Not Too Late for Gold Investment; Housing, Healthcare Also Attractive?

Excerpt from Raymond James strategist Jeffrey Saut's latest essay:

The gold index (GLD) has broken out to new all-time highs. This is not an unimportant point, for as our technical analyst Art Huprich noted in his insightful report last Friday:

Here is a quote I recently read by W.D. Gann, considered by many professionals as one of the greatest commodity traders ever. He states:

‘When a stock or commodity advances into new territory or to prices it has not reached for months or years, it shows that the force of driving power is working in that direction. It is the same principle as any other force which has been restrained and then breaks out. Water may be held back by a dam, but if it breaks through the dam, you would know that it would continue downward until it reaches another dam, or some obstruction or resistance which would stop it. Therefore, it is very important to watch old levels of stocks or commodities. The longer the time that elapses between the breaking into new territory, the greater the move you can expect because the accumulative energy over a long period will naturally produce larger movements than if it only accumulated during a short period of time.’

We urge you to read the aforementioned quote again, particularly the line, “The longer the time that elapses between the breaking into new territory, the greater the move you can expect because the accumulative energy over a long period will naturally produce larger movements than if it only accumulated during a short period of time.”

It has been roughly 30 years since gold has traded above $850 per ounce. Consequently, is there little doubt that a lot of “accumulative energy” has been stored up over that time frame? Obviously we are bullish on gold, as we have been for seven years. Regrettably, very few have heeded our bullish gold “call.” Yet, we think it is NOT too late to invest in gold.

In past missives we have mentioned numerous precious metals mutual funds, but recently have focused on the OCM Gold Fund [OCMGX]. Consider this; the Fed started cutting interest rates on August 17, 2007. Since that time, OCMGX has appreciated by nearly 50% as of 1/08/08. Manifestly, we still like gold!

Another mutual fund that has treated us well over the years is Quaker Strategic [QUAGX], managed by the astute Manu Daftary. Conveniently, Mr. Daftary is conducting a conference call on January 24^th, which we think will make informative listening. Likewise, MFS International Diversification Funds [MDIDX] has treated us well over the years and we continue to consider it a centerpiece for the international component in most portfolios.

In conclusion, we had an interesting conversation with the owner of a real estate appraisal business in the Tampa/Saint Petersburg area on Friday. He thinks the housing cycle is bottoming, as evidenced by a noticeable pick-up in his business. Since he is on the “front line,” we listened to his cogent comments intently. While we remain skeptical of real estate, if YOU believe the cycle is bottoming, we would watch the exchange-traded fund “ProShares Ultra Real Estate Fund” (URE), which yields more than 6% and has good leverage on the upside.

The call for this week: We are in Canada all week surveying the investment landscape, as well as our Canadian investments. Consequently, these will likely be the only strategy comments for the week. Nevertheless, it is apparent that the Fed, the Treasury Department, President Bush, Congress, the Central Banks, et al. are going to resort to almost any measure to prevent a downside “adjustment” and a recession.

While it is suspect they will be successful, the equity markets are short-term oversold and looking for any reason to rally. Interestingly, the Healthcare complex was one of the few sectors that lifted last week, helping our positions in Johnson & Johnson (JNJ) and Pfizer (PFE). We continue to invest accordingly.