muses of the moment

July 25, 2012

Misc. links

Filed under: Odds 'n ends — totallygroovygirlfriday @ 12:45 pm

Click here for Anaheim riots/protests. Police firing bean bag rounds at media. Didn’t see this on MSM, may have missed it.

Bob Janjuah’s latest on stocks/economy, click here. Claims 800 S&P still in our future.

How to spot disinformation tactics. Click here.

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The Gold “Bubble” or Long-term Investment Cycles

Filed under: Gold and Silver Investing, Odds 'n ends, Precious metals — totallygroovygirlfriday @ 1:51 am

Update: Compare the last gold cycle to the “bubble” market chart link below. Click here.

Notice the first sell-off between 1974-1976. The gradual and then accelerating take off thru 1980. Then, the “high”, “denial”, and “return to norm” points? Then by 1983, we set up a new trading range of 300-500. Notice the mania period (point from hitting the last sell-off high a second time to final high) is about 3 years total and the fall after the high is less than 3 years?

When the new low was established in 2001, a new cycle began.

DOW Inflation-adjusted Chart: check out this chart of the inflation-adjusted DOW , look at 1982 to present. Notice the first sell off in 1987, the mania period from 1996-2000. We can also see the bull trap in 2003 and the “return to normal” in 2006. If this chart follows the typical bubble chart, gg would guess we are setting up a trading range (until the next cycle starts) below the green line.

Side musing: You will also notice that during the period between 1960-1983, the DOW was in a bear cycle, while gold was in a bull cycle. And in 2000, the DOW entered another bear cycle and gold started its bull cycle. It is much easier to see these cycles if you use inflation-adjusted stock charts. The DOW and metal cycles tend to act this way. It is possible that around the time you want to sell gold/silver, it will be a real low in the DOW. But remember these are long-term investment cycles (running 15-20 years). If you need a quick return or constant annual income, you may want to spread investments over several different options.

Long-term investment cycles are about keeping your capital intact over generations.

Totallygroovygirlfriday is as impatient as the next PM investor. However, I don’t let my emotions get the best of me. And let me tell you, it is not easy.

In the mist of all the noise, I often refer to this chart of a typical “bubble” market. It is actually a chart of a normal market cycle. It helps me put things in perspective.

We are not in a bubble in gold and silver, far from it. This is a picture of a bubble. Click here.

Groovygirl used to think that the first sell off was in 2008, when we dropped from $800 to $500. But gg is thinking now that the first sell off might be this last one from 1900 to 1500. It received a lot more attention. Also the public really isn’t in the game yet, and gg thinks they will get in after gold goes above the last high ($1900).

If you think this time line is 20 years and the low was in mid 2001, then the first sell off lines up pretty well with the middle of the 20-year cycle. It also falls in line with Martin’s year for a high in 2017-2018. (Or if you go with 15 year cycle, 2008, could have been the first sell off.) GG is leaning more towards a 20-year cycle.

But that is just conjuncture. This is a psychological chart, not an investment chart. Just another tool to keep things in perspective. gg is also not convinced either way that gold will stay at an artificial high due to a new currency or debt revaluation.

Conclusion: we are not in the bubble part of the gold investment cycle yet. And when it hits, it will happen pretty quickly.

Side musing: remember the housing bubble? The main mania phase was only a few years: around 2004 to 2007. That housing bubble mania phase helps us know when a mania phase is really upon us. All banks are in the mortgage-lending business, your relatives and neighbors are “flipping” houses, banks are lending to dead people for profit, everyone is taking equity out of their house…….

Everyone (banks, news media, your neighbor) thought the housing market could never go down.

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