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Prologue & INDEX
ski (04/15/03; 22:32:09MT - usagold.com msg#: 101384)
Golden Nuggets ..... Introduction
I have been reading financial literature for over twenty years and have jotted down a few notes when I come across a brief sentence or concept that seems to contain a great measure of investment wisdom. I have given this personal collection of random financial information the name, "GOLDEN NUGGETS."
I think that some here will find the GOLDEN NUGGETS quite valuable and others may just want to skip my next series of posts. One of the things that I do, is to re-read the entire document prior to each and every investment move that I make with the expectation that I may have overlooked some of the contained wisdom.
I have grouped the "GOLDEN NUGGETS" by subject. They are listed below followed by a number. The number tells you the number of NUGGETS in that subject area.
Proverbs.....there are 49
Supply and Demand Forces .... there are18
When to Buy and Sell .....there are 32
Speculation and Longshot ....there are 45
What to Buy and Sell ..... there are 9
Debt and Borrowing ....there are 11
Bear Markets ... there are 2
For the First Decade of 2000 ...there are 30
Government Action ...there are15
Personal Quotes ...there are 35
Odds and Ends ...there are 32
The entire collection of "Golden Nuggets" is eleven typewritten pages. I have mentioned this collection in many of my forum posts.
Enjoy and benefit!!
ski (4/16/03; 00:10:14MT - usagold.com msg#: 101386)
Golden Nuggets .... Proverbs
1. R. Prechter "Those who have not studied markets (or ski would add, are not following the advice of proven market professionals) should not be investing, they should be saving, which means acting to protect principal, not to generate a return when they do not know how."
2. R. Prechter "The truth is that making money in markets is normally difficult; in fact, for most people, it is impossible." (Be especially aware of money that is easily made.)
3. J. Dines "Amateurs know the rules (of investing), but seasoned professionals know the exceptions."
4. J. Burnstein "(No matter what expert writings' you study) ... We always arrive at the inescapable conclusion that profitable trading in stocks and futures can only be achieved by individuals who are either extremely fortunate or extremely disciplined. Discipline is a rubric under which are subsumed such quintessential skills and qualities as self-control, consistency, organization, persistence, direction, insight, and the ability to take action when necessary. Unfortunately these are skills which cannot be learned easily or quickly."
5. B. Baruch "No law can protect a man from his own errors. The main reason why money is lost in stock speculations is not because Wall Street is dishonest, but because so many people persist in thinking that you can make money without working for it and that the stock exchange is the place where this miracle can be performed."
6. The market is far wiser than any one individual. The market reflects the sum total of people's opinions. The market is always RIGHT at any given moment.
7. Markets are ruled by emotion; if they were not, there would be no markets. If the markets functioned as perfect economic systems, prices woud always be at the RIGHT level. Human nature combined with uncertainty form emotionalism which feeds volatility which generate WRONG prices. WRONG prices generate opportunity.
8. The purpose of money is to get what you want out of life and to insulate yourself from others' stupidity or malevolence.
9. Every time history repeats itself, the price goes up.
10. Economics is basic to everything else, if there is a breakdown, all other systems will collapse.
11. A country that does not have a stable currency cannot survive.
12. Each generation always thinks it's special in some way and that new rules apply to it's games. So they consciously repeat the errors of their ancestors, hoping that this time things will be different. Their always wrong!
13. Human reaction to circumstances tends to be similar in similar circumstances. (No matter what century your calendar says you are in.)
14. The affairs of the world work in fairly predictable sequences, but TIME is one aspect impossible to predict.
15. In every crisis both danger and opportunity abounds.
16. In bull markets, put the majority of your assets in going long. IN bear markets, put the majority of your assets in going short.
17. Experience teaches that following market trends is perhaps the single most profitable trading tool.
18. If you wait till their is nothing to worry about, you'll wait until eternity. Take your position and use stops to protect capital.
19. Knowing how to live, work, spend and save wisely is more important than good investing.
20. Wealth comes from Saving, Investing and Profits.
21. The "other" way of increasing your wealth is to decrease spending, wasting money, paying excess taxes and throwing money away .... this is tax free.
22. All facets of investing take work, time and experience to master. Success comes after you pay your dues.
23. It is almost always a bad idea to substitute someone else's judgement for your own in the hope it will prove to be wiser. A better idea is to improve your own judgment ... usually by making your own mistakes.
24. Because the mix of inputs in a given market is never identical, there is no substitute for your own original, ever-adjusting, ever-compensating thought process.
25. The worst investment you can make is one you do not understand.
26. A change in the initial "Discount Rate Direction" will usually signal a change in the overall stock market direction.
27. Good management is 10 times more important to a company's success than any other consideration.
28. Ski's action formula, "It makes almost no sense to purchase or otherwise acquire good economic advice and not make purchases, adjustments, or otherwise heed the advice by putting at least some of it into practice."
29.It usually makes no sense to buy a commodity when you can buy its producer for a discount.
30. Few things that "everybody" knows are worth knowing.
31. Once you have thought out a strategy, do not change it frivolously.
32. The trend is your friend.
33. Things often take longer than you expect to develop and then begin rushing more quickly than you expect once they are underway.
34. If you want to make a substantial profit, you cannot do it with a limited position.
35. Views ingrained over many years do not turn on a dime.
36. Most people do not like to change their plans.
37. It's just as bad to believe something that is false as it is to not believe something that is true.
38. The longer the bull market continues, the more certain people are that it will continue further.
39. There's nothing like a sustained bull market to make us believe we are investing geniuses.
40. R. Prechter "The effects that a change in (a newly emerging) market trend will have on society ARE NOT IN EVIDENCE at the start of the trend. (However), they become intensely manifest by the time of its termination."
