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Well, the scandal over the New York Stock Exchange
continues to burn daily & will not seem to go away.
NYSE’s lead director
resigns over Grasso pay, Others expected to QUIT, too
…an expected exodus
of scandal-tarred board members in coming weeks.
Thor Valdmanis, USA
Today, 9-26-2003
What is the crux of this
story? That someone evidently performed such a satisfactory
service that his employers were willing to pay him 188 million
dollars. And what kind of superior job can a person perform
that will net him close to 200 million bucks? This is probably
the biggest recurring question rolling over & over in
most folks minds.
And how about the mutual
fund industries making special late night deals for their
best clients?
Mutual fund scrutiny
expands, By Christine Dugas, USA TODAY, 10-1-2003
The government investigation
into mutual fund wrongdoing expanded to Alliance Capital Management
on Tuesday, and the fallout from the scandal began to spread
to retirement plans. … It is unclear how far the scandal will
spread.
Yes, there seems to be
no end to these scandals.
If there really is just
one message that comes through all of this it is the fact
that the wheels will always be greased for the high rollers
but the average man or woman on the street is very much on
their own.
And is the economy really
improving for the average working man? Remember how I have
written over the years how "structurally" our world
is changing & not necessarily for the better? Read the
following:
…jobs in the dust,
By Sue Kirchhoff and Barbara Hagenbaugh, USA TODAY, 10-1-2003
"This is a different
situation, and it has all the characteristics of a significant,
structural change in the labor market," says Allen
Sinai, chief global economist at Primark Decision Economics.
"We will see fewer non-farm, payroll jobs created
per dollar of GDP (gross domestic product) than at any time
in our history."
Along with scandal we
are witnessing the deterioration of the labor market resulting
in more jobs disappearing. These are the reasons for gold
slowly growing in strength.
Let me share an email
I received last week.
…have been an investment
professional for over 13 years. … Most people will do some
research to get into an investment, but rarely if ever will
they have a strategy to get out.
M. C.
Let’s talk about these
high roller types a moment to understand their life styles.
Because of their power & connections these guys can make
educated & calculated guesses how long to hold & when
it is time to sell. But do you think the little investor on
the street is going to be privy to this kind of information?
Look at Martha Stewart.
When you are big enough someone is always willing to grant
you favors with info as to when it is the right time to sell.
But what about the average investor on the street? How does
he or she know when to sell?
Well, I suppose you can
pay a money manager to tell you when the most appropriate
time is to sell but can you really even trust this info &
risk ending up holding onto an investment a little too long
& thereby incurring losses you were not anticipating?
Where am I going with
this?
The bottom line is that
the average investor can never really know with absolute certainty
how long to hold on to a burning match before the flame reaches
the fingers & burns.
So what is an ordinary
investor to do to protect his gains & limit his
losses?
I came to a conclusion
recently that it is probably the wisest & most practical
decision for an investor to have a policy & strategy where
by he or she automatically sells half of an investment after
it appreciates 100% & effectively doubles in value. We
have talked many times about making money & I have always
written that someone should be willing to take a "measured"
risk. To me there is no greater method to partake in a "measured"
risk than to go ahead & sell half an investment after
watching it double in value.
There are many folks jumping
on this gold band wagon that do not understand about corrections
or reversals. Nothing ever goes up totally in a straight line.
What is wrong with a strategy that seeks to preserve the initial
invested capital & in the process procuring funds for
another investment that may be just over the horizon?
It is total greed &
foolishness to attempt to hold onto an investment all the
way to the top & to never consider selling a portion to
lock in profits. I know I am boring you with a repetitive
message but I feel that a selling strategy is important yet
never on the agenda of most investors today.
Are you familiar with
the movie Gone with The Wind? I have read both the book &
watched the movie numerous times. Both are classics. My favorite
scene in the movie is when Scarlet is in the field trying
to grow sweet potatoes. This is after the war has ended &
left the South in desolation & everyone is in poverty
& hungry. Scarlet is hungry & desperately attempting
to grow her garden so that she may eat & live.
In the movie in a moment
of fury & desperation & hope she reaches up to the
sky & declares before the clouds that she will never be
hungry nor poor again. This was a dark valley in her life
but one that filled her with the desperate hope to eventually
do better & to never again descend into the pit of nothingness.
Why do I preach conservatism
& a solid selling strategy when investing? Let me share
another story, but one which is true & based on a real
persons very real losses.
I recently read a biography
of a very successful Hollywood entertainer & performer.
This individual made literally multiple millions & she
consequently lost all her multiple millions due to poor management
& poor investment decisions. Let me share an excerpt from
her book right after she discovered she was bankrupt &
would be having to move out of her 7,000,000 dollar Beverly
Hills home (& these are 1970 dollars).
