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| Sorry, But It's Time For Another
Caution Flag and First Red Flag |
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The comments I’m about to make are certainly
not going to be to everyone’s fancy and some will end
up calling me something far worse than a party-pooper. Unfortunately
(or fortunately, depending on how important honesty is to
you), I think it’s real close to another one of those
“steps back” in the “two steps up, one step
back” mode I’ve often spoken about in describing
the price rise in this secular bull market in metals. In addition
to the caution, I’m now going to wave my first red flag
(NASCAR fans will understand the difference between a yellow
and red flag) on any metal since turning bullish on them back
in the spring of 2003. I only hope you will still love and
respect me in the morning.
Overview
It’s been nothing short of a sensational
ride I’ve enjoyed since returning to the metals arena
in the spring of 2003. My history will show that when it comes
to precious metals (gold, silver and PGMs) I’ve managed
to correctly foresee every major up and down move. The same
was true for base metals until a year ago when I first chose
to suggest overweighting in precious metals. While that proved
to be okay thanks to spectacular rises in the precious metals,
the fact is I became far too cautious on copper prematurely.
Now, I’m going even one step further in daring to suggest
it’s time to be actually bearish (assume prices are
actually going to decline over time) on copper.
I’ve operated on the assumption that the
great bear market in commodities in the 90s, especially in
the metals, allowed a “once-in-a-lifetime” buying
opportunity to occur and I think up until now I’ve done
a good job in taking advantage of it. The bad news is- the
easy money is now gone. The world has finally woken up to
the fact and they are all rushing through a rather narrow
door to get their share of the “new world order”.
This stampede can continue for a period but I’m never
happy being in a boat that was once nearly empty and is now
standing room only.
Some will view the following as pure sarcasm,
some as distaste, but those who know me will realize it’s
neither. It’s the truth as I see it: TOUT-TV (CNBC-TV)
has once again missed almost an entire move and, during the
dramatic rise in commodities, had mostly “bearish”
forecasters on the air. A case in point that clearly shows
the 180 degree turn around they have now made in order to
give the appearance that they are indeed the “world
leader in business reporting”, was seen a few days ago.
On the “home for lunatics” broadcast they call
“Mad Money,” mad man Jim Cramer stated how he
now loves base metals and devoted nearly a whole show to it.
So why does this mean anything? Well, unlike my neighbors
to the north, who are blessed with a “real” balanced
and unbiased business network like Canada’s ROB-TV,
I only have TOUT-TV for most of the day. And, for what was
at least many months, if not more than a year, CNBC ran a
commercial for “Mad Money” where you would hear
Cramer stated on an actual show “Commodities are Dead.”
(Ah, I can hear many readers silently in their hearts recalling
this). So, now, after 200%, 500% 1,000% increases, TOUT-TV’s
number one Market “Guru” now loves base metals.
Makes you warm and comfy, no? What’s worse is the fact
that the stocks he mentions are going through the roof. Please,
that’s not envy but a realization that when crowds are
willing to pay just about anything from someone whose history
in that area leaves much to be desired, the froth is clear
and the inevitable fall is never too far down the road.
I’m traveling out of the country and upon
my return mid next week, I will then be out if the office
for a few days in celebration of both making it to the age
of 50 and my wife putting up with me for 25 years. Therefore,
I’m likely a little early on the caution side but wanted
you to at least know what was in my heart and mind.
Gold
The danger in secular bull markets is trying
to time and profit from the blips of profit-taking or the
corrections to very overbought conditions. If you’re
strictly a long-term player (one assumes that means your time
horizon is more than the time to boil an egg or even a calendar
year), then you shouldn’t be overly concerned about
corrections. I do think we will end up substantially higher
from here, but before then, a significant correction is likely
on the way to $700. It is likely to come out of left field,
be vicious, and if the past is any indication, should bring
out what’s left of the bears pronouncing the end of
the bull market-again! Hopefully, I will once again receive
a rash of nervous-nellie emails and even those nasty vulgar
ones. They always reassure me I did the right thing. My concern
would be total complacency.
Silver
Here too, prices should eventually be substantially
higher before it’s all said and done. But even more
so than gold, silver is subject to a sharp correction that
could scare the weak and faint of heart.
PGMs
I have written often about platinum and palladium
being the most balanced of all the metals and that the spread
between platinum and palladium should narrow in favor of palladium.
It has narrowed by palladium rising over 70% while platinum
has risen by about half that. I don’t see any sharp
corrections here and I continue to favor the small minority
of companies that specialize in exploring, developing and
producing these metals.
Copper
At $3 a pound, I can no longer “Not”
be bearish longer term. Yes, I recently stated we could see
a parabolic rise to as high as $3 but felt it was the end
of something, not the beginning. The feeding frenzy could
even overshoot $3 but in my heart of hearts, I couldn’t
put any new money into copper now. Again, this doesn’t
mean sell all your copper stocks, but I myself am going to
make sure I’m seriously underweighted going forward.
I guess my red flag now makes me a copper bear. Who just shouted
“off with his head”?
Uranium
It’s best to just use a phrase I often
used to describe my opinion on it – LOVE IT!
Oil
I think oil should be a guest on the show “Fear
Factor” as it’s the fear of a disruption of oil
supplies, not the current supply-versus-demand factors that
are driving prices. The Iraqi situation is a loss now, even
if we actually end up achieving what was set out to reach,
because the costs of lives and dollars have been far too great.
But Iran is the real flash point going forward and as long
as sable rattling is in the news on a daily basis, the fact
that the current supply of oil is at a nearly-10-year high
is not going to have a major impact any time soon. I am by
no means an oil bull but since I paid dearly in the past trying
to catch a falling sword, I’ll stand aside for now.
U.S. Dollar
Read my recent special alert The
King is Dead! The only people who don’t know are
the Larry Kudlow’s of the world and the sheep who follow
them.
GRANDICH PUBLICATIONS, LLC.
P.O. Box 243 o Perrineville, NJ 08535
www.Grandich.com
phone o 732-642-3992
email • Peter@Grandich.com
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