41. When a market moves strongly in either direction, it carries at least 75% of stocks with it.
42. Markets have a tendency to go far beyond what's reasonable on both the upside and the downside.
43. There's no telling how tall a tree will grow or how high a stock, mutual fund or commodity price will rise. (In a final blow-off phase, value becomes irrelevant.)
44. Virtually everything: is cyclical, that goes around comes around, that goes up will come down, that is out of favor will return to favor. At some point, every market reverses itself. (And every prediction eventually comes true.)
45. Markets that appear to defy gravity do so on a temporary basis.
46. Vertically rising markets are always followed by vertically falling markets. The greater the up-move, the more spectacular the subsequent collapse is likely to be.
47. Overconsumption inevitably leads to a period of underconsumption of the same magnitude.
48. Fear like greed comes in waves.
49. Signs of trouble are frequently followed by the real thing.
50. In times of severe economic turmoil, ALL markets forces are disrupted to a point that virtually every trade carries a "turmoil tax". Even commodities like gold and silver may not even reflect their true purchasing power. In such times you are almost always better off being somewhere else that is not experiencing the turmoil.
ski (4/16/03; 00:40:36MT - usagold.com msg#: 101388)
Golden Nuggets .... Supply and Demand Foreces
1. In a free market, the only thing that can change the price of an investment is a change in supply and/or demand.
2. Demand is an economic concept; a function of peoples' wealth, not their desires or even their numbers (population). An increase in wealth precedes an increase in demand. A decrease in wealth precedes a decrease in demand.
3. In a free market, supply always rises to meet demand .. (and demand to supply). Or, in a continuous auction market, supply and demand are always precisely equal, with even the slightest imbalance being immediately eliminated by changes in price and volume.
4. Martin Spring "Inflation arises when there is an excess of demand for good and services relative to supply; it is not related directly to money/credit supply. Only when money supply stimulates excess demand for goods and services do the prices of the latter generally rise."
5. Most information, although disseminated almost instantly, is assimilated slowly and ultimately fully undertood by a small portion of the investing public.
6. Information which is OBSCURE or DIFFICULT TO COMPREHEND is most useful, as that is the type of information which is also most slowly assimilated by most market participants.
7. Often, an object is available for less than you're willing to pay. And if you can obtain it for a given price, the fact that you'd pay more is irrelevant and unnoticed. As long as it isn't necessary, you won't be pressed to determine just how much you would pay for the product.
8. Prices GO DOWN to their lowest profitable selling point as long as the product is readily available because the sellers compete with each other. Prices GO UP when a shortage develops because buyers compete with each other.
9. Stocks go higher only because there is more buying than selling. (Or fall due to more selling than buying.)
10. When a market is slow or depressed, prices are set by those who have to sell. It is pretty rare that someone has to buy .... buying is discretionary.
11. Regardless of the overall direction of the market, relatively overpriced stocks tend to decline, and under priced securities tend to rise.
12. A broad base of buyers (or sellers) is more secure and predictable than a narrow base.
13. Taxes cause people to consume fewer of the things that are taxed.
14. What "other" markets are doing will spill over into your market.
15. Marc Faber "Liquidity always heads towards a rising market."
16. CONVENTIONAL WISDOM has an incredible pull and consequently always has a profound impact on investment markets that directly correlate to it. Stated in a slightly different way, "markets make opinions".
17. Jim Puplava "Markets are just as much influenced by PERCEPTIONS as they are REALITY."
18. Cheaper prices in a "recessionary industry" will stimulate growth in complementary industries that use the products created by the "recession industry."
ski (4/16/03; 02:06:53MT - usagold.com msg#: 101389)
Golden Nuggets .... When to Buy and Sell
1. J. Blanchard "The smartest investors buy when an investment is cheap. It sounds silly to point out such an obvious investment truth. But history shows that only a very elite (and small) group of investors has ever been able to apply this simple wisdom to the markets."
2. Knowing WHAT TO BUY (or sell in shorting) is only one third of the problem. Knowing WHEN TO BUY and WHEN TO SELL are the other nearly equally important considerations. Human nature tends to pay the closest attention to "what" and not enough to both "when's".
3. Jim McKeever "Avoid bottom guessing and instead buy at the beginning of stage #2. This can be identified by the following: First, it must breakout above a previously reliable moving average. Second, it must break out above a previous high & ideally above all of the highs in stage #1 basebuilding phase. And finally, the previous should happen on significant volume." (Thin volume could be a false breakout.)
4. The idea is to be in a given investment only when the odds of its going up appear to be 90% or better; and to be short when the odds of its going down are equally strong.
5. BOTTOM GUESSING (or top guessing) is a dangerous thing, and more often loses money than it makes. It is usually based on fundamentals; which can give us the ultimate direction of a market, but we have to go the the technicals for timing. Fundamentals can never give us the timing as to when to buy or sell; only the direction. Bottom guessing is for novice and arrogant investors who haven't yet learned its insidios folly. Because the odds are so overwhelmingly on my side, I would take any bet against a bottom (or top) guesser.
6. Bull markets begin after a bear market has bottomed out and the market is severely oversold. There is dispair and people think they never want to touch that particular market again. That is the negative attitude out of which bull markets are born.
