Is The Gold Bull Market Over Now?

May 15, 2012 - PRLog -- US Stocks have been in an intermediate term upward trend since Oct. 3rd, 2011. Investors are starting to again discuss the great merits of “buy and hold” investing. We say things like:
•   “The stock market is going to go down but it will always recover.”
•   “In 2008 stocks went down but they are now almost back to where they were.”
•   “You just have to hold onto stocks. I have learned to take more risk and have the stomach to tolerate the big drops.”
•   “Just dollar cost average and you will be able to take advantage of those dips.”
•   “I bought Apple and it has done well.”

All of the above quotes are jargon that support this view of “buy and hold” US stock investing. But the fact remains that over the past 5 years US stocks are up 4.17% or have an annualized rate of return of 1%. Do you feel like 1%/year is fair compensation for the risk you are taking in US stocks? Over the past 12 years US stocks are down.

Corporate earnings are almost back up to the peak 2007 credit crisis levels. It will be interesting to see if buy and hold investing, in US stocks, offers people a bright future over the next 5 years.

May 1st is the first day of a 6-month time period that has historically been the weakest for US stocks. That is why you have the rhyme, “Sell in May and go away.” I will be watching closely this summer to see whether or not US stocks are a place where my clients want to be. The last two years, it's been so right. In both 2010 and 2011 stocks started strong and lost steam towards the second-half. Selling the Spring rallies in both cases allowed traders to buy stocks back at radically lower levels later in the year. Will 2012 be any different?

Gold

Since September of 2011 gold has been in a sideways narrowing trading range. By that I mean that the range started out as $1,600 - $1,900/ounce. Today that range has closed to $1,625 - $1,750/ounce. July 1st is the start of gold’s historically strongest time of the year. That does not meant that gold cannot go up between now and July 1st. From July 1st to December 31st gold has done its best over the 30 years or so. For some reason, on May 26th gold goes down about 70% of the time. I don’t know why that 1-day there has been such a high probability that gold will go down.

According to Jim Flanagan, the longest commodity bull markets on record were cotton (9 years), wheat (7 years) and sugar (6 years). Gold is now in the 11th year of its bull market. Is this long bull market, bullish or bearish? In my opinion, the answer lies in whether or not people view gold as money now, rather than a commodity. If people now view gold primarily as money, then I believe this bull market is far from over. Only time will tell. I have no emotional tenderness, on this topic, one-way or the other. Emotions destroy investors and net worth; from everything I have experienced and observed over the past 14 years.

Occupy Wall Street demonstrators, whose anti-greed message spread worldwide during an eight-week encampment in Lower Manhattan last year, plan marches across the globe today calling attention to what they say are abuses of power and wealth. Occupy groups across the U.S. have protested economic disparity, decrying high foreclosure and unemployment rates that hurt average Americans while bankers and financial executives received bonuses and taxpayer-funded bailouts.

These same protestors vote for politicians that support killing innocent, unborn children because of greed. The very reason these people are protesting is greed. In other words, if they didn’t love money they would not be going to the enormous effort of publically marketing their money related complaints. Do you think Jesus would be leading or participating in this type of protest?