Below is my fairly wordy response to a subscriber who asked how long the process (of crashing, bottoming and rallying) for HUI lasted in 2008. He expresses that, much like myself, he is not a day trader and while following my analysis he wants to know what to do in that context.
Using Wesdome Gold (WDO.TO/WDOFF) as an example, he somehow interpreted that I’ve said to buy it all-in at HUI 150 and ride it to 100% gains. As you can see in my email response below, I have no idea how that conclusion came about because it did not come from me. I reluctantly sold the darn thing last year and am now slowly buying it back.
Anyway, I send this to all subscribers because the effort to be clear in unclear times is never ending. I will be wrong because I don’t have a crystal ball. But at least I will put in effort to make sure what I am presenting is accurately read and interpreted. It’s also why at the end of every weekly email with a new archived report I request your questions, comments and critiques/corrections. I want to be clear.
As a side note, HUI 170-180 is getting a lot of air play now. But there are those lower gaps (as shown on GDX in the Trade Log), which for HUI are indeed down to 150. Not a prediction, but…
Bottom line: Q4 2008 was wonderful in hindsight. In real time it was a never ending shit show. Gold is now giving up for a test of the 200 day average (as the CoT specs go into forced liquidation). Treasury bonds are tanking. Stocks are trying to rally but continue under pressure and the 10/2 yield spread is still steepening to the tune of its highest level since the summer inversion. This and many other indicators are positive for gold and gold stocks. But as in 2008, there is nothing that will stop an over exposed and inflation-centric gold bug from his duly appointed rounds of puking, despite the evidence. That is because he bought inflation, which was the wrong way to do it.
My response, FYI…
First of all it is IMPERATIVE to tune out the gold bug crap like ‘QE infinity’ [noted by the subscriber]. That’s a promo to keep people bullish. It is imperative to tune out most gold bugs. They are tragic and un-trainble, in my opinion.
As for WDO.TO, I put the portfolios and trade log in so people can see whether I’ve sold or held something. As you might have noticed last year, I reluctantly forced myself to take the huge profit on that one. Now I am in the process (and this is all a process) of adding it back. 88% cash means that I am trying not to replicate my painful (but ultimately successful) experience in ’08. I am trying to be strong and only cash does that for me. A lack of it (percentage-wise) does the opposite.
I had HUI 170-180 targeted, was forced (by the inflation/reflation rally of Q4 2019) to admit I was wrong, then took it off radar, but the current COVID-19 hysteria that gold got wrapped up in has made me wrong again [to have taken it off radar]. It happens. Not to make excuses though. It’s entirely possible gold and the miners were going to take another drop all along [because the inflation tout had already topped out before Coronavirus].
However, I see no reason not to keep the HUI 375 target. As for how long the bottoming and rally process took in 2008, it took TOO long. That’s really all I can say. Until all hope was lost and the last damn gold bug puked, it did not bottom and turn up. I still think this is not ’08, but what do I actually know? I produce analysis each week to keep us in line with what the realities will be but I am no predictor of coming events.
I try to illustrate, through positions and cash levels, my stance at any given time. I cannot control a market any more than I can control Coronavirus. I can however show the macro fundamentals, update them and let you evaluate that and the whole range of other considerations for yourself, all while being very transparent about what I am doing at any given time with respect to ongoing plans, which can of course change because again, I can only control my own emotions and analysis. The rest is up to the markets.
I feel that people get doped up on gold bug promotions and promises of… the promised land. It ain’t happening. This stuff is hard and the promised land only comes after surviving out in the desert. Again, I personally got whipsawed by the Q4 2019 ‘inflation trade’ that broke my HUI 170-180 target and now that bill is coming due. It has never been my orientation to be telling people to hold these things indefinitely. Ever. That’s for the perma-bulls and promoters.