What separates the men from the boys in investing is patience. Jesse Livermore always talked about how very few people kept their position for the duration of a bull market. Most people either sold too early to lock in profits or they sold too early after a shakeout. As I’ve said, 20%-30% corrections are normal; in bull markets all timing mistakes are forgiven as long as you hold your position.
Right now we’re in a sort of “no man’s land” in gold. A break below $1600 is bearish and suggests new lows are coming. But this is the preferred scenario because the upside volatility will tend to match the downside volatility. Would you rather have gold rally here to $1900-$2000 for a 15% gain or would you rather be a buyer at $1300 on the way to a rocket launch to $2500? Buying large cap miners at $1300 will be very similar to buying blue chips like Apple and Coca Cola anywhere between late 2008 to early 2009.
I expect significantly higher inflation readings as we move forward that will officially put all talks of deflation to rest. Part of the reason is entirely technical: the CPI will soon trade “low inflation” months for the most recent months, which are “high inflation” months. But anyway, here’s some food for thought for people who sympathize with the “credit destruction creates deflation” camp. If credit destruction creates massive deflation, then why didn’t massive credit creation all these years lead to hyperinflation?
Expect silence from most deflationists. Or perhaps a mention of housing and how prices have not recovered.
Anyway, a word on housing. I am in Vegas now and let me tell you, it is very hard to lose money in housing here. The inventory is not as high as you think because banks are very deliberate about bringing homes back on the market. In effect, this is creating an artificial floor in housing that allows savvier investors to accumulate before household formation picks up. Think about it this way- if Western central banks kept on selling gold on rallies to suppress the price, wouldn’t you be happy? They are giving you an artificial window to accumulate gold until they run out of supply, which is when a rocket launch comes.
Real estate in select locations, stocks, and gold are the places to be, no doubt about it. As for bonds, I will add to my short position very soon because of some negative divergences I am seeing. Bonds are going to crater- this is a guarantee.
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