I hear it a lot from inexperienced Wall Street analysts, bloggers, and money managers who spend little time living in the “real world”.

Here’s what they’re saying: “Gold is way too popular now… It’s near the end of its bull market.” The recommended “action to take” is to cash in your gold profits and move on to something different.

I can tell you that taking this advice is a big mistake. Anyone who believes gold is too popular with the mainstream public simply doesn’t know who the mainstream public is… and they don’t understand how bull markets end.

Sure… gold is up big since it broke out to a new high in September. In just over two months, it has climbed from $950 an ounce to $1,100 an ounce.

Click here to read the rest of Brian Hunt’s analysis of the state of gold, published online at Fleet Street Invest.

Around Thanksgiving last year, we presented one of our favorite measures of real assets vs. landfill stuffing: the gold-hog ratio.

This ratio measures the performance of hard assets (represented by gold) vs. consumer “stuff” that will end up in a landfill someday (represented by the share price of Harley-Davidson, ticker: HOG)…

Back then, the gold-hog ratio was 17 and rising in favor of gold. Now, that ratio is around 26. Gold is climbing as investors flee to real assets, and HOG is falling as consumers flee from expensive toys.

If you bought gold at the start of 2007, you’re 50% richer. If you bought HOG shares at the start
of 2007, you’re 45% poorer. Right now, folks are much more likely to buy real assets than a motorcycle.

Brian Hunt

Source: An Update on the Gold/Hog Ratio

David’s argument for a rally in gold shares boils down to this: After years of digesting the costs (hiring workers, buying new equipment, and upgrading facilities) associated with getting a mothballed industry back into fighting shape, big gold producers are finally enjoying lots of cash flow.

Add the increasing price of gold, and you’ve got the ingredients for a big bull market in gold miners. It’s a solid thesis… but let’s check with old man market to see what he thinks. Have a look at Goldcorp (NYSE:GG).

Goldcorp is one of the “flagships” of the gold-mining industry. It is one of the few gold miners with a market cap over $10 billion… and widely considered one of the best-managed mining companies on the planet.

As today’s chart shows, the market likes the bull case for gold shares. Goldcorp is showing classic bull-market behavior… the tendency to make “higher highs and higher lows.” Shares reached an all-time high this week. Thesis proved.

Source: Goldcorp Weighs in: It’s a Bull Markert in a Gold Stocks

Investors looked for a safe haven after the greenback hit a record low versus the euro. Gold prices reached $989.60 an ounce and fell back to $978.70 after a sharp drop crude oil prices.

Gold is not the only precious metal gaining ground, says Brian Hunt. Silver has gained 27 percent this year, against gold’s 17 percent. As long as the US government insists on bailing out the likes of IndyMac (IMB), Fannie Mae (FNM) and Freddie Mac (FRE), investors will turn to precious metals to protect themselves.

Catastrophe insurance is getting more expensive this week. We’re big fans of gold and silver at DailyWealth. We don’t think the world is coming to an end… We simply see precious metals as excellent catastrophe insurance – assets that soar when stocks and bonds are sinking.

Last week’s destruction in Fannie Mae and Freddie Mac counts as a catastrophe… and silver is making good on its “claims.” After trading around $17 per ounce since March, the precious metal has broken out to $19. The chart of gold looks much the same.

Here’s the reason for the strength in gold and silver: Precious metals rise when investors smell serious risks to the financial system. They rise when the government spends too much money and extends too much credit, which stokes inflation. Silver’s breakout is a response to the huge liabilities our government is assuming with Fannie and Freddie.

In “market speak,” silver is telling our officials in Washington, “You’re going to spend all that taxpayer money on a big bailout? This could be bad… and I’m heading higher.”

Source: A New Bull Market in Silver is Starting 

Bullish news from biotech: One of the market’s most speculative sectors is “acting well.” Biotech stocks are a lot like mining stocks. Most of them have no earnings and no real assets… They’re just wild dreams with stock tickers. But every five years or so, the public goes crazy for miracle cures and cancer drugs… to the tune of hundreds, even thousands of percent rallies. The busts that follow are just as spectacular (so trailing stops are vital).

The broad market’s destruction began in mid-May. The S&P 500 is down 13% since then. Now, here’s where the biotech story gets interesting…

One of the best ways to own biotech is the PowerShares Biotech ETF . This fund is loaded with the best companies whose names include “bio,” “genics,” or “ceuticals.” During the gigantic selloff of the past two months, shares in PBE have held like a rock. When a speculative asset refuses to sink in a bear market, it’s “acting well.” That’s an incredibly bullish sign.

