Wait for the Panic, Then Buy

I think it’s nearing the time when everyone is going to be confused by markets. I’ve spoken about volatility rising, and this is what we’ve seen recently. People are turning bearish on the economy and this is leading to what I believe are false assumptions. I’m seeing the “90% stock market collapse” crowd come out of hiding, and this amuses me. Short-term they are right, long-term they are dead wrong.
Downside volatility excited me: I love being a buyer into a panic. You will want to be on the long side in stocks, particularly precious metals stocks. A 20% correction in stocks is very reasonable, which means a 30-50% correction in precious metal stocks (particularly silver stocks) is not out of the question. Just be patient and let the bears take center stage. Then fade them.
I’m long the dollar, bearish on precious metals (but trying to catch bounces), and bearish on stocks (but trying to catch bounces). I am very tempted to short Treasuries, but I am holding off for now. You’ll notice that most of these positions reflect thinking that is the opposite of my long-term outlook. As I’ve said before, it is never wise to get too attached to any trade. The market is going to give you trades that many times will go against your fundamental positions. Take them.
As an aside, remember that all this bearish news is increasing the impetus for the Fed to come in with more quantitative easing. If you understood how weak the economy was, you knew QE was inevitable. The only question now is how soon it will arrive.
Stand back and watch for blood on the streets, then go long against the crowd. Every basis point that bonds rally is more fuel for the eventual rally in stocks. Keep this in mind. This is just the setup for higher inflation down the road, which will benefit gold, silver, stocks, and yes, even real estate.
Wait for the Panic, Then Buy is a post from: Expected Returns
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