The truth about “Sell in May” and precious metals

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The markets seem impervious to any negatives and it feels great to have stocks going crazy and it feels like you should be even longer, right? Make the hardest trade. Do exactly opposite what your emotions are telling you.

Remember how hard it was to buy (see: Flip It: Why the Greek/EU set-up is bullish) when the markets were down 10% in a straight line last summer and panicky headlines dominated the world’s news? It’s not like that right now, is it? Don’t get bearish, and don’t get short either, just let your long positions do the work for you. Don’t go getting aggressively long or chase this momentum. (see: Whiners and Liars Hosed With Job Revisions, Free Market Hypocrites Out in Force)

There will be another E.U. debt crisis and there will be other things that cause the market to pullback at some point. I do think the set-up remains bubblicious and that the bubble is likely to keep getting bigger for at least another year or two, but great traders usually want to sell a breakout and buy a panic. Don’t let your emotions, your greed, your envy drive your trading and investing.

From an overall portfolio management approach, we simply will be best-served by continuing to be patient and fearful when others are greedy. To sell high and look to buy lower again later. Cut your losses. Let your analysis and contrarianism drive your moves. All this comes together at times like this.

And as far as the “Sell in May and Go Away” idea goes (see: The Truth About ‘Sell In May’, for example)? Just like last year because this market’s been acting just like last year all year, right? The more we hear about a big pullback in May the less likely it is to happen. We really nailed the “this year’s market is set up to be just like last year’s market” back in December when I was writing about that and setting us up for that. But you know how it is — now that everybody else is on board with that concept, it’ll likely be a briefly self-fulfilling prophesy and then the markets will do exactly opposite what everybody is set up for. In sum then, feet to fire, on this one, I’d say that the upward momentum is most likely to continue for a couple more weeks and then we’ll have the big pullback just after everybody decides that the big pullback won’t come. Markets are ironic like that.

And as for gold and silver, (see: Everything you need to know about investing in gold and silver) again, feet to fire, here’s what’s going on with the metals right now:

The banks and governments want the price of metals low and are trying to force the paper gold and silver prices down. That has backfired badly, as people like you and me around the world immediately took advantage of the lower prices and the recent crash to load up on physical metal coins and bullion.

There’s a real disconnect between the price and action in the paper and the physical world right now and that gap has to close one way or the other. Either the physical prices have to come down and stabilize or the quoted spot paper prices have to go up. And again, the real reason I’ve gotten so aggressive about owning physical precious metal bullion and coins this year is because of the wild currency wars and aggressive attempt at debasing every major fiat currency around the globe. Right now all the forces are coming together to likely force higher prices on both the physical and paper markets.

And before I move onto some of your questions on these same topics, please click here to take our Poll – Does the government accurately report inflation?. I’ll report the results back in a column next week. The polling results so far are absolutely astounding, I must say.

And here are a few answers to questions from Marketwatch readers on these same topics:

Q. Considering the endless printing of money do or have you considered putting some money in a bank in say Canada which seems to be (is) more fiscally conservative to diversify away from this ridiculous debasement of our currency?

A. Interesting thesis. But here’s my answer – if and when the major currencies of the world really do end up nearly worthless, Canada will not be a safe haven. I wouldn’t want my money sitting across the border when the next collapse comes.

Q. Would you at some point be adding to the short positions of JPMorgan Chase and Morgan Stanley. I haven’t taken a position yet but don’t trust the banksters and their complicit regulators. It seems as though the banks can do as they like because the “Law” is on their side. Your take?

A. You got that right — as long as people keep voting for this Republican/Democrat Regime which in my opinion is wholly owned by giant corporations and big banks, specifically, the banks that seem to have an endless line to subsidies and accounting gimmicks that will guarantee they always show earnings growth. Businesses that depend on government subsidies for earnings should eventually collapse since they wouldn’t have been depending on government subsidies for earnings if they had a viable business to begin with. My timing has been terrible on these financial shorts, but I remain confident that at some point the shareholders of the big banks will be crushed.

Q. Do you see any difference in buying metals from say, Apmex vs. local bullion dealers?

A. I like supporting local businesses much more than big businesses located elsewhere. I like to build relationships with small business owners and the community. I trust the local coin dealer I found and these days I don’t trust nobody in the metals business if I can’t shake their hand. All that said, I think if you really want to buy some gold and silver coins from Apmex it’s probably not a bad thing.

Cody Willard writes Revolution Investing for MarketWatch and posts the trades from his personal account at TradingWithCody.com, which is not affiliated with MarketWatch. At time of publication, Cody was net long gold and silver and net short JPM and MS. Follow Cody on Twitter at twitter.com/codywillard.

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Cody Willard

Founder, CEO & Chairman at Wall Street All-Stars, LLC

Cody Willard is the founder of Wall Street All-Stars and the principal of CL Willard Capital. Cody serves as an adjunct professor at Seton Hall University and writes TradingWithCody.com. He was an anchor on the Fox Business Network, where he was the co-host of the long-time #1-rated show on the network, Fox Business Happy Hour. He wrote a monthly investment column for The Financial Times as well as columns for TheStreet.com and was a regular guest on CNBC’s Kudlow & Company from 2004 to 2006. Cody’s stock picking ideas and economic outlooks have been featured on NBC’s The Tonight Show with Jay Leno, ABC’s 20/20, CBS Evening News, CNBC’s SquawkBox, Jon Stewart’s The Daily Show, as well as in the Financial Times, Wall Street Journal, New York Times, and many other outlets.