Views from the Crows Nest: February 2013 Issue

“Mass Media Mimics Mass Mania”

Since our January edition of Views from the Crows Nest, equity markets continued their slow grind higher for almost two weeks. In the last two weeks we’ve finally begun to see signs of a short-term market top. One of the most reliable signs of an inflection point was delivered yet again by the mainstream media.

On Saturday February 2nd, uber-accurate gold market timer Mark Leibovit spoke at the World Outlook Financial Conference and remarked about a powerful headline in that day’s business section of the Globe & Mail. In reference to the equity market rally, they declared “The End of Fear.” We know from experience that “The Herd is always wrong at the extremes, but creates the trend in between.”

Since the close on Friday February 1st, the Dow Jones Industrial Average has advanced a mere .06%, the S&P 500 grew .54%, and both look poised for a pullback; the TSX and major European equity indices peaked in the last few days of January and short-term corrective action appears to now be in motion.

To me, this is further proof of the important duality of mainstream media: they are simultaneously USELESS and USEFUL; useless as a source of insightful advice but extremely useful as a barometer of “group think.” Mass media mimics mass mania.

In last month’s newsletter I wrote, “While I remain long term bullish on Precious Metals, I’m getting increasingly concerned that we might have a downside scare before getting back to the secular trend.” Unfortunately for those holding longer term positions purchased at higher levels, my concerns are currently unfolding.

Gold and silver have now both violated short-term technical formations, causing us to take another step back and view longer-term charts for clues. Depending on whose indicators you follow, the failure of gold to hold support around $1,629 brings into play lower level support around $1585 or even as low as $1525.

Bullions and PM producers have reached very stretched “oversold” readings, and the shares of PM-producers are again radically under-valued versus bullion prices. The price of gold relative to other commodities is also very close to extreme readings that have typically marked significant turning points. We would not be surprised if these extreme conditions persist for a few weeks, though we hope the turn happens faster.

Sometimes bullions and producers move in concert with broader equity markets (currently pointed downward), and sometimes they act more as a “safe haven” and move contrary to other assets classes. We never know with certainty whether Dr Jekyll’s or Mr. Hyde’s Precious Metals persona will show up. Our strategy now is to hold onto very-recently-acquired positions with stops below major support levels.

Though this newsletter is primarily focused on providing higher level perspectives on global financial markets, this platform also affords me an opportunity to express other non-mainstream views about non-financial trends that are very relevant to your wealth, health and happiness. We will explore some of these non-financial issues in future articles…there’s lots to dig into!

In today’s world, there are a lot of things that thinking people can legitimately worry about. Though smaller doses of stress can actually be quite healthy, prolonged exposure to stress or worry can lead to chronic anxiety. Humans have many different ways of “self-medicating” their constant anxiety, including working or thinking too much, or zoning out in front of the TV or other screens. Some people abuse alcohol, food or other addictive substances. The result is always a negative spiral, and the anxiety continues until its root causes are addressed.  

As we walked the dog by the Bow River yesterday morning, our discussions turned to some of the destructive anxiety-provoking trends unfolding all around us. These subjects are rarely (if ever) part of the public discourse. So much of what is happening in our modern world is driven by promoting fear in the masses.

I’ll return to this subject in future articles because it’s critically important. In the meantime, I will continue to focus on serving readers by doing what is within my personal power to help reduce their stress.

In that respect, readers are welcome to attend our upcoming freeWinter Education Series workshop on Wednesday February 27 from 7 to 8:30 PM here in Calgary. Entitled “Protect and Prosper in 2013,”  this workshop will focus on practical actions that investors can take to reduce their personal investment stress.

These sessions are being promoted in various media, including our upcoming roadshow with Larry Berman on February 20th, so if you’d like to attend we encourage you to Click Here to find out more and to register. Remember, “Applied knowledge is power,” and getting educated on how to optimize your outcomes is one of the most liberating and empowering actions you can take.

Yesterday I did another Talk to the Experts segment on QR77. Byron and I chatted at length about the current market conditions, the key insights I learned at the 2013 World Outlook Financial Conference, and a few things to think about in respect to RRSP investing. You can listen to the full show without commercials by simply Clicking Here. Give the site and the file some time to load, and re-try if you receive an error message on the first click.

Patience and Discipline are accretive to your wealth, health and happiness; Fear and Greed are destructive.

If you would like to speak with our team about your personal situation, please Click Here to arrange a time.

Cheers,  
Andrew H. Ruhland, CFP, CPCA
President, Integrated Wealth Management Inc. 
Portfolio Strategist, ETF Capital Management