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Strange Things in the Precious Metals
Issue #531, July 17, 2018

Buying Years of Retirement
Issue #530, July 09, 2018

Rent-A-Kid for Retirement
Issue #529, July 02, 2018

The Dark Side of Student Loans
Issue #528, June 25, 2018

The Cost of Out-sourcing Convenience
Issue #527, June 18, 2018

Social Security: 66 or 70?
Issue #526, June 11, 2018

Student Loans: There’s (Unfortunately) a Lot More!
Issue #525, June 04, 2018

Co-signing a Note
Issue #524A, May 31, 2018

The Knight Frank Luxury Index and Collectables
Issue #524, May 28, 2018

The Importance of Diversification: The Myth of Diversification
Issue #523, May 21, 2018

How to Save Thousands on Your Food Bill
Issue #522, May 14, 2018

MoviePass and Other Things
Issue #521A, May 10, 2018

Degree Inflation, Long Training Periods, and “Certification”  Part III
Issue #521, May 07, 2018

Degree Inflation, Long Training Periods, and Certification” Part II of III
Issue #520, April 30, 2018

Follow-up on Several Things
Issue #519A, April 25, 2018

Degree Inflation, Long Training Periods, and “Certification”: Part I of II
Issue #519, April 23, 2018

The Kids Birthday Party Hustle
Issue #518A, April 18, 2018

A Pension Question: Part II of II
Issue #518, April 16, 2018

A Physician is an Executive
Issue #517A, April 11, 2018

A Pension Question: Part I of II
Issue #517, April 09, 2018

Is the Correction Over?
Issue #516A, April 05, 2018

Used Car Dealers, Student Loans, the Chinese, and Uncle George’s Rule
Issue #516, April 02, 2018

Starter Homes
Issue #515, March 26, 2018

Redecorating: Beware!
Issue #514, March 19, 2018

NASDAQ Closes at Record High
Issue #513, March 12, 2018

A 40% Chance
Issue #512, March 05, 2018

Several Things
Issue #511, February 27, 2018

Human Capital, Education and Wealth
Issue #510, February 19, 2018

Another Stock Market Update
Issue #509A, February 18, 2018

Some Thoughts on Savings
Issue #509, February 12, 2018

A Stock Market Upfate
Issue #508S, February 10, 2018

Who Can You Trust? Part II of II
Issue #508, February 05, 2018

The Christmas Decoration Pre-worn Jeans Hustle
Issue #Interim Bulletin #507A, February 03, 2018

2018 Outlook for Financial Markets
Issue #507, January 29, 2018

Who Can You Trust? Part I of II
Issue #506, January 22, 2018

Life Insurance Settlements
Issue #505, January 15, 2018

Commodities and Buying the Breakout
Issue #504, January 08, 2018

Buffett Wins His Bet
Issue #503A, January 04, 2018

Practice Real Estate and Free Agency
Issue #503, January 01, 2018

Outlook for 2018: Part III: Stocks and Bonds
Issue #502, December 25, 2017

My Outlook for 2018: Part Ii: Precious Metals
Issue #501A, December 21, 2017

Outlook for 2018: Hard Assets: Part I of III
Issue #501, December 18, 2017

More Thoughts on Bitcoin
Issue #500A, December 14, 2017

Fees and Good Relations with Bankers
Issue #500, December 11, 2017

Salvator Mundi
Issue #499A, December 07, 2017

Should You Rent or Own a Home?
Issue #499, December 04, 2017

A Gift Subscription
Issue #Interim Bulletin #498A, December 02, 2017

Stocks vs Real Estate: Asset Allocation: Part II of II
Issue #498, November 27, 2017

When Good Enough is Fine
Issue #497A, November 22, 2017

Stocks vs Real Estate: Asset Allocation. Part I of II
Issue #497, November 20, 2017

The Saudi Arrests and the Perils of Foreign Investing
Issue #496, November 13, 2017

Gambling and Las Vegas
Issue #495, November 06, 2017

Some Tips on Auto Insurance
Issue #494, October 31, 2017

Bitcoin and the Digital (Crypto) Currencies
Issue #493, October 23, 2017

The Coming Bear Market: Part II How to Prepare
Issue #492, October 16, 2017

Some Observations on Cemeteries
Issue #Interim Bulletin #491A, October 12, 2017

The Coming Bear Market: Part I: The Myth of Buy and Hold Forever
Issue #491, October 09, 2017

The Market makes New Highs
Issue #490, October 02, 2017

The Importance of a New High
Issue #489, September 25, 2017

A Little Insurance: Wealth, War and Wisdom
Issue #488, September 18, 2017

Some Observations
Issue #487, September 11, 2017

How to be Successful in Your Career
Issue #486A, September 07, 2017

How NOT to Buy a Home
Issue #486, September 04, 2017

This Week in the Market
Issue #485, August 28, 2017

Is the “Trump Bump” Running Out of Gas?
Issue #484, August 21, 2017

Gold is on the Move
Issue #483, August 14, 2017

The Importance of Estimation
Issue #482, August 07, 2017

Buying Art and Collecting: Part II of II
Issue #481, July 31, 2017

Buying Art and Collecting in General, Part I of II
Issue #480, July 24, 2017

Physicians need to be More Forceful: Follow-up
Issue #479, July 17, 2017

Physicians need to be More Forceful
Issue #478, July 10, 2017

Your First “Real” Investment
Issue #477, July 03, 2017

Leasing a Watch: Don’t
Issue #476, June 26, 2017

The Importance of Your Children having a Job
Issue #475, June 16, 2017

The Problem with Medical Student Debt is—the Med Schools
Issue #474, June 12, 2017

