Friday, March 22, 2013

Unfounded Fears or Valid Pessimism

I recently receive correspondence from a friend who is close to capitulation. In markets like these it's easy to understand. But is it acceptable?

Capitulating and selling your positions makes sense if you are operating from a rational, non-emotional state. Easier said than done, I'll grant you that.

Below is his email to me and my response. Maybe you're feeling what he's feeling?

Message to me:

With all due respect, all that seems to keep happening is that I lose money on my mining stocks...   currently down 15k + (or - rather) And its been years! A financial adviser would say Drop The Losers... I'm not sure if its hope or laziness but I continue to hang in....

My response:

Well then both you and I are bailing water out of the same sinking ship but I see a port off on the horizon! Actually as of yesterday a few of my stocks have moved into the green. Not by much but it’s encouraging.

If you’ve been losing money for years you may just be picking bad stocks or your timing is off. Remember I’m not a financial advisor but there aren’t too many out there available to the public that are worth their weight in salt. Just yesterday an advisor told Carrie that the Dow is on an amazing run due to the strength in the economy. Well, I have two charts for you…. You tell me how it’s going to go for the Dow.

Do you see that big spike right before 1980? That’s gold correcting. Everyone thought the bull market in gold was over. I think we’re seeing that process fill out presently. The leverage in the system MUST be wrung out and there’s only two ways to do that. Cancel the debt or inflate currencies to pay for them. The Fed has already told us in clear terms they have chosen the inflation route. Gold must rise but in the short term, so will the Dow. Why? The Fed has told us they are in the market buying stock. They’re doing it to create the “wealth effect”.  They want people to “feel” wealthy so they will spend their money.

Does that sound like a healthy situation to you?

Now you say you’ve been losing for years. I’ve been watching my stocks creep down since 11/2011. That’s when I started moving heavily into the miners. I’m down over 10K. Some of the financial advisors that I read are down more than I am percentage wise. It’s discouraging but I’m sure of a turn around. Think about it, are all the miners going to go bankrupt and the whole sector wither away? That’s a mind succumbing to fear. My problem has always been timing.

Let’s look at another chart….

Do you see that waterfall decline from the 2008 crash? Well that’s when I sold all my stocks last time around due to fear. I then missed a several hundred percent gain in some of the positions I had sold out on. A huge mistake and it was all due to bad timing and fear.

Now I’m not saying there aren’t challenges in the mining sector but  the powers that be are also creating an illusory world for us to be deceived in. They want us to believe that money printing is good and healthy and that gold will not protect you because we’re on the path to recovery.  Do you believe those things?

Personally, I am not selling out. I will address my fears and embrace reality. I am prepared to wait a full two more years for a recovery in the miners. Do I think it will take that long? No. I think we’re at the bottom or very close. Keep in mind though, “close”, can mean months. These processes take time to play out. All we need is for time to pass.

Listen to this interview by Rick Rule. Pay particular attention to his mind set…. And I encourage you to seek out other videos with him. He has helped me tremendously.


I hope that info helps you.

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