Tuesday, May 12, 2009

Hards Assets - the Good, the Bad and the Sleazy

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Like all other market information, you could find valuable investing advice at the New York Hard Assets Conference as long as you sifted through the material carefully. The Aden Sisters, who have a 30-year history of accurate gold forecasts, were cautiously bullish on gold in the short term and have now raised their long term price target to $6000 an ounce. Elliot Wave guru, Robert Prechter, considered by many to be part of the lunatic fringe (with the emphasis on the first word) because of his early 2000's prediction that the Dow would fall to 400, thinks gold will go to $600 and ounce. Peter Schiff, essentially a one-note Johnny, is bullish in the long term and thinks the short term is irrelevant. He got a lot of his clients in at the top of the commodities market and they are now sitting with massive losses, but he still has the hefty fees he collected, so in typical Wall Street fashion he makes money no matter what happens. Why indeed should he care what happens in the short term?

At last year's 2008 Hard Assets Conference the Aden sisters had a long term price target of $2000 an ounce for gold. I personally spoke to Pamela Aden and mentioned to her that the New York Investing meetup had forecast that gold would be going to $5,000 to $10,000 an ounce at our March meeting. It is my opinion that she was far more bullish than the $2000 figure indicated, but the sisters like to gradually raise their price targets so as to avoid a backlash from the public (something the New York Investing meetup understands quite well, although it has not prevented us from making bold predictions - we always get negative flack when we do). The Aden sisters became famous when they predicted gold would go to $800 an ounce in 1980. Almost everyone scoffed at their prediction until gold peaked out at $850 an ounce that year. According to the Aden sisters long-term price channel for gold prices, gold should hit $2,000 an ounce some time in 2010. They now see the peak of the current bull cycle around $6000. Pamela told me that it was certainly possible that that number could be raised in the future.

In contrast to the reliable and bullish Aden sisters, Robert Prechter was bearish on gold. Unlike the Aden sisters, Prechter has made some spectacularly bad predictions and you easily have lost all of you money more than once if you listened to him. Why he is still given a public forum is beyond me. Peter Schiff on the other hand is bullish in the long term. He has been consistently bullish even as some small cap gold stocks have lost 90% or more of their value. He reminds me of the people who predicted a major stock market and economic crash in 1928. Sure, they were eventually completely correct. However, they unfortunately shorted the market in 1928 and had lost of all their money before it actually crashed in 1929. Long-term predictions without proper timing can be as destructive to your wealth as the ravings of any Elliot Wave practitioner. A lot of Peter Schiff's clients are hurting, but he's living it up with the fat fees he collected from them even if he lost most of their money.

There was more important information that could be gleaned from the conference than what was stated in the talks. There were only about a third as many exhibitors as there had been in 2008 and maybe a third as many attendees as well. Lack of interest in an investment category is a classical contrary buy signal. The opposite is true as well. The huge Real Estate Expo that packed the Javits Center with 10,000s of attendees in the mid 2000's took place at the top of the housing market. As for the exhibitors at this years Hard Assets Conference, only one caught my eye - Nova Gold (NG). I bought some this morning.

NEXT: Oil Inventory Report Super Bullish; Watch Gold and Silver

Daryl Montgomery
Organizer,New York Investing meetup

This posting is editorial opinion. Like all other postings for this blog, there is no intention to endorse the purchase or sale of any security.

1 comment:

sparky said...

aden sisters predicted 2500-3000 dollars gold in 1980