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December 1, 2005

Gold vs Dow 30 performance, Thur., Dec. 1, 2005, 6:10 PM

For those who still feel I made a mistake in staying out of this year-end rally, have a look at the Gold vs Dow 30 chart since I recommended Gold. You will also recall that all through the past six months I have recommended long positions in oils, techs, healthcare, consumer staples and consumer discretionary stocks.

So, don't cry for me Argentina.

This chart shows that Gold compared to the Dow Industrials would be about 12,375, not 10,912 from the point of my recommendation on gold. To say I have blown away the market is an understatement, but I think you understand that already, and many of you understand why my market discipline has kept me out of the majority of sectors in the recent rally.

Besides, you know how the levered gold shares have outperformed the gold bullion, so I could have shown you extreme out-performance had I chosen to. My bigger point, however, is that everything in markets is relative. In this regard, I just wanted to show you that, while Wall Street may call me a fool missing the boat, I happen to know where I stand.

And isn't it ironic that when I was on the sell-side " Mr. Dream Merchant " I used to be that Slick Willy who would tell people they were missing the boat? LOL


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I am often asked why I didn't go whole hog on gold. Well, Cramer is right about hogs. They get slaughtered.

Portfolio management is not a casino game where you place your bet and hope that red 16 comes up a winner. In fact portfolio management is mostly risk management, as well as taking the risk, whenever appropriate, to seek rewards where the mathematical research shows you have an edge, which I choose to do in the shares of companies that have shown me to have successful management and a good business model.

I have been wrong on XLF. Let's say I had gone crazy there, like I could have with gold shares. You see my point. Nobody is bigger than the capital market.

Posted by Posted by Bill Cara on December 1, 2005 06:10:34 PM | Category: Guide to Markets

Discourse

Bill,

Check out the short interest on these mining shares.

http://www.resourceinvestor.com/pebble.asp?relid=14960

Posted by: g034 [TypeKey Profile Page] at December 1, 2005 9:07 PM [link]

Rydex money fund balances spiked down yesterday through the lows hit in 12/2004, classic panic buying. That takes cash on sidelines to the lowest levels in at least 2 years. Note this cash is not buying weakness! Those cash levels oscillate up and down inverse to the market.

The pressure on the gunslingers while this continues is to get on board. Most are behind the market ytd so they are dealing from a position of weakness. Their actions are not rational but emotional.

For individuals it is critical to ignore the 'train leaving the station syndrome' and instead look at those charts Bill points to. If you bought on weakness you are now a seller, taking some money off the table. However high we go in the short run, we will indeed have more buying opportunities and the market will take a wave down giving us the chance to buy at better prices. At this type of extreme it is critical to avoid following the herd in my opinion.

I raised an additional 5% cash into yesterday's ramp for my investment account. That puts my equity exposure at the lowest level in 5 years. A time for selling and/or hedging, lock in the gains.

Posted by: stockman [TypeKey Profile Page] at December 2, 2005 7:06 AM [link]

The bell is ringing BIG TIME.

Lead story on ABC World News last night was the rally and whether the Dow would hit 11,000, the economic news was great, yada,yada,yada.

THEN
This morning NBC Today Show 1st segment was Katie C talking about the markets AND they had Kosmo on, urging everyone to get long, things are great.

When everyone knows something, it isn't worth knowing. And the mkt is the lead on general news, we're within 30 days of a significant top.

Posted by: bsi87 [TypeKey Profile Page] at December 2, 2005 7:18 AM [link]

Katie Couric? You have GOT to be kidding. Bill, time write another Dubious Feat article or to put her up there next to Kudlow.

Posted by: MarkM [TypeKey Profile Page] at December 2, 2005 8:20 AM [link]