Random Thoughts: The Gold Scold!

By Todd Harrison  SEP 08, 2011 11:40 AM

Popular opinion is not always profitable.


I'm back in the saddle following an early morning double epidural -- you don't know fun until foot-long needles are injected into your spine -- and there’s no shortage of news to view. Before we dive into that arena (in real-time on the Buzz), I’m compelled to discuss the elephant in the room.

Yesterday morning, I shared a 25-year weekly bubble comparison chart that plotted "bubble benchmarks" Japan (80's), NASDAQ (Y2K), China ('07), and crude ('08) against the current state of gold. I did it for one reason: to offer the "other side" of the parabolic frolic. Scroll to see below.

Over the years in the 'Ville, we've gotten a fair amount of flack at various junctures. We shared "the other side" of housing in 2006 (while preparing for "a prolonged period of socioeconomic malaise entirely more depressing than a recession"), offered that financial institutions were "technically insolvent" in 2007, and braved the short side in crude in 2008 (while transitioning my long-term bucket to 100% cash).

While some of you may not remember those stances, lemme assure you they were wildly unpopular at the time.

I've been trading for over twenty years and writing for more than ten. While I understand that life -- and financial commentary -- isn't a popularity contest, I'm conscious of the reaction to my vibes as they keep my finger on the pulse of market psychology. I was held to task for each and every call above, which ironically made me feel "better" about my contrarian stance.

I have no position in gold. I bought it right in 2003 and sold it right in 2007. Where I erred was in not buying it back (in size) when I saw the government mule saddle up the debt.

While I've traded both sides since then, I've largely left it for others. I learned a long time ago that if my greatest cost is that of opportunity, I should consider myself fortunate. That's not post-rationalizing; profits reside in the ride ahead, not looking back at what might have been.

Why do I bring this up? The push-back on yesterday's article was perhaps the most vicious I've seen in my career. While some, if not most of that is due to the secular shift in social mood -- yet another Minyanville theme that played through in spades -- I would be remiss if I didn't share that fare for those who care. My job is to provoke thought, not shape it, and the reaction to that article has been more interesting than the article itself.

I have no skin in that game. The only game I have skin in, as far as this discussion is concerned, is making sure our community is well informed and sees both sides. We try to side-step acrimony in the 'Ville, but perhaps we can use those obstacles as an opportunity to better understand the current market mindset.

And before you react to the vitriolic tenor that has become commonplace in the financial set, I'll ask you to please remember that most folks are scared, many are weak, and some are just plain confused and looking to take it out on anyone who dares to offer a variant view. It comes with the territory, I know, but it's likely to be around for a while so I thought I would address it.

Click to enlarge

Random Thoughts


Twitter: @todd_harrison

No positions in stocks mentioned.