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Notes From the Rabbit Hole
NFTRH
We're Only Making Plans...
By Gary Tanashian December 30, 2008
Excerpted from the December 27 edition of Notes From the Rabbit Hole My investment
and trading style involves always having a plan that is subject to
revision and evolution at all times, and generally serves as a road
map for navigating financial markets that can be complicated on a
good day and downright violent and irrational on a bad day (or in
the case of recent events, many bad days clustered together). In 2008 I had
done my homework and decided who and what I was and despite the
traumatic moves in markets that went wildly against my bullish gold
miner stance, I held strong and took good advantage of HUI 150,
which you will recall was merely the latest (and ultimately last)
downside target after 250, 220 and 175 were snapped like dried
kindling during Armageddon ’08.
But a target it was, and it held. The original
plan, before the acute phase of panic began, was to hold gold miners
and cash in the face of an on-coming deflation impulse.
Bearish oil, bearish copper, bearish human hopes for
prosperity, bearish the Ponzi scheme known as the United States –
and by extension,
global – financial system, I held what my research told me to
hold; cash (along with t-bills and short term treasuries) and gold
miners. Once again,
here I will interject my belief that gold miners are to be
‘played’ only after one has seriously considered ownership of
the actual precious metals, especially gold. As noted many
times, the reason to hold gold miners is that they should perform
well in an economic contraction environment as these companies’
cost drivers decline relative to their product.
Well, as the market crisis grew more violent and human hopes
crashed along with cost inputs like oil and base metals while gold
held its own, I grew more bullish the gold miners as they came on
sale at crazy prices. The plan morphed
and I began to have visions of an epic opportunity in the making;
something we would look back at years from now and thank the trading
gods we had the focus and courage to capitalize on while most people
were panicking. Even as
I was suffering financially in the short term and being negatively
reinforced by everything around me, I was able to get outside the
October/November bubble in fear, look at it objectively, tweak the
plan and remain on course and on message. The message was
updated weekly here at NFTRH
and regardless of how things were to turn out for the investment
stance – and I believe it is well on its way to being validated
– I wanted to have it documented during historic times.
The letter’s entire ‘Q1’ will remain posted on the
website as a sales tool, yes. But
it is in reality a once in a lifetime opportunity for me to have
shown exactly how the service operates in the most difficult of
circumstances; historically difficult circumstances.
After all, everybody is a genius in good times and I am glad
I waited until the world began falling apart to see if Notes
From the Rabbit Hole could pass muster. Both portfolios
are now back above ‘baseline’ (their levels at NFTRH launch in
late September), the panic phase is over and a plan is in place.
This one involves a broad global market recovery from
unsustainably morose sentiment levels with the gold miners –
relative strength leaders already having doubled off the bottom –
leading. This makes
sense because not only did the same forces that drove the world’s
reserve debt note impulsively higher also drive gold mining
fundamentals higher, they put a serious exclamation point on the
proceedings in the form of gold-oil, gold-industrial metals and now
gold-thirty year rate ratios. It is advisable
to tune out hyperbole (bullish and bearish), look at
convention with distrust (and really, has conventional thought not
been the undoing of the vast herds of followers, including most
financial professionals?) and to have your own plan, subject to
ongoing revision through rational thought. At this point,
my personal plan holds that a bear market rally is beginning
as the markets grind out a bottom.
The rough target for the S&P500 is in the 1200 area.
The plan holds that the gold miners have begun a new bull
market; one that may eventually make heads spin.
But be aware, the plan also holds a contingency that if our
broad market ‘next leg down’ is as severe as I suspect it could
be, some serious profit taking may come into play in the gold miners
as well. After the
recent panic, we know all too well what can happen in emotionally
charged markets despite fundamentals. Markets are now
functioning ‘normally’ and the major media, always a day late
and a dollar short, continue to beat the dead economic horse.
The new US administration will continue a rich history of
inflationary policy that has been the product of the most myopic
academic minds on the planet; a Keynesian nirvana, which is actually
the worst nightmare of honest economists, the likes of whom come
from the Austrian school of von
Mises and Rothbard. The world turns,
a global depression (in many assets and industries) is likely to get
worse before it gets better, misperceptions will run rampant and
within the confusion, there will be opportunity.
I am not here to save the world.
Biiwii.com was started
as a free resource to try to do its small part in that regard.
Most of the world yawned.
It is time to make money, preserve wealth or do whatever else
is necessary to navigate a world in financial and social disarray.
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