21st Century Gold
Rush Revisited 2008
Back in late 1979, the lineups to buy Gold
looked more like lineups to buy tickets to the latest rock concert. There they
stood all wrapped up in their parkas and bulky sweaters wearing anything from
construction boots to overshoes; there was even a sprinkling of executives in
their Italian leather shoes, business suits and cashmere coats, 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 on the very day that the
big surge of American buying was slated to drive Gold to $5,000. This was yet
another example of “The Obvious is Obviously Wrong.” All the good fundamentals
for Gold had already been discounted. Tell me something that everybody doesn’t
already know, that’s when you would have something of value on which to act
upon. The only important factor was simply that prices were skyrocketing.
Anybody who was already in was making money (of course not as much as they
claimed) and everyone else was afraid of being left out in the cold.
Gold had fluctuated up- from $35 to $200 then back
down to $100 then up to $250 and was selling for $250 when 1979 began. But by
December, Gold devotees, amazed by the sudden surge above $700, began talking $1,000 plus, some were even trying to justify
$5000 and even $10,000. The rocketing prices startled all the experts and
frightened even those analysts who had forecast the precious metals boom,
because none had foreseen anything like this. For the first
five years of this Bull Market, the newspapers and magazines had completely ignored
Gold, just as they have for the last 7 years. Then suddenly in late 1979, Gold
and Silver started making front page 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. Are we once again approaching that
deluge of newspaper articles on Gold and Silver? Not that I can see, but rest
assured, before this Bull Market in
precious metals is over, there will be similar front page stories all around
the world and Kramer will be yelling booya, booya at every one of the Gold
stocks that will permeate his program.
IS IT TOO LATE
TO GET IN?
If you’re
worried that it’s too late, that you missed the Bull Market that has just hit
my minimum target of $900/oz? Ask
yourself how much space is being devoted to Gold? On MSNBC’s FASTMONEY the question was asked, “What
was the best way to play the rise in Gold?” The answer came back very quickly, “although
he didn’t like Gold, the best way to play gold was to buy GLD, which is the ETF
for gold bullion.” None of the other panelists had any opinion. Does that sound
like everyone is wildly bullish on Gold? The truth of the matter is we may not be
finished with even the first Wave let alone The Entire Bull Market itself. However the end of the first stage may not be
too far ahead of us as my minimum target of $900 has been hit but can still go
to $1175, the upper end of my target range. So if you are not yet invested in
Gold, don’t jump in with both feet, SCALE IN instead. But definitely get your
feet wet NOW.
BUYING THE
JUNIORS
The market is behaving almost exactly as I been
forecasting in all my missives, with the UP move in Gold being led by the Major
Producers such as ABX, NMT GG, AEM etc. However, the Juniors
have hardly begun to move. So if you are nervous, you can wait for a 5% to 15%
pullback in Gold before buying the Majors, OR you can start nibbling by
accumulating some of the better Juniors (ones with excellent prospects, proven
reserves and producing mines) NOW !
(actual trade recommendations are reserved for subscribers)
HISTORY REPEATS
As I have often reminded you, History Repeats. Today, as back then, most analysts and the
media are completely ignoring Gold. It’s only the so called Gold Bugs who
continue to believe in this Bull Market.
Well I’m not a Gold Bug; I’m a realist and economist 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, let
alone get any quedos for precious metals or their stocks. As a matter of fact
at TD Ameritrade, which is in
The last Gold rush lasted eight years (1972 to
1980) and was then followed by a 20 year Bear Market. This one started in
either 1999 or 2001 depending on which technical analysis you prefer and we are
still only about to complete Wave I of what in my opinion will be a Five Wave
16 to 20 year Bull Market in Gold which will coincide with a 16 to 20 year BEAR
MARKET IN STOCKS.
The 70’s Gold Market was an ending Bull Run that
was followed by a 20 year Bear Market. The end of this Wave 5 that we are now
in will only mark the end of Wave I of an on going 5 Wave Bull Market run. Remember
that the majority of commodity markets have their most explosive and dynamic
runs in their fifth and final 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 in the future. The library that I went to had the Financial Post
newspapers on microfilm all the way back to 1972, the very beginning of the
last Gold and Silver Bull Markets. There
were no articles that I could find when Gold first moved from $35 in1972 to
$200 by 1976, completing Wave I. Hardly anybody noticed, certainly not the
newspapers, when Gold dropped back down to $100 in late 1976, completing a 50% Wave
II pullback. It was not until Gold was exploding past $200 and well into its
Wave III move that a few scattered stories on Gold and Silver began appearing in
the Financial sections of the News Papers and then not
until late 1978 early 1979 as Wave III was peeking. Gold headlines did not hit
the front pages and the news magazines until late December 1979 helping to fuel
the final Wave 5 explosion into its eventual blow-off top. We are definitely
not even close to that kind of action today’
The stock tables that I found were absolutely
amazing and brought back some very fond and not so fond memories. In 1975,
three years into its Bull Market, most Gold and Silver stocks were trading at
under $2 and a great many were 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.
