The Average Joes Perceptions of Gold and the Dow
Sol Palha & Alan Lunt
Gold like the sun, which melts wax, but hardens clay, expands great souls.
Antoine Rivarol -- 1753-1801, French Journalist, Epigrammatist
We spoke to a total of 500 people or so. First of the all, the state of things is simply terrible. I had no idea that we had gone to such an insane state, where common sense is really not so common anymore. I think it's time we changed the term to uncommon sense. Because common sense does not exist anymore only common madness and its in abundant supply.
In total we have responses from 500 people counting the ones that my friends helped me with. 200 or so are individuals that fall into the 18-22 age group. When I looked at what these individuals aspire for, I was totally shocked.
The main theme seems to be getting a job, then get a nice fast car, cell phone and have a great time. I found the most appropriate term for them currently would be to call them happy idiots. I kept running into individuals who had regular cars and who felt it was time to upgrade to Mustangs etc on their waitresses, or clerk salaries. Most of them had not even finished paying of their loans on their existing cars, but were all smiles when they spoke about the next car they wanted to buy. And yes they wanted to buy this car soon and trade the "junk" they were driving in. Mind you, these cars were not even 3 years old or so but they were being referred to as "junk."
One individual really stuck to my mind. She was 22-year-old waitress. She was already driving a Mustang and paying through here nose in insurance charges, as she was under 25. And guess what she was looking to buy? A Corvette. I was pretty stunned. I asked why did she want to do that. Why not invest in the stock market or put that money aside for a rainy day? For a second I felt like I just learned a new foreign language and had forgotten to speak to her in English. The look she gave me was one of complete lack of comprehension, one that screamed out, Hey Dude, what's with you? Get with the dam program. Her response was a Corvette is cool, a Corvette is me and man, a Corvette is a fat car. Fat is slang for really good or cool.
Some of you might get the impression that I am an old wise man. I am actually not that old, perhaps one day I will talk about my age. But like most things in this world, age is nothing but an illusion to try to justify your position in life. Age or maturity is seen as an open pass to state that they know more than anyone younger than themselves. It is interesting to note that it is not only wisdom that comes with age, but senility too and most people who think they are wise are actually closer to the senility arena than the wisdom arena. One sign that you met a wise person is when the person does not try at all to impress you and in most cases goes out of his or her way to state that they don't really know that much. An empty can makes a very very loud noise.
My small experiment simply tells me this nation has been sold lock, stock and barrel to the concept that it is good to have as many loans outstanding as possible and that credit is a word to be proud of. Saving, investing and looking for deal are not "in" and so those that do so, must be shunned.
As far as Gold goes, the young generation knew nothing about it other than it is basically used in jewelry. When I informed that it had taken off from a low of $250 and was at that time in the $420 range, they seemed totally unfazed and not interested in this. Many of them actually said, "So what's the big deal and how can I buy gold anyway and how would I sell it?"
This attitude tells me that the pure Gold Bug is in la-la land if they think this generation is going to get up and embrace Gold anytime soon; and for that matter, if anyone else in the other age groups that have embraced the credit principle as these youngsters have will not embrace gold either.
The only time they will look at gold is when they go to the gas pump and find out that a gallon suddenly costs them $5, a loaf of bread $4, a gallon of milk $5 and the 99 cent menu's in all the fast food places have vanished and are replaced with $3 dollar menus. Then these dazed cows will finally awaken. The only problem is will it be in 2004 or 2050. If it is 2050 I could care less if Gold goes to 100K an ounce.
Forget where Gold and Silver are headed. Just remember the trend is your friend and if the trend is up then don't fight it and play it till it ends.
Just in case you forgot to check the trend is firmly positive and Up for GOLD, SILVER, PLATNIUM and just recently for PALLADIUM to
Back to the sentiment studies
So lets break down all the data of 500 surveyed people:
- 27% don't know a thing about gold other than it used for Jewelry.
- Another 33% have not considered investing in it and don't see any reason they should.
- 13% or so think it's a good idea and it appears they will invest in it soon or have a small position in it.
