6 May 2006

Would you like Ketchup with that Hat?

Safe Haven | Would you like Ketchup with that Hat?: "The fact that this bull market has basically proceeded in utter obscurity for six years, with recent price rises causing many to cry 'bubble' or 'blow-off,' provides further evidence of just how much further this bull has to run. As an example, one self-professed metal's expert, who has urged caution since late 2004, was so convinced that silver's recent rise constituted a speculative 'blow-off' that he publicly promised to 'eat his hat' were that not the case. In addition, in the aftermath of silver's sharp one-day drop he subsequently advised investors to sell declaring that a significant correction in both gold and silver had begun. In retrospect the correction ended before the ink on his quotation marks even had a chance to dry.
As a reminder of just how large bubbles can grow before popping, during the 1990s the NASDQ rose from 300 to 5,000. If the NASDAQ could do it why can't gold? Sure gold does not pay any dividends, but than neither did the NASQAQ. Plus during the entire NASDAQ rally new shares of stock were constantly being issued, either as a result of IPOs, secondary offerings and option grants. However, the growth in the supply of gold and silver will be far more constrained, creating the potential for far greater appreciation.
It seems fitting that on the first day of trading for the silver ETF, shares of Microsoft, once the quintessential 'new era' stock, plunged by 11%. Trading as high as $60 per share in December of 1999, Microsoft shares now trade below $24. During that same time period the price of gold has risen from $290 to $680. Imagine if one had survived typical investors on New Year's Eve 1999, asking each to predict which would perform better in the first decade of the new millennium, Microsoft or gold. Do you think even one in one hundred would"

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