How far will gold and silver fall?

I'm thinking about selling some CEF to reinvest in INTC. If gold/silver continues to rise and INTC falls just a bit more, I might do it as early as next week. At some price point, everyone should be thinking about selling at least some of their PMs and buying underpriced assets of whatever they know a lot about.

 

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IMO, the stock market has long lost any connection to the industrial output of the USA (or the companies located in it) and now is nothing more than a poker game being fueled by money printing, HFT computers and very low volume. In the last 4 years it's made gyrations exceeding 200% in the absence of any corresponding real world economic activity. This alone says its wacked and a rise in the stocks doesn't mean there is any sort of recovery taking place.

This is why gold continues to rise and barring some fundamental changes to how this economy is being handled, I don't see a change coming anytime soon.

 

Your observation is the same as that of Ben Graham. He used to illustrate this with his example of "Mr. Market" who sometimes is very optimistic about stocks and prices them very high, and at other times is very depressed and prices them very low. But the prices swing more than the underlying economics of the business warrants. Ben recommended taking advantage of Mr. Market's overreaction by buying when the market was depressed and selling when it was manic, taking care never to believe Mr Market.

So the situation today hasn't really changed from 60 years ago.

 

It's stating the obvious and also useless advice for most people because restated it says the investor should try to time the market. Yet there is nothing that anyone can do to determine where the market will be tomorrow, next week, next month, year, decade, etc. This is because there are no longer any realiable market indicators since the government is now picking business winners and losers, risk has been removed (or can't be determined) and nobody believes the ratings agencies. The value of the market can now be changed by a handful of people working at the federal reserve. Nobody has any idea what they will do and when.

It's a better plan to simply go to Las Vegas and place bets on the tables. At least there, you know what the odds are. IMO, the true value of the market was briefly revealed in April-June 2009 before the Federal Reserve started printing massive amounts of money and dropping the rates to 0.

This is the very reason that people are flocking to PMs. It removes the follies of government from the equation.

 

Your comment about timing is the typical misunderstanding of what Ben Graham was saying. He wasn't saying that anyone should try to time the market in the sense of anticipating where it would go. He was a big advocate of taking advantages of big moves in the market AFTER they occurred -- buying AFTER a big drop and selling AFTER a big rise. Essentially he was using a PRICING model, not a TIMING model. It is true that this takes a basic knowledge of how to read and understand financial statements. Probably the most dangerous thing an investor can go is buy gold with no intention of ever selling regardless of how high it goes. This was the mentality with tech stocks in the 90s. Nobody knows what the top will be for gold, but it is foolish to believe there won't be a top.

 

I have no idea what Graham said, my commentary is based on your paraphrase of what he is supposed to have said. No matter how you spin it, it's investing by trying to time the market.

 

To invest any other way, i.e., ignoring the price of stocks, is pure gambling. Since the stock market is probably one of the best ways for the average person to grow their savings, it's worth the effort to learn. But you are correct that if someone doesn't understand this, it is better to put your money elsewhere.

 

People get forced into the stock market because of the policies of the Federal Reserve. It however hasn't done much for the average person, as you put it, in more than a decade. The reasons why, I gave above. There is nothing to learn because the valuation of the current stock market can't be determined by any means.

 

I've been in the stock market more or less continuously since 1971. Nobody "forced" me into it. For me, the fact that the market has gone noplace for 12 years is more of a plus than a minus because I like to buy stocks cheap. I don't agree that the value can't be determined for specific issues. Your comment that "there is nothing to learn" is very telling about your attitide.

 

Personal acnedotes are irrelevant to my argument. It doesn't matter to me if you are up there everyday banging the gavel to open the market.

You responded to what I posed above without addressing any of it. When you are willing to discuss the actual points made, you will get a more satisfactory response.

 

Since you have already stated that you have nothing to learn it isn't surprising that it went over your head.