7. When a bottom is at hand, a feature article with strong emphasis results in only sporadic buying.
8. At bottoms, the most common or typical investor is the very sophisticated investor. At tops, the most naive.
9. It is rarely wise to "chase" any market when prices are charging ahead or even right after they have had a significant run up. (The converse is also true for falling markets.)
10. BUY, BUY, BUY ........ when the market tells you when to buy (a fast moving average crosses a slow moving average), buy at a point of maximum pessimism, when you can't convince anyone to buy, when prices are almost unaffected by bad news, when things literally cannot get any worse than they presently are (dispite your and everyone elses' feelings of the day) and can only get better, on bad news, at market bottoms, when everyone else is pessimistic and trying to sell, after prolonged negative periods where the last discouraged seller is gone, when a state of "no hope" exists, when a market is held in contempt and the investment is commonly thought of as foolish, stupid, ignorant, or forgotten, when the market is quiet, trading volume is low, when prices are stable or cheap, during extended periods that are void of positive news stories (under-reporting), when the item is easy to find, before people and dollars start chasing it, when EVERYONE else is negative (possibly even the contrarians, speculators and tired, old, diehard bulls), when a last substantial selling climax can be identified, when nobody else is or on weakness, not on strength. Do not buy when there are too many buyers because you will pay too much. Do not buy all at once (it may become a better bargain). Start buying when you are ready .... not forced or pressured.
SELL, SELL, SELL ...... when the market tells you when to sell (a fast moving average crosses a slow moving average), when things cannot get any better than they presently are (despite your and everyone elses' feeings of the day) and can only get worse, on good news, at market tops, after extended periods that lack urgent selling, when the item is expensive and rare, when it is easy to convince others to buy, when the investment is regarded as a low risk, desirable and highly respected by the public, when buying decisions are thought of as simple, sound, wise, elementary, no-brainers by novice investors, when novice investors are confidently giving market advice and sharing their wisdom, when the market is hot, trading volume is high and investments are loved, when volatile price swings are the order of the day, when everyone else is optimistic and buying, when Wall Street and Main Street investors hold huge positions, when you can't find a bear or a person who is actually acting like a bear, when a continuous steam of positive news stories are commonplace (over-reporting), when a last substantial buying claimax can be identified. Sell on strength not on weakness. Never sell when there are more sellers than buyers because you will not get the best prices for your goods. Don't sell all at once (the price may become even better). Start selling when you are ready.
11. When a market does not do what it should do, that is a sign to pay attention. Or, a market that will not rally on good news will usually fall rapidly on bad news.
12. Old saw: "When a market should fall but doesn't, that's the place to be."
13. When a market closes above or below a key target for three days in a row, assume a new trend is in place.
14. Anytime you can buy a commodity that is in demand for less than it's cost of production, in the long haul it will pay off.
15. In the short run, markets move on the public perception of the facts (not reality); in the long run, markets move on the reality or actual fundamentals (after traders finally wake up to their mistakes).
16. When the technicals and the fundamentals both point up, we want to be long in a market. When they both point down, we want to be short. But when the fundamentals point in one direction and the technicals point in another, caution needs to be exercised.
17. The majority is always wrong. The majority rush to buy at market tops and rush to sell at market bottoms.
18. Unanimity of public sentiment is perhaps the most certain single indicator that a top of a speculative boom has arrived.
19. When everyone knows an investment is a "smart move", the top has probably been reached.
20. Important tops can sometimes be identified when a majority of investors are more afraid of not catching the next upmove than being caught in the next plunge.
21. The death knell of any bubble is the growing reluctance of investors to commit new cash to a market that seems to have lost its irresistible upward momentum.
22. Money drives prices ... The most important determinant of investment market trends is a change of liquidity.... more liquidity (money) drives prices up.... and contracting liquidity is what drives prices down.
23. Steve Saville "A rising price, not a falling price, stimulates investment demand for any investment."
24. High volume churning after a long run-up means that all buying is being met by an equal amount of selling. Eventually, the buyers will run out of money, or patience, or both. Then the sellers take over.
25. Declining volume on rising prices is always the sign of an important top.
26. A higher volume of trades on upticks is bullish. While a higher volume on downticks is bearish.
27. Insider buying is normally a better indicator than insider selling.
28. In the early phases of a bear market, the bargain hunters buy the dips. Suddenly the dips become corrections, which then trigger more profit-taking. Finally the correction turns into a plunge, with everyone scramblng for the exits.
29. At market tops or during severe corrections, "euphoria" turns into caution. "Caution" turns into concern. "Concern" turns into fear.
30. Use bear market rallies to sell off your stocks and to short weaker stocks.
31. For the prudent investor, on the way up you buy the dips but on the way down, you short the reversal peaks.
32. By all means, leave the door open to your mistakes and let the market tell you when to sell by using "stops". A stop-loss should be located at a price that, if touched, would tell you that your expectation was wrong & that you should get out. Stop-losses also protect you from totally unexpected surprises that were impossible to see coming.
ski (4/17/03; 01:07:11MT - usagold.com msg#: 101441)
Golden Nuggets ..... Speculation & Longshot
1. H. Browne "but in the real world, speculating isn't simple ... Successful speculation involves risk, hard work, hours of study and humility to admit one's mistakes (and learn from them). Not surprisingly, these are the requirements for achieving anything important in life."
2. Jerome Smith "Truly outstanding investment opportunities occur only occasionally. In general, opportunities are normally long term in their maturation, and by careful study can be foreseen long before they come to the attention of most investors."
