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A word to those
looking for financial/economic advice: Buy me at my low.
There
are, from time to time on Wall Street, a number of analysts—brokers,
mutual fund managers, newsletter writers –who emerge from obscurity to
shine brightly. These people are making big profits. Their
customers are making big profits. It appears that they have found the
secret to the markets.
However,
if you study such analysts, you find that things are not as bright as they
seem. Let us call them hotshots because for a time they are indeed
hot. But what happens next is like a rocket. The take-off is
beautiful, but soon they reach the peak of their trajectory. They
descend to earth, and then they crash and burn. In terms of profits,
they are back where they started, and it is clear that they do not have the
secret to the markets.
But
what happens to the followers of such hotshots is indeed sad. The
hotshot may be back where he started. But the client who followed him
is not so lucky. This is hard to comprehend, but every analysis of such
situations proves it to be true. The clients buy the hotshot at his
high (when he is very successful and the talk of Wall Street), and they are
with him all the way down. The hotshot breaks even, but the client
takes a big loss. In other words, some evil force brings them in at
just the wrong time.
A
good example of this is the gold bull market of the 1970s. When I
turned bullish on gold (in 1965), no one would listen to the gold bugs.
But in 1979, they were beating down our doors. They were buying us at
our high.
I
was not a hotshot at that time as I managed to turn bearish on gold in
January 1980. Most of the other gold bugs, however, hung on to gold
through the 1980s and ‘90s. They did not come out even because
they had bought close to $35/oz., but they did come out with diminished
profits. The problem was that their clients played them wrong.
Most of the clients did not buy them low but rather bought them high.
The clients thus took a winning position and turned it into a losing position.
This
is very frustrating to an analyst. He wants to make money for his
clients. He can be making the correct plays on the markets. But
the clients buy him at his high and sell him at his low. Over time, he
may make money, but they lose money.
These
remarks are in view of the Abelson low in gold of July 27. It bears
evidence of being an important intermediate low – AN OPPORTUNITY TO
BUY. And yet, my clients were buying me back last November (as gold
neared an intermediate high), and today they are walking away.
Here
is the problem. The client has not come to appreciate just how ignorant
and irrational today’s media is. You can count on it. The
media will speak with one voice and with great confidence. They will be
humiliatingly and embarrassingly wrong, over and over and over. And
then they will refuse to acknowledge their horrific error. One would think
that the media would apologize to its readers. “Gee, we told you
back in 1990 that there was going to be a great depression. It never
happened, and you lost a lot of money. We are sorry.”
That
is all I ask of the media. Tell your readers you are sorry.
Apologize for costing them money. Admit that you don’t know
anything about economics. And then retire to your cave and do not
bother us any more.
But
no, this is not what happens. So now the ball is in your court.
You the client are living in a society where the overwhelming voice of the
media is shouting at you from all sides, and they are almost always wrong.
“Fool
me once, shame on you. Fool me twice, shame on me.”
This old saying
has to be amended for the modern media. I would prefer to change it to
“Fool me a thousand times, shame on me.” Because in the
financial markets today’s media is so repeatedly and reliably wrong and
shows so little conscience about it that it must be setting some kind of
record in human history.
You
all know the story of Galileo. He developed the theory that a heavy
weight would fall at the same speed as a light weight whereas the majority of
physicists of his day believed that the heavy weight would fall faster.
He performed an experiment from the Leaning Tower of Pisa by dropping a 10
pound weight and a 1 pound weight at the same time from the top of the
tower. It was obvious to all that both weights hit ground at the same
time. The opposition physicists were convinced, and Galileo won a great
victory
This
is proof that Galileo did not live in the 20th-21st
century because we know what would have happened to him if he tried his
experiment in our time. The two balls would have landed at the same
time. Then the opposition physicists would have said, “This
doesn’t prove anything. How do you know that the wind
didn’t affect the experiment? Who is Galileo anyway?”
We
know that this would have happened because this is exactly what happened to
Jim Dines after he predicted, in 1963, that the price of gold, then $35/oz.,
would rise significantly over the coming years. Indeed, while gold was
still close to $35 and the DJI was still close to its high above 1,000, Dines
predicted that the two numbers would cross. This occurred on Jan. 21,
1980 when gold hit an interday high of $875 (Comex, near future) and the DJI
closed at 872.
`Dines’
broker fired him in 1963 for his gold prediction. They later went
bankrupt, but they never apologized to Jim Dines and never even admitted that
they had been wrong. In general, gold bugs were insulted and denigrated
in the media. The New York Times, for example, argued against
Harry Browne’s book (How You Can Profit from the Coming Devaluation,
1970) by accusing him of not getting along with people. This book,
by the way, is an excellent exposition of the Austrian theory of economics,
and had the Times had the brains to read it they might not have lost
90% of their investment in their own stock over much of the past decade.
The
problem is that, in our society, the inmates are running the asylum.
One can certainly forgive a human being for making an error. But when a
human being looks reality directly in the face and says, “Get thee
hence reality,” something is seriously wrong. If I could get Moses
to rewrite the Ten Commandments, I would ask him to add an eleventh and give
it the number one position.
