Mar 14 - Market Update:  Cardozo was WRONG!!!

More charts than normal are coming my way as people attempt to get a grip on the surging (and purging) financial markets.  Straight analysis by charting past price movement is what is known as "technical analysis."  Consideration of the full host of underlying assumptions, corporate changes, earnings-per-share and the like, falls under the rubric "fundamental analysis."  Technicians and Fundamentalists have been at odds over the correct approach ... forever, it seems.  As usual, the truth lies somewhere in between.

Famous New York appellate judge Benjamin Cardozo, later a US Supreme Court Justice, once observed (about his Palsgraf vs. Long Island Railroad Company opinion) that he judged best, the less he knew about the parties beyond the relevant case facts.  He preferred not, even, to know their names.  His approach is revered today by almost every lawyer and judge but myself, it sometimes seems.  Cardozo's Palsgraf opinion, perhaps more than any other judicial case in American history, set the limits on simple negligence tort cases and is the centerpiece of every law school's first-year Torts class.  I thought Cardozo was wrong when I studied him in law school and, today, I am sure of it. 

For nearly 30 years, I have been meaning to get a T-shirt printed up that states, simply, "Cardozo was WRONG!!!"  It would have played better, had I done so during law school.  Now it simply would be the ultimate obscure in joke.

The investment analog to Cardozo's approach to judging is called "technical analysis."  No doubt, he was a Republican.  The late Supreme Court Justice William O. Douglas, on the other hand, represents the opposite end of the spectrum.  More recently, the late Chief Justice William O. Rehnquist represented to me the diffident stiff in judging.  Both Douglas and Rehnquist had nasty habits of authoring strictly logical opinions that were perfectly orderly except for single paragraphs, buried deeply, which amounted to "he waved his hands and it magically appeared."  I long have dismissed all ridiculously-liberal judicial opinions as "Douglas opinions" and equally-ridiculously-conservative opinions as "Rehnquist opinions."  Real judging requires consideration of both ends of the spectrum.

Cardozo, by all accounts, lived and died a cold, impersonal and lonely man.  Douglas, on the other hand, laughed a lot, traveled, made no apologies for his abject liberalism and died married to a young babe.  You choose which approach seems to work best on a personal level.

There is a time and a place for everything.  All things in moderation, especially moderation, in other words.  This applies to investing, too, not surprisingly.

I respectfully suggest that technical analysis, by itself, truly is useful only in "normal" or "made-to-seem-normal-because-manipulated" markets.

When things change fundamentally, technicians sit on the sidelines, at best.  At worst, technicians tend to buy high and sell low in huge bull and bear markets. We are in the midst of the most fundamental change seen in financial markets in modern times.  Now is the time to temper with fundamentals, else charts will kill you all day long.  In other words, all chart-based market timing approaches suck these days.

I now am retired.  My solution, since I view this as the greatest silver bull ever, is to buy on dips and never sell squat on perceived peaks.  The last time I had anything with which to buy, silver dipped just below $12.  Now I intend simply to ride it until I die or silver hits $100 (adjusted for inflation), whichever comes first.

So far, so good. 

When "Easy Al" (Bad Credit? No Credit? Come on down!) Greenspan spoke of the stock market's "irrational exuberance" 13 years ago, yet did nothing, letting the Dow surmount 5000 and thereby kill me and my naked S&P 500 shorts, I knew we were in trouble.  I started buying gold a year later, a coin or two at a time, as I could afford them.  Then I started buying silver 8 years ago and laid in a good foundation while it was beneath $5. 

A little over 2 years ago, I went "all in," selling all the gold I had bought and using the proceeds to buy silver at $7.  I have added to that silver with all the funds I have had come available (including borrowing) since then, whenever the price got taken to the cleaners.  I have to take some down here and there for living expenses, but I'm continuing to roll the bones, day after day.

People keep emailing me to ask, "Is this a good time to enter the silver market, despite the recent price runup?"  Always, "Every day is a good day," is my response.

I could be wrong, but I doubt it.

What to do with our empty hours, once investing becomes so ... easy? There always is Internet porn, of course.

-ed

Mar 6 - Market Update:  Short and Sweet

Silver is over $20 per ounce for good.  The dollar index is headed for 70, kicking and screaming every step of the way.  That's just the near term. 

Long term:  Can you spell "Moon," Alice? 

Mid term - this Fall, perhaps:  $30 silver, widespread homelessness, poverty and WWIII.  I predict a very harsh winter for next year.

-ed

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