LAST UPDATED: 13 June 2005

The Goldenbar Report offers a fundamental, economic, and technical analysis of the international equity, commodity, bond, and currency futures markets for investors seeking investment and trading opportunities across a wider spectrum of assets than just equities - with a focus on gold and the USd (the current international reserve currency and the sole monetary competition for gold).

The report includes charts, tables, earnings updates for the key intermediate and senior gold producers (as well as for the S&P 500 aggregrate), COT updates, a subjective outlook matrix for the various markets that are followed, and an ideal asset allocation for the hypothetical investor. Our clients typically include stockbrokers, money managers and sophisticated individual investors; clients are assumed to have an intermediate (plus) understanding of economics, markets, and chart analysis... novice traders and investors are welcome but may find the content of analysis challenging and counterintuitive, since the letter rebuffs most of what is said by mainstream writers & analysts and the author refuses to "dumb down." That said the author ensures that his arguments are well supported and the support well articulated. Hence novice investors are able to learn quickly.

The author is Ed Bugos, a former stockbroker specializing in venture capital & futures trading for private clients. See below for more on his background, and a picture. His investment philosophy is to seek out and invest in undervalued sectors for the primary move (i.e. the trends typically lasting from 3-5 years), to diversify (not overly) by asset class; but also to highlight special situations, insights, as well as provide a short and intermediate review/outlook on current positions and other key markets, sectors, currencies, and commodities.

The term undervalued implies a growth component (at least in profits even if cyclical - since the outlook is 3-5 years and not 10 plus years for instance) and the targeted trend implies one with scope; fundamental & economic analysis is applied to ascertain growth, value, and/or scope. The usual approach is both top-down and bottom up; philosophically Mr. Bugos prefers a bottom up approach to analysis but in practice realizes it is too time consuming to rely on solely.

His investment strategy inolves entering and exiting positions slowly – by wading in and wading out – buying some too early, some to late, selling some too early, and some too late. He depends on technical analysis to help determine timing of entry/exit points, and trading/investment strategy, and tends to wrap his strategy around the 3 to 5 year fundamental outlook for the economy, profits, and rates.

Unfortunately, politics are also routinely discussed - as they are in fact connected to money today. Indeed, an analysis of markets absent an analysis of the political interventions in money is incomplete. The investor is lucky to be right without it.

What most investors don't understand is that money is always the market's choice, and politicians are always trying to alter that circumstance, if you will, through currency policy, legal tender laws, and other monetary regulations.

This they must do because the policies they favor today - inflation for instance - would otherwise immediately and more uniformly devalue their currencies thus prevent them from taxing and otherwise confiscating the wealth of the productive members of society. Ergo, Mr. Bugos believes that his job in part is to help you figure out the goals of central bankers and policymakers in order to sift out the opportunities that make themselves apparent in their always failed interventions.

The case for gold is not merely the case for a monetary devaluation; it is the case against the state's largest interventions in commerce - be it too much money or too much regulation - both of which affect prices, productivity, and real returns.

Make no mistake: investing in gold is both a vote against the state's encroachments and a defense against the consequences of its interventions.

Money is the market's business; and the market is your business!

Who is Ed Bugos?


Technical analysts assume that the market is always right. We don't believe that's true, at least not in direct implication. What the statement means to us, and most pros, is that the market always has more of the information than any single individual or group. We know that markets are dynamic and subjective. Thus, when we say the market is always right, we mean the market is the final determinant of value... that neither individuals nor government nor formulae could replace the market in this capacity... that the market exists solely to determine value - allowing entrepreneurs and capitalists to rationally forecast profits and calculate costs.

The assumption that markets are always right thus means simply that the value of a good or financial claim at any given moment is what the market says it is, no more, no less - the endeavor of investing tries to anticipate changes in value for a given future timeframe.

Needless to say, we believe that markets are neither completely efficient in this capacity, nor random. They can be both at times. In terms of capital markets they may forecast events correctly, or incorrectly - though usually correctly as anyone that seeks to invest based on the fundamentals can attest to the difficulty in trying to stay ahead of the market. But even if incorrect forecasts are made in the valuation of capital, they still factor more information than most individuals are capable of taking into account; at best, analysts like ourselves can merely move the market 'toward' an ideal efficiency. If attempts at analysis were to stop across the board then the market's efficiencies would disintegrate and opportunities would be widely perceptible. Still, the more efficient a market is, the more value technical analysis has to me.