3. The last to see a new truth (paradigm) are usually the former leaders under the old paradigm.
4. H. Browne "A large firm may have extensive research facilities. But profitable ideas seldom come from amassing huge amounts of information. They usually come from independent thinking about the information that's available to everyone."
5. H. Browne "Normally, big gains are possible only if your opinion differs from the prevailing view. (However), Don't expect to make money just by being contrary."
6. A speculative opportunity exists anytime there is an immense chasm between perception and reality.
7. R. Prechter "The Elliott Wave Theorist's position has been that successful investing requires one thing: anticipating successful investments." (Said in a similar way .. (Anticipate where the money will flow next.)
8. R. Maybury "New dollars are always going somewhere and wherever that is, prices rise. That place is where an investor should invest."
9. J. Dines "A way to make money in the stock market is to find an area with explosive growth and mindboggling potenial; then investing in it as early as possible."
10. J. Dines "The fact is, to make real oney, you have to act before the crowd. But he who is first always LOOKS wrong, by definition."
11. R. Prechter "The early buyer makes the most in a bull market, and the early seller preserves the most in a bear market."
12. It is not necessary, or prudent, to invest 100% of your capital in search of a 10% gain when the same result can be achieved by investing 10% for a 100% gain.
13. You are only likely to get 1,000% returns over a business cycle in those investment areas that have already crashed and have hit bottom.
14. D. Dreman "NONE of us can escape the anxiety and doubt that permeates a crisis."
15. D. Casey "Make fear your friend."
16. D. Dreman "In a crisis, carefully analyze the reasons put forward to support lower ... prices. More often than not they will desintegrate under scrutiny."
17. Sellers make unusually high profits ONLY when they've had the foresight to make available to demanding consumers, a supply of items that few others have to offer.
18. Sir J. Templeton "Bear markets start at the point of maximum optimism and bull markets start at the point of maximum pessimism. We are close to maximum optimism (in the US stock market 5/96). There is an arrogant belief that things are going to go this way indefiniely."
19. A GOOD speculator looks 'where and when' nobody else does, to afford a better chance of finding bargains.
20. Being in the minority doesn't make you right, but it usually means that you have more to gain if you are right. In general, the market offers big odds only when your interpretaton differs from most other investors. When you share opinions with the crowd, prices will already reflect everyone's expectations.
21. D. Casey "Good speculators are always LOW-RISK speculators. Far from taking risks, speculators only go in for SURE THINGS."
22. Ski's thought: A GREAT speculator looks for 'REVERSE BUBBLES' (the exact opposite of BUBBLES or MANIAS) where everything that can possibly go wrong over an extended period of time (at least several years) HAS and the bear has fed upon itself to a point of hyper pessimism. These 'REVERSE BUBBLES' will usually have as a prerequisite, a capitulation selloff on high volatility and high volume. The still viable investment will be on sale for 90% off or more!
23. Long term forecasts that indicate a CHANGE IN TREND at the right time will NEVER have a widespread acceptance. The reason that such forecasting is dismissed is that by nature, human beings project the future linearly, not cyclically. A good deal of study, experience and practice are required to UNLERN the natural tendency and adopt the correct orientation.
24. D. Casey "The longer good times continue, the less likely bad times seem ... But the truth is just the opposite."
25.The Bank Credit Analyst "Major bull and bear markets rarely end without a substantial overshoot and a buying or selling climax."
26. Mania's kill the smart people partly because being reckless, fully invested, and highly leveraged are the strategies that reap the highest rewards ... not conservative investment practices. R. Prechter "The mania plays the genius for a fool and the fool for a genius, and then slay the fool for believing it."
27. A bull market (prosperity) dulls people's senses.
28. Watch for depressed (long opportunities) or inflated (short opportunities). In other words, look for GROSS distortions or anomalies ... severely undervalued or over-valued opportunities.
29. Look for over-reactions to political events for buying opportunities especially when you want to re-enter a market and are looking a dip.
30. As investment fashions change, the first tend to become last and the last to become first.
31. Bottom picking is a delicate art because stock prices often turn before fundamentals.
32. Watch for extreme psychological top and bottom indicators to alert you to opportunities.
33. Examples for #32 above:
TOP: greed, zealous, fervent, unanimity of public sentiment, elation, passion, fervor, smart move, highly respected, now or never, give in
BOTTOM: non-existent or zero optimism, dismay, disrespected, distress, it can't get much worse, dispair, unbearable pain, dead, fear, panic, wipe-out, give up, gone forever, irreparable, can never recover, not worth the time of day, death
34. Ask the common man what investment is most likely to gain in the future to find out what is overpriced or in for a fall.
35. If there is anything in speculation which requires courage and power of will, it is selling stocks at high prices.
36. When risk is high, it's better to be 'out, wishing you were in' than 'in, wishing you were out'. In the former, you are losing an opportunity. In the latter, you are losing your capital.
37. Leverage into any market at the bottom, not near the top. But keep some cash to weather temporary downturns.
38. When everything about an investment looks right, one can have some positions that are highly concentrated. Mark Twin said .. "You may put many of your eggs in one basket as long as you watch your basket carefully."
39. James Sinclair "The only way to make big money is to have the courage to put your eggs in one basket."
40. Stay with an investment decision until the price rises or the facts prove you wrong.
41. The longer the base building goes on the bigger and more dramatic will be the break out to the upside.
42. Never spend all of your investment money because other terrific opportunities may present themselves.
43. Ski's thought: Contrrians have much better odds of making money by betting against overbought situations versus oversold ones. Why? In oversold (bear market) situations, contarians can never be quite sure if the herd will ever recognize and act on a given oversold condition. In overbought situations, all bull markets will, at some point in time, reverse their course and fall.