Even with Gold up near 600% from the 1971 low of $35 to the 1975 top of $200,
most Gold and Silver shares did little to make anyone take notice except
perennial Gold and penny stock traders. Throughout
1973 - 74 I was holding seminars in an attempt to push Gold as the best way to
make money during a falling market (the general markets were down 50+% in less
than 2 years), but getting an order was like pulling teeth. It was not until
Gold was well into Wave III after having retraced all of its first big sell-off
and gone back well above $200 (the equivalent to $730 today) that I started to
open some 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 ay!!!!! 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 and 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
they offered great potential, they also contained much greater risks as most of
them ended up falling back to zero. So be careful.
No question about it; that was one of the
biggest and best financial opportunities in history. I don’t know of any other
time, not even the dot.com bubble (how may 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 like
that in your whole life to be super successful.“
I believe we are now at a very similar 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 and we had just seized the assets of IRAN as they held 45
American hostages, oil prices soared while we lined up in long lines to buy gas
and the Oil Sheiks couldn’t wait to get out of US 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 Swiss Franks). Back then, like today, our
budget deficits were soaring out of control but unlike today, back then the
( I will leave the explanation
as to why for another time)
Although history repeats it never does so in an
identical fashion, so that it only ends up being recognizable long after the
fact. These are just some of the real fundamental cornerstones of why Gold is
in a Bull Market today and why the recent TOP made in the general equity markets
and subsequent sell off (almost exactly on the schedule that I was looking for)
is really only the very beginning of a 16 to 20 year Bear Market sometimes referred
to as a Kondratieff Winter (see my Jan.1, 2008 letter). The first casualty was the
crash of the Real Estate market (exactly as called for in my March 2007 letter
DENIEL) to be followed by the imploding of the credit markets, Banks, Brokers
and Stock Markets as the take-over and
privatizing craze came to an abrupt end. We are about to witness the Laws of
Supply & Demand in action.
{For your own information, I recommend you read
"The Dollar Crisis" by Richard Duncan. Balance of payment deficits of
an unprecedented magnitude have resulted in credit induced economic overheating
on a global scale. There is a limit to how much money and credit can be created
out of thin air and still keep the
Greenspan and then Bernanke were attempting to
create a soft landing by slowly raising rates. But Berenanke is now being forced
by the know-nothing trio of Wall Street, the Media and the Politicians, back to
cutting rates (doing exactly what got us into trouble in the first place) in a
vain attempt to keep the economy from falling into a steep recession. Greenspan
was lucky but has painted the FED and the world into a corner that his
successor who will not be so lucky and will not be able to get us out of our
troubles without a whole lot of pain and suffering. Investing in Gold and
Silver and their shares and holding
them for the foreseeable future could be the only major financial decision you
may ever have to make .
TRADING IS ONLY
FOR BROKERS TO GET RICH
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 front pages of all the newspapers and magazines across
the country and the world. Or better yet, subscribe to my new Letter and I will
keep you abreast as to what to do on a timely basis. If you have not yet taken a position, then
scale into any precious metals mutual fund. Or the GDX. As Gold continues to rise, use
your increased buying power to increase your positions. By the time that front
page story, which ran in January 1980 appeared, most Gold and Silver stocks
were trading over $50 per share and quite a few were trading over $100 -$200, some even as
high as $500 per share. Only a few years earlier, you could have bought those
same stocks quietly for between $1 to $5. I know it’s hard for most of you to believe
that Gold and Silver will surpass their old January 1980 highs, but 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 1980 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 and Commodity 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 about not only Greed, but abject FEAR as
well. There is nothing more powerful
or can stand in the way of a combination of a Bull Market based on both 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
limited supply of shares and you can’t create a Gold mine out of thin air like
you could a dot.com company. The combined total of all Gold stocks in the world
is less than that of the equity of EXXON and GE. Yet there are 8,000 Mutual
Funds in the
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
new Gold 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.
WHERE TO NOW
Reserved for subscribers
GOLD AND SILVER
Reserved for subscribers
OPTION TRADES
Reserved for subscribers
STOCK (S) OF
THE MONTH
Reserved for subscribers
GOOD LUCK AND
GOD BLESS
SUBSCRIPTION
LETTER
Don’t forget to mail in your subscription before
February 1st. so as not to miss the first letter. We are now in the
type of times that you will definitely want to be kept abreast as to what is
happening and not have to wait 2 weeks to read my letter on the websites. You
can call me to let me know that your check is in the mail.
The cost is a reasonable $199/year for a Bi Weekly
letter.
Simply mail your check along with your name, address,
phone # and email to the address below:
Aubie Baltin CFA, CTA, CFP, PhD.
aubiebat@yahoo.com
561-840-9767