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All Bull Markets Have Horns

By Tom Dyson, publisher, The Palm Beach Letter
Monday, January 30, 2006

I spent last Sunday and Monday at the Vancouver gold conference. I was amazed by the size of the crowd.

I’m not sure what time the doors opened, but the program kicked off at 7 a.m. I got there at 7:15.

When I arrived, the main lecture hall was already packed. Almost all the seats were taken... people were standing two deep against the back wall. There were over one thousand people in this room, I’d estimate.

...At 7:15 on a Sunday morning!

The exhibition hall was a zoo. There were probably over three hundred different mining and exploration companies in there, plus all the financial newsletter and website exhibitors. All of this activity concerning gold scares me... and it should scare you and your money as well, as I’ll explain.

Two of the conference’s speakers commented on the huge audience.

Veteran resource investor Doug Casey said he’s never seen this gold conference so packed. He recalled speaking to an almost empty room at this same conference only a few years ago.

Money manager Frank Holmes put up a picture with the caption: “Beware of the bull.” It was a photograph of an airborne matador. The bull’s horn was just about to enter the flesh behind the matador’s knee.

“Don’t ever get complacent,” Frank said. “The market will take away all your profits in a second.”

With this in mind, what should you do right now with your gold investments... or any investments for that matter?

Here is a summary of the arguments I heard at the show:

1) The bull market in stocks that began in 1982 – the longest and strongest in western history – came to an end in 2000. The rally that started in 2003 is just a dead cat bounce and we’re about to head down again.

2) Bonds are an even worse investment. You face a triple threat to your money. Interest rates, credit risk and currency depreciation. Forget about bonds.

3) Real estate is an even worse investment than bonds. There’s a full-blown mania, and you just don’t want to be in real estate today. Buy a house to live in, sure, but as an investment, forget about real estate.

4) “The dollar is a piece of toilet paper,” as Casey put it. We’ve been cranking them out at such a rate that, today, foreigners hold trillions and trillions. The Chinese central bank owns a trillion. So does the Japanese central bank.

Sooner or later, these dollars are going to come back to the USA. And when they do, they will buy up everything that can be moved and take title of everything that can’t be moved. Inflation will go through the roof.

5) Gold isn’t just going through the roof, it’s going to the moon. This is the mother of all bull markets. Put the bulk of your savings and investments into gold.

These were the major themes of the conference.

Myself? I’ll let you be the judge of the first four, but I believe in the fundamental case for gold, and I believe that we’re in a long-term bull market. So... considering the strength of gold’s fundamental story and the extreme bullish sentiment I observed at the gold show, this is how I would recommend you play it:

If you already own a portfolio of high-quality gold investments, do nothing. Do not trade these investments. We’re in a long-term bull market... and it’s best to just sit tight.

Otherwise, I’d proceed very cautiously. If you want to own some gold investments but haven’t bought in yet, wait.

Bull markets like the one we’re seeing in gold never move in a straight line. Take the 70s for example. Gold suffered large drops on several different occasions. It fell from $205 to $109 between 1975-76 and from $125 to $90 in 1973.

Like the experience of the 70s, I expect the gold market to experience a severe but temporary correction this year... which will give us a good chance to buy gold at cheaper prices.

But the bullish sentiment I’m seeing in the gold market at this time is unsustainable. Trade accordingly.


Tom Dyson

Market Notes


Norfolk Southern (NSC)… railroads
BHP Billiton (BHP)… commodity giant
Aber Diamond (ABER)… diamonds
Wipro (WIT)… Indian outsourcing
iShares MSCI Canada Index (EWC)… Canadian stocks
E*TRADE (ET)… online broker
Silver, Copper, Platinum, Aluminum, Lead, Nickel
Joy Global (JOYG)… construction and mining equipment
Armor Holdings (AH)… military and security products
Exelon (EXC)… nuclear power generation


Live Hogs
Johnson & Johnson (JNJ)… drugs (OSTK)… internet retailer with batty CEO
Natural Gas
U.S. Dollar
Juniper Networks (JNPR)… networking

While compiling the New Highs list, we noticed how the stocks our colleague Porter Stansberry recommends are constantly heading higher…

Porter’s recommendation of nuclear power generator Exelon (EXC) for instance, is up 180% in just a few years… his buy of Digital Insight (DGIN) has resulted in a 165% gain in just over a year. His recommendation of aerospace specialist Raytheon (RTN) is up 50%.

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