The market's silver lining?

 
http://video.cnbc.com/gallery/?video=3000014555

What a bunch of hacks.  CNBC anchors and reporters have been ridiculing and marginalizing gold and silver bugs for years, and now that the precious metals are breaking all-time, and decade highs, they're praising the outperformance of gold and silver.  My question to them is this:  where we you when the financials and auto companies were collapsing?  Why were you pimping Bear Stearns, GM, and Citi right before their spectacular waterfall declines?

Eric Sprott, the hedge fund manager being interviewed, on the other hand, has been bullish gold and silver for over a decade, which means he and his investors have been rewarded handsomely.

Which brings up another point:  are we approaching a bubble in gold and silver?  My answer is no, because the average person and institutional investor (who should know better) still doesn't have a clue on this sector, which is still under-appreciated, and more importantly, under-owned.  Less than 1% of financial assets are in the precious metals sector, with silver being even more under-represented than gold.  With ownership in America that tepid, the bubble is not yet here--not even close.  That doesn't mean volatility will not increase--it certainly will, as price swings will become exaggerated going forward.  This is not for the faint, as I expect the rollercoaster to gain momentum, shaking out the weak hands (see post-Lehman collapse in September 2008).  In a secular bull market, you buy the big dips.  Warning: it's easier said than done, as it entails courage in the face of skepticism and fear.  But when put in the context of the layperson, severe corrections allow attractive entry points to buy when it's "on sale."  What shopper wouldn't want that?

Readers should put on their independent thinking cap when "experts" are declaring a bubble in gold and silver.  Ask these pundits if they were able to predict the bubbles in high-tech and real estate.  Because if they are truthful, there's a 97% chance they did not see it coming, and lost a fortune as a result.  Extending that thought, if they missed two of the biggest bubbles in the last 80 years, what makes them so sure they got this "bubble" right?

So don't take their word as gospel, because most advisors, experts, pundits, and professionals are afflicted with groupthink--the so-called trend followers who believe there is safety in numbers--even if it means falling off a cliff.  And certainly don't take the word of gold and silver bugs, either.  Sure, the easy money has been made, precisely because no one was buying gold or silver 2.5 years ago.  Successful investing requires contrarian thought--the lonelier the trade, the better the chance it's a profitable one, even if it causes discomfort.  Think about it:  if all your neighbors are doing something, it's probably too late to get into the game (think internet stocks in 1999 and sunbelt real estate in 2006).  Conduct your own independent research and come to your own conclusions, but ask yourself the following pertinent questions.

1) are real, inflation-adjusted interest rates still negative (in other words, are your deposit yields getting crushed by true cost-of-living increases)?
2) are the peripheral (and core) Euro countries still having sovereign debt problems?
3) are Japan, the UK and the US increasing their sovereign debt loads and deficits?
4) are trading nations still debasing their sovereign currencies?
5) are central banks globally (including the Fed) running the printing presses as far as the eye can see in an attempt to stimulate their moribund economies?
6) are credit markets still deleveraging?
7) are central banks now net buyers of gold, instead of net sellers?
8) are citizens fearing inflation?
9) are there shortages and tightness in the physical commodities sector?
10) are precious metals prices in the paper markets being suppressed and manipulated?
11) are government entitlements bulging?
12) are emerging markets still growing at breakneck speeds?
13) is there social unrest in the middle east, Africa, Europe, and other countries?
14) will the USDollar loses its status as the global reserve currency?
15) who will continue to buy US Treasury bonds if/when the Fed stops?

I'm sure there are many more questions readers could contribute.

See disclaimers in the side bar.

Disclosure:  long precious metals mining shares.