I would like to add the road to financial chaos is paved with logical and rational thoughts.
To end the dilemma one must put aside all aspirations of trying to be some genius, spending hours looking at all the crappy arguments and predictions that are being made about the next financial Armageddon, and ask yourself one simple question, if everyone knows its going to happen how the hell can we all make money. Answer everyone cannot make money and if you are part of everyone you will be rewarded with hard financial slap and an account balance with a super down trend line, which will never be broken; If everyone knows about it, its time to forget about it.
In today’s market which is filled with so much manipulations, lies, fraud etc, one has to do one simple thing, look at the trend. If you look at the trend and throw all the other garbage that is taking up unnecessary space in your brain, you are forced to come to one inescapable conclusion no matter how much you feel like rebelling against it. The trend is up, period.
As a result we at the Tactical investor, decided to do something different, why simply just try to short the market only, because supposedly it has to correct, if everyone thinks its going to correct and it should correct perhaps it wont correct, so why not do something totally obscene, try to look for extreme oversold areas in what appears to be a bull market, so that even if we should correct these sectors would not be affected that adversely since they are already beaten down and that’s why we have progressively taken more and more long positions in the independent gas and oil producing companies and now oil and gas drilling exploration companies and a few other stocks that are severely beaten down. So far it seems that luck has smiled on us. We still have a few put positions and that is because we after all are human and have decided to take put positions in rotten companies, but even though they are rotten they seem to be floating up as this market seems to take the good, the bad and the ugly up equally.