cash burn and outcome, page-13

A little perspective from North America. Taken a little out of context but you'll get the picture

Tax-Loss Season Shopping List

Moving on from the Big Picture, what do we do here and now, under current market conditions?

First, remember how you felt and what you thought when the Berlin Wall came down: we were right! Then remember what I've said many times in these pages: patience and discipline are absolutely essential for successful speculation. Imminent or not, inevitable is inevitable.

What lies ahead for the global economy will be tragedy enough; how much worse for us if we are right again but fail to benefit from our foresight?

A reader recently wrote to me, saying something like: "If we don't break $1,800 gold soon, we'll be in trouble." With all due respect, I don't think this is the right way to look at things. All that really matters is whether the driving trend we're betting on remains intact. As long as it does – and it does – it's simply another buying opportunity if gold doesn't hit some milestone of mass psychology and sells off for a time.

Market fluctuations are nothing more than trading opportunities to buy low and sell high – they don't mean a thing in and of themselves. They are noise that only matters if you let it distract you, or worse, push you into a panic.

That's the risk today; the market has turned bearish again, many shares are off sharply with no bad news, and, as expected, tax-loss selling has kicked in with a vengeance. This is, without question, an excellent opportunity.

Consider this simple 10-year chart of the price of gold and the TSX-V, a surrogate for the junior resource sector we focus on in this letter. First, look at the line for gold – does that look like a trend in peril to you? Does it look like a trend that has obviously peaked? I'm not a chartist, but the gold trend looks entirely intact to me. What's more important is that this backs the Casey consensus view on what lies ahead for gold, fluctuations along the way aside.

But the TSX-V line – what a disaster! Or is it? Our sector was tracking the rises in gold, with leverage, until the crash of 2008. After the crash, it started to do the same again, starting from a lower level, until market sentiment turned decidedly bearish in 2011. The "alligator jaw" divergence on the chart has been widening ever since. This will not last – cannot last. The prices of related equities cannot diverge from the price of the underlying commodity forever.





Actually, most of the skeptics and the fearful – those who are selling off quality stocks in companies with good management, real projects, and money to advance them – probably agree with me about this. But they think the price of gold will fall to close the gap, and I think the equities will rise.

The beauty of it is that near-term weakness in gold will make the skeptics think they're right, and the sell-off in the equities could become even more pronounced – and hence the opportunities greater. But if Doug, the Casey Brain Trust, and I are right, the break-neck pace of money-printing by governments all around the world will keep the price of gold moving upwards for years to come. The alligator jaws will indeed snap shut, with spectacular results for those who had the courage to "buy low," speculating on the best of the best gold equities.

To take advantage of this opportunity, our portfolio updates this month are written as a sort of holiday shopping guide, courtesy of tax-loss season. Remember to buy in tranches, stay with the strategy, but don't pass up the excellent buys available now if you're still building your portfolio.

If you're "all in," then hold tight. Don't take losses unless it's clear the company in question has run out of rope. And don't forget to take profits when you get them – yes, it's hard when a stock keeps going up, but being able to enjoy gains without risk while speculating on "the most volatile stocks on earth" is a wonderful thing.

And don't forget that the primary way to protect yourself, your wealth, and your family from what's coming is to build up a cache of precious metals – not just stocks, not just legal ownership, but physical gold and silver, in multiple secure locations where you can access it with relative ease