What's more, the random walk hypothesis in our view is valid only to the extent it denies a dependence between the prior day's move and the next. However, beyond the day to day relationships, the existence of trends if not experience refutes it almost entirely.

To be sure, there is no real mystery to technical analysis.

Imagine yourself a NYSE floor trader acting only on instinct - reacting to what the crowd is doing, rather than fundamental/valuation developments. Now, many traders read their analyst's research so they are vaguely aware of the fundamentals. However, some traders boast skills in guaging the crowd's behaviors and some even have a reputation for usually leading the crowd.

Their sole data is price and volume behavior, from the point of view of the front lines.

Similarly, a chart is but a compilation of raw data - a history of the action on the floor absent the emotion of actually being there. I think it's possible to claim that you will never find data as raw as that which is on a chart. It's unfiltered, unmanipulated, unaltered. Indeed, any analysis of markets that ignores the information in a chart is utterly useless. Even the most rudimentary analysis of fundamentals is made with reference to the information in a chart. The concepts of bull and bear markets would never exist if it weren't for the existence of trends in the first place.

The main difference between the chart and the data on the floor is a matter of time - a chart divulges the same thing in days and weeks on paper that the floor divulges in minutes, or hours.

Nonetheless, as with any skill, or art, there are those who can and those who can't. The fundamental sin of technical analysis is made in the interpretation - specifically the lack of discipline in regards to the limitations of reading a chart and the rules designed to keep the personal bias out of the analysis. More often than not, the chart reader will see in the chart what they've already determined in their outlook. In other words, the main sin is in using technical analysis to validate a predetermined view. Even the professional is susceptible to such errors.

So the secret to reading charts lies in knowing its limitations; in knowing what not to do, and in knowing what your own preconceptions are. This is true whether you interpret charts using Elliott Wave, Edwards & Magee, Dow Theory, Astrology, Gann, or Geometry.

For example, a common error made by technicians is in drawing trendlines.

The theoretical structure of a trend implies higher highs and higher lows (or lower highs and lower lows), and even empirically, such sequences being observable enough, constitute a trend.

However, the sequences aren't always amenable to a straight line, even on a log chart.

Often, when drawing trend lines, analysts tend to conveniently forget that fact... convenient because the straight line may happen to confirm their views better. It is very important to make sure that a given trend connects the most recent lows (or highs) with the last highest low (or last lowest high), which is the one occurring 'just before' the last higher high (or lower low).

However, trends are commonly drawn either where they appear to conform to a straight line, regardless of the time period covered by the chart, and/or where the author's bias is. In reality, trends and most technical frameworks are ground in some theory about crowd behavior. They are not nearly as mysterious as one would be correct to think by the average interpretation.

As for chart formations which technicians claim to spot and whose meaning they claim to know, and which draw greater disagreement than trend analysis, they do exist in my experience and they as often do tell me something about the behavior of the crowd as they don't. The fact that they don't always reveal some truth about a market does not rule out their significance - every edge counts in the market after all. What technicians look for is evidence of market (price and volume) behavior that has occurred in the past and which may tip the market's hand again.

What they often find is evidence that they themselves have planted to confirm their views.

Patterns can usually indicate either accumulation, distribution, or consolidation, and can even be used to determine the extent of a potential break out. If chart theory is understood, adhered to with discipline, and is ground in experience technical analysis can be a useful tool.

Our use of technical analysis is basic. We rely only on patterns / trends that can be explained by the actual course of events (fundamentals) and which I have confidence in myself through experience. Otherwise, we leave the interpretation open-ended. I don't believe a chart can tell the future, but I do believe it can tell us what's happening in the present, and help us determine the most likely future course of events on that basis. The biggest value any analysis of the chart has to me is in determining what the real story is - today. For, the tape never lies.

Only its readers do - and mostly to themselves.

If you're interesting in hearing from someone who's willing to tell it like it is, subscribe now.



