Why Do I Always Miss The Bubble?

Why Do I Always Miss The Bubble?
Have you asked yourself this? Did you buy Tech stocks right before the crash? Buy a house at the top of the market? Well you are in good company. Lots of intelligent people did this. But as Lt. General Russel Honore famously said "don't get stuck on stupid".
You can turn this around to your advantage.
You can educate yourself to the point where you can catch the next bubble at the right time.
You can use your past experience to guide you on what NOT to do.
There are definable stages of a bubble and once you know about it you will never do it again.
The first stage is the stealth stage, this is where the insiders, analysts and big money move in. There is generally a lot of easy money to be made in this phase.
Once it is played out, usually a very brief amount of time, the wall of worry stage begins. This is the long drawn out phase where the majority of the professional investors move in and start "playing chess". Accumulating shares for their their position by buying the dips. The smart advisers, analysts and brokers lead their clients carefully into positions. And always in this phase, there is the endless debate as to whether or not a bubble is about to burst. This phase could also be called the "correction, consolidation, and rally phase", and can last for years. Building up energy.
The next stage is the mania stage, and it is the "Holy Grail" for the professional investors. This is the moment that investors spend years setting up for. There is a tipping point that occurs seemingly overnight where everybody starts buying anything and everything even remotely connected to the investment in question. Driving the price skyward. They will employee any investment tool they can, especially buying on margin(borrowing). Some mortgage their homes, others take from their retirement or children's college funds. It truly is a mania that grips people and they will do whatever it takes to jump on board the profit train.
How does it end? Some have used the shoeshine boy analogy as the harbinger of the coming crash. Once it has become so widespread that even the shoeshine boy starts advising people to invest, it's time to sell because the mania has come full circle.
In reality there are two crashes or bubble bursts in the correction phase. There is an initial "pop", Which is a sharp drop in price on extremely heavy volume, but inevitably, the dumb money tries to re inflate the bubble, stopping the first crash and driving the price back up slightly, but never to the previous high. Finally the "shorts" (Investors betting the market will crash) move in in a massive way and start to devour the dumb money. This is the second and final drop and is also referred to as the denial stage, and it is the most devastating point for the inexperienced investors. It is where, tragically, these people watch their life savings go down in flames. Instead of bailing out and cutting their losses, they feel that they can't afford to sell and believe the price will turn around, but it never does, in fact it overshoots to the downside and often stays there for years.
Sadly these events scar people forever and they may never recover financially or emotionally, and they will surely never invest in anything ever again.
This scenario has played itself out over and over again for hundreds if not thousands of years. And it will likely continue to play itself out in the coming years. In fact I believe we are still in stage two of one of the largest bubbles the world has ever seen. We have been in the correction, consolidation, rally mode in precious metals for two to three years now and it could be getting dangerously close to the mania stage. If you are not in position to take advantage of this, you may be missing the grand daddy of all bubbles. We are currently in a "dip" in metals pricing and it appears that, this is about to turn to the upside maybe as early as Monday the 30th of June.
More specifically I like silver, but gold will likely share in the mania stage and if you like gold better, fine, you will still be taking advantage of the best investment opportunities of our lifetime.
The important thing to realize here is not to try and time the mania stage, no one knows for sure when it will begin. It could begin tomorrow it could take another three years to build the necessary energy. Begin building your position right now! Even if it is just a few coins from your local coin shop.
I will continue to write about the merits of precious metals in further essays but for now start accumulating.
Have you ever wished someone had let you in on the Microsoft story before it's price went ballistic? Well I just did.

JT


Legal disclaimer: This post is for informational purposes only and is solely the opinion of the writer. Nothing in this post should be considered investment advice. Before investing in anything, the reader is encouraged to do his or her own research and consult with a certified financial advisor. Which John Tompkins makes no claim to be. John Tompkins and Toro Creek Investments accept no liability for financial losses or damages incurred by the reader because of this post.

Why "RICH" ain't a four letter word.

Think about the last couple of movies or TV programs that you've watched. I'm willing to bet that the bad guy was some corporate Fat Cat. What about the latest political rants? Have you heard about the evil, rich "speculators driving up the price of oil"? How about "the rich getting rich off the backs of the poor"? What about taxes? That the rich should be made to pay their fair share? "The rich get richer and the poor get poorer"?

I'll guess that you are familiar with these statements or maybe you've even repeated these things to other people. It's okay, this sentiment is everywhere, unfortunately they are not based in fact. Just a couple of facts that argue with these statements; on taxes, The top 5% of wage earners in this country pay 75% of all tax revenue that the government receives. The top 10% pay over 90%. At the other end of the spectrum the poorest aren't paying any taxes apart from sales and local taxes. In fact they are receiving money through "Earned income tax credits" which is a phrase designed to hide the fact that wealth is being taken from the rich and given to the poor. I'm not making a value judgement on welfare. My only point here is to dispel the myth that the rich aren't paying their fair share, or that they are getting rich off the backs of the poor.

So what is my agenda here? Why am I defending the rich? Well it sure as hell ain't because I'm one of them. I aspire to be. I think that this country should continue to be structured to allow as many people to become rich as possible. I think that demonizing the rich insures that a person will never become wealthy. Why would anyone want to become a greedy, money grubbing miser?

Here is why; when has a poor person ever built a hospital, created a scholarship fund, supported a church, saved the animals, protected the environment? Whatever your favorite cause it takes a wealthy society to do these things. That's why we have such a great country.
I'll say it again, I'm not making a value judgement against the poor. I'm just trying to point out that instead of believing that "it takes money to make money" (which is another way of saying that only the rich can make any money), the saying should read "it takes money to give money". When you are worried about putting food into your children's mouth, you're more than likely thinking, "screw the spotted owls, I gotta get a better job".
I'm sure I've just offended a lot of people who are not rich and yet have donated to different causes. For those of you who are offended, we are making this distinction between rich and poor, not between rich and middle class. And yes I understand that poor people tithe to their churches too. Okay I get it. The thing that I want people to get, is that part of the greatness of this country lies in the fact that anyone can get rich here. But only if you do certain things. And one of those things is to stop hating the rich. Change your perception.
As motivational speaker Jim Rhone is fond of pointing out, "Find out what the poor people do and DON'T DO IT! Find out what they read and DON'T READ IT! Find out how they speak and DON'T TALK THAT WAY!
The opposite if this is equally important. If you constantly blame your place in life on the greedy rich people, and despise them, how can you emulate them and copy their success? You can't. Find out the good positive things they do and make it part of your life, it worked for them.
Hiding behind old stereo-types about the rich only insures that you will never join their ranks.
And don't forget that when you are successful, you'll be able to be as generous as you want to be.

JT