The Phaserl


A Historic Rally in Gold Stocks – and Most Investors Missed It

by Claudio Grass, Acting Man:

Buy Low, Sell High?

It is an old truism and everybody has surely heard it more than once. If you want to make money in the stock market, you’re supposed to buy low and sell high. Simple, right?

As Bill Bonner once related, this is how a stock market advisor in Germany explained the process to him:

Thirty years ago, at an investment conference, there was a scalawag analyst from Germany. He showed a chart where a stock had gone up steadily for 10 years. He pointed to the bottom, left side, and in a thick accent explained his system:

“Ja, you see, down heer? Vee buy.”

Then, pointing the upper right hand corner opposite…

“Und up heer, vee sell. Zat vay vee never lose money.”

A hand went up. A listener had a question:

“But what happens if the stock doesn’t go up?”

“Ah, zen,” he replied without a moment’s hesitation, “vee don’t buy it.”

He was right. The winning formula is “Buy low. Sell high.”


A recent article at Bloomberg points out that investors have apparently not taken this lesson to heart in the gold sector (more on this further below). Gold stocks have rallied by approximately 110% between mid January and mid April – something that obviously doesn’t happen very often. The rally has started after the conclusion of one of the most grueling bear markets the sector has ever endured. As we pointed out at the time, the turnaround was marked by a “false breakdown”.

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