“I’m making so much money in Florida real estate, I don’t know why I bother having this plumbing business anymore,” Matt Badiali’s plumber told him, as he backed out his flexible auger at Matt’s house.
The year was 2005 – a year before the real estate market peaked.
Chances are, Matt’s plumber got clobbered.
[ad#Google Adsense 336×280-IA]To me, a plumber quitting his job to flip houses back in 2005 was a “sign of the top” – anecdotal evidence that people are irrationally optimistic.
When you see one of these “signs of the top,” it doesn’t necessarily mean the top is actually here.
But it’s usually not that far away.
The same is true for “signs of a bottom”…
Reading the news on Friday, I saw “signs of a bottom” in gold…
For example, one Bloomberg news headline said: “Paulson Said to Stop Regular Reporting of his Gold Fund.”
I laughed out loud when I saw that headline…
“You can’t do that!” I thought to myself… you can’t choose to only report your good results.
Billionaire John Paulson, you may recall, became a legend by making $15 billion for his investors. He did it betting against subprime mortgages in 2007.
But Paulson’s Gold Fund “has fallen 47 percent this year through April,” Bloomberg reported – a terrible result.
Gold itself was down about 25% from its peak last October to its low in April. Gold stocks, as measured by the big gold-stock fund GDX, were down about 50%. That’s taken its toll…
Last year, fund manager Taurus Funds had a quarter-billion dollars in its precious-metals fund. But lately, so many investors are asking for their money back, Taurus decided to close the doors of its precious-metals fund.
When there’s nobody left to sell, the bottom is here.
Heck, even my business isn’t immune…
At Stansberry & Associates, we were forced to close the doors on our newsletter focusing on small mining companies. That’s partly because the number of subscribers had fallen to microscopic levels.
It’s a sign of the bottom when a billionaire’s performance is so bad, he chooses not to report it to his regular clients.
It’s a sign of the bottom when hedge funds are quitting the business.
Heck, it’s a sign of the bottom when a newsletter focusing on small gold and mining companies is forced to close up shop.
This, to me, is anecdotal evidence… These are “signs of a bottom.”
Again, these signs don’t actually mean that the bottom is here, today. We don’t know exactly when the bottom will get here, based on these “signs.”
But from experience, I can say you typically only see extreme anecdotal evidence like this when you’re actually near a bottom.
I’m always on the lookout for “signs of a top” – guys like Matt’s plumber quitting his day job to flip houses.
I think that, today, in gold, we’re seeing relentless “signs of a bottom.”
I am not a buyer, yet. Personally, I would like to see a bit more of an uptrend before piling in.
But I’m not far from being a buyer, either.