Critters and Varmints in your Home and Yard
Issue #473A, June 07, 2017

Leveraged ETFs
Issue #472, May 29, 2017

Leasing a Vehicle: Don’t!
Issue #471, May 22, 2017

Issue #470, May 15, 2017

More on Buying Jewelry
Issue #469, May 08, 2017

Buying Jewelry: Gold, Diamonds and Pearls
Issue #468, April 30, 2017

Thomas Sowell: Part III of III
Issue #467, April 24, 2017

Thomas Sowell: Pat II of III
Issue #466, April 17, 2017

Live Close to Where You Work
Issue #465, April 10, 2017

Medtronic in Hospital Management
Issue #Interim Bulletin #464A, April 07, 2017

Thomas Sowell: Part I of II
Issue #464, April 03, 2017

A Political Contribution a an Investment: Part II of II
Issue #463, March 27, 2017

A Political Contribution as an Investment: Part I of II
Issue #462, March 20, 2017

Buffett Selling Vacation Home
Issue #461, March 13, 2017

Advanced Placement (AP) ourses
Issue #460, March 06, 2017

The Importance of a Credit History
Issue #459A, March 02, 2017

A Credit Card Scam
Issue #459, February 27, 2017

The Electronic Health Reord
Issue #458, February 20, 2017

Issue #457, February 13, 2017

Platinum and Palladium
Issue #456, February 06, 2017

Economic Outlook for 2017: Part II of II
Issue #455A, February 02, 2017

Economic Outlook for 2017: Part I of II
Issue #455, January 30, 2017

A Story From Vegas
Issue #454A, January 25, 2017

Land Donation Deals and the IRS
Issue #454, January 23, 2017

The Theory of Gambler’s Ruin
Issue #453, January 16, 2017


By Robert M. Doroghazi, M.D., F.A.C.C.

My Outlook for 2018: Part Ii: Precious Metals

Issue #501A, December 21, 2017

    As noted in last weekend’s newsletter: 1) stocks and commodities alternate bull and bear markets that average about 13-17 years. 2) Compared to stocks, commodities are as cheap as they were in 1971, and cheaper than the last bottom in the late 90s. 3) It’s time to buy commodities.
    A little history. Gold bottomed in 2001 at $255 per ounce and peaked at $1,900 in 2011. Silver peaked earlier that year at $50 per ounce, almost to the penny the high when the Hunt brothers tried to corner the market in early 1980. The precious metals then backed off, and suffered a Hiroshima-like smack-down in April, 2013.
    I believe a new bull market in the precious metals started when gold bottomed at $1,050 in December, 2015.  Gold shot straight up to peak at $1,370 in May, 2016. This year, gold has bounced around from $1,200 to $1,320, and currently stands at about $1,265. The latest COT report (Commitment of Traders, see below) suggests the current correction could be ending soon.
    An important metric to compare gold to stocks is the DJIA/gold ratio: how many ounces of gold it takes to buy the Dow Jones Industrial Average. The average for the 20th century was about 10. The highs were about 22 in 1929, 30 in the mid-60s, and 37 at the peak of the bubble in 1999/2000. At these times, stocks were very dear, and gold was cheap. The low was 1 in 1980, and just above 1 at the stock market low in 1932: gold was very dear, stocks very cheap. At gold’s peak in 2011, the ratio was 6: low, but nowhere near the historical extremes. The current ratio is 21.25: stocks are dear, but again not to historical extremes.
        Note: Since 2000, gold has far out-performed the stock market. The DJIA rose from about 11K+ to the current 27K, about 2.5x, while gold, even with the weakness of the last 6 years, is up about 5x ($255 to $1,300). Even adding in the meager dividends, gold has still far out-performed stocks since 2000.
    Compare gold to silver. When the US was on a bi-metal standard (gold and silver were both in circulation), the ratio was 16:1. Since the demonetization of silver, silver has lost relative value, and the ratio has averaged about 50 to 1. In precious metals bear markets, silver under-performs, and the ratio is high. In precious metals bull markets, silver out-performs and the ratio falls. Peaks were 30 in 2011 and 16 in the Hunt brother’s debacle of 1980.  It is currently 78: silver is cheap compared to gold.
    Of course, everything depends on the US dollar. Over the last 2-3 months, the dollar strengthened and gold was weak. But the Dollar Index stalled at 94, and has fallen back to about 93.4. If the Dollar Index falls below support at 92.5, gold will rocket higher.
    I recommend:
    1) an asset allocation of at least 5% to the precious metals, with the core position being physical gold in your personal possession (in a safe deposit box at the bank). I recommend 1 oz. US Gold Eagles (see below). Physical gold is not an investment: it pays no dividend. This is your insurance should stuff happen.
    2) The current correction will be over when gold breaks $1,370, the high of 2016. I’ll have much more to say, with further recommendations, at that time.     
    In the futures market there is a long and a short for every open position. The COT report counts the large speculators, who traditionally take the long side, and the commercials, who are traditionally short. The miners (commercials) use futures to conduct their business, to bring their product to market. Say they sell gold short at $1,300. If the price drops to $1,200, they cover the short for a $100 profit and keep their gold. If gold rises to $1,400, they just deliver the physical gold to fulfill the contract. Whether gold goes up or down, they can’t lose.
    At major turning points, the “smart money” is always right, that’s why they’re the smart money. In the last few weeks, the commercials have exited many of their short positions, with levels now typical of market bottoms. The correction may be ending soon.
    If you wish to buy physical gold or silver, I suggest Stephen Davidson at Blanchard & Co. (1-888-830-2646. .(JavaScript must be enabled to view this email address) ). Note: Stephen and Blanchard advertise on my website, but I receive no further commission or compensation. I make this recommendation because Blanchard has been in business for decades, Stephen has given me good service for almost 15 years, and no one I have recommended to him has complained to me.   

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