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Message:: [QUOTE="Daniel M. Ryan, post: 1240620, member: 32253"]Thanks. Sadly, it's easy for a knowledgable person to get hooked when a bubble's blowing. Not only are all the experts bullish, but also they have long-term credibility: they were the ones who were bullish long before the general public. They've also become used to dismissing skeptics, which has worked marvellously for them. Calls of "bubble" were made about gold as far back as early '06, when gold went above $700. Any gold bull who listened and sold out missed most of the bull market. There have been calls of "bubble" in early '08, late '09, and late last year. There may have been more. Gold was supposedly "finished" when it briefly sunk below $700 in the '08 crisis. In order to stay the course, a gold bull has to brush off a lot of negativity - including false or premature cries of "bubble." Once the gold bull finally cracks, all the long-term pros will simply categorize it as another pullback. "Just like '08: just you wait and see." The people who spot the bubble and yell about it - even if they're right - will be lumped in with the gold skeptics who cried wolf too many times. That's the psychodynamics of a bubble. Anyone who spots trouble will wonder if (s)he's like the skeptics who've been refuted time and again. The ones who stuck with gold have become habituated to any major decline being a mere correction. They're also habituated to thinking of bears as idiots, or biased, or misguided. Weren't the "gold haters" proven wrong several times beforehand? "What else do you need to know about their bias?" [This last dynamic's the killer.] Everyone knows that Paul Volcker killed off inflation. In 1979, 1980 and 1981, though, most everyone was scoffing at him. It was held almost unanimously in the goldbug circuit that Volcker would eventually fold and go back to inflating becasue of the economic pain his tightening caused. It was held almost unanimously that, once Volcker cracked, inflation would go up to 20% and more. The only ones who expressed doubts, in 1981, were Harry Browne and Terry Coxon: their doubts were in the context of a portfolio plan that would also protect against any futher inflation should it have come roaring back. Volcker did turn on the money spigots in mid-1982 during the Mexican banking crisis. By that time, though, inflation's back had been broken. The new money pushed up the stock market (and gold to an extent, but the prime beneficiary was the stock market.) Inflation remained in single digits, and kept drifting lower. Gold languished until 2001.  My guess as to the next downward turn of the gold tide is a budget deal that really cuts spending. I've already been told by a professional that such an occurrence is highly unlikely. "As 'highly unlikely' as Volcker breaking the back of inflation," I thought in reply - but I didn't push the point.[/QUOTE]

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