Riding the Golden Bull

Back in late 1979, the lineups to buy Gold Coins and Bullion looked more like lineups of people waiting to buy Stanley Cup Hockey tickets at the then Famous Montreal Forum. There they stood all wrapped up in their parkas, ski jackets, and bulky sweaters wearing everything from construction boots to overshoes; there was even a sprinkling of executives in their Italian leather shoes, business suits, cashmere coats and silk scarves, all waiting to get in on a sure thing. The analysts and economists cited a litany of reasons to explain the Gold rush, but nobody cared. Gold prices were said to have become a barometer of political and economic fears, but in the end it was just pure GREED that drove the price until it finally peaked in January 1980 at $875 an ounce, almost on the very day that Americans would finally be allowed to buy and own Gold bullion; the day that the big surge of American buying was to drive Gold to $5,000. This was yet another example of 'The Obvious is Obviously Wrong"; the expected mad rush of Americans lining up to buy Gold had already been discounted in the price and never materialized. Tell me something that everybody doesn't already know and that's when you will have something of value on which to act. The only thing that mattered was simply that prices were skyrocketing. Anybody who was already in was making money (of course not as much as they all claimed) and everyone else who was not in was afraid of being left out in the cold, missing out on a sure thing.

Gold was selling for $250 when 1979 began. By December, amazed at the sudden surge above $700, Gold devotees began talking $1,000 plus, some were even trying to justify $5000 or even $10,000. The rocketing prices startled all the experts and frightened even those analysts who had forecasted the precious metals boom, but none called for anything like this. For the first seven years of this Bull Market, all the newspapers and magazines had ignored Gold; just as they are doing today. Then suddenly, in late 1979, front page newspaper headlines, reports and articles on Gold and Silver began to appear everywhere and not only in the financial newspapers, but in the dailies and magazines as well. So far, we are not even close to seeing ANY articles on Gold in the financial pages let alone the front pages of the Daily's.. Although we are starting to see quite a few advertisements for Gold, be careful as some of those ads are for"Fools Gold". Using Kramer and CNBC'S FASTMONEY as well as every portfolio manager and guest analyst as indicators, NONE of them like and or are recommend buying Gold Stocks and would you believe that not one recommends buying a Gold or Precious Mutual Fund, even though they have been the top performing funds for the last 7 consecutive years. Rest assured that before this bull market in precious metals is over, there will be front page stories permeating newspapers and financial shows, around the World, touting the merits of owning precious metals. One analyst after another will make false claims as to how early they were recommending Gold while Kramer, if he still has his show, will be yelling booya booya at every one of the new, hot mining stocks that his callers just discovered and are inquiring about. It's too bad that there are no longer any shoeshine boys left to tout the merits of Gold as the final straw to signal the end of the Bubble.

IS IT TOO LATE TO GET IN?

If you're worried that it's too late, that you missed the Bull Market, that it ended last March at a $1030, just ask yourself: How much space is being devoted to the fact that Gold has not only hold steadfast to its natural support level, but is inching steadily higher? After a seven year near 400% Bull Run and my called predicted pull back to its natural and expected Elliott Wave support level, Gold is behaving exactly as it should in the early and middle stages of an extended Bull Market. We are no where near the BLOW OFF BUBBLE stages such as we witnessed in OIL, POTASH, Etc. Etc. The fact that there are so many people who are still afraid to buy Gold at the TOP is proof positive that we are no where near that final TOP. Besides, what would you rather be sitting with, GOLD or Fiat paper Money?

