HALF PRICE SALE
Mike HoyWhen I read all the articles being written today about the risk associated with gold and gold stocks I have to ask myself if someone figured out how to solve all the world's problems?
Have I missed something? No, I didn't, but I think a few others may have.
Let's start by asking ourselves a very simple question. Why do we own gold in the first place? I don't want to get into this in depth because it would take more time than we have. There are many different reasons why we own gold. As for myself, I own gold stocks because I am scared to death of all other alternatives. I was a broker, starting in 1978, I had a license for twenty years. I remember the prime interest rate rising to 20.5%. I remember the 30 year bond yielding 14-15%. I remember owners of long term paper getting killed. I remember gold rising to above $850/oz. The debt in 1980 hit $1,000,000,000 for the first time. Where do we stand today? Crazy, right? No, it's absolutely insane and our politicians should be held accountable for it. I believe the 20.5% prime rate of 1980 may not be the high for the cycle. But, do you hear any technicians talking about this?
The reality of owning gold is simple. It just makes sense. Each and every day the reasons become more and more obvious. In the end, financial independence may be decided as a result of the exposure one has to gold and gold stocks. When all these central banks and governments realize their largest assets are nothing more than paper, then the real scramble will begin. I suppose, at that point in time all these writers will be bullish as Hell. If I read them right, they all agree that gold will be substantially higher down the road. If this is the case, then why are they so scared today?
Here's how I look at it. I believe, without a doubt, that gold will rise in each of the next several years. I believe gold will hit new highs, before it finally does peak. I think the possibility exists that it could go to $2,000-$3,000/oz. before it's all done. It could take years! If I'm correct, all gold stocks will rise in multiples. With this as my guidelines I believe the real risk is being caught out of the gold stocks or being under-invested in them. Read this paragraph again! It's important! It's the whole story!
Real wealth is created by investing not trading. I did a little trading last year. I wish I hadn't. After taxes, I lost money and my holding period, the price of the stocks would have had to fall at least 50%, of my profit. I had terrific profits. I bought my stocks right. I bought right after 9-11. I had terrific gains. My total portfolio was up about 4X. My portfolio grew because I had identified value and bought it! What excites me the most is, I see a lot more value out there today than back on 9-11.
I see these technicians saying what they do because, they really don't have any profits! If they had profits, the last thing they would want to do is pay taxes and then find out the stocks pulled back, but not far enough to have made the trade worthwhile! Yeah, my portfolio has been hit. What was 4X is now 2.5X. Do you know what I think about that? I love it! I'll buy more! How many times do we buy a stock, see it go up, and then say "I wish I would have bought more?" Weakness, in the price of my stocks, give me 20-20 hindsight. My three core holdings are doing fantastic, as companies doing business. Two of my companies have just crossed the threshold to cash-flow. Why in the world would I want to sell them now? You've got to be kidding! I believe these stocks will rise 10X in the next three years, the earnings from operations will justify the price. If you want to have a "HALF PRICE SALE" then make sure I have an invitation. If I can buy these same stocks at half price then I can think of a return of twenty times on newly invested money.
So what's the problem on the street today? I feel, perception and emotion have taken over and we have lost sight of the end goals. People are scared. they bought when they should have sold and now they will sell when they should be buying. Their greed and inexperience coupled with margin have them in a bad way. Some people you just can't help! In order to be a successful trader you have to do the opposite of your emotions. The time to sell is when your gloating to your friends. Not after you have had your butt kicked! If leverage has you by the balls then you face a real test. Good luck!
Most people only have a small amount of their portfolios allocated to gold and gold stocks. To those of you in this category, you should be ecstatic. You have the ability to increase your exposure to the metals at discounted prices. You truly are in the best position possible. If you bought your current position at higher prices you may have a opportunity to average down. If your companies are doing well, as ongoing concerns, then don't be scared. If you need "free" help or advice my e-mail is available.
If we would just take a few seconds and think of the reasons why we own gold in the first place, then we may look at things differently. If the street perceived things differently then, I believe, pullbacks would be short and sweet. If you are fully invested in the metals now, without margin, then don't sweat it.
For those, not fully invested, take advantage of the '"HALF PRICE SALE " smile and hope they give you a chance to buy at even cheaper prices. Remember, the one thing we all agree on- gold will be substantial higher down the road. With this as a guideline, all gold stocks will be higher down the road. A rising tide will lift all boats.
I'd be glad to share my stocks and my investment ideas.
Remember, Smile! This truly could be the opportunity of a lifetime!
3 May 2004
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