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You Don't Need to Work Hard or Be Smart to Make Money

By Brian Hunt, Editor in Chief, Stansberry Research
Saturday, May 28, 2011

Can you really make money by acting "dumb" in the market?
 
Ask a thousand financial advisors this question, and a thousand will tell you it's impossible. They'll say you need to study the fundamentals. They'll say you need to know where the economy is going... They'll say you need to pass a bunch of tests like they did to make money in the market.
 
As Steve covered in yesterday's essay, it's easy to get caught up with things that are "supposed" to matter to your finances. You're "supposed" to be concerned with unemployment numbers and GDP estimates. After all, that's what they talk about on CNBC.
 
But decades of experience and huge amounts of computer testing have proven to us that simply focusing on what's happening with the "big trend" is what matters when it comes to making money in the market. By simply sticking with trends – by acting "dumb," as your financial advisor sees it – you can actually make a fortune in any asset.
 
For example, folks in the media obsess over every little daily move in the gold price. A $50-per-ounce decline in gold merits a 10-minute news segment nowadays. Investors like Warren Buffett will tell anyone who will listen that owning gold is a dumb idea. After all, it doesn't pay any interest. You're just sitting on a lump of metal.
 
But if you simply "act dumb" and look at gold's long-term trend, you'll see there's no need to get worked up over a $50 move... or what the price of gold "should" be. Gold was at $300 per ounce in 2002. It has gradually climbed to $1,500 per ounce today. This obvious idea is the most important thing when it comes to making money when trading.
 
 
It's the same story with gold's cheaper cousin, silver. Silver was $5 per ounce back in 2003. It's now $37 per ounce. It's easy to get worked up over the big moves we've seen in the past few months... or to get "spooked" out of your entire silver position.
 
But when you step back and look at the big picture, you see silver is in a huge, long-term uptrend. Silver could actually fall to $25 per ounce (a big 32% fall from here) and still be in a bull market.
 
 
Yes, it's important to know the decline of paper currencies against gold and silver is what's driving this uptrend. But ultimately, making money here comes down to simply sticking with the trend.
 
There are always going to be big moves in any asset. There are always fundamentals to keep in mind. But when sizing up investment choices, make sure to take a deep breath and consider the "big trends." Short-term declines and "news noise" will always get you worried. It's just human nature. Sticking with big trends is what makes you money.
 
Following this advice amounts to "acting dumb" in the eyes of a mainstream financial advisor. But it's a simple idea we've proven works over and over.
 
Nobody ever knows exactly what will happen to stocks, the economy, the upcoming election, or interest rates. But we DO KNOW trends tend to last far longer than anyone expects. Right now, the trends in gold and silver are UP. Trade accordingly...
 
Good investing,
 
Brian Hunt




Further Reading:

There are ALWAYS reasons to panic in the stock market. But most investors worry more than they have to. And right now, you need to stay in the trade. Read more here: The Most Important Lesson from One of the Best Traders I've Ever Known.
 
"To me, investing is all about risk and reward," Steve says. "You'll often hear me say I want to have at least three times the potential reward as the amount of risk I'm taking." Now, he's found a trade that's even better. "Downside? Zero. Potential upside? 50%. I like those odds," he says. Get the details here: How to Own Metals with No Downside Risk.

Market Notes


CHART OF THE WEEK: THE LATEST ON SILVER'S BIG TREND

After a wild month of trading, silver has put in a bottom... in the short term at least.
 
Over the past nine months, the investment world has been fascinated with the huge rise in silver. The volatile form of "real money" enjoyed a massive rise that started in September 2010... and then exploded higher this March. On April 29, we warned the explosive move was due for a big correction.
 
As you can see from our chart of the week, this correction came... and it was brutal. In one of the worst hits a commodity has suffered in a decade, silver fell from $50 per ounce to the low $30s. But long-term silver bulls (which we are) are getting a small glimmer of light from a trend standpoint...
 
Since bottoming on May 17, silver has dug in a foothold near $34 per ounce. Solid buying pressure is supporting the metal. While we can't guarantee this level will hold, it's a step in the right direction in restoring sanity and health to silver's long-term uptrend.

Silver has dug in a foothold in the low $30s

Stat of the week

17%


Recently announced increase of packaged coffee prices by Starbucks. Coffee prices have nearly doubled in the past 12 months.

In The Daily Crux



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