HISTORY REPEATS

Today, as in 1973 up until late 1979, most analysts and the media were completely ignoring Gold; It was then like now only the so called Gold bugs who continue to believe in that and this bull market. Well I'm not a Gold Bug; I'm a realist and an economist, trader speculator who studies not only the past, but human nature as well. Right now you would be hard pressed to even find a quote on junior Gold stocks. As a matter of fact, at TD Ameritrade which is owned by Toronto Dominion (a Canadian Bank that also has TD Ameritrade Canada, one of the biggest discount brokers), you can't even get a quote or chart on on your computer of any Vancouver or Toronto stocks that are not dually listed in the USA ,regardless of their price or volumes. The last Gold rush lasted eight years (1971 to 1980), BUT remember in 1933 FDR confiscated all of America's Gold at $20/oz and then promptly increased its price to $35/oz. The price was fixed until 1971 when the USA, the only country still on the Gold Standard was forced to go off due to excessive credit creation and money printing. The Gold price then began to trade freely and its BULL market began. All things have cycles including stock markets and Gold, which trade in 16, 18 and 20 year cycles. This one started in either 1999 or 2001 depending on which technical analysis you prefer and so we should have a minimum seven to twelve years left to run. Don't forget that most commodity bull markets have their most explosive and dynamic runs in their fifth and last Waves. I have gone back in time to the 1970's and focused on Gold and Silver stocks just to give you an idea of what they will perform like during their BLOW OFF BUBBLE TOP year, and to see what happened back then when Gold first hit $500, then $600, then $700, and finally $850 all within the final three months.

The first library that I went to had the Financial Post newspapers on microfilm all the way back to 1972, near the very beginning of the last Gold and Silver bull market. There were very few if any articles when Gold first moved from $35 in 1971 to $200 by 1976, completing Wave I of Gold's Bull Market. Hardly anybody noticed, certainly not the newspapers, when Gold dropped back down to $100 into late 1976, completing Wave II. It was not until Gold all of its correction abd was well into its Wave III that odd story on Gold and Silver began to get published in late 1978 early 1979 as Wave III was peeking. Gold headlines did not hit the front page until late December 1979 into January 1980, helping to fuel the final Wave 5 (not very many people even heard of Elliot Wave back then) into its eventual blow off top. We are definitely not even close to that kind of action now.

The stock tables that I found were absolutely amazing :| and brought back some very fond and not so fond memories. In 1976, four years and in its Wave II correction of its bull market, most Gold and Silver stocks were trading at under $2 with the majority being penny stocks trading under $0.25. Don't forget that we were at or near the bottom of the worst Bear Market since 1929-1932 (sound familiar?) Gold, after being up 600% from the 1971 low of $35 to the 1975 top of $200, was now in correction mode and most Gold and Silver shares did little to make anyone except perennial Gold and penny stock traders wake up and take notice. I held a few seminars in an attempt to push Gold as the best way to make money during a Bear market (the general markets were down 40%+ in less than 2 years), but getting an order was like pulling teeth. It was not until Gold was well into Wave III and had retraced all of its first big sell-off and got back above $200 (the equivalent of $1030 today) that I started to open new accounts and get some decent orders as the Gold and Silver stocks started their historic bull market runs that would end at unimaginable prices.

Some examples were: Lion Mines - 1975 price $0.07 / 1980 price $380. YES, that's right it's not a misprint - you could have bought 10,000 shares of Lion Mines in 1975 for around $700 dollars and if you held on for the whole 5 years until January 1980, you could have netted a total profit of around $3,799,300. Not bad, eh!!!!! A few others were Bankeno - 1975 price $1.25 / 1980 price $430. Steep Rock - 1975 price $0.93 / 1980 price $440, Mineral Resources - 1975 price $.60 / 1980 price $415. Azure Resources - 1975 price $0.05 / 1980 price $109. The majors also performed superbly well, but nothing compared to the juniors. WARNING: The juniors, although offering great potential, also contain much greater risk as most of them ended up falling back to zero. So be careful.

There is no question that was one of the biggest financial opportunities in history. I don't know of any other time, not even the dot.com bubble (besides how many of us could get in on the IPO's anyway) where in only a 3 year time span, you could have turned so little money into so much wealth. "You only need to make one good investment decision in your whole life to be super successful".

