Gold & War

by David N. Vaughn, Mar 10/03

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I've got to share a story I just read in USA Today.

The recent stock market has not been cooperative. They estimate the value of their investments at about $330,000, down from a peak of $500,000. Says Gary Cardenas: "You look at the quarterly statements, and it's just bloody. It's hard to take."

So far, the couple continues to invest in stocks and stock funds. In addition to making the maximum investments into their company 401 (K) plans, they both invest in their employers stock ownership plan. By Thomas Fogarty, USA Today 3-3-3

Let's read part of this again:

"You look at the quarterly statements, and it's just bloody. It's hard to take."

But is this family really nervous or worried about the state of the economy?

...the couple continue to invest in stocks and stock funds. In addition to making the maximum investments into their company 401 (K) plans...

What is my point in bringing this up?

Even considering all the money this family has lost their faith that "long term" they will come out OK remains unshaken. In the newspaper article a picture shows the family sitting at the kitchen table. "Dad" is sitting there in his socks with a big smile on his face!!! He is no fool! Though his nest egg has lost almost 200,000 dollars he knows that eventually it will all come back. But will it come back & in time for his retirement?

What concerns me about having watched this debacle of a market crash is that the analysts never alert "ma & pa" to any other types of investments that may balance & cushion them from losses. Again, we come back to the fact that gold & gold equities are a viable alternative investment. Gold & gold equities are not a perfect investment, but they do provide BALANCE in a diverse portfolio.

I am reminded continuously that a war continues for the finances of the average investor. And in that war the strategy is the attempt to keep the average investor investing blindly in his company 401K plan & other investments that have already severely plummeted in value these past few years.

Remember the movie with Michael Douglas that came out in 1987, Wallstreet? The movie always reminds me of the fact that Wallstreet was once the province only of professional speculators & professional money managers. Up until this time, the 1980s, when the average guy wanted to invest in Wallstreet he did it through a knowledgeable broker or an established institutional mutual fund.

But that fact changed as we entered the 1990s. The average "Joe" was told that he too could become as proficient as the "experts" & make a killing in the market. Invest for the "long term" & you will come out OK & get rich in the process. Forget about "balance", gold or any of the principals that in the past were common well used safeguards & common denominators in a well balanced portfolio before the "New Era" of the 1990s.

In my opinion the market today is not even about a true effort to make money. If making money were the true goals of the market leaders today then why did they not steer investors into gold equities 2 years ago to make the killing that has occurred in gold equities? And if the concern was that this was only a temporary bull market then so what? The investor could have been told to sell & get out when the high was perceived to have reached its peak.

But as I said. The objective is not to teach the small investor how to make money. The objective is to keep the "Mom & Pops" forever filling the coffers with their dollars so the professionals can come in periodically & skim the cream of this money off the top. And while mom & dad are told to NEVER sell but to hold on for the long term the professional is buying & selling REPEATEDLY while mom & dad keep the stock coffers flush with cash.

This is the true financial war being engaged today.

And the rules for this war call for a continued lemming like behavior for the majority of investors across the country. Sure, investing will always be filled with risk. But as I see it the average investor who is continuing to follow in lemming like behavior "holding" on is taking the greatest risk. While the Martha Stewarts are receiving insider info when to sell "ma & pa" are continuing to buy & hold on for the "long term".

But I do believe we are quickly approaching that day when everyone will finally learn what real capitulation is. I have noticed already that fewer people are staying tuned into the cable money channel all day anymore. Short term hopes for a quick stock market turn around are passing into obscurity. Most people are holding onto their portfolios & refusing to sell & accept their losses simply because they remain shell shocked. But the day is coming when investors wake up & finally accept the fact that this bear market is not going away any time soon. And when this simple fact is truly grasped we will begin to see capitulation & significant selling. And yes, when that time arrives we will see across the board a greater appreciation for investing in hard assets including gold.

Even though we have covered this ground so many times before in these essays it is a message we need to continue to hear. When Paul Revere made that late night ride warning the towns people that a great danger was at the people's doorstep there were many who wanted to throw their boot at him for being awakened in the middle of the night.

Even today there are those who grow tired of these messages & words of warning. But as we can already see many of these warnings are already coming to pass.

* * * * * *

NEVER GIVE UP YOUR DREAMS

David N. Vaughn
Gold Letter, Inc.
David4054@charter.net

Exercise your freedom to express your personal opinion by emailing this writer your feedback & observations.

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