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Lemmings, Investors and Gold

Tuesday October 02, 2012 10:14

Investors (sometimes called lemmings) since time immemorial, have a distinct propensity to blindly follow the herd, propelled by corporate-banker-media public relations fiction.

A continuing stream of packaged news is designed to bend ideas and thinking because they, of course, know better than us. The reality is “they” are determined to install “their” thinking and ridiculous unreality into our minds and pocketbooks…in a serious effort to empty it for their benefit. Mostly, this is old paradigm stuff with rules and ideas drilled into peoples’ heads for decades. Changing times call for changing ideas. If you’re stuck in the last decade you might pay a hard price.

When some public figure in government, in higher education or in a corporation makes a statement that has no reason for utterance, most often there is an agenda behind the words. When some lackey is repeating himself with vigor, it’s normally to sell an idea that aligns with their schemes or attempts to get you to think like them. For investors and traders this can be very dangerous to your accounts. Face reality and understand it on your terms.

The winners in trading and investing take the time to assess situations and read about those relative ideas (both positive and negative). Each of us has different objectives, varying account sizes and contrasting appetites for risk. In our current environment a one-size-fits all fund for your money is really scary.

“Lemmings became the subject of a popular misconception that they commit mass suicide when they migrate. It is not a mass suicide, but the result of their migratory behavior. Driven by strong biological urges, some species of lemmings may migrate in large groups when population density becomes too great. Lemmings can swim and may choose to cross a body of water in search of a new habitat. In such cases, many may drown if the body of water is so wide as to stretch their physical capability to the limit.

“Because of their association with this odd behavior, lemming suicide is a frequently used metaphor in reference to people who go along unquestioningly with popular opinion, with potentially dangerous or fatal consequences.”  - Wikipedia

Common Misconceptions in Today’s News – PART ONE

Fund managers know better than you where your hard earned money should reside. They prefer that it be in their fund where you must park it for years. This way they can take their 1-2% annual fee plus an average 20% of the net. While we are certain they would like to earn nice gains for you, the reality is, many of these managers could care less as long as they get theirs. This game is a goner in our view. We are not totally against buy and hold but rather suggest that trading often (not day trading) has distinct advantages. Look over the following ideas and misconceptions we think are fraught with wild risk.

  1. Bonds are a safe place to earn money. They contain less risk than stocks, particularly municipal bonds.  Both Meredith Whitney and Trader Tracks said years ago that when communities had the inability to keep taxing and taking, they would be in a world of hurt. It’s happening now and spreading fast in California. Yet, more bond paper is being sold to credit-buying lemmings. Bond interest is paid from taxes. Taxpayers cannot pay as they are broke in increasing numbers. We strongly advise against these kinds of trading products. 

  2. Forex trading is great fun, quite safe and risks are contained. There have been several of these Forex wild-west types of trading operations that have closed down. If you want to trade currencies, get an experienced broker, learn about 2-3 currencies and focus on trading the big futures currencies markets. Stay away from cartoon trading.

  3. You can earn money with no risk.  We don’t care what anyone says; even the most conservative trading and investing ideas have some risk. There is risk every day in the morning when you arise to meet the day and go to work.  If you are trading or investing you have some degree of risk. Learn to control it as best you can. Trade or invest with a solid plan and a strong focus.

  4. Big banks are solvent and have cleaned out all their bad debts from balance sheets. There are trillions in bad debts hidden in the back rooms of global banks all over the world. In our opinion, they dumped all their toxic debt trash off the balance sheets and are currently reporting in denial of horrid bad debts existence. If all toxic derivatives and bad loans were recorded and reported on updated balance sheets, in essence, these banks would be insolvent and bankrupt. They are living on fiat paper from the Federal Reserve and US bond spreads.

  5. Gold and silver are dead products. They don’t earn interest and are for fools. This one is simple. Look at gold’s value in 2000 and what it’s worth today…the same for silver. We will compare those gains against most anything else spanning more than a decade. Guess what? The best is yet to come as 80% of the whole upside historically lands in the last six months of a multiple years’ rally.

  6. Gold and silver shares are a poor investment. This is a precious metals’ stock market. You can buy and sell companies of all sizes. Those who made good decisions have earned a pile already.  If you’ve made serious gains and have given the upside back, stay in the game, be selective and trade less. We like a handful of juniors and a few more senior stocks as good choices. Faster traders can buy call options. 

  7. Get into blue chip companies and hold the shares forever. How many big blue chip companies trading in 1925 lasted until 1946 after the war was over? They have risks too, just like any other stocks. Watch the Nasdaq 100 for trading signals that forecast trends for the stock indexes as an entire group. It’s reported some billionaire traders are in precious metals and nothing else. We are not so sure of that, but it is a trend.

  8. Your 401K and IRA funds are totally secure. You cannot lose whatsoever. We can see potential for mismanagement of these funds just like any others. Those managers try to do a good job but they are at the mercy of credit markets, international politics, tax changes, etc. They have advantages, but it is advised you understand the fund rules and exit strategies.