- 12% have a position in it and think it should be part of one's portfolio.
- 5% are fanatics about it. We had a hard time trying to keep them quiet since they are fully invested in it.
- 10% think it's more or less a joke and that technology is a far better place to be.
What does this mean as far as Gold and Silver go and the other precious metals? I believe that Silver will lead the metals by a huge factor when we examine the returns on a % basis. In addition, silver is not only viewed as a currency but it is something that we use in our every day lives and we desperately need. There is a chronic shortage of the metal, which is being made up with reserve supplies and finally, It Is Much Cheaper To Buy and Hold as a safe hedge against inflation. Remember, people are CHEAP and cheapskates look for the easiest way to protect themselves.
There is a reason why silver is referred to as the poor mans gold. The main reason being that people want to get the most for the least and Silver fits this principle perfectly.
Gold will carry on being a good investment, but in reality it's only use is that of a currency and the problem here is convincing all the blind to accept it as currency. To convince the blind that Gold is a currency is more than just a monumentous task; it is task that is almost impossible. Blind people do not get sight miraculously. They have to want to see and for the near foreseeable future they have no desire whatsoever to find the light. To make matters worse, they don't think they are in darkness.
No outcome in life is guaranteed other than the fact that we will all die one day and that we will never be free of idiots. When anyone guarantees you an outcome and it concerns money and you believe it, 9 out of 10 times the best thing you can do is to go to the nearest Home Depot and buy yourself and your friends the best shovel you can find. Then get a beer and start to dig your future-resting place.
Investor sentiment as far as the Stock market is concerned
55% thought the market will go up more but actually when pushed we found out that only 39% or so have actually taken a position to try to benefit from their so called perceptions.
45% fell into the bear and neutral category. Bears and neutrals are the same right now, as they have no clue as to what is going on. Like a broken clock they will be right sometime soon only to be proven wrong again. And finally when its time to be a true bear they will throw the towel in and sit and moan in self-pity.
When pushed to see if they had taken any position, we found out that only about 35% had taken some position
So what do we have here?
39% or so of the bulls taking a position and about 35% of the bears taking a position
That leaves a whole 26% who are doing nothing but blabbering away. For all intents and purposes we can put the deaf with the blind since they both are lost. The blind being the bears and the deaf being the ones who have a lot to say but listen to nothing other than the roar of their voices.
Combing these numbers and we come up with 61%, we can say for all intents and purposes that 61% are more or less bearish as the neutral are just to afraid to stand up and take a position.
The number of individuals in the bullish camp has increased, so this means that we are now going to enter a period of volatility that will be further hampered by extreme levels of uncertainty. The question will be. Direction. And no one can give you an answer during these times. We have to listen carefully to what the market is saying and then act on this information. Sometimes the market is stingy and gives you no clues for weeks on end.
The market was made to make the few sane people insane and to make sure the insane never see the light of day. If you want to fall into the very small category of 1-2% of not only successful traders because we know 10% are successful, but sane and successful traders, learn to deal with your demons. Learn to understand that nothing comes easy, that you will and must lose every and now and then. This is, after all, the most rigged game in the world and in no other place are you guaranteed to lose with such precision and accuracy as when one jumps into the stock market.
Understand that winning is also learning to understand that there is a time to win, a time to lose and a time to sit tight and do nothing absolutely positively nothing . While you are doing nothing as far as your money goes, read as much as you can and find out who you are and what it is you really want. Most of us don't do this because we are scared of finding out our true selves. Fear is nothing but ones inability to deal with reality. And reality is nothing but the place where insanity and sanity converge.
We could also suddenly enter the correction phase, which would actually be healthy for this market and gives us the real power we need to blast off and take out 11k. However, things never always work out the way they should and as of right now esoteric cycles are not fully clear as to where the market is heading so we are taking this as a sign that we will enter a stage where volatility levels will be above the norm.
For those of you that are risk averse, right now is the time to enter the markets with caution. The last stage of the bull is the most rewarding but the most painful. There will be some stupendous gains but there will be some unreal pain. You have been fairly warned. Now decide on the level of poison you want to put in your system. And remember: Nothing that ever was worth anything in this world ever came easy. If it did, it was not worth anything to begin with in the first place.
