This Makes Me Sick… And Ready To Buy More
by Tom Dyson
June 19, 2006
In all my years of speculation, I have never seen such a violent and bloodthirsty market…
I rate the last three weeks as one of the greatest global market sell-offs of all time.
Gold fell $170, about 25%. The FTSE (London stocks) lost nearly 10% - the biggest top to bottom fall since the bombs dropped on Baghdad.
The crash was everywhere. Japanese stocks are down 20%. Indian stocks are down 45%. The Russia fund is down 50%. The Saudi and Bahrain stock markets have halved. Brazil is off 30%. Commodities took it on the chin as well. Copper, zinc, aluminum, silver... all down a long way...
And it all happened in the last few weeks. Amazing.
Most stock market sectors got whacked. Shares dealing in housing and real estate have halved. The world's largest mining companies like Rio Tinto, BHP Billiton and Anglo American have all dropped 25-30%. Even Goldman Sachs, one of the most profitable firms in the world, is off 17%.
On Tuesday, gold fell nearly $50 an ounce. It was the biggest one-day fall since 1990. I can tell you, I wasn't feeling very cheery that day. I felt sick. The gold market wasn't feeling well either. I sensed a real feeling of capitulation and panic.
I have two things I want to say about this.
First, I am relieved. Here at DailyWealth, we’ve been waiting for this correction for quite a few months now. We knew it was going to happen, we just didn’t know when.
Steve warned about emerging markets. He warned about India. Our managing editor Brian Hunt warned about Russia. I warned about gold and commodities. We all warned you about U.S. stocks.
The fundamentals haven’t changed in any of these markets. Only traders’ sentiment.
Many of the markets we watch went up too fast. Gold is a good example. The inert yellow metal gained over 50% since late December. It was too much too fast. There aren’t many sure things in this business. But gold’s correction was one of them. Markets breathe in… they breathe out. This is life.
Second, I am excited. I’ve wanted to buy more gold and commodities for many months. The relentless move higher prevented me from plunging. Now the water is safer. If we’re not at bottom, we're probably close. Sure, there may still be some residual downside, but the big risk is gone.
Of course, buying investments after a big fall goes against our emotional wiring. I felt like dumping my gold too a couple of days ago. So what did I do?
I did what I always do when I feel sick towards a market. I bought more gold and took a position in silver…
What are you going to do?
Good investing,
Tom
Editor's note: Tom Dyson is a regular contributor to DailyWealth, a free investment newsletter focused on the world's best contrarian opportunities. We write with a simple belief in mind: You don't have to take big risks to make big money with your investments.
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