Precious Metals

GOLD – The Possibilities

Viewing the barbarous relic from a very long-term can help filter out the day-to-day noise. As you can see in the 20-year chart below, Gold’s price (the middle pane) was in a strong uptrend that lasted nearly 13 years, ending in 2011. In the bottom pane, you can see in the ratio of performance between gold and the US stock market, gold massively outperformed, exceeding the SP500 by more than 600% at its peak during that uptrend period.

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As you would expect, 2011 not only marked the end of Gold’s uptrend but also its out-performance as stocks have gone on to outperform gold by almost 500%. Investor should be thinking to themselves why be in stocks when gold is outperforming? and vice versa. Diversification?

Gold’s price bottomed at the end of 2015 and has risen slightly since then but has gone nowhere for almost 6 years. Do I need to even say it? It’s been “dead money”. What has caught my attention though, is the saucer bottom that gold’s price has taken on that has formed over that “dead money” period. I shouldn’t have to mention the potential inverse head and shoulders bottom reversal pattern that is in development and screaming out “NOTICE ME”. Please note the word potential as it still has a lot of work to do to get to where it is something more than just “in development”. I have been watching this build out over the course of years and it’s been an agonizing tease as it has failed to breakout above the horizontal resistance zone at least 8 times. As we approach that zone once again, will this time be any different? Or will we get our investment hands slapped once again?

The key for me to over allocate investment capital will be to see at least two things 1) Golds price break out above the pattern’s neckline (blue horizontal resistance area) sooner rather than later before the pattern becomes unsymmetrical and invalid; and 2) a higher high followed by a higher low made on the bottom performance ratio chart. Until then any position in gold is nothing more than a trading vehicle.  

At its current pace, investors will be lucky to see both of these items happen in the near term as such it stays on our radar and is stalked. Besides the potential for a future profitable investment opportunity, the other major take-away’s (something I continue to reinforce every chance I can) are 1) investment themes trend for years as such being able to recognize turning points is key to long term out performance 2) just because an investment opportunity can make you money, it may not be worth your investment capital if it doesn’t outperform your other ideas/holdings.

Maybe This Year

On Jan 2, 2018 I walked into Melanie’s office and told her I had set a goal for myself to see if I could double my small, trading account IRA account in one year (achieve a 100% return).  An ambitious goal but something that is doable with good risk management, some leverage, active trading and of course must include a dash of luck and a cooperative market.

With 2018 now in the rearview mirror and a tally of the results I have to come clean, I did not achieve my goal. In fact, I was far below it. Disappointing no doubt as at one point in the year I was up more than 70% with about 40% of the year left to go I thought it was going to be a slam dunk. I had it all mapped out, I was going to sell everything once I hit that 100% mark and sit in cash and wait for December 31. But, alas, Q4 happened. I didn’t react fast enough to the rapid change in sentiment and so I fell hard with the market. Deal with it big boy, the market is talking and doesn’t care what I want or think. Oh yah, the “Woulda-Shoulda-Coulda” game is a waste of emotional and brain capital too so don’t do it. Its non-productive. If you don’t like the results, change your process.

My return for the year was 25.7%, not bad as I outperformed the SP500 by almost 32%. But those that know me understand “not bad” is not what drives me. So, being the uber competitive individual I am, I will, once again, set another goal to double my account for 2019. The odds are I will fail even worse than I did this year. Why? Because I am human. 2018 provided me the opportunity to fly under the radar with only one person knowing my goal. No external pressure or embarrassment if I failed, just my pride was at stake. You see the sad thing is as humans we have a tendency to act differently the more sets of eyes that are scrutinizing what we do, especially when money is involved. Even though I have the same set of trading rules, because of emotions that drive decisions, I am more than likely going deviate from them even though I know I should not***. Hopefully my genetic stubbornness, adjustments to my process and most importantly my real goal for doing this can keep my emotions in check. I want to make it clear, if I achieve the goal it’s not because I want to gloat or brag, or even because I want a bigger IRA (although I don’t mind this), instead I have something that is way more important to me. I want all clients and readers to know beating the market (and hopefully substantially) is doable in spite of Wall Street’s mantra it’s not possible. If Wall Street is too dumb (and this has nothing to do with intelligence) or lazy, that doesn’t mean it’s not possible. Peter Brandt taught me this and it changed my life. My goal is to do that same for some of you.

Let’s be real. Can beating the market be done every year?  Nope, not going to likely ever happen every year over a long run by anyone let alone me. All of my mentors and people I follow and compare methodologies and processes with do it regularly, but not every year. Each of them has experienced underperforming years, some terribly so. That is going to occur with random markets, it’s inevitable. And what is a common trait is that those individuals become better when they fail. They key-in on and learn from their mistakes/failures, something all of us should do if we want to get better at anything in life. They are also in a continuous loop, never staying idle or complacent but always improving. To be a successful investor all that is required is 1) have a process that provides positive expectancy 2) insure steadfast discipline following the process, 3) access to multiple markets to invest in (more than just stocks and bonds) and 4) an unwavering desire to outperform (a politically correct way of saying being an overly competitive pain-in-the-^%$.

Maybe this year.

Any doubters feel free to email me as I will be more than happy to provide a validation of trades and account values. And no, in case you were going to ask as others already have, I can’t do this for anyone else’s account.  Sorry. On the other hand, if you would like to learn how, please send me an email as I’d love to share with anyone what I have learned (what’s the old Chinese proverb about teaching a man to fish?).

***If you want to learn more about this human trait, there is a really interesting and true investment story you can read, just google the “turtle traders” or email me and I can send you an ebook.

September 2018 Charts on the Move Video

The bulls were out in force as we closed out the third quarter. With the expected year end rally, 2018 looks to be another strong year for the market…. the US stock market. Bonds, commodities and foreign investments continue to under-perform and act as an anchor to portfolios. Mean reversion will eventually show up but, based upon the charts, Q42018 seems like more of the same.

My Q3 recap video can be viewed in the link below.

August 2018 Charts on the Move Video

August was a barn-burner for stocks, specifically US stocks. The Nasdaq popped almost 6% and the rest of US stocks moved higher while most of the rest of the world equities fell.  Its a great time to be an investor in the current US market strength. As the pro's and big money come back from summer vacation will September follow August's lead and continue higher or will it offer something more challenging?  While we wait for this question to unfold, have a look at this months Charts on the Move video at the link below.....



June 2018 Charts on the Move Video

Yawwwwwwwn.   Sideways chop within the Jan -Feb consolidation range until we see a catalyst. I thought maybe trade war fears would be enough to break the trend but apparently not.  Bulls are still in charge.  I don't expect to see a resolution for months so until then, sit back, enjoy the summer and check out this month's Charts on the Move video at the link below  ...