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Hi Eric,

I enjoy reading your posts on mineset. I must admit that sometimes you are over my head though.

I have been a PM buy and hold guy for 3 years now without trading back into cash on any occasion. I have a feeling that PM stocks and physical silver are about to take an ass kicking for the next 9-18 months.

Hello Jack,

You must understand why you are holding gold. Without understand of why, it is too easy to let fear dominate decision making.

If you fear gold in 2010, it is because the dollar will rise. If the dollar is ready to rise in 2010, does the money, not the talk, anticipate such an event? Is the fear of holding gold stocks a function of an anticipated decline in gold or equities? History suggests that gold stocks, though having the tendency to follow equities over the short-term, take their lead from gold. In other words, the correlation between gold stocks and gold is much stronger than that between gold stocks and equities since 1925. Indeed, a severe, capitulation-style decline in equities would likely pull down the gold stocks. A third capitulation decline within a depression, which in and of itself has no historical precedent, occurring within a year of the termination of the previous in 2009.03 would be unique.

This does not suggest equities are solid or even the place to be. As long as this infinite QE, devaluation-as-the-path-to-prosperity mess continues to churn, few sound choices exist beyond gold.

Regards,
Eric