Loading ...http://www.lemetropolecafe.com/img2015/Midas/0710/FredHickeyLetter.pdf
\
Investment Legend Fred Hickey: “This Market Is Going Down And Will End In Chaos”
by Contributor • November 22, 2014
Reposted from Finanz und Wirtschaft
The editor of the influential investment newsletter «The High-Tech Strategist» warns of trouble in semiconductor stocks and spots bright investment opportunities in gold miners.
And how does your strategy look like with regard to longer term investments?
I was never a gold bug and I’ve never even owned an ounce of gold until the late nineties. But in 2002 when Greenspan was dropping rates rapidly and all the money printing started, I said to myself: I need to protect myself. The technology stocks that come and go wouldn’t be the right place since they’re not a long term store of value. But I knew that the best way to protect yourself in an easy money environment historically has been precious metals. Yet at that time, I would have never imagined that we would end up with central bankers printing trillions of Dollars. But all that happened and for ten years gold was the place to be and outperformed stocks dramatically. So despite the 2000 decade was considered to be a lost decade for stocks, I had double digit year after double digit year.
In the last few years, though, the gold price has been falling quite rapidly.
In 2011 gold got overbought. We had a lot of hot money that came into the market and we had a sell off and that sell off has continued. I would argue this sell off has gone on longer than normally, partly because there are so many gold haters out there. That same herd that’s willing to pay any price for bubble stocks like Tesla, GoPro or NetSuite also dislikes gold intensely and the owners of gold. Anything they believe in, is based upon the theory that the central bankers will be able to stop QE successfully, that they will be able to raise interest rates to normal levels, that the economy will normalize and that we will live happily ever after. That’s their belief. Gold owners don’t hold that belief. They say: «You’re going to die in that cesspool of liquidity.» But the herd doesn’t want to hear that. So I believe that they use a lot of their leveraged money to punish the gold owners. And they’re having a good time doing it.
Are you suggesting that the gold price is being manipulated?
We have basically all prices manipulated right now: Interest rates are manipulated down, stock prices are manipulated up and gold prices are manipulated down. That’s the way they want it. I think they can do that in the short run. And I do think they target major technical break levels with their enormous leverage. They can throw billions of dollars at something in the dark of night or the wee hours in the morning when trading is illiquid. But we’ve also seen a number of things happen: We’ve seen that investment demand for precious metals skyrocket around the world, even in Germany according to reports. We’ve seen it even in the U.S. where the mint ran out of silver coins. In addition to that, the leasing rate for gold has gone negative. That’s a very rare occurrence and a good sign that there are shortages of gold. I’m not going to say that the gold price won’t come back more but I’m hopeful that these pressures will go away and that the amount of buying that we have will be enough to hold off those attacks that occur in the futures markets.
So what’s your advice when it comes to investing in gold?
It’s easier to hold the metal. You can own it through an ETF but it’s important that you hold at least some physically and some amount outside of your country, particularly for U.S. investors. The gold stocks, on the other hand, are extremely volatile. They will go widely to the upside and widely to the downside. At this moment, they’re historically depressed, back to the levels we only saw before the bull market began. So this is an opportunity and I try to own only the highest quality names. I start with where they are located. If it’s Russia, I’m worried about expropriation. The same goes for Venezuela. In a lot of other countries like Bolivia, I’m worried about big tax hikes. So a good example is Agnico Eagle Mines. Their mines are located in Canada, Mexico and Finland. You can’t get a better basket than that. And then, I look for the quality of the mines, the track record of the management and that they have sustaining costs. That’s why I like names like GoldCorp, New Gold, AuRico Gold and Detour Gold, which is a little bit more risky. But I’m not levered and I never go in debt. Therefore, I’ll never get a margin call and I can wait until the rally comes.