Sunday, August 19, 2012

Investing is little more than seeing opportunity when everyone else is terrified. The greatest time in US history to invest in the US stock market was between July 1932 and June 1933. The Dow was 295 in October 1929 when the market crashed. It hit a low of 41 in July 1932. That’s a decline of 87%.
Not a single market cheerleader can say what happened next. They know nothing of corrections or opportunity. Cheerleaders don’t even use the term “correction,” yet every investor knows that corrections are part and parcel of investing.
In July 1932, during the depths of the Depression, with the Dow at 41, a few brave souls realized that no market goes to zero and they invested. Barely a year later, the Dow was 108, up 150% during the worst part of the depression.
Moriarty notes that markets that decline between 87% and 91% will tend to have a countertrend rally of 150%.
He has followed the platinum/gold spread for many years. Platinum is more rare than gold, and also more expensive to refine and mine. For most of history, platinum has sold at a premium to gold. At the start of 2012, gold climbed to a premium of $220 over platinum; by mid year, gold and platinum prices were virtually the same.
As of August 10, the spread is up to $227 with $1,620 gold and $1,393 platinum. If you sold 100 ounces of gold (one contract) and bought 100 ounces of platinum (two contracts) you would be betting on the spread to narrow.
Only three times in the last 25 years has platinum sold at a discount to gold. The spread may well widen, but the platinum/gold spread is a pretty sure bet
To read Bob Moriarty article: Pretty Sure Bets
source: BMG

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