  9. Real estate keeps rising with inflation. Buy now with a cheap interest loan and borrow to the hilt. Inflation will grow and pay off your home. Real estate is a great investment. Ask a homebuyer in Las Vegas who purchased at the peak between 2003 and 2006 how well that worked out. That cycle saw +100% gains in housing values. Then, with the following crash, many held mortgages owing thousands above current values. With mortgage derivative slicing and dicing of loans, many do not know whom they should pay on open mortgages. This industry is a gigantic mess that won’t be untangled for a decade. If you are a buyer, know the values and expect to be in that place for a very long time, as it may not be eminently saleable.

  10. Stock and bond markets cannot crash. The Federal Reserve will prevent major damage. We have all seen scary stuff in 1987, 1996, 2000 and 2008. The next one could be only weeks or days away. On the other hand, we could mush along in rising interest rates, inflation and depression for years…until the next war starts for a new jobs program. Nothing is crash proof.

  11. All major international currencies are safe. Be in a money fund for growth. We’ve all seen and heard about the Zimbabwe currency. Toilet paper is worth more. How about disasters in South America, Greece, Iceland, Ireland, Venezuela and a few other nice places where currencies were previously viewed as safe? Tragedy has ripped apart the economic and social fabric of those nations and has left their money degraded.

  12. Your Social Security is secure. In a few years it will be there for you for sure. It’s common knowledge that Social Security is not safe in an account somewhere, but was deposited directly into the US Treasury General Fund where spending has gone wild. Which would you rather own: $100,000 in future social security payments or physical gold and silver paid for with your Social Security money?

  13. Taxes are fixed. They won’t go up any more. We’ve heard that story before and can observe the aftermath: Herculean debt. Congress and the local states and communities cannot seem to control spending so they keep raising taxes and installing new ones. You have no choice but to pay or move out. Look at Europe. How much longer can they remain standing?

  14. Congress contains a hard-working group of people who have your welfare at heart. By law, members of congress have to pass a national budget, yet they have not done so in three years. Next, they continue to add taxes to maintain raises and perks for themselves not available to the folks who pay them. They argue and fight over stupid stuff, pass more stupid rules and take more days off than ever. This is not a responsible body of people elected by the taxpayers to do a job. They should get one term only and be obliged to pass the necessary minimum rules or return their salaries.

  15. The Federal Reserve is a division of the federal government designed to regulate and control the national economy and prevent recessions and depressions. The Federal Reserve is a private banking cabal that is set-up to enrich private bankers and their colleagues at the expense of the national citizens. Since 1913 they have been robbing the electorate by printing phony fiat money and bond paper and lying about it.

  16. Central banker bonds, bills and paper are super safe and very liquid for entry/exit. Some of it is for now, but this will change with the amount of confidence buyers have in the paper. As risk increases, investors demand higher yields. If the seller cannot pay the interest or the confidence is lost, the paper is just junk. That’s why some high yield paper is called junk…because it’s junky.

These ideas are common in the news and on the street.  If you believe this nonsense, you will believe anything. Wake up!

Stuff That Works

Understand your market and educate yourself to do a few things right. You do not need 50 stocks and 40 others to make money. Some of the best of the best do only one thing.  Look where you would be right now if you had piled into physical gold and silver in the year 2000.

While all eyes are on Europe’s destruction, the USA’s test comes November 6th. It might even arrive sooner if the broader stock markets slide out of control during September 23-25.

Meanwhile, we suggest you gravitate toward physical gold and silver and only the best-of-the-best of related stocks supporting that view.  In our work, we are busy looking for options and selling ideas for the broader stock markets heading toward the dustbin of destruction. Last week we recommended two new ones in Trader Tracks Newsletter. We see more coming in this new seasonal beginning.

The Greater Depression Repression II is swiftly taking hold now and layoffs will be legendary. Housing has an additional -20% drop from the current USA national average.  Joblessness goes to 30%-35% and food stamps reach over 50 million to 60 million. We will get a 2013-2014 World War in the Middle East and when Obama is reelected, inflation goes to hyperinflation. Not happy stuff but it’s not the end of the world either. 

Somebody please tell us when the global bond markets crash for good and we’ll tell you when this can all get better and we can start all over again, maybe with a partially backed fiat gold currency.

By Roger Wiegand
Editor Trader Tracks Newsletter
The Jay & Rog Blog at webeatthestreet.com

Roger Wiegand is the writer and editor of Trader Tracks Newsletter for gold, silver and energy traders.  Roger provides recommendations for short and longer term traditional stock shares, futures and commodities trading with specifics for individual trades. Stay tuned for more of Traderrog’s insights and predictions via his exciting new daily audio subscription.  Coming soon! Details at www.wavelengthpublishing.com

Roger also is a regular contributor to The Korelin Economics Report ( www.kereport.com) , the highest rated daily internet radio program listened to throughout the world dealing with politics and hard assets. He is also a regular guest on the Weekend Edition of The Korelin Economics Report which airs on radio stations across the U.S. on Saturdays and Sundays.

Contact Claudio Bassi at Trader Tracks in our New York City publishing offices for an introductory 30-day trial subscription for only US $49.00.  Call us at (718) 457-1426 Monday through Friday, 9am to 4:30pm (EST) for details.  You can also email our office manager Claudio Bassi at cbassi@miningstocks.com for more information.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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