Has the end come for gold?

The metal has dropped from its high of around 430 an ounce. Is this the end of that fabled & wonderful gold bull market? And yes, there are those investors who believe this now. Isn’t this what has happened after every gold run the past 20 years?

Do we all run out and buy real estate now & invest in tech stocks? And why not? Who should really dare to believe that this gold rally was ever anything more than a very short term rally?

And what is your personal opinion of gold’s recent plunge?

I know you, the reader, have an opinion of what you believe to be gold’s next step. Have you lost your confidence & called your broker to sell all your gold stocks?

But I am writing this article so I guess the burden rests on my shoulders to share what my personal opinions are concerning this recent adjustment. And what has just happened to the gold price? We have experienced a price correction. Nothing more & nothing less.

But do you know what?

It is when corrections such as these come that those investors with discipline are quickly separated from those with NO discipline.

Did you “jump?”

Did you go out & sell all your gold stocks? Corrections are inevitable & you better expect & know for certain that there are going to be dramatic swings in BOTH directions. And while we all like the “up” swings the best we better be prepared intellectually in advance before either of these swings occur.

But my question to you now is to ask yourself if there is something to be learned when these wild corrections arrive at our doorstep? Every event that comes in our lives we should consider as an opportunity to learn something new.

And this is why I say over & over & over again that an investor must have specifically a selling strategy planned well in advance before purchasing the first gold stock. Because I am a conservative I believe an investor should have a well prepared plan for selling at least some percentage of his gains as a stock rises.

I always loose patience when I read where folks are holding for gold’s peak before they even consider selling their first share. How do we know when gold will have reached its peak? We don’t & we should be pocketing at least a portion of our gains along the way. And that is just plain & simply the “conservative” thing to do.
And how goes the good ole’ US Dollar?

“Falling Dollar prompts action abroad” USA Today, Barbara Hagenbaugh, 1-21-2004

“But it’s doubtful the talk and actions will do much to stem the dollars downward momentum.” …

‘You’re going to continue to see the dollar weaken on a gradual basis,” says Chris Melendez, president of currency hedge fund Tempest Management in Tustin, Calif.”

Wow!!!

And need we say more about the LONG TERM trend for both the dollar & the price of gold?
You know we talk a lot about those factors that are contributing to the breakdown of the United States. And I can think of no worse act than to see good jobs moving to other countries where by corporations are taking advantage of others who will work for pennies to fatten their profits at home.

It took me a while to be comfortable with ordering a computer via the postal mail but when I finally took the plunge & bought my first Dell I fell in love with these computers.

Good craftsmanship, etc. But what happens when you decide to take advantage of the customer support telephone number that you paid extra for? Yes, what happens now when we try to reach Dell via their customer support number?

AND HERE IS WHERE THE TRUE ADVENTURE BEGINS.

Yes, yours truly had a problem & tried to call the support number & I found myself amazed to be talking to someone in India half a world away about my computer problem. But do you think this person understood the English language very well? I gave up our conversation after 45 minutes & ended up bringing in someone local to come over to fix my machine.

And a week later I had another problem that this time was a billing dispute. But again, the company had prepared well in advance for my call & others like me by directing me to India.

IT WAS REALLY LIKE LIVING INSIDE A HOMER SIMPSON CARTOON, EXCEPT THIS EXPERIENCE WAS FOR REAL.

Well, if Michael Dell wants to take my money & give it to a foreign country that is his right, but I do wish he would require his employees to learn English. But again this may be part of their strategy by providing poor service so you will not waste their time on the telephone & discouraging you from calling & bothering them in the future.

No more Dell computers for me.

The irony of this is that while writing this article on my Dell Laptop I accidentally dropped my laptop from a height of about 4 feet. And my laptop kept on working suffering no ill effects. But of what value is even a well made product to me or anyone if the company refuses to allow a consumer to call & speak to someone at the company in their native tongue?

Again, no more Dell computers for me.

Daily Reckoning, 1-22-2004
“One of the biggest trends of our time is the entry of millions of people into the world labor market. As recently as a few years ago, Chinese peasants posed no threat to Milwaukee factory hands... nor did Bengali engineers
seriously threaten Chicago information workers. NOW, THIS HUGE SURGE IN THE PROLETARIAT IS LOWERING LABOR RATES EVERYWHERE.”

“America's middle class can't believe it is being ruined by it.”

