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View Full Version : Fear and greed and implications PM's


rotschadel
11-01-2010, 11:43 AM
The two great emotions driving the market are fear and greed, traders and investors live at the intersection of Fear Avenue and Greed Boulevard. succeeeding and surviving demands controlling both in decisions you make.

Both can be in play at the same time (and usually are).

The 'greed' emotion leads to TickleMe Elmos for $3k, Cabbage Patch Dolls, and the internet stock bubble ( I gotta own some of the next dot com, every body's gettin' rich on these things)

PM's are still in a 'greed' mode but a some point, that will change to a 'fear' mode. Once more of the population realizes that fiat based wealth is dependent on the whims of fallible, corrupt, and perhaps evil people, they will 'fear' for their savings and rush to PM's in any form.

That switch could occur at almost any moment. QE announcement, government default in Europe, large muni default in the US (Ambac is a bigger deal than is appreciated)

I believe the extent of irrationality possible in a fear driven market is much greater than in a greed driven market. It is critical to not get wed to a specific absolute numeric price target, (Au $3k, Ag $100, whatever). The upside potential is huge

You must look at the total economic, political, cultural landscape. Have the changes in beliefs, valuations, behaviors, changed so that some other asset class offers the best attributes for preserving wealth. And, if so, what is that asset class, cash? Real estate? other commodities? etc.

Make your move then, not simply because some price level has been reached.

For those of us that have gotten in early relative to the masses, our investment in PM's will not be simply wealth 'preserving', they will be wealth creating. The segment of the asset pie represented by PM's is going to change from an anorexic sliver, to a gluttonous wedge. That is where the wealth creation for the early birds is going to come from.

Keep your core long position. Don't get too cute with trying to trade short term swings, it is difficult to do well and could result in you missing discontinuous market move to the upside.

as always,
Good luck,
K