smart-money-report.com Blog

The guys at the The Texas Hedge Report think that those who have the courage to buy silver and gold at these prices will be richly rewarded:

Those with the courage to hold $600 gold and $11 silver in September 2006 will likely find heady metal gains in their stockings in the years ahead. Picking the exact bottom is impossible but the precious metals have now lost 15-20% in a little over a few weeks’ time and when one considers the supply/demand tightness in both markets, we think that such buying opportunities won’t exist for very long.

You just have to step in and buy the metals when Mr. Market decides to sell at bargain prices.

J.P. Morgan says that commodities are about 30% undervalued. I think they’re a lot more undervalued than that but who am I to quibble.

The Aden Sisters must have been reading my mind (or maybe I’ve been reading their minds), but they also say that when it comes to gold focus on the mega trend and don’t let yourself get distracted. These mega trends don’t come around very often. If you miss one you’ll be waiting a very long time:

Since 1803, for instance, there have only been five mega upmoves in commodity prices, lasting about 22 years on average. The sixth mega upmove is just beginning and it’s coinciding with the war on terror, just as previous upmoves also coincided with wars.

The eminent Richard Russell on Gold, Bonds, and Oil.

Dr. Steenbarger sees an interesting analogy between sports psychology and expert trading:

…when people become skilled, they literally learn to see things in new ways and think in new ways. It’s not just a difference of hardware (having better memory, vision, or concentration); experts develop their own software: internal programs that enable them to recognize patterns and act upon them rapidly.

Richard Russell shares his thoughts:

“The fact is that raw materials, oil, gold and silver, appear to be have “had it” for the time being. I’m saying this strictly based on my reading of the charts … Blame it on China, blame it on the central banks, blame it on anyone you want, but better still, forget blame, just deal with reality and what the chart tells us. Raw materials are correcting, all except that key item — Dr. Copper.”…..”Gold broke a quadruple bottom when it hit the 605 box. Gold is in an area of potential support now, but gold is moving below its rising trendline, and the downside count is 525 … I’ll hold gold forever, which means the rest of my life … I went through the same thing in the ’70s. Looks like history is repeating.”

Evelyn Rubin reminds us of the Dow/Gold ratio. The money quote:

I look around various dens on the web and I find bears exhibiting extreme agony at the moment: The PPT has really exposed its farcical modus operandi as it props UST bond paper/stocks and hammers commodities. Another script reads something like this: “Honest money” is being manipulated by coordinated central bank sales in the lead up to the elections. I am not going to comment on the levels of validity to these assertions because I simply do not know the answers. All I do know is that the chart says stocks became deeply oversold when measured in their ON-GOING bear market to gold. It’s a technical thing. The target is getting close for things to reverse back to the primary trend (stocks will continue to be bearish when measured in gold).

Is the commodity boom over? Not likely. Call it a “bump in the road” or whatever what you want to call it, but don’t call it over.

The lesson of 9/11 for the markets is that big geopolitical turmoil doesn’t affect markets as much as you might think.

How good are economic forecasters? They’re pretty much worthless. The forecast that is, not the forecaster:

The median prediction was in the range of 3.1% to 4.0% in every single quarter. Perhaps not coincidentally, the actual quarterly GDP increase over the past 25 years (1981-2005) averaged 3.14%. The forecasters, in aggregate, perennially thought that one year hence, business conditions would be just about average. In reality however, actual GDP gains gyrated between 0.2% and 7.5%. The forecasters’ nearly inert consensus was all but worthless.