THE GREAT DEBATE: TRADING VS. LONG-TERM GOLD INVESTING

[G-khan]

November 2003 Issue

Volume IX, Number XI
October 19, 2003

THE GREAT DEBATE:

TRADING VS. LONG-TERM GOLD INVESTING

My early years as an investor witnessed my attempt to master all aspects of this enormously complex and difficult field. I repeatedly read or heard of individuals who amassed great fortunes while investing or trading for their own accounts. Some succeeded by trading commodity futures. Others reaped great rewards when dealing in stock options. While still others gained their wealth through day trading or short selling. However, after much study and research it came to me that those who most often achieved their ultimate goals were those individuals who identified a long term Bull Market, invested early in it, and then let the trend work for them. They bought and held during both the various exciting and pleasurable upswings as well as through the sharp, terrifying reversals, as the market ultimately worked higher until it reached its ultimate peak. Then, when the Bull Market appeared to be in its final, frothy stage, they gradually sold their holdings to the late comers who were clamoring to accommodate them.

Throughout this era, I felt that if great profits could be garnered from trading currencies, stocks or bonds by others, certainly I should easily be able to join their ranks. After all, I was quite bright and not only loved the markets but thoroughly immersed myself in learning about and understanding them. In fact, although it was early in my adult life, investing had already become my second occupation. How could I lose, I thought?

I tried them all! During this period I spent many sleepless nights wondering if I had over-leveraged myself. I tossed in my bed questioning if a sharp correction was destined to deepen into a devastating Bear Market. I remember buying call options on General Motors in December, 1974, when it appeared that the great equity Bear Market of 1972-1974 had ended. I paid $1 for each and sold them near their high at $10 several months later. What a rush! I reminisce about buying a number of silver futures contracts in 1976 or 1977 when silver was about $5.00 an ounce. Then, just prior to its amazing run the locals briefly sold silver off to about $4.90. They took silver to about $0.02 below my stop-loss level and stopped me out. I was left in the dust and licking my wounds as I watched silver move higher, questioning if I should acquire a new long position. I never did! Silver traded to $52.50 only a few years later. What a bummer.

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