Dispelling Myths About the Stock Market and Precious Metals

When surveying the financial and economic landscape of November 2009, it isn't that hard to get "the big picture". It seems to me that the manipulations and the activities of the "Smart Money", a.k.a the Exchange Insiders, the Specialists and their array of big banking clientele makes it abundantly clear that they want the stock market and precious metals market to remain in "bubble mode" for awhile longer. There are many opinion and myths about it all floating around. This concerns me.

Alfred Goldman, the wise old sage of the former brokerage firm called A.G. Edwards and Sons had a saying that I always liked: "It's not the snake you see that bites you, it's the snake you don't see." He wanted to warn customers that we can easily become distracted by all the noise, all the "talking heads" and myriad opinions and miss what is really going on.

So I have a question for you. Do you still think the stock market and the precious metals markets are an orderly, auction-based market that responds to the forces of "modern portfolio theory" and the best interests of investors?

Another question might be: Since we made it through the scariest months of September and October with not much damage to the DJIA, the S&P 500, the Russell 1000 Financial Index (symbol: RIFIN) and the precious metals markets, is it "up-up-and-away" from here?

Our most followed Seeking Alpha contributor David Fry had an interesting comment in his Friday Roundup:

RBS economist Stephen Stanley wrote today’s employment report was “a mild disappointment”. It’s easy to say with his firm and others, plied with cheap money from a generous Fed. And, that’s really the issue. The liquidity bubble for Da Boyz is creating a stock bubble. Like all bubbles it will have an ugly end. But with cash and bond yields low, going for higher returns in equities is an easier; “make hay while the sun shines” choice. So, spin bad news and go for returns in stocks.

Once again we see the underlying reality that what we see and hear about the economy and the stock market doesn't necessarily correlate to why stock prices or the price of gold goes up and down. For now, keeping interest rates low and creating the myth that the stock market or the precious metals market can't suddenly and dramatically fall, is working its magic.

I keep my eyes on companies like Alcoa (AA), GE, Procter & Gamble (PG), Boeing (BA), JPMorganChase (JPM), Goldman Sachs (GS), Google (GOOG), Apple (AAPL), Texas Instruments (TXN), Chevron (CVX), Exxon (XOM), Chesapeake Energy (CHK), Dupont (DD), NYSE Euronext (NYX), Barrick Gold (ABX) and Freeport McMoRan Copper and Gold (FCX). I want to see the hourly and daily volume, and what appears to be driving each of these very popular stocks.

Listening to the Spin Doctors on CNBC or Bloomberg, as well as the interviews that are often available on Yahoo! Finance gives me some idea of the prevailing consensus and "schizophrenia" that drives the emotions of the investing public. No wonder so many people are confused and turn to actors like Jim Cramer (although he is a very well-connected Goldman Sachs alumnus) to try to make sense on current market conditions.

Having read the books of the late Richard Ney, I continue to benefit from the monthly reports that are posted by my friend and "Ney student" Richard Wendling at The Bear Facts Specialist Report.

Ney and Wendling have reminded realists and seekers of truth to keep their eye on "the ball" and to know what "the ball" actually is. These reports help us to see the market forces and the Smart Money from a unique, historical perspective.

Legendary Hedge Fund Manager Kenneth Gerbino of Beverly Hills weighed in on the current misunderstandings on the markets in an interview he gave to the Mineweb.com folks. You can read the entire interview at Mineweb or at my site.

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it. Please remember investments can fall as well as rise. And they will! - Advanced Investor Technologies LLC accepts no responsibility for any loss or damage resulting directly or indirectly from the use of this content.

DISCLOSURE: I currently own some AA, CHK, BA, NYX, FCX, TXN and CVX

Comments

[JudeJin:]

the title of the article is much taller than the content, which dispels nothing.

Nov 08 06:18 AM

[apppro:]

Unfortunately, the connection between the stock market and other parts of our society, mainly the elusive ‘Main St.’, has become a far more important connection. When we allowed a few short sellers to bring down our financial institutions, the confidence in our system almost destroyed the rest of us. This handful of narcissistic, Generation Me shorties have developed trading strategies that do nothing more then enrich their own pockets and create nothing in return. “Creative destruction”, ala Gordon Gecko era, that at least created something out of the mire they caused. The David Einhorn’s of today’s world do nothing for the greater good or for any good… except their own that is. When he was allowed to naked short Lehman’s into the toilet, we should have learned our lesson, but we didn’t. Now he is shorting the dollar into the toilet, just so that his large gold position increases in value.
This time when he brings it all down he will bring us ALL down with it and not just a few brokerage houses.

Nov 08 08:53 AM

[apppro:]

I assume you all remember this line:

"I welcome any enterprise that increases my stake in it!"

www.youtube.com/watch?...

Nov 08 09:55 AM

[greyma:]

I can not escape the feeling that the stock market is not honest. Why would a stock like Alcoa be $20.00 and then right after I buy it, it drops to the 12 dollar region.This has nothing at all to do with the value of this old and important company. Is this what the public deserve or want?

Nov 08 12:06 PM

[April May:]

When good companies, with good fundamentals, suddenly drop in price, it makes ordinary investors begin to believe that investing in the market is not much more than gambling. You only make money if you are lucky. What differences are there between the Warren Buffets and ordinary, educated investors? Luck?!

Nov 08 04:56 PM

[ArtfulDodger:]

I keep telling all the sages who claim to be able to pick the direction of markets over the short term to open a futures trading account. They can make more than Buffett ever dreamed of having---if they can actually pick market direction accurately.

No one so far has done so. But still, everyday another article telling us the direction of markets over the next month, week, or even the next day.

I mean I wouldn't give you two cents for volume, the Vix, the average price or anything of the type.

Find me a good company with good management, good products, good margins, with growth potential---and I'll give it a chance with my little investment.

To hell with trying to figure the machinations of market direction; it's a worthless endeavor, as far as I'm concerned.

Nov 08 10:18 PM

[cowlady:]

Gerbino interview, very interesting. Makes perfect sense to me. I urge everyone to read it. The Indian gold purchase should, as he says, be one of foreboding. Really thoughtful analysis.

Nov 08 11:28 PM