"I felt that coldly
bland feeling that comes with turning your back on a whole
way of life, knowing it’s gone & still not believing it."
DR & DPC, 1989
These were the spoken
words of someone who just lost a millionaires life style &
found that they were flat broke & could not even get a
mortgage on a little house in the suburbs. This is why we
preach conservatism because of the fact that every day investors
are going bankrupt all across our nation simply because they
did not practice what I call "measured" risk &
simple prudence. You can be successful, make a lot of money
& practice common sense so you keep what you acquire &
not lose it over to the bank & a bankruptcy court.
And let me share another
quote from this book & this is a statement made after
this individual finally succeeded in paying off her millions
in debt after 10 long years.
"And it was mine,
all mine, this house with no mortgage." DR & DPC,
1989
This woman who once lived
in a 7 million estate & lost it took 10 years to pay off
the banks & get out of debt. Now she was finally able
to purchase another home and that home was a modest 2 bedroom
fixer upper in a modest neighborhood, but she was determined
after the hell she went through to make sure she could afford
& pay off this new home.
It is never a sin
to practice old fashioned conservatism.
This is why a selling
strategy is so very important. Our objective in investing
in gold stocks is "not to go for broke." You can
make money & preserve your original capital if you are
willing to exercise discipline & responsibility in your
investing habits.
It is a fact that more
money has been lost in gold stocks than has ever been made.
This is why we have become committed to preaching the advice
to sell half a stock issue after it doubles. This way you
can never lose & you will always come out a winner. Your
capital will be secured & available for additional investments
& the sum that is the equivalent of your original investment
now remains the sum you have left in the stock issue to take
advantage of any further stock gains.
This is a conservative
strategy & one in which if practiced you cannot lose.
Read the following:
Most investors in the
mining industry are experiencing their first foray into this
market. I am confident that their legion will swell as the
secular Bull Markets in these & all gold & silver
investments unfolds. To their credit, most are seeking a way
of leveraging their gold investments. Unfortunately, to their
detriment, they do not fully understand the great risks involved
in their quest to maximize their gold investment profits.
Dr. Richard S. Appel, 9-15-2003
I like this guy as he
is a straight shooter & Dr. Appel tells it like it is.
And again what is his message? Let’s read on!
To put it bluntly,
exploration companies are fraught with risk! Numerous problems
can arise for these small enterprises, even if they are ultimately
successful & actually make a mine. Dr. Richard S. Appel,
9-15-2003
I think what the good
doctor is advising us is to exercise extreme caution when
investing in precious metals stocks.
…we recognize that
many fortunes will be made. These can only accrue to those
who follow sound rules in selecting the companies in which
they invest. Dr. Richard S. Appel, 9-15-2003
OK. Now we are hitting
the meat & potatoes!!!
Let’s read this last part
again & go over it.
…we recognize that
many fortunes will be made. These can only accrue to those
who follow sound rules…
What the good doctor is
telling us is that we must have a plan & a strategy in
our buying & selling. And the fact remains that while
most investors don’t have a problem buying they have not one
clue as to when to sell. For the professional investor who
already has his millions in the bank he probably already has
learned a good exist & selling strategy that works for
him, but what about the small investor who is still attempting
to make his first pile?
You have got to
have a selling strategy!!!
"You can’t go
through life insulating yourself from danger. Everything is
dangerous. Living is dangerous. Eventually, everybody dies
of it. "Malcolm Forbes, 1988
I like the above comment
as it illustrates the element of risk in everything we do.
But while we cannot insulate our lives from danger we can
proceed through life & our investment decisions with a
strategy & a plan.
And if you have not devised
a more elaborate plan at the minimum you should sell half
a stock after it doubles so that you protect your original
capital & limit any future losses. Quit worrying &
thinking about how much money you might make if you kept it
all in one stock and never sold and attempt to ride the wave
all the way to the top.
And what is another reason
for selling a portion of our profit?
"Dinner aboard
the Virginian. The Kluges lay on another fine spread: slices
of beef rolled around horseradish cream on fried toast, caviar
atop blue cheese, a dripping Brie en croute, fresh
cakes, and a beautiful split of icy-cold German desert wine."
MF, More Than I Dreamed, 1989
Yes, it takes money &
cold hard cash to enjoy a few of life’s simple luxuries.
We only have to look at
the last bull market that ended in the spring of 2000 to count
the individuals who never had a strategy to sell & consequently
lost a lot of money. It never hurts to devise a plan for obtaining
your original capital back.
And what does the great
Warren Buffet have to say about investment & risk?
