My PNP members pay a lot of money to access my trading ideas, and it just wouldn’t be right for me to give away for free what they pay for.
However, I am always happy to share my general and sector-specific views with you here, and that’s what I want to get into today.
OK, here it is: It's time to buy gold. Let me repeat in a bigger font size: IT’S TIME TO BUY GOLD.
On an inflation adjusted basis, gold is nowhere near its all time highs. In fact, gold would have to cross $2,000 an ounce just to match its highs from the 1970’s!
If I had told you in 1998 that oil would be over $80 in 2007, you would have looked at the then current price of $10 a barrel and called me crazy. Don’t make the same mistake when I tell you that we will see $2,000 per ounce - and more - on gold over the next several years.
Commodity inflation, a declining dollar, and burgeoning Indian and Chinese middle class wealth are all coming together to create a perfect storm for gold prices.
In my opinion, the long term trend is set; we will see astronomical prices for gold.
I can’t give you an exact “bus schedule-like” timetable for the very moment gold makes its move, but what I can tell you is that over the next three years we will see a move in gold that will leave you breathless.
People called me crazy when I published my OSX article a year and half ago when the OSX was at 179. Back then, I called for a long term move to 600, today its already close to 300.
My point is that you must get some exposure to gold in your portfolio, PERIOD.
I want you to focus on those companies that have their gold reserves in politically secure areas of the world. Additionally, you must ensure that they do not hedge their gold production.
This is critical!
Many gold mining companies will sell “forward” contracts, guaranteeing to deliver gold at a future date at a specific price. Now that’s great if gold crashes, but awful if gold explodes to the upside.
Let me be clear here: In my opinion gold is going to explode to the upside, so do not buy hedged gold plays.
Make sure your gold miners are well capitalized. You want to be long those gold miners that have the financial ability and the portfolio of gold properties that can be rapidly brought on line. Those gold mining stocks that have the ability to quickly ramp up production will be the stocks given the biggest premiums by the market.
Stay away from the 2 bit penny dream miners. You know the ones I’m talking about: The 5 cent stock that trades on the pink sheets that the online tipsters are all over. There are plenty of great gold mining names that trade on the New York Stock Exchange.
Last but not least: Be patient!
Remember that we are playing a multi-year macro trend ... not day trading the S&P. Over time, if you consistently put your money to work in the right sectors, you will crush the returns of the fast money boys, C-R-U-S-H!
But it takes courage and foresight to sit through the inevitable draw downs that hit a sector as it progresses through its bull market. That’s why everybody’s not rich. Very few people have the confidence in themselves to stick with a plan.
Finally, I want to caution you about becoming too focused on the U.S. Economy.
Much has been written of late on the possibility of a U.S. recession or slowdown in the offing. There is no question that the U.S. economy is currently - and will be for many years to come - the preeminent global economy.
We are a twelve trillion dollar money-making machine, for goodness sakes. We are the 800 pound gorilla of global wealth.
In markets of old it was said that “When America sneezes, the whole world catches a cold.” But the world is changing ... economic wealth at the international level is starting to broaden. As foreign companies become wealthier, they invest more, take more risks, pay their workers more, and the global economy as a whole benefits.
None of us alive today have ever experienced an economic growth curve like the one that is about to unfold before our very eyes. Your ability to make money in the market over the next several years will have very little to do with the general state of the U.S. economy IF (and it’s a big if), IF you are in the right sectors.
Sector positioning will be critical for your investment success over the next several years.
The transition from the agrarian to the industrial that's currently sweeping through the Third World is THE investment theme for the next decade.
You must position yourself to ride it, or risk being left behind in the investment dust.
Chief Investment Officer
ETF Master Trader