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Perspective is Everything - We're Only Making Plans

|Includes: DIA, GDX, SPDR Gold Trust ETF (GLD), IEF, QQQ, SHV, SHY, SLV, SPY, TLT, UUP
NFTRH65 is out now, with some light macro and the opening phase of gold stock charting that may lead to more intense opportunities before too long. A bit of uranium is in there as well.

Meanwhile, from NFTRH13 dated December 27, 2008:

We're Only Making Plans

My investment and trading style involves always having a plan that is subject to revision and evolution at all times, and generally serves as a road map for navigating financial markets that can be complicated on a good day and downright violent and irrational on a bad day (or in the case of recent events, many bad days clustered together).

In 2008 I had done my homework and decided who and what I was and despite the traumatic moves in markets that went wildly against my bullish gold miner stance, I held strong and took good advantage of HUI 150, which you will recall was merely the latest (and ultimately last) downside target after 250, 220 and 175 were snapped like dried kindling during Armageddon ’08. But a target it was, and it held.

The original plan, before the acute phase of panic began, was to hold gold miners and cash in the face of an on-coming deflation impulse. Bearish oil, bearish copper, bearish human hopes for prosperity, bearish the Ponzi scheme known as the United States – and by extension, global – financial system, I held what my research told me to hold; cash (along with t-bills and short term treasuries) and gold miners. Once again, here I will interject my belief that gold miners are to be ‘played’ only after one has seriously considered ownership of the actual precious metals, especially gold.

As noted many times, the reason to hold gold miners is that they should perform well in an economic contraction environment as these companies’ cost drivers decline relative to their product. Well, as the market crisis grew more violent and human hopes crashed along with cost inputs like oil and base metals while gold held its own, I grew more bullish the gold miners as they came on sale at crazy prices.

The plan morphed and I began to have visions of an epic opportunity in the making; something we would look back at years from now and thank the trading gods we had the focus and courage to capitalize on while most people were panicking. Even as I was suffering financially in the short term and being negatively reinforced by everything around me, I was able to get outside the October/November bubble in fear, look at it objectively, tweak the plan and remain on course and on message.

The message was updated weekly here at NFTRH and regardless of how things were to turn out for the investment stance – and I believe it is well on its way to being validated – I wanted to have it documented during historic times. The letter’s entire ‘Q1’ will remain posted on the website as a sales tool, yes. But it is in reality a once in a lifetime opportunity for me to have shown exactly how the service operates in the most difficult of circumstances; historically difficult circumstances. After all, everybody is a genius in good times and I am glad I waited until the world began falling apart to see if Notes From the Rabbit Hole could pass muster.

Both portfolios are now back above ‘baseline’ (their levels at NFTRH launch in late September), the panic phase is over and a plan is in place. This one involves a broad global market recovery from unsustainably morose sentiment levels with the gold miners – relative strength leaders already having doubled off the bottom – leading. This makes sense because not only did the same forces that drove the world’s reserve debt note impulsively higher also drive gold mining fundamentals higher, they put a serious exclamation point on the proceedings in the form of gold-oil, gold-industrial metals and now gold-thirty year rate ratios.

It is advisable to tune out hyperbole (bullish and bearish), look at convention with distrust (and really, has conventional thought not been the undoing of the vast herds of followers, including most financial professionals?) and to have your own plan, subject to ongoing revision through rational thought.

At this point, my personal plan holds that a bear market rally is beginning as the markets grind out a bottom. The rough target for the S&P500 is in the 1200 area. The plan holds that the gold miners have begun a new bull market; one that may eventually make heads spin. But be aware, the plan also holds a contingency that if our broad market ‘next leg down’ is as severe as I suspect it could be, some serious profit taking may come into play in the gold miners as well. After the recent panic, we know all too well what can happen in emotionally charged markets despite fundamentals.

Markets are now functioning ‘normally’ and the major media, always a day late and a dollar short, continue to beat the dead economic horse. The new US administration will continue a rich history of inflationary policy that has been the product of the most myopic academic minds on the planet; a Keynesian nirvana, which is actually the worst nightmare of honest economists, the likes of whom come from the Austrian school of von Mises and Rothbard.

The world turns, a global depression (in many assets and industries) is likely to get worse before it gets better, misperceptions will run rampant and within the confusion, there will be opportunity. I am not here to save the world. was started as a free resource to try to do its small part in that regard. Most of the world yawned. It is time to make money, preserve wealth or do whatever else is necessary to navigate a world in financial and social disarray.

Thank you dear subscribers for being aboard NFTRH during its first quarter in existence. 2009 stands to be an interesting and potentially profitable year [it certainly has been]. We will remain outside whatever box gets constructed post Armageddon ’08 and attempt not to predict the future, but to interpret events along the way in service to an ongoing and revisable plan.

Disclosure: Still long the gold sector, and short various other markets