“… while millions of Chinese and Indians stand in line to do their jobs at 1/10th the price. Each year, about 1% of the entire value of America passes to foreign owners. And yet, Americans dreamily imagine that they have some special talent... a gift from God himself perhaps... that gives them the right to progress without saving, prosperity without capital investment, and wages 1,000% above the global bid.”

Any recommendations from readers on a computer company that hires employees who speak good ole’ English??? Please forward the info.

And this is just one story & personal experience on why our country is going down the tubes. Here a company that spends years developing a good product & all that effort becomes wasted over night as they let their support mechanism deteriorate by saving a few bucks by employing folks in another country who don’t understand the Queen’s English!

Listen to the following article which sums up the point I am trying to get across about the significance of shifting local jobs overseas.

“USA shifts to lower-paying industries, USA Today, 1-22-2004”

“U.S. jobs being created pay less than those they are replacing, the non-profit Economic Policy Institute said Wednesday. A study found that since November 2001, expanding industries in the USA have paid an average 21% less than contracting industries.”

And the facts above are part of a continuing & growing trend literally guaranteeing that tomorrows children will find fewer & fewer career opportunities in the coming years.

But read the following article.

Estate of McDonald's Heiress to Donate $1.5 Billion to Salvation Army
Wall Street Journal Staff Reporter Shirley Leung, 1-20-2004

In one of the largest individual charitable gifts ever, the estate of McDonald's heiress Joan B. Kroc is about to drop a one-time cash donation of $ 1.5 billion into the Salvation Army kettle, Tuesday's Wall Street Journal reported.

Well, at least someone did something right for the week.
Last week’s winning recipient of our essay contest on why gold is important was won by Herb Haines from Texas.

Let’s read the winning essay Herb wrote.

“As a voluntary missionary, I realized many years ago, that my investments had to have real value, liquidity, and an ability to have substantial growth potential. Only gold (and silver) met those criteria. Mining stocks were a way to leverage that investment. The combination, a knockout punch for the future.” Herb Haines

Why did we pick such a short & really very dry & dull essay as the winner? It surely lacked pizzazz & it really just did not have any “chutzpa” did it? But we picked it for the messages’ very simplicity.

What the writer first conveys in his simple statement is that gold is first & foremost a TOOL for accomplishing a simple end. While we can make lots of money off of gold during a gold bull market I like to always remember that wealth is not a means in itself, but it should always be first & foremost simply a TOOL to accomplish more important tasks.

“…Soros as a man who satisfied his contemplative side not by making money but by finding VISIONARY ways to spend it.” Milwaukee Journal Sentinel, Soros, Michael T. Kaufman

I think that we all can agree that Herb “…a voluntary missionary…” found a unique & very worthwhile purpose for his gold profits.

But before I quit dissecting Herbs’ essay I have to admit a prejudice for men & women who make this type of employment their life long vocation. You will not read about these “…a voluntary missionary(s) …” in financial publications or in the Wall Street Journal, but I believe that in time & in about a 1,000 years from today we will see the value of what these guys & gals did with their lives. These are life’s real unsung heroes whose accomplishments go totally unnoticed by our world.
Let’s do something different for next weeks essay to win the ¼ ounce gold coin.

We talked about in this article an act created by American companies that is leading to this country’s deteriorating standard of living. Contribute to us in 50 words or less the one act you personally believe is doing the most to destroy the good ole’ US of A.

Again, why do we follow the gold mining stocks?

“IF YOU CAN FIND THE COMBINATION OF A REASONABLY VALUED MID-CAP OR SMALL-CAP COMPANY WITH AN INTERESTING ORE BODY THAT IS IN A GROWTH PHASE, YOU ARE GOING TO MAKE AN ENORMOUS AMOUNT ON YOUR MONEY.” JOHN EMBRY, SPROTT ASSET MANAGEMENT

Making money is usually centered around averaging & not merely striking it rich on one lucky win. Do not make the mistake of looking at this gold market as a horse race where it is necessary to pick the one winning horse. There are many good companies out there that will & have found good properties that they are working to develop or to sell to a larger miner.

Simply put, our goal is to review many different new & promising projects & not merely talk over & over & over about the same old previously covered gold plays.

As we talk about gold & making money it is always a good idea to keep things in perspective. In a 100 years from now that shiny gold coin you bought today will still have its lovely yellow luster, but what about your luster?

Prioritize your life's goals.

David N. Vaughn
Gold Letter, Inc.

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