Saturday, July 15, 2017

Since most Americans now invest on momentum over value, don't expect many to begin buying gold until the price rises much higher

There is a reason why Warren Buffett is one of the richest men in the world and 99.9999% of investors are not... because he is the ultimate contrarian to the way most Americans invest in the markets.

By this I am referring to the fact that Buffett is the quintessential value investor while the majority of retail and Wall Street investors buy on MoMo (momentum), and only when an asset is going up in price.

Even the world's richest family (Rothschild) promotes a strategy of buying assets when there is 'blood in the streets', because that is when you can buy the most for the least cost, and reap the benefits when the markets as a whole raise all boats.

Yet because Americans are programmed to buy on momentum rather than on value, it is very unlikely that U.S. investors will be buyers of gold and silver now that the price has fallen well below their all-time highs of six years ago, and have remained beaten down despite the fact that the Fed is now raising rates, and the dollar has fallen nearly 9% since the beginning of the year.

So far in 2017, stocks have been under significant control of the “momo” (momentum) crowd. The momo crowd does not care about the economy or fundamentals. Momo simply buys because the price is going up. 
It is no different now. Momo is totally oblivious to the weak economic data. In contrast, the “smart money” (professional investors) cares about the economic data.
Investing along with momo is a fine technique but investors must be careful about two things. 
• Playing with momo is like playing musical chairs. Sooner or later, the music stops and someone is left standing. 
• From the large number of emails I have received from investors and social media, the momo crowd is driven only by price. Often such investors do not even have a good grasp of what a company does, yet they buy large quantities based on price momentum. 
Investors who are not especially nimble may consider staying away from this approach. - Marketwatch
Despite the fact that much of the rest of the world (UK, China, India, Russia, Dubai) are buying gold at high levels, Americans will be the last to the table when the economic reasons behind owning precious metals reveal themselves in shocking fashion.  And if we thought the shortages in silver that led to the price going as high $50 in 2011 were spectacular, just wait until individuals rush towards the door for gold and silver this time as there will be little left available, no matter how much momentum is driving the price up.


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