We can’t know when stocks in general will get on with a new bull market… But we can look at the action here and say, “When stocks get going again, you’ll want to own some biotech.”

Source:  You’ll Want to Own these Stocks when the Market Recovers

Marty is a saint in most investing circles… for good reason. His Third Avenue Value Fund (TAVFX) has averaged 14.4% per year for the past 18 years. Not many folks can come close to that kind of sustained investment return for five years, let alone 18.

Problem is, Marty’s fund has been taken behind the woodshed this year. It has a lot of exposure to China and financial shares. Both are disaster areas… and they’ve helped send the fund down about 30% since November.

As you can see from today’s chart, it’s tough out there… even for a saint. In one of the perversions of investing, right now is likely the best time to hire a manager like Marty. This is when most investors will start searching for the “hot fund of 2008″ and abandon an old winner.

Our take? Marty has piled into Asian stocks and real estate lately. His Third Avenue team is among the best in the business at finding great bargains. When Asia gets back into an uptrend, you’ll be a lot better off with Marty than “Mr. Hot Fund.”

Source:  Even the Saintly Investors are Going Through Hell

The cockroaches are starting to cover the floor.

Back in November, we ran a chart of the iShares Financial ETF (IYF). This basket of Wall Street banks was down from its peak around $120 a share to $100. A few cockroaches had crawled out of the mortgage mess and into mainstream headlines. I forecasted more would crawl out of the heap before it was all done.

Today’s chart confirms that forecast. This fund is loaded with the likes of Lehman Brothers (LEH), Citigroup (C), American Express (AMX), and all those on the hook for thousands upon thousands of silly loans. The cockroaches have arrived, and IYF’s chart resembles the last second of a javelin toss.

The IYF has been sliced in half in one year. There is a crisis in Big Finance right now… and crisis leads to fantastic asset bargains. But damage like this takes a long time to repair. My advice? Check back on Big Finance in a few years.

Source: As Predicted, the Cockroaches have Arrived

Bleak headlines for America’s third largest supplier of foreign oil: Production at Mexico’s giant Cantarell field fell 34% from May 2007 to May 2008. This is a huge problem for Mexico. Cantarell is one of the three largest oil fields in the world. Mexico’s state-owned Pemex gets 37% of its production from it. The Mexican government gets 40% of its revenue from Pemex.

Cantarell’s massive decline also pulls together a number of themes we cover regularly in DailyWealth: 1) Never trust a government to operate so much as a hot dog stand. 2) There are no easy barrels left. 3) The world needs to spend billions and billions on new oil exploration, which will drive a bull market in oil services. And lastly, 4) Invest in Canadian oil production.

Canada is one of the ABCs of resource investment. It is home to the largest safe oil deposit… a deposit that is increasing production. The world’s largest gas-guzzler is Canada’s next-door neighbor. And most importantly, caribou aren’t interested in suicide bombing.

All of these attributes will produce a slew of stock charts like today’s. Suncor Energy (SU) is the poster child of the Canadian oil boom. As you can see, what’s bad for Cantarell is good for Canadian oil investments.

Source: HORRIBLE NEWS FOR MEXICO, GREAT NEWS FOR CANADA

We’ve run a ton of charts showing this theory at work. The S&P 500 vs. gold is the centerpiece chart of our theory. The S&P is the world’s most widely followed gauge of stocks. Gold is timeless, real wealth.

As you can see from this week’s chart, stocks are still in a long downtrend when measured in gold. This trend won’t reverse itself anytime soon.

Briant Hunt

Source: The Latest on Stocks Vs. Gold

Gold and oil respond similarly to inflationary pressures… so the two tend to trade in a “range” together. Over the past 25 years, one ounce of gold has bought, on average, 15 barrels of oil. When an ounce of gold can buy 20 barrels of oil, it’s expensive and due for a fall. When an ounce of gold can buy less than eight barrels of oil, it’s cheap and due for a rise.

Right now, an ounce of gold buys you just 6.5 barrels of oil – less than half its traditional purchasing power. As you can see from today’s chart, the “rubber band” is pulled extremely tight.

There’s no guarantee this trade will work out quickly. But it’s worth keeping on the radar. If oil stubbornly refuses to correct from its levels above $140, gold could easily pop up to $1,000 and beyond in just a few days.

Source: Why Gold Could Jump $100 in One Day