44. Ski's Top/Bottom indicator:
a. No matter what the facts, circustances and prevailing knowledge of the day indicates, if there are NO MORE POSSIBLE DOWNSIDE RISKS AND THINGS CAN'T GET ANY WORSE .... you are at or near a bottom ... period. At this point, when everyone is saturated with fear, from a profit/contrarian perspective you should have maximum bravery.
b. As to market tops, no matter what the facts, circumstances and prevailing knowledge of the day indicate, if there is NO MORE POSSIBLE GOOD NEWS AND THINGS CANNOT POSSIBLY GET AN BETTER .... You are at or near a top ... period.
c. One qualifier .... Even if things appear as though they can not possibly get any better, un-heard-of and un-thought-of positive/negative surprises are always possible.
45. Ski's speculative, common-thread theory: All markets that go to un-imaginable extremes on the up-side as well as the down-side must contain at least one or more significant, pervasive, mystery elements that are impossible or nearly impossible to properly analyze. DOW: options and derivatives. Gold: leasing, market intervention Silver: COMEX, hidden stockpiles
ski (4/17/03; 01:27:48MT - usagold.com msg#: 101442)
Golden Nuggets ... What to Buy and Sell
1. Ski's thought on what to buy and sell, "Buy the stocks of companies that promise to produce a stream of increasing future earnings. Or sell stocks of companies that promise ot produce a decreasing stream of future earnings."
2. Peter Lynch "There's no better tip-off to probable success of a stock than people in the company putting their own money in it." (The converse would be massive insider selling.)
3. D. Casey "It's usually a mistake to bet against an established trend."
4. The BEST predictor of higher commodity prices is a sustained period where prices are well below the all-in costs of production.
5. D. Casey "An old economy stock is historically considered cheap if its market cap approximantes total sales."
6. Steve Puetz "In a capitalistic economy, PROFITS (or the expectation thereof) are the most important factor to monitor."
7. Steve Saville "Very few people in the world purchase an investment because it's getting cheaper."
8. J. Powell ... former Vagas gambler "Never play another man's game."
9. Ski's Poor Pricing Paradox: "There are two distinct classes of investors that are prone to making the greatest pricing projection errors: A. rank novices (they know too little and are blissfully ignorant of elementary fundamentals). B. the most knowledgeable or the professionals closest to the particular situation .. (they know too much and don't realize the degree of mistakes that the uninformed herd is capable of.)"
ski (4/17/03; 01:39:22MT - usagold.com msg#: 101443)
Golden Nuggets ... Debt and Borrowing
1. Steve Puetz "People do not borrow money with the intent of letting it sit in a bank account."
2. One persons debt is another's asset.
3. The worst loans are made in the best of times.
4. Eventually, all debt must be repaid or defaulted on. Period.
5. Saving will normally increase the savers future standard of living, just as borrowing will normally decrease it.
6. Savings represent postponed pleasure.
7. When income and standards of living are rising, past debt becomes easier to bear. During deflationary depressions, when wages and living standards decline, debt becomes an onerous burden.
8. Borrow only for goods or investments that produce more wealth (don't borrow for consumer or consumable goods.) Wise borrowing should pay itself off with the increased profit that it generates.
9. Paying down high interest debt is the same as earning interest or money.
10. When the government or anyone borrows just to pay the interest, you can be sure that the game is over.
11. Setbacks encourage reflection, ... success nourishes action.
ski (4/17/03; 01:45:18MT - usagold.com msg#: 101444)
Golden Nuggets ... Bear Markets
1. The biggest daily rallies in market history in % and absolute terms occur in the midst of raging bear markets. They did not happen during the bull bubble period. Bear market rallies are almost always extremely impressive and compelling. Average bear rally length 1929 DOW 9 weeks, 2000 NASDAQ 6 weeks.
2. Adam Hamilton "Bear market rallies are confusing for everyone ... bull and bear alike."
ski (4/18/03; 00:15:18MT - usagold.com msg#: 101497)
Golden Nuggets .... For the First Decade of 2000
1. Ski...What will be the practical consequences of an inflationary depression be for me? To have any hope of grasping this question adequately, every major category of life should be evaluated individually ... cultural, political, social, moral, spiritual, investments, retirement, pensions, savings, real estate, debt, job security, psychological, militarily, travel, education, experience, etc.
2. W. Buffet "The mere fact that share prices were rising so quickly became the main impetus for people to rush into stocks."
3. In the age of instant everything, the conventional forecasting time horizon has consistently been shortened and is now only a few months long. Negative events of 6-12 months ago are simply relegated to the past. Forecasts are simply a refletion of present conditions and the trends that led to them. Everyone is growing shortsighted.
4. Ski's deduction: Due to the internet & other instant communications trends, both good and bad info will be disseminated and acted upon much more quickly. Time horizons will compress. Volatility will increase. Money will be made and lost in less time. Business cycles will shorten. Keeping up with the news and using stop losses will become more important.
5. D. Casey "For the 90'S .. First, keep what you have. Second, cut back your current standard of living. Third, speculation may prove the most prudent of investments."
6. Recession ... A period of time when distortions and misallocations of capital caused by the business cycle are liquidated.
