I have long been a reader of Robert Prechter's [1] newsletters and articles [2, 3]. There are times when I agree with his views on financial markets and times when I just have to disagree fully [4]. Year 2008 truly is remarkable. The following recaps some of the things Prechter had said and what I had published here at bhc investment. I will continue to answer a very important point LT had raised in [7] in the coming days.
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Robert Prechter [1], EWI [2], April 2008 [3]:
- Called the bull market rally in stocks in 1980.
- Called the correction in 1987.
- Metal prices (Gold and Silver) had peaked.
- Silver: resistance trendline for 5 years; very pretty EW picture with the right numbers of waves.
Well the beautiful thing about markets is they tend to do things when the fundamental reasons are completely missing and absent. They are no fundamental reasons to buy Gold and Silver back in 2001 that I read anywhere. And now everybody seems to know why you should own Oil and Gold and Silver. So usually the fundamentals are all telling you the wrong things at the extremes. They may be in sync during the trend but at the extremes they all saying one thing.
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bhc investment, April 2008 [5]:
Gold is a currency. It has been seen that way for centuries, and will continue to be seen as a storage of purchasing power for the centuries to come.
- As with all things on earth, Gold has its cycles of up's as well as down's. Gold was in a nearly 20 years of bear market between 1980 and 2001. Within that period of history, investors bought stocks and was shying away from Gold. It was a boom time for "paper assets", because of their higher yieldings.
- Since 2001 Gold has been gradually moving to the upside. Such a move is signifying the return of "real assets", alongside commodities such as Wheat, Cotton, Sugar, Crude Oil, Natural Gas, etc. Investors are now shying away from "paper assets" and buying into "real assets".
- The switch between "real" and "paper assets" has repeated several times in human history, each of which tends to enjoy at least 15 years of up's or down's.
- Although Gold has been gradually appreciating since 2001, it's inflation adjusted value has only just made a new high. I believe the bull market in Gold is surely not yet over, and will possibly last for years to come.
bhc investment, June 2008 [4]:
- We continue to believe the price of Gold will reflect the investment demand in the inflationary environment we are in, which we have been predicting all along.
Markets are irrational, but strength and weakness tend to 'propagate' from one dominating time frame to another. In my view, the previous all-time high at 850 is already broken. The correction we are witnessing right now is a good-bye-kiss, not the beginning of a secular bear.
- The fact that I am betting against the central banks cartel doesn't worry me. The fact that after all those 'massaged' jobs and GDP reports and nearly 80% and over 60% of concentrated net short positions in Silver and Gold, respectively, they can only manage to bring these precious metals down less than 30% from the recent highs makes me think: "it's gonna be a heck of a ride when the sentiment turns!"
- If prices are to fall below 850, I will buy more.
bhc investment, September 2008 [6]:
- Don't buy and sell by simply listening to what the others are saying. Buy and sell because you knew what you are doing; get your facts right and do your own reasoning. The Fed can bail out its friends on Wall Street and it can print, and it can exchange whatever junks of no value with Treasury of supposed value. What they can do is only limited by their imagination, but not without consequence. The consequence in such a kind of behaviour in a hugely indebted nation has always been: Inflation. The Fed can attempt to manipulate, but it will not be able to do that forever.
Take a long-term view, look beyond the manipulation and volatility. Years down the road, all those talks of deflating Gold prices will go bankrupt. If we are indeed heading to a complete collapse even in the Gold market, the baseline target should be $200, not $600. The bears didn't even get their numbers right!
bhc investment, September 2008 [8]:
- The secular bull market remains intact. We will buy more if the yellow metal is at even cheaper prices when we are back.
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References:
- Robert Prechter
- Elliott Wave International
- Prechter: Gold and Silver
- Boon vs Robert Prechter, Part VI
- To Jay
- Quick Update
- Global Wealth Destruction
- Quick Update
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