Gold fell off a bit of a cliff Wednesday when the Fed cut rates. The rate cut was expected, but uncharacteristically, Powell managed to calm markets in his press conference. For some reason, the paper gold traders in New York decided to ignore the weaker dollar policy of the Fed and sell gold. This was so clearly wrongheaded, I tweeted about it as a buying opportunity.
That was well received, and several readers wrote in to say that they had acted on the buying opportunity.
But one guy commented wryly that we’ve had enough buying opportunities—nobody wants any more.
I feel for long-suffering gold bugs who are all in and just want a payday. The next gold mania can’t come fast enough, especially for those who bought at higher prices seven or eight years ago.
$2,000 gold now!
I get it. I bought plenty back then myself. Making matters worse, I was required to sell by my former employer pretty near the bottom in 2015.
But I also understand that for lots of folks who missed the gold breakout from its $1,300-range prison, the normal and healthy correction we’re seeing now is a wonderful thing.
I’ve heard from readers who’ve been out of gold and silver stocks for years. Now that the next bull market has gotten going and is showing some real strength, they want in. But—being disciplined, rational speculators—they also don’t want to chase after high-flying stocks and pay too much.
Besides, it really makes no sense to complain about $1,500 gold. This is a great price. The best companies and projects were making good money, or could, at $1,300. The whole world just got better for these stocks, and that will be reflected in their share prices going forward.
But there’s more to be said to those who are already all in than just, “Suck it up and be happy gold is finally heading higher.”
Remember that nothing stays the same for long in the fast-moving precious metals sector.
Many of 2011’s top picks can’t be called that today—and there are many terrific new opportunities that deserve to be called top picks today.
Nobody can spot all the winners in advance. That’s why deep-pocketed speculators like Doug Casey and Eric Sprott use a shotgun approach, buying many junior mining stocks. The 100x winners make up for their many losses. Most of us can’t afford that approach, and have to be much more selective.
And that’s exactly what makes a correction such a good thing.
I can tell you that there are several great gold and silver stocks that got away from me. I would be sincerely delighted to have an opportunity to buy them on the cheap again—with 20/20 hindsight on my side.
A correction is like a stock market time machine; it gives us a chance to buy winning stocks on the cheap—sometimes for even cheaper than they were before they went vertical.
But does this do you any good if you’re already all in?
Nobody’s portfolio is perfect. A period of correction and consolidation is a great time to sell the dogs and underperformers on up days, and buy the new winners we missed before on down days.
A stock-market time machine is a gift for anyone smart enough to see it for what it is and put it to good use.
But how do we know the market hasn’t peaked and will now head back down for years?
Well, we don’t. I think the fundamentals and technicals say precious metals will do spectacularly well in the years ahead, but that’s a subject for another day. The context of this article is people who agree with me that precious metals will head higher. They’re just unhappy to see them going the wrong way for a time.
And to them I say: don’t begrudge the opportunity to those new to the game—nor waste the opportunity a stock-market time machine offers you.
This all begs one final question of whether, if the current correction is such a great opportunity, one should we go all in now. After all, wouldn’t we make less money if we hold back and the buy more at higher prices later?
In the first place, going truly all in is almost never a good idea. There’s always the chance that our expectations or our timing are off. I had no problem buying the silver stock at the top of my shopping list when gold and silver corrected recently. But I held back some cash in case I get lucky enough to buy more at even lower prices in the weeks ahead. That could very easily happen.
That aside, you never know when the deal of a lifetime may pop up. As bad as it is to miss out on something good, or lose money on something bad, the worst pain a speculator can experience is to correctly identify a truly generational opportunity—and not have any cash to take advantage of it.
If the question is, “Should I go all in on my favorite stocks today?” My answer is no. I might have something I favor even more, tomorrow.
But if the question is, “Should I use all the cash I have available for speculation on an opportunity that’s the best I’ve ever seen?”
Then my answer might be yes. But if I did that, I’d look to raise more cash ASAP, in case something even better came along.
I’m not asking myself either of these questions today. What I’m wondering is if some of the remaining stocks on my wish list will get even cheaper in the days ahead.
The honest answer is that I don’t know, but it “feels” like they could, so I’m keeping some powder dry to make the very best use of the stock market time machine that’s available right now.
That’s my take,
Friday, September 20, 7:47am, EDT, 2019