Thursday, November 20, 2008

This Is Not My Market

20 November 2008

I began investing in the precious metals sector in 2003 because I believed that the financial policies of both government and business had become unreasonable, irresponsible and reckless.

Recent events have proven my original thinking correct.

As a Canadian investor with the majority of my holdings in registered retirement accounts, I did not have the option of holding gold and silver directly. I also did not have the option of taking short positions in what I considered to be over-priced general equities. Therefore, I have been investing in gold and silver mining and exploration companies.

The current market has punished gold and silver miners more severely than general equities. I regard this as irrational, but I have never expected markets to behave rationally.

If markets were rational, general equities would never have attained their (recently departed) high-flying prices.

I believe that gold and silver will continue to perform well as safe and sound alternative investments. Therefore, the shares of gold and silver mining companies will continue to appreciate over the long run. (The explorers will not do well again until they can obtain development capital at reasonable prices.)

Thus, I am not a seller in this market. And, because I am not a seller, I am also not a buyer (though we do add gradually each month to our registered retirement savings accounts).

The gold and silver miners will some day again attain reasonable valuations, and those valuations will be
much higher than today's levels.

Similarly, general equities will also proceed towards more reasonable valuations, though in my opinion, many of those values may be lower than those we see today (depending partly on the decisions of governments and central banks with respect to continuing to follow their grossly inflationary practices of the past 21 years - here I am referring to the duration of the "Greenspan-Bernanke administration" at the US Federal Reserve).

My present investment strategy?

I'm just sitting this one out.

This is not my market.


  1. Good idea .. sitting this one out.

    Advice from everyone seems to be "Stay the course". I think it's pretty wise.

  2. Depends on what you're holding.

    Nobody knows what bank stocks are worth, as they can't raise collateral on securities for which there is no market. Banks can keep losing money for a long time.

    Consumer businesses are falling into a black hole. I'm not expecting any bounces in that sector.

    No secret what has become of manufacturing, though I'm pretty sure Toyota will still be making cars in 5 years.

    Asia is likely to prove resilient relative to North America due to more savings and less debt.

    Gold is always a safe place to be in crisis.

    Since gold stocks have fallen as much as general equities, I'd sell general equities for gold stocks - or, if your investments are not registered, for physical gold.