Thou
shalt see reality as it is.
What is wrong
with our age is that virtually no one is obeying this commandment.
And
the outrage of it is that the overwhelming majority of people are
suckers. They are consciously and deliberately being lied to.
This all began in the 1930s when FDR slipped through economic legislation (on
his first day in office) to give the commercial bankers the privilege to
create money (all the while saying that he hated the bankers and was “a
traitor to his class”). This creation of money could only work on
the theory that the country was in a depression (or recession), and such
phenomenon do not exist. So these bankers hired a collection of
crackpots to argue that the early 1930s were such a period. In previous
articles, I have pointed out that from 1929-33 real wages rose. People
ate more meat and switched from margarine to butter. They gave a bigger
percentage of their income to charity. Recently, I checked, and average
wages in the U.S.
in early 1933 were above 50 oz. of gold per year for working people.
Today they are around 30 oz. In the 1950s, these crackpots were
infiltrated into American colleges as economic professors, and today the
teaching of economics in the U.S.
is essentially corrupt.
There
is not one thing about this period which is correct. For example,
credit for the “new” economic theory was given to a sexual
pervert named John Maynard Keynes when the same theory appears in a book (The
Road to Plenty) written in 1928 by two Americans, William Trufant Foster
and Waddill Catchings. I read this book in the New York Public
Library. Don’t tell me it doesn’t exist. All one has
to do is to read it to realize that it is a statement of
“Keynesian” economics 8 years before Keynes published. That
is, Keynes plagiarized his work from Foster and Catchings. Not only is
his theory phony, he is phony too.
But
the Foster and Catchings analysis was very useful to the bankers because it
provided a rationale for the bankers to create money out of nothing and thus
make more loans. It was also useful to Wall Street because the low
interest rates bulled the stock market and increased volume. All one
has to do is to redefine the economy as the well-being of the commercial
bankers and Wall Street and, lo and behold, the government can stimulate the
economy. This lie continues in force to this day and has the same
reality as the Salem
witchcraft trials of 1693. And, of course, as we speak, the Federal
Reserve (using the powers that FDR gave them) is lowering interest rates to
“stimulate the economy.”
The
problem is that the more they “stimulate the economy” the poorer
the country gets. The same theory has been tried in many other
countries. Last week (“Hyperinflation”) we saw how the
exact same economic theory, applied in Zimbabwe over the past decade, reduced
the life expectancy of the average Zimbabwean from 60 years to 40 years and
resulted in an unemployment rate of 95%. But I’ll bet that it
made a lot of money for the power structure.
You
see, when the bankers are given the legal authority to steal from us, it is
just human nature to always want a little more. So they have to
continually invent more and more absurd economic crises. Right now the
establishment is screaming about an imminent “deflation” when in
fact the last year in American history in which consumer prices declined was
1955. As noted, the 30 year period of actual price decline, 1866-1896,
was the greatest period of economic growth both in America and any country in
human history. So if a “deflation” were coming, it
should be welcomed with young girls strewing flowers in its path.
No
such luck. The period of sharp price increases which is being caused by
the money the Fed started to print 2 years ago looks just about to
explode. Gold has made its “Abelson low” and is ready for
an attack on its highs. Cocoa and coffee are right behind gold.
The CRB index is within striking distance of its July 2008 high. And,
as I featured in last week’s One-handed Economist (2010-08-6),
wheat has just broken out from a triple bottom, signaling a possible move in
the grains. If you want to track consumer prices, then start with
commodity prices. Once they have begun to move, the rise will pass
through to the Producer Price Index, and from there it will pass to the
Consumer Price Index.
So,
I urge you not to buy me at my high. Buy me at my low. In that
way, you get my maximum benefit. Do not listen to the media. They
are staffed with the students of these banker corrupted economists.
They don’t know the difference between supply and demand, and their
predictions have an almost perfect record of being wrong. To bring a
small amount of rationality to the science of speculation, I publish a
financial letter which analyzes the markets with special emphasis (at this
time) on gold and gold stocks. I make my decisions on 1) standard
technical analysis, 2) Austrian theory economics and 3) the commodity
pendulum. For example, right now the commodity pendulum says that any
significant increase in consumer prices has to be preceded by a corresponding
increase in commodity prices.
The
One-handed Economist is published fortnightly (every other week, dated
Friday). Cost is $300/year. You may subscribe by visiting www.thegoldspeculator.com and
pressing the Pay Pal button. Or you may subscribe by mailing $290 ($10
cash discount) to: The One-handed Economist, 614 Nashua St. #122, Milford,
N.H. 03055.
Thank
you for your interest.
Howard Katz
The Gold Speculator
Howard S. Katz is
the editor/publisher of the One-handed Economist, a financial letter which
combines fundamental and technical analysis. He was a bug on gold in the
1970s and became a bug on gold again in late 2002.
Subscribe to the Gold
Speculator (the One Handed Economist)
You can subscribe
to Howard Katz’s thoughts on commodities, stocks, bonds and real estate
are available in a letter entitled The One-handed Economist and published
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