Why Precious Metals Now?
We believe precious metal investments currently represent great value in comparison to other investment opportunities. It is important to look at investing from as broad an overview as possible. Looking at a few months of a stock chart is like reading only a few sentences in an entire book. You only get part of the story. We believe it is much easier to make a profit investing in a very slow moving, long term monthly chart, than a short term intra day chart. When an investor backs up and reads the full story, the picture and strategy to make money becomes clearer. In our opinion commodities in general and precious metals specifically are currently available at a sale price.
So what does the story of investing look like today? We know that as individuals people can be very unique. However, group behavior is much more predictable. On average, a large group of people will react in a similar fashion under certain circumstances. For example, people tend to "rubber neck" at a traffic accident. Even though some drivers remain focused on their driving the majority will be compelled to slow down and look. As a whole the drivers behave in a predictable manner and traffic slows. We recognize the predictability of group behavior as it influences the markets. As a result we have developed a set of time tested rules intended to take advantage of this phenomenon.
Based on history we believe:
1) All markets are cyclical. No investment is constantly a good or a bad investment. Where a particular investment is in its cycle is what is critical.
2) All major macro market trends will not end until an extreme is reached in the direction traveled. Once that extreme is met, like a pendulum swinging, the new trend will start and will not end until the extreme is met in the other direction.
3) Major investment markets have relationships to one another that do not change over time. For example, Real-estate, Bonds and Stocks tend to move in the opposite direction to Commodities.
Once our basic rules to investing are established, we look at the overview of our current investing story.
1) 1970 - 1980 were times of extremely high inflation. Interest rates were rising from an extreme low to an extreme high that peaked around 1980. As a general rule the cost of everything was rising during this time period. As an investment, commodities did fantastic, while stocks, bonds and real-estate did not do well. Silver and Gold reached true bubble status as gold peaked around 2300% higher than its low and silver peaked around 2700% higher than its low.
2) 1980 - 2003 were times of steady but much slower inflation. As a general rule interest rates were falling from their high in 1980. During these times consumer prices did not increase very rapidly. Stocks, bonds and later real-estate flourished. Commodities had flown so high during the 1970's it took two decades of falling prices to re-balance the previous bubble, and as commodities fell, stocks, bonds and real-estate hit bubbles of their own. The Dow Jones increased from about 800 to 12,500. Major stock indexes, bonds, and real-estate hit key extremes to the upside. They became very expensive and their relentless two decade rise could not continue at such a pace. Homeowners experienced the effects of an appreciating asset at a dizzying pace. On the other hand commodities had been neglected and vilified as an investment class. After a two decade bear market precious metals became the most hated asset class around. But the astute investor knows this is likely the type of set-up where fortunes are made. Starting in 2000 commodities started to head higher as stocks started to head lower. Stocks were coming from an extreme high and commodities were coming from an extreme low.
3) 2004 - 2007. We know that over the last handful of years a few market movement extremes were hit. If our time tested rules hold true we hope to predict what will happen regarding investments over the next several years. In our opinion in 2004 interest rates hit an extreme low. Therefore it is logical to expect they will continue to increase until they hit an extreme high. This is similar to the market conditions of the 1970's.
Not long ago commodities in general hit an extreme low and it is now reasonable to assume they will continue to rise until they hit an extreme in the opposite direction. Based on history we expect Gold and Silver's price appreciation to finish extremely high. In a major bull market we expect massive moves such as the Dow Jones from 1980 to 2000 or Gold and Silver from 1970 to 1980. We believe the majority of investors today do not know about the commodities bull market while other investors claim the bull market in commodities and precious metals is over. In our opinion this is an invalid conclusion to draw because according to our analysis and understanding of the markets, the pendulum will not change direction in mid swing.
In 2007 we do not think commodities are a poor investment. Contrarily, we believe that even though they have been a poor investment in the past, they are a fantastic investment now. After more than two decades of a major bear market we do not expect the following bull market to be over in a handful of years.
We have created a long term major macro custom scored chart that monitors the precious metals movements relative to other investment markets. Our unique scoring system compares six different markets to illustrate the precious metals trend.
For Example:
* This information is only valid for the date shown on the chart.
You will notice the score peaks at ten at the top of the commodities bull market in 1980 relative to these other markets. It then bottoms in 2000 against these same markets before heading higher again. You will also notice the recent breakout from the long term downtrend. In our opinion this confirms that the new bull market will not end until the gauge reaches the upper portions of the chart.
As illustrated above, we believe the long term story of investing is still in the early stages of developing the characters. According to the big picture in the chart above we can see the commodities bull market is just getting started, and based on history we know the final stages of a major bull market are the most exciting and most profitable of all. In our opinion this asset class is where fortunes will be made for those who understand the current mega trend underway. In short, we expect commodities and silver in particular to be a major asset bubble such as tech stocks in the 1990's, real estate in the 2000's and commodities in the 1970's. As always, the trick will be knowing when to sell out of the future bubble to preserve ones profits.
Our subscribers have access to an updated long term trend chart such as the one illustrated above. Understanding the long term commodities bull market through the use of
Our Charts gives us what we think is unparalleled focus and clarity in our investment strategy.
Please note:
All charts and statements on these pages are applicable only on January
1, 2007. Markets are continually moving and as a result these charts
may not reflect the same investment opportunity as they did when they
were created. However, we believe markets are cyclical and therefore
think there is always a bull market just starting or maturing
somewhere. In our opinion, when the precious metals bull market is
nearing an end, a new bull market with a new low risk, high reward
opportunity will be just getting started. At that time our charts will
be used to direct us to the next investment opportunity. Based on our
analysis, our current investment of choice is silver. This will change
when the markets and
Our Charts signal that a potential major change is coming. Our
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