The first step to success is pain, the second step acceptance, the third step is patience and the forth step is huge gains.
Hence the saying "No pain, No gain." Remember, failure is also a form of pain. Accept it, study where you erred and make sure you do not repeat it again.
You will notice that I have been spending a lot of time in the last few weeks on psychology. Many of you wrote in and asking us to give you pointers on how to go about becoming better investors. And In case you have not gotten the point yet, psychology has probably more to do with investing than any other TA tool out there.
So start asking yourself the question, Who am I? as soon as possible.. And then ask the second question, Who are those people out there?. And finally, What is it that I really want?. The reality is this, if you have a problem answering any of these questions, then you are going to once again be donating a lot of blood to the sharks that are circling around you eagerly waiting.
You cannot win if you do not know what wining entails and you cannot win if you have no target to aim. Making lots of money is the dumbest target one can have. Quantify it; how much you want and don't just say I want a lot.
Success is not guaranteed but failure is; and furthermore, it is a very easy Goal to achieve!
One final thought: Until you can truly strip down to the bare essence what it is you really want you will not have won anything regardless of whether you have a million dollars in the bank or just 10 bucks. A winner is not defined by the amount of money he or she has, but by the fact that they are content with what they have and understand that in the end money is nothing but a tool. A tool can always be bought.
Happiness, health, self-satisfaction are all beyond money. They all represent a state of mind. Heaven is a mind in peace and hell a mind in pieces.
Where does one go from a world of insanity?
Somewhere on the other side of despair.
T. S. Eliot 1888-1965, American-born British Poet, Critic
Gold So what by Alan Lunt
In today's world there is a flight of money from consumption type nations, the USA,
into productive type nations....... NZ, Aust, SA, Can.
What is gold? Well it's shiny and yellow and worn on the finger by the married. I talk to people about gold and they just look at me and change the subject to property. Stating how well housing has done in the recent past. I get an even more vacant stare if I mention silver.
Why would people in this country, New Zealand, want to buy gold as an investment, cash has been better over the last 3 years. Property has been the place to be at. In US dollar terms cash has advanced 64% and property in the demand areas over 300%, poor old gold has not held it's own in NZ dollar terms. Even as I know to the bottom of my boots that gold is the safest investment of all (it will never be worth much anytime soon), I just do not see it in the sights of the local investor. The magazines and newspapers have screeds of editorials about houses and housing. Gold however is only mentioned in the 2 centimetre by 4 centimetre block at the bottom of the financial pages in a few of the major daily newspapers, and then possibly only once a week in the business edition.
To compound matters further there is a lack of outlets that sell gold in the 99.999% fine state. When I bought mine I did a goggle search, always appending the nz suffix. I came up with one entry and that was of a jewellery chain. The margin above market was 20%. I have since found a better source, but that took over 6 months of searching. This last outlet is 50% cheaper for 99.999% fine silver than the jewellery store. I was determined to buy but could have been put off by the difficulties I faced.
One thing I did note however was that 99.999% fine bullion attracted no Goods and Services Tax, whereas gold below 24 carats did, so coins did not enter into the equation at all. I wonder if that means that gold in its pure form is money. I also noted that I did not have to declare my purchase to the Inland Revenue Department. So maybe it is the ultimate investment here.
Is gold in the investment thoughts here? Nope, it is the ancient relic, to be worn on the finger. Currency issues have precluded it from thought processes and to own it you must be "nuts". However I am nuts enough to own both Gold and Silver, Last year I increased my purchases of Silver significantly.
In the end you have to ask yourself do you want to appear to look sane in an insane world or would rather appear insane to those who claim to be sane but do everything in their powers that suggest otherwise.
Alan Lunt
allies1111@tacticalinvestor.com
© 2004 Sol Palha
TACTICAL INVESTOR
www.tacticalinvestor.com
info@tacticalinvestor.com
8 March 2004
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