"…real investment
risk comes from not knowing what you are doing, says Warren
Buffet." Bill Bonner, Daily Reckoning, 9-29-2003
Investors who do not have
any kind of prearranged selling plan & selling strategy
are in my opinion flying blind into the wind. And generally
those folks who never know when to sell end up holding on
to an investment all the way to the top & then all the
way back down to the bottom.
Let’s listen to the rules
of Kenny Troutt, a billionaire who grew up dirt poor growing
up in a housing project & who represents an excellent
rags to riches story.
"I try as much
as I can to take the emotional part out of the equation,"…"If
you get hung up on emotions & you don’t have a business
plan, you will lose. And once you start losing money, it just
takes the fun out of it." Josephine Lee, Forbes, 10-6-2003
And because Kenny has
taken the emotional element out of investing & stuck with
a plan he sometimes feels the following concerning his wealth:
Says Troutt, "Sometimes
I just have to pinch myself."
We would like to see gold
investors some day pinching themselves one day to make certain
that their success is real & not just a dream.
But remember that if "…you
don’t have a business plan, you will lose."
Oh, by the way Kenny Troutt
made his fortune during the Tech Bull Market & he is rich
today because he knew WHEN to sell!!!
Let’s listen to what the
great Malcomb Forbes had to say about making money.
"I am an ardent
discipline of the school of thought that postulates you must
spend money to make money. How you get it in the first place,
so that you can make it multiply, is indeed a sort of chicken-and-egg
situation." Malcomb Forbes
What we just read is very
important so let’s read this again:
"…How you get
it in the first place, so that you can make it multiply,
is indeed a sort of chicken-and-egg situation."
And here is our answer
to the chicken and the egg question. As the investment doubles
take out half that sum & invest it in another investment.
This is called the principal of MULTIPLICATION!!!
"…so that
you can make it multiply…"
And let’s read an encouraging
quote about where gold may be heading!
Martin Murenbeeld:
"It’s very likely
we could hit $500 an ounce sometime next year…"
Jon Warner, USAGOLD.COM,
9-24-2003
A good point to make for
those who are bothered at selling half an investment after
it doubles is to consider this selling process as an opportunity
to procure capital to invest in further opportunities. As
gold strengthens there will continue to be new gold &
silver companies coming on the horizon.
The price of Gold will
continue to rise as the risk of holding paper denominated
assets becomes harder & harder to ignore. Bill Buckler,
9-12-2003
Follow a conservative
approach that aims at protecting capital & spreading risk.
"Nothing
confirms freedom like a buck in the bank." Malcomb Forbes,
1988
At Gold Letter we are
working toward creating a family of 1,000,000 plus investors
with the common goal to make real money in gold & silver
stocks. Join the Gold Letter family today and let’s work together
helping one another to acquire that "buck" in the
bank.
And remember, your subscription
is for LIFE.
Subscribe to Gold
Letter Alert!
http://goldletterdv.com/subscription.php?uid=d3961c0bba2a2cfbb434bd5651c2e667
* * * * * *
The following is an email
from a subscriber from across the continent!
Dear David!
…To make your subscriber
base somewhat more personal, let me tell you that this mail
is sent to you by a sculptor who is living in a mountain valley
some 100KM from Cape Town.
Leopards, baboons and
the like roam around and here I talk to you on the other side
of this planet. …
Sending you best regards
and a golden ray of African sunlight -
Karl-Heinz Wilhelm
My wife wanted me to mention
that our hamster died yesterday. I know I will catch a lot
of flack for "wasting" time with this trivial event
but this really is what life is all about: the little seemingly
"trivial" events that we share together with our
families.
"Miss Tucker"
(our little boy had named her this) was 2 years old and that
is about the entire life span of the little things. My wife
mentioned Tuesday morning that she was going fast & probably
would not make it through the day & that I needed to say
good bye to her.
Miss Tucker brought us
a lot of fun these past 2 years. About a year & a half
ago one evening Miss Tucker got out of her cage & we did
not know this until we saw her little eyes peering around
a corner in the living room while we were watching the evening
news.
Anyway, when my wife told
me she was dying I went & got her out of her cage to hold
her in the palm of my hand. My wife was there beside me &
as I held the little thing we watched her breathe her last
breathe & die.
I could just about be
certain that little hamster was holding back dying until we
came & said good bye to her one last time. We gave Miss
Tucker an honorable funeral that evening & our son &
his friends gathered flowers & made a cross for the gravesite.
And now its supper time
& on to the home-made turkey soup & croissants my
wife prepared for this evening.
Comments?
David N. Vaughn
Gold Letter, Inc.
David4054@charter.net
Gold
Letter Website
October 3, 2003
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