7. All of the improvements of the last 50 years have solely been in the fields of science and technology. Meanwhile, economic, social and intellectual foundations have been crumbling. Most of the amenities we now have that make life better are products of the industrial revolution, and the attitudes that made the revolution possible are not widely in favor today. Psalm 11:3 "If the foundations be destroyed, what can the righteous do?"
8. No currency ever really gets stronger; it only becomes stronger relative to other currencies that are weakening faster.
9. Population is growing geometrically and agriculture is not.
10. For the first time, more Americans work in government than manufacturing.
11. As of early 1993, almost every basic agricultural commodity is selling for less than its cost of production.
12. As the govt. tries to prop up the economy with ever more desperate measures, the 'short term' will become more unpredictable while paradoxically, the 'long term' more certain.
13. There is a huge gap between reality and the public perception of reality. What people perceive is happening and what is really happening are quite different.
14. Economically or socially ... the things that sink your ship are the things that you're un-prepared for.
15. You cannot hide real estate, which makes it the most taxable of all investments.
16. Real estate prices are determined not by the 98% that are holding but by the 2% that are active in the market.
17. In real estate, the surest and largest profits will be made by owning something that the rich are likely to want.
18. The last people to become aware of globalization and the consequent increased value of their assets are the local people in that region ... the rural and unsophisticated who have never ventured out very far.
19. B. Dohmen "This is the century of Asia, and that's where you want to have most of your investment money over the next several decades." (Or in something that is "tied" to Asian prosperity.)
20. R. Maybury "I think raw materials will be to the next decade what high-tech was to this ... the new glamour industry where profits will be spectacular."
21. The average Chineese family saves (and invests) a remarkable 38% of their income. What's your excuse?
22. D. Casey "The single most profitable thing you can do year in and year out is to short."
23. D. Casey "Short sales should be restricted to stock promotions, stock frauds, and companies that are on there way to bankruptcy. Stick to companies on their way to the trash can even in the best of times."
24. The bottom line on bonds is that they're a triple bet ... on the solvency of the issuer, on the value of the currency, and on the level of interest rates.
25. While today's average bondholder is convinced that a poor economy means rising prices for bonds, history will reveal that on a larger scale, a poor economy means DEFAULT.
26. The present trend is toward quality and to things that last.
27. In the US at present, expect people to spend EVERYTHING they earn or are given by government.
28. The central thing to remember in an inflationary environment is "time eats money".
29. In an inflationary environment, STOCKPILING is the only sure way of maintaining wealth.
30. Events, changes and opportunities will come quickly. Therefore, attempt to anticipate future needs and move to meet them now.
ski (4/18/03; 00:39:27MT - usagold.com msg#: 101500)
Golden Nuggets .... Government Action
1. At the end of the 20th century, the main danger to your wealth comes from government.
2. Never before has govt. been able to exert so much control over the citizens and can now more easily operate in the "national interest".
3. Mistrust most public pronouncements by govt. officials, politicians, bankers and monetary authorities. In many cases, lying furthers their own personal interest or is done to preserve their own positions.
4. Confiscatory taxes, regulation and inflation all destroy public morality.
5. There are only four ways to raise govt. revenue: taxes, inflation, borrowing and confiscation.
6. All forms of taxation, inflation, regulation, tariffs, price controls, subsidies, unionization and special privileges are nothing more than well disguised, legalized forms of THEFT. In the long run they decrease production and competition and thereby lower everyone's standard of living.
7. Taxes, like every form of govt. action, cause distortions and misallocation of capital. Taxes induce people to act in ways they otherwise would not.
8. Someone receives each of the tax dollars the govt. confiscates from someone else. Or, for everything that is given, something is taken.
9. Regulations .... cause people to change their actions.
10. Politicians always think short term because by the time the long run comes, someone else will be in office or they can count on the fact that the people will forget who did it to them.
11. The govt. creates new money by selling its debt to the Federal Reserve, which credits the govt.'s accounts with federal reserve notes (dollars) at various commercial banks. In other words, the govt. acquires the dollars at zero cost and is able to trade them for real wealth at face value; the state benefits directly and drains resources from the private sector to itself through inflation.
12. With regard to ineffective laws, the laws will not change until some true crisis makes change imperative or unavoidable.
13. R. Maybury "Governments act rationally only after all other possibilties have been exhausted."
14. Like a boulder rolling downhill, it's rare that any downward (social or political) trend can be turned around once it's underway.
15. Whatever you TAX or REGULATE you get LESS OF: customers, buyers, sales growth, demand ... etc. Whatever you SUBSIDIZE you get MORE OF: poverty, home sales, employment (tax cuts), airline companies, cotton, defense industries .... anything!
ski (4/18/03; 01:29:19MT - usagold.com msg#: 101503)
Golden Nuggets ... Personal Quotes
1. Maggie Thacher "The veneer of civilization is very thin." (barbarism)
2. B. Livingston "Self-preservation is the first law of nature. It is not immoral."
3. R. Maybury "The economy is not a machine, it is people. Investment charts, graphs and statistics give the illusion of an exact science but every investment forecast is, at bottom, an attempt to predict human behavior."
4. Bert Dohmen "The markets are never wrong. They reflect the supply and demand relationship of the moment."
5. Bert Dohmen "Locals in any market are always too negative at market bottoms. They know "too much" about the dismal state of events and don't recognize values."
6. J. Dines "Bubbles are invisible to those inside the bubble."
7. Bill Miller "Even Benjamin Graham decided his views by the experience of his time and became captive of that experience."
