13 October 2011
The gold bull market is in full force. How long it will continue I have no earthly idea. This gold bull market very much reminds me of the real estate bull market. I have a difficult time recalling all the conversations I had during the technology bull market that ended in March of 2000. But I can certainly remember all of the attitudes and all of the people and the way that they acted during the great real estate bull market. I remember the confidence level of people at church and all the different people in the real estate industry that were making money. I remember people that didn’t have real estate licenses going out and getting real estate licenses just so they could buy and sell (flip) homes. They had no knowledge of doing this. I had clients of mine, pull money out of their accounts to buy real estate that they had never seen before. And on and on it goes. And now, here we are in the middle of another bull market…gold!
I have recently seen someone that I consider to be a herd investor. This person is intelligent and certainly does a lot of things good financially. This person is particularly good at making money and not wasting money on car purchases. Some people think that because they’re good at making money that means they’re also a good investor or because they’re intelligent and they’re good at math that means they’re automatically a good investor. And that’s simply not the case. This person’s typical strategy, ever since I’ve know them, has been the typical most employed Herd strategy, which is dollar cost averaging. And so this person has been doing the dollar cost averaging in U. S. stocks and has now finally decided he’s going to buy some gold here in year number 11 of the great gold bull market.
As I drive down the streets, I see signs that say “We buy gold”. I see advertisements in magazines that I receive from the financial industry, and on the internet advertising, about investing in gold. One of my favorite conversations I’ve had during this gold bull market is when I was talking to a client.
I said to one my client, “you know I was looking at the previous bubbles that we’ve had throughout history.” [I have this chart sitting in my desk and this chart looks at the different bubbles that we’ve had and gold is up 414% in its current bull market.] And that’s really not that high on the bubble chart. So in other words, gold can certainly increase a whole lot more before it gets to even what it’s previous bubble level was where it went up 2,200%. Gold is only up 414% right now.” So I told my client, “I could see gold going up to $6,000 an ounce as kind of a maximum target during this current bull market.” He quickly and brilliantly replied that he was reading an article [and I sensed that he found this article to be very useful and well written and probably correct.] And he said that this article stated that “the great thing about gold was that there was just no limit on how high it could go.” And so here we are in this wild bull market and you hear phrases like that, “there’s no limit on how high” something can go. Certainly that’s just like any other bull market that’s ever occurred in investor psychology.
We’re there, we’re in the heart of it. Where this gold bull market will end, I have no idea. Is it going to end tomorrow? Is it going to end at $3,000 an ounce, at $4,000 an ounce, at $5,000 an ounce, $6,000 an ounce? We don’t know. Is it going to end at $10,000 an ounce? Only God knows. One thing is for certain and I can’t write this enough. I can’t state this enough. The gold bull market will end with an enormous crash, just like every other bull market has ended in the history of mankind. So that much you can be certain of. How high it’s going to go, how much longer it’s going to last; only the Messiah Jesus Christ knows that information.
On an interesting note, this bond bull market that’s been going on for roughly 30 years, I don’t see the same euphoria that I see with gold and real estate. I haven’t heard people talk about it as much. So the bond bull that we’ve been in, that’s been going on for so long, is not as talked about. The bond bull market, to me, is much more interesting than the gold or the real estate bull markets. People don’t want to talk about bonds, as much as gold. People aren’t as crazy and goo-goo for bonds as they are for gold right now. Gold is the latest “buy and hold” darling. The bottom line here is that yes, we’re in the middle of a gold bull market which I think will continue for now, but don’t be lulled into thinking that this bull has no end…That’s just a bunch of bull.
