We have continued to mention that the big picture is simply to survive the bear market and arrive at the bottom with both capital and psychology intact. If you find yourself at the bottom and you are rattled and beset with fear as a result of a bunch of blown trades due to chasing false bottoms or your portfolio value is a tenth of what it once was, you have lost the game. Simply put you will be damaged goods throughout the upcoming bull market.
Rambus’ big picture chart is very instructive as it highlights what I believe the past 4 years has been all about. This wicked 85% bear market in the PM stocks I believe is simply a consolidation of the great bull market in precious metals of the past 47 years. It essentially started in 1968. It got a big boost on August 15 1971 with the Nixon reneging. After the peak in 1980 we underwent a 20 year consolidation. The next leg up lasted 11 years and now we see ourselves consolidating that advance. Maybe we have another year of that process. Who knows really how long it will take. I think the fundementals driving this is the process of the death of money. As we get closer to the end, we will enter the terminal phase and things will speed up, so this cycle of consolidation we are in now should be much quicker than the 1980-2000 cycle. I think we need to complete the deflationary part of it before we get gold to renew its advance. Its easy to see this in the actual metal price, not so easy to draw these conclusions by looking at the stock prices. That is of course a reflection of the reality that these companies have such short life cycles that they can’t span these vast time lines intact and they blow up or get merged out of any form of recognition.
But the point is one can now see a resolution to this bear market in Rambus’ charts of the gold price. Once the bear is over and completes its base, we will see a breakout to the upside. That initial breakout will retrench and test itself. Once the test is complete, the next leg up should be a sight to behold. If you haven’t established your positions by then all I can say is good luck to you. In the beginning of this bull market (1968) there were about 170 US dollars in existence for every ounce of gold held by the Treasury. Today that number is north of 7,000, and that’s if you believe there is any gold in the US Treasury. I would think someday the gold price will reflect this reality in some form.
So hang in their knights, purpose NOT to get blown up financially or psychologically and keep refining your shopping list. The bottom process will be a challenge to negotiate. I am working on a series for the future on the phases of a bull market, but let’s not get ahead of ourselves.