8. Benard Baruch "Success in speculation requires as much specialized knowledge as success ... in any other profession."
9. Benard Baruch "Buy stocks when they are low and sell them when they are high."
10. B. Dohmen "All of the best and strongest bull markets have commenced with huge upsurges (momentum moves). The greater the surge, the longer the demand will last."
11. L. Rukeyser "Stocks are the only commodities in America, were, when you lower their prices, no one wants to buy them."
12. S. Fraser "Do not buy the natural resources sector in November (due to tax loss selling pressure).
13. D. Casey "The irony involved in gaining knowledge on a subject is that the more you learn, the less you think you know. While your COMPETENCE improves, your CONFIDENCE ... will likely lessen, because more knowledge draws your attention to what can go wrong (and to what you don't know.)
14. J. D. Rockefeller "If you want to become really wealthy, you must have your money work for you. The amount you get paid for your personal effort is relatively small compared with the amount you can earn by having your money make money."
15. J. Templeton "Looking for a good investment is nothing more than looking for a good bargain."
16. B. Graham "Buy stocks as you would buy groceries. Not as you would buy perfume."
17. R. Rule "It is better to buy a great company at a fair price than to buy a fair company at a great price."
18. Warren Buffet "The single most important rule in investing is to avoid losing money."
19. Warren Buffet "I want to be brave when others are afraid and afraid when the public is brave"
20. R. Czeschin "The problem for most people who end up the victim of events if failure to properly understand (and prepare for) the obvious."
21. Gary North "No rumor should be considered true until it's officially denied."
22. Dr. Franz Pick "The destiny of the currency is, and will be, the destiny of the country."
23. H. Browne "You only produce or exchange when you believe it will lead ultimately to something you want."
24. Marquis de Custine on Czarist Russia "Oppressed people always deserve their fate; tyranny is achieved by a whole nation, it is not the accomplishment of a single individual."
25. Thomas Hobbes "Freedom is government divided into small fragments."
26. H. Schultz "In a real inflationary depression, the only way to keep fairly liquid and at the same time be invested with the trend is to short."
27. H. Schultz "It takes a special type of courage to look disaster straight in the eye and work out how to capitalize on it."
28. H. Schultz "Volume, in my opinion, is both the most important, least understood and worst measured factor in the stock market ... Also, ... prices tend to follow volume as a close rule of thumb."
29. R. Prechter "Market justice is the payback that the dependent person receives for abandoning his independent judgment to the emotions of the crowd."
30. Kenneth Tarr (pre-2000) "There is an event in every generation's lifetime that seperates people from their capital. We have not had one, (ours) yet."
31. R. Prechter "Ultimately, manufacturing (or tangible production) supports all wealth."
32. Ron Ellison "One thing we know about addiction is it's pretty difficult to wean folks off anything that causes great euphoria ..... In other words, it's very hard to keep them in the trenches after they've had a taste of gay Piaggi."
33. Ron Ellison "As the old saying goes, the public is usually 'right' in the middle and 'wrong' at the ends."
34. Bill Bonner "Unprofitable investments waste capital ... make people poorer, not richer. What causes people to make unprofitable investments? Loose credit."
35. Dostoevsky's spent his entire literary career proving that the major struggle in our personal lives is not between good and evil but between humility and pride.
ski (4/19/03; 00:13:31MT - usagold.com msg#: 101564)
Golden Nuggets ..... Odds and Ends
1. On sophisticated oppression. Opposition to most human endeavors will arise with time, but if you own it (the opposition), it will never be a real threat to your enterprise ... and it may choke out legitimate opposition.
2. Economically a slave is just someone that is taxed at 100%.
3. Or Russia ... since the state owns evrything, theirs nothing to tax. When the ruble is worthless, there is nothing to induce workers to work for the state, or farmers to farm ... all economic activity will take place outside the system.
4. The four G's of survival are God, Guns, Gold and Groceries.
5. Victims are terrible judges.
6. When people rise above subsistence level, the first thing they want is .. to eat a little better.
7. As a country becomes more prosperous, it becomes more independent.
8. CHANGE does not necessarily beget improvement ... quite the opposite is possible.
9. Mary Aden "Major market changes can be triggered by ANYTHING."
10. In the long run, the best use of money is to invest it in the tools of production.
11. Financial markets react to what they sense about the future. If they just followed present events, you could read today's paper and buy and sell accordingly. Financial markets reflect "what will be" not "what is".
12. The best use of mutual funds is to make investing more convenient once you know what you want.
13. Close-ended funds generally offer the greatest potential returns.
14.Experienced investors never buy a common stock without first checking to see whether a company also offers a convertible.
15. Only short "low" or "no" dividend stocks.
16. Ask about "B" shares of "load" mutual funds. Often you don't pay for the front-end load if you hold the fund for at least 5 years.
17. A successful hedge will do two things: reduce your risk and increase your profits.
18. The best indicator of the value of a house is what it will rent for. 1% of market value per month. .... Just multiply rent X 100 to get approximate value.
19. Except in inflationary periods where real estate values are constantly rising, home ownership is seldom a sound investment as it ties up capital that could be working elsewhere.
20. The time to purchase real estate is when it can be purchased for back taxes.
21. Once real estate is depressed enough (in real terms), it will once again become an inflation hedge.
22. A company is a good value when, it's "private" or "wholesale" value is no less than the sum of all the shares outstanding. (the market capitalization)
23. Ski's axiom: An individuals MATURITY LEVEL is directly proportional to the INCREASE of the number of times they say NO to the times they say YES.
