Gold: LET THE WILD RUMPUS BEGIN!
- Joshua M Brown
- November 12th, 2010
O. M. F. G.
Richard Russell, James Cramer and my mom all agree now – gold is the move.
That doesn’t tell me there’s a top in gold – that tells me that the parabolic, hyper-speculative phase is imminent. You know the one I’m talking about. Where the chart becomes an Empire State Building and Donald Trump announces the first-ever Mine & Casino somewhere out west.
Read this recap of last night’s Mad Money and get scared:
“Gold is not just another commodity,” Jim Cramer told the viewers of his “Mad Money” TV show as he once again urged investors to put up to 20% of their portfolios into gold….Cramer once again gave the nod to Eldorado Gold and Agnico-Eagle Mines, along with the speculative Novagold, a stock which he owns for his charitable trust
Seriously, after a ten year run, a recommendation to the least sophisticated audience imaginable to put 20% of their assets in gold. Yes, he said “assets”, not “portfolio” on the show, but we’ll assume he meant “portfolio” and give him the benefit of the doubt. Oh, and he sent his viewers to buy the individual miners now instead of the metal itself. Oy vey.
Many of the large cap miners have lagged gold, and I get Cramer’s point about how small their combined market caps are – but still.
I’m not a Cramer-basher, I’ve always liked the guy, but this is bananas.
Richard Russell, a phenomenal newsletter writer (Dow Theory Letter) but horrendous forecaster of anything, is now saying that gold has entered the thrid and final bull market phase – the speculative phase. I think he’s right…
Most bull markets progress in three psychological phases.
I believe the first phase of the gold bull market has passed. It’s over. This is the phase where students of great values take their initial positions.
I believe we are deep into the second phase of the gold bull market. This is the phase where the institutions and funds join in the bull market show.
Often, more money is made in the third or speculative phase of a bull market than is made in the first and second phases combined. This can mean that the late-comers to bull markets often make a fortune, more than those who had the courage to buy early in the game, but they have to have fortitude to sit in the highly volatile second/third phases.
Lastly, let’s hear from my well-meaning, saintly, real estate agent mother:
Joshie, my friend in my office wants to know about gold. She just bought it yesterday and today she thinks it went down. How much more should she buy?
Mom, I don’t think it went down. In fact, I think it just closed at the highest price ever.
OK, hold on…(muffled) He said to buy more it’s going to the highest prices ever!
Um, Mom, that’s not what I said…
How much gold do I have, you have me in gold, right Joshie?
The unholy triumvirate of my mom, Cramer and Richard Russell are in. The prophecy has been fulfilled.
Let the wild rumpus begin!
Or it’s the top. Something tells me we’re about to find out one way or the other right now.
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The Reformed Broker is a blog about financial markets and the economy. Joshua Brown is a New York City-based investment advisor for high net worth individuals, charitable foundations, retirement plans and corporations... More.