May 10, 2011
1. The smartest millionaires of 1913 watched the Federal Reserve being formed with great interest. They sold a million paper dollars and received 50,000 ounces of gold.
2. Today’s paperbug millionaire of 2011 barely knows what the Fed is, let alone what an ounce of gold is. If he sells his million US dollars today he gets about 666 ounces, based on gold at $1500 an ounce. A very interesting number indeed.
3. I’d like you to tell me whether you would rather have 666 ounces of gold, or 50,000 ounces of gold.
4. If you want to build major wealth, you need to understand that you don’t have a $100 million algorithm trading computer system on your desk. While I understand the gold community is fairly concerned about the recent rally in the dollar against gold, the fact is that you are not going to compete with the best hedge funds by attempting to trade counter trends, especially with size. Do it for fun (or to stay sane). Use put options and leveraged ETFs to play counter trends.
5. For the bulk of your wealth building, only the power of the biggest primary trends will work to make you seriously rich.
6. On that note, there is no primary US dollar uptrend. I own the UUP (bull US dollar) fund, as a tactical trade. Owning UUP, or any counter trend play, is often more of a mental tactic than a financial one.
7. You should hold 100 times more risk capital in metals assets than in UUP. I do. The time to buy the US dollar in size is when interest rates are already sky high, not now in a counter trend play. Buy UUP to strengthen yourself mentally, so you can step into the discomfort zone and buy more gold in size.
8. I want you to read these next two points many times, because they are absolutely critical for serious wealth builders. First, the odds of a near-term rally in the dollar against gold are higher than the odds of a near term decline in the dollar against gold.
9. Second, and much more importantly, note that when the odds of a near term counter trend asset rally are high, but the odds of a collapse of that same counter trend asset are sizable and real, the wealthiest investors will not take that counter trend trade. Are you taking it in size? If so, you are making a grave error. It’s only a matter of time before those tactics destroy you financially.
10. The bottom line is that the dollar could rally, but you are not going to build any serious wealth selling gold to play that rally, and it could turn into a collapse that wipes you off the financial map.
11. Have the patience to wait for a collapse in the bond market, the backing of the dollar in some way with gold, then buy the dollar and the bond in size. That time is many years away.
12. Gold and food go together. Both are extremely low risk assets, in terms of the odds of them going off the board. The lower they go, the more of them you should want to buy. I have a $100 target for the DBA-nyse agricultural ETF. Click here now to view the weekly DBA chart.
13. I have little to zero interest in up and down trend lines. When you look at the weekly flyer from your grocery, do you get a ruler out and draw an uptrend line across the weekly sale prices? Do you say, “look, the uptrend line on bread broke, I better not buy any even though it is on sale!” No. If price is on sale, you buy.
14. Click here now to view the daily DBA chart. DBA is “10% on sale in the $32 area and the oscillators are indicating we could spike higher. You will not make it to DBA $100 with your core positions intact if you disintegrate mentally into a world where all you do is look in the mirror and ask how much lower price could go after you buy. Don’t worry, people are going to keep eating!
15. Click here now to view the daily gold chart. The gold price meanders between the green Keltner lines, like a river bounded by its banks.
16. Note that price has only come close to the lower “river bank” about 3 times in since September! The decline into $1462 has been analysed into oblivion, and bought by almost nobody. I called the gold market “out of control” on the day of the $1462 low, and urged you buy anyways.
17. Now price has soared $50 an ounce, and the short term oscillators suggest much further upside is possible, basis this daily chart!
18. Click here now to view the 30 minute gold chart via the comex gold trust fund, IAU-nyse. I’ve drawn in five blue HSR (horizontal support/resistance) lines. Those are five beautiful profit booking areas.
19. Note that price has risen to one of them, at $14.70. Only if you bought into your own feelings of panic are you now able to ring the cash register. While others guess whether the market will bounce or fall, you get richer!
20. I have begged, urged, and come close to using expletives to “encourage” you to get richer by building ounces, rather than staring at the dollar valuation of a fixed amount of your gold. You need more gold, more silver, not more marked to model valuations courtesy of Ben “Dr. Pinocchio” Bernanke’s photocopier machine.
21. Click this 30 minute gold to silver chart. This is a method of getting richer by building more ounces of both gold and silver, keeping yourself at least partially isolated from the world of the US dollar paperbugs. Note that I am using SGOL for gold and SIVR for silver.
22. That chart is just days old, and at the time I suggested it was time to sell some gold and buy some silver. Now, I would suggest it is already time to sell some silver and buy gold. Silver has jumped strongly against both gold and the dollar over the past few days, but focusing on the dollar isn’t going to get you any more ounces of silver, or gold!
23. Now click HERE to view a freshly annotated version of the gold to silver chart. The 30 minute chart is absolutely ideal to move back and forth from gold to silver, and vice versa.
24. What sounds better to you; spending your trading day staring at the dollar valuation of gold or silver, or building more ounces of both? I’ll dare to suggest the answer is a “No Brainer”.
May 10, 2011
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Tuesday May 10, 2011
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