24. Take responsibility away from individuals and the more irresponsible they will become.
25. Ski's thought: All history books teach one re-occurring lesson. Things never stay the same for long.
26. Ski's conclusion: Egypt, China, Greece, Rome, France, Spain, England .... empires that have fallen ... but why? I conclude that the vast majority of the 'seeds of destruction" of an advanced civilization are rooted in the DIVISION OF LABOR. As civilizations mature, only cobblers have the knowledge to make shoes, only farmers are experienced at making hay, only mechanics have the requirements to repair cars, only doctors are licensed to treat diseases, only the religious leaders possess the know-how to talk to God, only lawyers are certified to deal with the laws they have created and only politicians have the expertise to govern. Because of the DIVISION OF LABOR, the greater tendency is to mostly do what you are specially qualified, educated, regulated or licensed to do. The result is that we then necessarily and voluntarily, disassociate ourselves from the activities & interests of others & TRANSITION ONTO A NEW COURSE of preserving our own agenda; practiced in real life, this would constitute a very subtle but DIFFERENT objective. ("TRANSITION ONTO A NEW COURSE" .... Imagine Columbus setting out for the New World with only a one degree course change ..... He would APPEAR to be going in the same direction but would have actually ARRIVED in a significantly different destination!) The resulting paradox is that in a specialized society, relatively few people know what you are actually up to, whether you are doing a good job, or if your actions are productive, counter-productive, or downright harmful to others in your very own society. The final outcome is that members of the advanced civilization then have the capacity to conceal their incompetence, hide their real agenda, line their own pockets and generally preserve their own self interests to the detriment of others ... right up until the final day of the inevitable social collapse. In the case of politicians, until the very last penny has be squandered, the vault is empty and the enemy is at the gate .... after it's too late to fix the problem.
27. Ski's seen: Of the thousands of different possible fields of study that an individual could embark upon, INVESTING is at the absolute top of the list as being the most: difficult to master, in-exact, ever-changing, confusing, technically involving, frustrating, un-predictable, costly, emotionally draining and loaded with exceptions and paradoxes. It is among the least scientific yet is supported with mountains of mathematical formulas, charts, graphs, ratios and the like. INVESTING is loaded with "good-intended" but bad, out-dated, conflicting or fraudulent information .... it is the most subject to being "rigged" against you. This is the central reason why virtually all investors, with the exception of the pro's, need to choose and heed the advice of a single, proven, professional investment advisor.
28. Ski's perspective: The art of successful investing is similar to looking into a kaleidoscope. At any given moment, various economic events and forces combine to form a picture .... a picture that accurately reflects that particular moment in time ... this moment in time is reflected in the "market price" for that investment at that moment. Thus, the market price is always "right". However, just as you can never EXACTLY duplicate a particular view in your kaleidoscope, the market NEVER perfectly repeats itself either. Therefore successful investing requires not only a study of HISTORY but that the individual constantly factor in the CURRENT technical & fundamental forces at work. In this endeavor, beware of "history repeats itself" talk. It repeats itself but never perfectly.
29. My "investment SPEED theory" says: One reason that we tend to get it wrong with investing and economics is that economic events take place at a speed that we are not programmed to grasp or that we are psychologically unaccustomed to adjust too. Events might be too slow or fast to see recognize, comprehend and internalize. The great depression had been underway for a few years before people even recognized that they were in it. (Imagine a slow motion landslide ..... its great mass and great ultimate destruction.)
30. In business... What is the source of your competitive advantage?? "Creating a customer experience superior to anything my competitors can create" is the core component of most successful businesses.
31. Ski's theory of magically changing investment strategies: During a sustained equity bull market, a bullish investor is likely to adhere to one or more specific investment strategies. Such as: individual stock selection, dogs of the DOW, buying the dips, buy and hold, index buying, mutual funds, large cap, small cap, value, growth, tech, throwing darts etc. etc. etc. No matter how DIFFERENT the strategy, virtually every strategy performs its magic as long as it ultimately gets the bull invested during the dominate up-trend. (The end result is that the investor psychologically buys into the ILLUSION that it was HIS STRATEGY that worked. It worked, not because his specific strategy was so wisely chosen, but because the trend simply carried him along.) No matter what strategy(s) the bullish investor is sold on, a cruel reality takes place as the market transitions into a sustained bear event. Without the investor even realizing it, virtually each and every one of the individual and formerly successful bull strategies magically TRANSITIONS into a completely different, SINGLE, NEW investment strategy..... BOTTOM GUESSING! Examples of the prevailing market chatter include: we are buying the dip, the market is bottoming, 'V' or 'U' shaped recovery is next, projected end of the slide, business recovery, soon to follow, going to get back on track, historic buying opportuity, market is undervalued etc. etc..... As the bear market chews up the bull profits, EVERY STRATEGY VOICED by EVERY BELIEVING BULL ultimately now BOILS DOWN to nothing more than some form of BOTTOM GUESSING .... and he doesn't even know it! Where too from here? Just as the bears were wildly unsuccessful at picking TOPS on the way up, bulls will be equally unsuccessful at picking BOTTOMS on the way down.
32. Ski's quiet moment says: In investing and many other life pursuits' as well, pride is usually your enemy, humility your friend.
End of Golden Nuggets .....
© 2003 All material is copyrighted property of the indicated contributor, presented at USAGOLD by permission. All rights reserved.