Curried Wealth Building
Finding an Edge

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October 26, 2008
Issue 17  -  Don't Panic Now
 

Let’s Review

With the absolute bloodbath taking place in the whole market and in the commodity sector particularly, I thought I would review the reasons to stay in gold/silver, and why they are better now then ever before. It's easy to stare at a hugely down portfolio and think all is lost. I can feel your pain, believe me. The reality is that commodity investing makes sense. The case for investing in things is stronger than ever before and while it may take a while to reconcile to the upside, it can be very helpful to an investor in tough times to review the original thinking for the purchase.

A. Endless Money Printing

The United States government is going into debt at a faster rate than anytime in history. Read that again. From GATA: “The Federal Debt had another seismic increase of $130.7 billion on Monday to $10,464,889,644,552.18. The debt increase since 9/15/08 is now $830.8 billion which is $7100 per private sector worker.” Think about this for second. The National debt has increase over 8% in the last 35 days! Do you think that could be slightly inflationary? I certainly do.

B. Banks Stopping/limiting Sales of Gold

There are numerous reports of world governments limiting the sale of gold. They are curtailing minting of gold coins (Mexico and U.S.) and even stopping the sale of gold bullion. (Canada and several European countries) There are  even rumors of the Central banks turning buyers. This would have tremendous effects on the price of gold.  There are shortages everywhere for gold and the Central banks are going to buy?  My only question is from who?

C. Shortages

Bull markets don't end with shortages. Were there shortages of Internet stocks in 2000? No, there were endless quantities of initial public offerings and the buyers were what was in shortage as there was nobody left to buy. Today the buyers of precious metals are few and far between. I know very few people (one) who have substantial holdings of gold or silver and only about 7 who have a little. Does that sound like the 2000 bubble ending? Just about everybody had some Internet or tech stocks then and I fully expect it to be the same for precious metals this time.  I will say that there has been increased interest by people asking me to help them buy gold and silver.  This is highly unusual behavior as human nature doesn't like to invest in declining assets.  This is very bullish.

D. Commodity Bull Markets last 15-20 years

The current bull market in commodities is just about 8 years old. Given history, it just doesn't make sense that this bull market is over in half the normal time. These bulls last that long for a reason. It takes a long time to put a mine into production. Drilling, surveying, permitting, and construction take years to complete and that is the only way to build up a surplus in commodities. New mines have to open. This just isn't happening in a meaningful way. No, this bull has a long way to go, mark my words. Nothing goes straight up and this is no exception.

E. Stocks Selling for Book Value or Less

There are now mining stocks that are selling for less than book value. Book value is basically the fire sale price of a companies assets. NO company sells for book value very long. Either it is bought out or it rebounds. There are so many companies selling this low that something must give. These stocks are also at record overbought readings. This is basically a measure of buying and selling pressure. As a stock gets sold the reading goes lower, once it gets too low a rally is guaranteed as nothing can go to zero with tangible assets. There are some stocks now selling for less than cash on hand. This situation is ready to change in a hurry. Which brings me to my last point.

F. Don't Sell Now

Remember these stocks are very thinly traded. Any appreciable interest can send these stocks sky rocketing. These stocks will rocket sometime in the future and you will be kicking yourself for selling now. Don't compare these to Internet stocks. They have actually assets. I have been buying because I know what is coming up. A moon shot is coming and you need to be on board. I know it is terrifically painful to look at the damage but if you sell now I know you will regret it later.  Don't be the guy who is saying "I knew that I should have bought silver at $10 or gold at $750."   Instead, be the guy who is wishing he bought more.  Our time is coming.