I believe we are now at that same juncture as we were in 1976-78, only this time the fundamentals are even better for Gold and Silver than they were back then. The similarities between the 1970s and today are uncanny. Then, as now, we were in a GUNS & BUTTER economy about to lose the respect of the world as we pulled out of Vietnam, turning our backs on all our allies. A Paper Tiger was the label that was applied to the USA as the Oil Sheiks couldn't wait to get out of Dollars and into Gold and Swiss Franks (would you believe you had to pay 20% negative interest if you wanted to keep more than $100,000 in SF). Every time trading in Gold was halted due to the IMF and US auctions of 4 million ounces of Gold each. Trading would be halted and when trading resumed it would open $20 to $40 higher. Back then the USA had a surplus in its balance of trade and we had a large net inflow of interest and dividends but then like today our dollar was weak but only because we were investing so much more money abroad. Back then we were the worlds largest Creditor while to day we are the worlds Largest Debtor needing a an inflow of $3 billion going on $ 4 billion every single day. In the 70's the world was not in recession, where as today the world is already in Recession and marching quickly into Depression while every country's monetary printing presses are working around the clock: As one country after another is talking trade protectionism and competing currency devaluations.

Although history always repeats, it never does so in an identical fashion; so that it only ends up being recognizable long after the fact. The world is in a much worse financial shape today than it was back in the 1970's. These are just some of the real fundamental cornerstones of why Gold is in a bull market today and why any rally that may materialize in the general equity markets will only be a consolidation phase of the ongoing Bear Market, the likes of which has not been seen since the 1930's. It is now consistent with record low interest rates, proposed tax cuts as well as the FED and Treasury of every country flooding the world with fiat money! In the not too distant future, the Fed will be forced to raise interest rates in an attempt to save the dollar and stop inflation from exploding. Into Hyperinflation. The last and most certain causality the bursting of the Bond market Bubble and it will act to exacerbate the continuing crash of the Real Estate market which has at least another 5 years to go before it comes close to stabilizing and the already imploding stock market finally hits bottom. The credit markets and the take-over and privatizing craze have already topped but the fallout is just about to begin in earnest, as one deal after another goes either bankrupt or into re-organization.

You are witnessing the Laws of Supply and Demand in action.

For your own information, I recommend that you read, "The Dollar Crisis" By Richard Duncan. Balance of payment deficits of an unprecedented magnitude have resulted in credit induced economic overheating followed by the inevitable collapse, on a global scale, that I have been warning you about for 3 or 4 years now. There is a limit as to how much money created out of thin air can keep the US and world economy going.

Greenspan and then Bernanke were attempting to create a soft landing by slowly raising rates before being forced to. But along with raising rates, they also pursued a policy of easy money in an attempt to keep the economy rolling along while trying to engineer a soft landing for real estate. However, unlike Reagan and Volker, Bush, Bernanke and the Congress were all to afraid to take the heat for even a mild short but necessary Recession, to correct the country's massive imbalances. Greenspan Clinton and Bush ha painted the FED and the world into a corner that with out ever being corrected had to inevitably lead the World into Hyperinflation and Depression lasting as long as 20 years. Investing in Gold and Silver Bullion and their shares now and holding them for the next 8 to 12years or so, could be the only major financial decision you may ever have to make in your entire investing life.

Do NOT trade in and out. Just buy some stocks and bullion now, add to you positions on any short term sell-offs or on break-outs to new highs and wait until you see Gold and Silver splashed all over the headlines in all the newspapers and magazines (not just the financial ones). Or if you have not yet taken a position, then scale into any precious metals mutual fund. When Gold breaks out to new highs above $1030, use your increased buying power to increase your positions. By the time that front page stories ran in January 1980, most Gold and Silver stocks were trading over $50 per share and quite a few were trading over $200-$400, some even as high as $500 per share. Only a few years earlier, you could have bought the same stocks quietly between $1 to $5. I know it was hard for most of you to believe me when I insisted that Gold and Silver would surpass their old January 1980 highs and now their $1030 high, but remember that is what a 20+ year generational bear market will do to a whole generation of investors who have grown up with falling real assets (Gold, Silver and commodities) and rising paper assets (stocks and bonds). When the tide of human emotions swings and paper assets really start to fall hard, the lust and fervor for real assets will be unbelievable. Gold will have to increase to over $2,500 just to get back to its previous high in real dollar terms. The dot com bubble will look like small potatoes compared to some of the upcoming gains in the Gold and Silver bull market of the 21st century. But unlike the dot com bubble that was based on easy financing, unrealistic dreams of profits, aggressive accounting and pure greed, the coming explosion in Gold and Silver stocks will be all about not only greed, but abject FEAR as well, to protect one's savings from the paper destruction combined with the GREED to get in on a sure thing. There is nothing that can stand in the way of a Bull Market fueled by a combination of GREED and FEAR.

