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Rick’s Picks occasionally publishes opinions with which we disagree. The inflationist argument below, bullish on stocks but also on gold and silver, comes from our savvy friend Chuck Cohen. On stocks, at least, if not on bullion, Chuck’s scenario goes against our own expectations, since we’re looking for a global economic bust that would send shares into a steep dive before year’s end. While this could also push gold and silver lower, we still expect precious metals to perform well in relation to all other classes of investables. Economic expectations aside, the broad averages have broken above the tedious sideways correction of the last six weeks, and the charts of many key stocks are undeniably bullish. There are also less-than-subtle signs that the Fed is eager to get QE3 under way with the explicit goal of pumping up stock prices.  Keep these things in mind as you read Chuck’s contrarian take on the markets – a follow-up to a piece he did two weeks ago that we disseminated to paid subscribers.  If you’d like to contact Chuck directly about his financial consulting services, or about mining stocks in particular, click here. RA]

Following the recent move up in stocks, I want to update my piece of October 4 (A Bottom Is At Hand) by making some comments regarding stocks, and more importantly to the gold community, about the disappointing lag in the precious metals.

First, the stock market. In just two weeks, while the media and most investors continue to dwell gloomily on the financial landscape, the Dow has recaptured almost 1400 points (13%.) Today we are closer to the April high than we are to the recent low. In fact, both the market behavior and the Dow chart are remarkably similar to those of last year at the bottom in August. (The chart below shows how it unfolded from May 2010 to the end of August. Simply substitute 11,000 for 10,000.) And for those of us who have a short memory, the 2010 low came amidst an almost identical hysteria that a total collapse was at hand. At the very bottom, Death Cross and Hindenburg sightings were seen all over the globe and many were confidently predicting Dow 5,000 or worse. As I pointed out in my October 4 e-mail to clients, it is at such extremes of fear that major bottoms are made. [continue reading…]

Financial consultant Chuck Cohen’s (click here to get in touch with him)  excels at interpreting sentiment figures.  Following is his very bullish, contrarian take on the latest data from Hulbert’s:

“This latest extraordinary Hulbert stock report, along with today’s Investors Intelligence report (which reported increasing bearishness among its survey, in spite of a sharp rise in stocks,) reinforces the very bullish landscape for the stock market, and by proxy, the precious metals. This outlook is also reflected in the Hulbert Gold Survey, which is at nearly zero.

“I realize that we are all seeing one gloomy announcement and prediction after another, but please rise out of your barricaded cellars, to understand that we are very likely to see a shocking rise in stocks and precious metals. The sentiment among professionals and the public is now approaching the 2009 lows when stocks rallied almost 66% to their highs.

“This appears to be heading into markets unlike anything we have ever seen. My strong sense is while almost every pundit is warning of a deflationary depression, we are in a formative shift into hyperinflation.”

Our elected leaders need only look at the chart below to see how the budget stalemate will turn out.  Gold has been rising at an exceedingly steep pitch since early July, implying that whatever deal emerges from the sausage factory on Capitol Hill, it will not much affect the ongoing destruction of the dollar that began in earnest in 1913 with the creation of the Federal Reserve System. The Fed, as we know, was charged with conducting monetary policy and supervising the banking system. However, events of the last few years have allowed the central bank’s directors to expand its mandate to….as Buzz Lightyear would put it, infinity and beyond. The dire implications of this for the U.S. dollar have not been lost on bullion investors and traders, even if conventional thinking would deign to suggest that precious-metal prices have come too far, too fast. But compared to what? Over the last decade, bullion has outperformed just about every asset class you can name. The fact that it is now moving away from the pack of investment also-rans suggests not that buyers have run amok, but that the destruction of the dollar has entered a new and perhaps cataclysmic phase. What will replace the dollar when it utterly fails, as it must? Although gold may not pass political muster right now as America’s and the world’s next choice for money, no one can be certain that it won’t be drafted into the role.  After all, how many tried and true alternatives are there? [continue reading…]

[Have Gold and Silver seen their lows for this correction? Were encouraged to think so, for two reasons. First, downtrends in both Comex June Gold and July Silver reversed on Tuesday from precisely where they should have if the long-term uptrend is to be judged healthy. Second, our astute friend and mining stock consultant Chuck Cohen, who turned cautious on bullion just before the correction began, thinks the selling may have run its course.  In the guest commentary below, he explains why. RA]

Like Freddy Krueger, it’s back. The infallible New York Times contrary indicator has returned for another testing. If you remember last August at the market bottom, amidst the palpable gloom on Wall Street, the Times was moved to interview superbear Bob Prechter on the dire market situation, not coincidentally within a week of the bottom. At the time, I mentioned the Times contrarian indicator in a lengthy essay published at LeMetropole Café, 22 Things to Look for When Gold Finally Makes Its Top.

For some amazing coincidence, since the Times rarely takes sides at the markets, when it does it is usually right on the money — on the wrong side. Lo, last Sunday, one of the Times‘ savvy financial reporters wrote about the seemingly endless gold bubble and the danger of getting caught in it. Read it and see what I mean. In particular, note the clear logic that gold has had a major correction of 4% after doubling from its bottom in 2008. The size of the correction is definitely proof that what goes up must always come down — except for the thousands of positive articles the Times put out on housing through the mania several years ago. [continue reading…]

Something really does stink on Wall Street, and so, like nearly every other trader we know, we’re itching to get short up the old wazoo. And while we would never do so expecting to nail the Mother of All Bear Rally Tops, we’re content to find juicy, perfectly tradable highs at least once or twice a week.  Yesterday, for instance, the E-Mini S&P stalled for four hours precisely where we’d predicted, at 1351.75. Here’s the forecast exactly as it went out to subscribers the night before, when the mini-futures contract was developing thrust from around 1343.00.  Keep in mind that we’d partially covered a short earlier in the day for a theoretical profit and were looking to do it again on the very next thrust:  “Shorts initiated yesterday from near 1345.00 should be tied to a 1349.75 stop-loss. That is somewhat lower than the 1355.25 stop suggested here earlier, but it is also where the five-minute chart would now become menacing.  Please note that the lesser charts are already working on a minor, bullish impulse leg that yields a 1351.75 target and a midpoint at 1347.00.” [continue reading…]

Detour Gold is a Chuck Cohen pick that I aired in the chat room in the summer of 2009, when it was trading for around $8.80  a share.  I had asked Chuck for the name of a stock with speculative potential for my 90-year-old mother’s portfolio.  This one absolutely had to be a winner, since my mother, a stock-picker of local legend, had shunned my advice since the mid-1970s.  At the time, I recommended that she do a covered write against some Loews Corp stock she’d held since the 1960s.  Loews shares hadn’t budged in years, but naturally they skyrocketed after she did the covered write. Her shares subsequently got called away and the stock went to the moon.  Fast-forward 35 years. Having quadrupled her investment in Detour (which, ironically, was held in Loews’ corporate portfolio), I can only hope I’ve redeemed myself.  For the record, she’ll be selling half of her position on the opening, plus some Goldcorp stock acquired for around $35.  “No one ever went broke taking a profit,” is how I sold her on this plan.  That, and the fact that she has been carrying forward a long-term capital loss that will nicely offset the gain.

In a report just sent to his clients, our friend Chuck Cohen says “Gold share bottom coming into view.  Be prepared to take action!”  For the full report, click here.  And if you’d like to receive Chucks reports directly, or to inquire about his consulting services, click here.

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