The Bull Market in Gold & Silver,
The Bubble, & Potential Mania that Lie Ahead.

Eric McWhinnie
Eric McWhinnie
Chief Commodities Analyst

It will be easy to profit ...

Just buy shares and hold? Right? Wrong!

Dear Reader,

I'm Eric McWhinnie, Chief Commodities Analyst at Wall St. Cheat Sheet. Before I tell you about myself, let me tell you about gold shares. They are incredibly volatile and unsafe over the long-term. Someone once told me that these companies were not real businesses. Doug Casey says they are burning matches. You have to get rid of them because ultimately they will blow up one way or another.

That is because commodities are very cyclical. Gold and Silver are extremely cyclical. Even in a secular bull market, there are not corrections but crashes. It makes it nearly impossible to run a successful company over the long haul. The value of Gold and Silver fluctuate so much that poor assets can suddenly become great assets and great assets become uneconomic. Hence, the gold and silver shares fluctuate like no other shares on the market.

Boom and Bust Cycle

As you can see from the Barron's Gold Mining Index, there is a sharp boom bust cycle, where the bust can take away nearly all of the gains. During the secular bull market of the 1970s, the BGMI had two corrections of more than 60%. And keep in mind; this is an index of the largest most established companies. If they declined 60%, what happened to the smaller, high growth companies?

If they survived those downturns, (which some inevitably do not) something like this happened:

Boom and Bust Cycle

Why Am I Sharing My Secrets?

Most advisors tell you what to buy. And they may make quality recommendations. But do they tell you when to buy it? Do they tell when to take profits or when to sell? This is important for any trade or investment. As you may now be realizing, this is extremely important when it comes to the gold and silver stocks.

As you can see, after a boom these stocks typically give back most, if not all of the gains. The current bull market is moving into the later stages in terms of time, but not in terms of upside potential. That means that we could experience very sharp gains in a short period of time. At the same time, the eventual bust is likely to negate most of what could be historic gains!

A fundamental analyst will simply tell you to buy and hold and then sell when the company becomes overvalued or when fundamentals deteriorate. While this works early in a bull market it does not work at the end of a bull market. Either the investor will sell too soon because a stock becomes overvalued. (How would you have liked to sell tech and internet stocks in 1997?) Or the investor will wait for fundamentals to turn negative and then miss the chance to sell before the bust. Technicals lead the fundamentals!

With this in mind and our belief in a long-term bull market in Gold and Silver, my publishers and I set out to create a service designed to help traders and investors profit from what could be a historic, perhaps epic bull market.

Introducing ...

Gold and Silver Premium

In fact, you don't even need to pay to try the service. We offer a 14-day no risk trial. You aren't billed at any time during the trial.

For either $29.95/month or $149.95 for six months, I happen to think this is an incredible bargain for the amount of research you receive. I wanted to charge more but my publisher decided otherwise.

Model Portfolio Performance

Our Model Portfolio of 10-15 junior Gold and Silver companies vastly outperformed the benchmarks in both 2009 and 2010:

Data

How do we achieve this kind of performance? Let us show you ...

Superior Market Timing

Rest assured, your editor Eric McWhinnie is a credentialed, skilled and experienced analyst who is able to identify both risk and opportunity. In addition, he utilizes stock charts in conjunction with sentiment surveys and real-time sentiment data, such as options. Options can help us spot extremes in market sentiment.

The International Securities Exchange measures only opening customer long options transactions while excluding market maker and firm trades. This is thought to best represent sentiment. In tracking the ISE put/call data for individual equities, we have found the data to be very reliable. There are two things we look for in this data that give a potential bullish signal. The first is an outright spike in the put/call ratio on a single day. The second is a higher trending moving average for the data. That indicates persistent bearish sentiment.

Gold Chart

As you can see, the GLD put-call data was instrumental in providing bullish signals. We track put-call data for GLD, SLV, GDX, GDXJ and the individual equities.

We also follow public opinion polls from Sentimentrader.com. Its data compares public opinion to the movement in the market.

Silver Chart

When the public becomes very bullish, we know that risk is elevated and it becomes a time not to buy but to take some profits and wait for risk to decline.

Furthermore, we examine weekly the Commitment of Traders reports for Gold and Silver. The COT data tells how the futures traders are positioned. We look at speculative long positions and open interest. When these are very high relative to the past, we know that there is more risk in the market.

Using options data, public sentiment and COT data gives us the ability to enhance our market timing and provide our subscribers with the knowledge of a high-risk or low-risk situation.

But that isn't all. When selecting stocks we have strict criteria that we follow.

Criteria for Picking Winners

1. Buy Value. We look for companies that based on their price today are trading at a discount now or likely bigger discount 12 months from today. The takeover game is a huge part of the resource business. Quality undervalued companies will not remain so for long.

2. Don't Chase. Gold and resource stocks can rise substantially in short periods of time. However, they can often fall 25-40% very quickly. We reduce risk by never chasing a company whose share price has appreciated tremendously in recent months. Hence, we try to find stocks that are less vulnerable to a sudden downturn.

3. Fundamental Catalyst. Undervalued resource companies need a catalyst to reach their full value. This can include going into production or announcing new resource estimates. We always evaluate what news is on the horizon and the potential impact on the share price.

4. Technical Catalyst. Resource stocks will typically trade in either an impulsive manner or a long consolidation. We seek to find shares that have very recently broken out from long consolidations or that are trading within a consolidation and have a chance to breakout within weeks.

5. Tight Share Structure. This is critical for various reasons. The mining business is a very capital-intensive business. Companies can raise funds by going into debt or selling shares. The companies who can find and/or develop a resource while keeping the share structure tight and undiluted are the companies you want to own. That speaks of good management. Also, the tighter the share structure, the faster the shares can .

Read what subscriber had to say:

I have beaten the Gold and Silver ETFs and the general markets since I've been subscribing to the Gold & Silver Premium newsletter. I recommend it to all my friends and family.

~ Bob Hirsch, California

Huge Potential

In even the last year and a half of the previous bull market, junior gold and silver companies experienced tremendous gains. Take a look at this graph:

Huge Potential

Please note the difference between the juniors and the producers. Anyone can tell you Newmont Mining or Yamana Gold is going higher. Investors will make good money in those stocks (if they can sell at the right times). However, traders and investors can make historic gains if they turn their focus to the junior producers and explorers, who will be the "growth stocks" of this bull market.

What if you were lucky enough to invest in juniors, not in 1978 but in 1975? Take a look at the gains in these juniors:

Gain in Juniors

You may not believe in technical and fundamental analysis and you may not care. That is fine. The reality is that these types of analysis will help us in finding the leading companies. It will help us stay invested in the strongest stocks. And it will give us a chance to spot the handful of companies that make epic gains.

To our knowledge we are the only publication that tracks as many companies as we do on a week-by-week basis and offers our research and analysis to the public.

For only $29.95/month you can get our service. You get our first-rate research and I promise you have my ear if you send me an email.

As an independent analyst, I make my living by providing high quality actionable research to folks like you. I take my work seriously as my subscribers are my lifeblood. Unlike typical Wall Street analysts or newsletter writers with thousands of subscribers, I don't have the luxury of being wrong. My career depends on providing subscribers with top notch and accurate research.

If this service interests you, I kindly suggest you consider taking a 14-day trial. You are not billed at any time during the trial. All you need to do is cancel before the 15th day. If you choose to do so, no hard feelings from me.

If you have any questions, don't hesitate to ask! Looking forward to finding big winners for you,

Sincerely,

Eric McWhinnie

Eric@wallstcheatsheet.com


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