Friday, September 17, 2010

Measuring Risk Appetite (4)

One way to avoid risky behaviour is to arrive at parties early and not linger to the point when participants get out of control. The party in the precious metal complex began quietly in late 2000 and is now into the tenth year. In the early years the invitees were sophisticated investors who basically are not comfortable in crowds.

Precious metals component Barrick Gold Corporation has been in a secular up trend since 2000. A secular up trend is a long term advance that can span anywhere from 12 to 20 years. The secular up trend will be interrupted by a series of shorter bull and bear markets (cycles) that span about 40 months as measured from trough to trough. A secular up trend will contain at least three of these cycles and possibly extending to five cycles. The first cycle in Barrick ran from a mid 2000 trough to a peak in late 2002 at (1) and then to trough at the 2003 low at (2). The second cycle ran from a trough at (2) to peak in January 2008 at (3) and then trough at the late 2008 low at (4). It is quite normal for the second cycle (2 to 3) to extend beyond the normal 40 months and be the longest of the three or five cycles.

Barrick is now in the early months of a new third cycle advance which should peak at all-time highs sometime in late 2011 at (5). Enjoy the party and leave early.


Anonymous said...

Interesting post. Where do you get your timing lengths for the cycles you talk about? Stoken's book? said...


The Barrick study is based on secular time frames
(Stoken) and Elliott Wave (Prechter) and the intermediate stock cycle (Notley)- in this business you have to blend all time frames and theory

Bill Carrigan