TOTAL EQUITY OF ALL GOLD STOCKS

When the entire world wants a piece of the Gold and Silver bull market, they will discover that there is only a relatively very limited supply of shares and you can't create a Gold mine out of thin air like you can a Dot.com company. The combined total of all Gold stocks is less than that of the equity of EXXON and Google. Yet it is estimated that there is over $10 Trillion in Money Market Fund money alone just waiting to be invested and with 2%-3% Treasuries, where else can it prudently go? That's not counting all the leverage ability the hedge funds have at their disposal. Can you imagine what happens if suddenly they wake up and begin a rush to Gold, the only Bull Market still standing? There are over 10,000 mutual funds that have not even looked at Gold and yet they have a mandate to be fully invested. What do you think they will do when the only stocks going up are Gold and Silver stocks (maybe Uranium, Platinum and Palladium as well). Remember, most mutual funds cannot go short, so what better way to make money in a falling market than buying into the only markets that are rising?

The Gold and Silver stock sector is very small compared to the bond and stock markets and it won't take much buying, percentage wise, to push these stocks into the stratosphere. I am sure that most of you have friends who can't name even one Gold stock. But I'm also sure that in the not too distant future, they will be touting you about the latest hot Gold new issue coming out of Vancouver or Alberta or Denver, even though they don't know where Vancouver and Alberta are. That will be the first major sign that the top is near. I firmly believe that the current opportunity in Gold and Silver and the companies that mine them may be presenting you with a once in a lifetime opportunity, where even a modest investment could change your financial destiny.

NEAR TERM OUTLOOK

Plain and simple: The Junior Penny stocks are still not that far off of their LOWS. That is the first sign that the second stage of the Bull Market is beginning. Junior Gold shares usually lead Gold bullion both up and down. Check out their respective charts. The best ones have broken out of beautiful basing patterns. The Majors look to me like they too are rising out their consolidation phase and they soon will increase their takeovers of midsized and exploration companies.

WELL, ARE YOU ALL PREPARED TO BUY YET? It takes guts to stand alone, but that's what you have to do if you want to make real money. Who among you can really expect to do better than to get in within 15% or 20% of a major bull market bottom? My long term projection of $6,259 is the same as it was 5 years ago. Guide yourself accordingly.

WARNING

If you are already invested and you attempt to trade a GOLD RUSH like you trade any other market, you will be sadly disappointed. You may be lucky enough to pick a short term top that will make you feel smart for a day, week or even a couple of months. Then suddenly you will be left standing at the station with your hands and money in your pockets, watching as the Gold Rocket Ship takes off and you will not have the courage to jump back in at accelerating new highs. You will sit there waiting for the pull back that you were praying for, which came and is now over. If that happened to you, scale back in now or be ultra careful that you don't get sucked back in later at or near the HIGH as the front page headlines clamor about the Bull Market in Gold and Silver. If you have been suckered or scared into taking profits and are now sadly sitting on the sidelines, watching as your smart sales break out to new highs, SCALE BACK IN NOW.

Be careful not to let buying at new breakout highs stop you. Just treat them like Investors Business Daily and a host of other analysts have been treating the regular markets buying at new breakout highs for the 20 years. Then, if you think you're unlucky because the market sells off just after you bought, think again and reconsider whether or not you were unlucky or whether you just got yourself a second chance and are now able to scale in at lower rather than higher prices as you build your positions before the Golden Rocket Ship blasts-off.

I have spent my career trying to identifying major trends in the markets - and helping others to profit from them. By identifying the trends that will be happening tomorrow; trends that most analysts and investors notice only after they have already been well established and the majority of the easy have been made, we are presented with superior profit opportunities. In my newsletter, "UNCOMMON COMMON SENSE", I have often uncovered changes to the major trends before they even begin and then presents a goldmine of specific, actionable information that will help you profit even during the worst of times. Make me work for you, by subscribing to UNCOMMON COMMON SENSE at the still low, discounted Holiday Rate.

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UNCOMMON COMMON SENSE
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm Beach Gardens FL. 33418
[email protected]
561-840-9767