I remember riding down the elevator with our chief (all-star) trader, an upper middle aged short and pudgy Jewish gentleman. I was reading an article in the Journal about a Silicon Valley experiment using Gold as a conductor for their chips. Elijah popped his head up at me and asked, "why ya' readin' that?" Naive as I was, I said that "I thought that knowledge was power," to which he smugly replied, "no sir, cash is king!" I was stunned. Here I was trying to figure out how to get an edge, and the city's biggest trader told me I had it all wrong. Anyhow, the story didn't end well for him, which provoked the thought that was determined to impress upon my mind... that a fool and his money are lucky enough to get together in the first place - actual anecdote by Ed Bugos, editor of the goldenbar report.

The Goldenbar report came about as a consequence of two factors. By accident, and by reaction to the opportunities that arose from the economy of the nineties.

The monetary events that unfolded during 1999 were not unrelated to the decision motivating the launch of the report - the year was marked by the Bank of England's announcement to sell its remaining gold, the Washington Agreement, the biggest stock bubble known to history, and it was the last year of the millennium - a once in a lifetime opportunity and/or story in the gold sector seemed to be materializing.

However, a lack of credible market analysis, particularly at the monetary level, combined with the advent of cheap Internet publishing capability was enough to tempt a career change for Mr. Bugos. Information was now easier to find, and cheaper to acquire and publish.

Proponents of the dying media monopolies were trying to sustain them by trying to find new ways to protect their fading monopolies. In the financial business they seemed to be panning to their advertisers, and were dumbing down to reach more and more readers in order to bolster the resultant advertising revenues. In other words, the advertising and traffic model became an increasingly viable model (relative to the subscription model), and with everyone hence chasing more dumb readers Mr. Bugos thought a niche was opening up for the readers that were being left behind as a consequence, especially in the financial and economics businesses - he became convinced that in this new environment, where the moguls had an identity crisis, that the demand for independent news, analysis, and research would flourish again. Only this time, there could be new winners, as if a whole new market was opening up for the taking.

"I can't help thinking that the most exciting benefit will go to society, as a more level playing field (in the information age) promises to devastate the lies holding it back." - Bugos

In 2000, Mr. Bugos started his letter by warning investors of the impending bear market in stocks ahead, and of the political machinations that policymakers would employ to thwart it, but instead, could only worsen it. Over the course of the five years since, Mr. Bugos developed a product he felt investors needed in the current complex economic order to help them formulate a strategic outlook based on reason, that could work, was spoken in some manner of English, and that would apply to many markets, not just stocks. Mr. Bugos has proven an uncanny forecaster of intermediate & primary market trends, particularly in the major stock market averages, the dollar, and gold, but also in many other markets. For example:

During September 2000, he declared the point of recognition for the bear market in stocks was at hand, and then forecast that the Dow would reach 7000 by the end of 2001. He was one year early. All through 2000 as gold prices fell back from their post Washington Agreement buying spike, and while the whole world was calling for gold $180, Mr. Bugos declared that the primary bear market low for gold was in at $255, and that the next few hundred points (and certainly the next 100 points) would be up not down. In December of 2001, as the Dow was coming back - thanks to the Fed's monetary pump in reaction to 9/11 - Mr. Bugos warned that the Dow was going to turn down again soon, and this time take the dollar with it. Mr. Bugos called the peak in the US dollar with uncanny accuracy when he issued a report entitled "dollar reversal" during July 2001, one day after its 18-year record high, so far. In April 2002, he forecast the Dow to plunge to 6000, and continues to hold to that medium term target (although that lower low has yet to occur at the time of writing this update (June 2005) - and instead the bulls began a bear market rally of enormous historic magnitude - Bugos is confident that is the next fate for the Dow). In 2001, Mr. Bugos showed why the strong dollar "policy" had the same effect on commodity markets that price caps would - a reduction in investment. He was one of the few writers that warned gold's strength forecast dollar trouble. And even while fellow gold bulls saw a rising gold price, many did not anticipate the bull market in gold shares Mr. Bugos wrote about in December of 2000. Since then the AMEX Gold Bugs index has gained 500%.

What's more, after aggressively ratcheting up his gold stock weightings from 2001 to 2003, at the end of 2003 he warned his clients of a potential gold stock correction and scaled back his allocation to emphasize it - he bet that gold prices would continue to rise, however. Mr. Bugos called for US$50 oil back in 2001 while most analysts were looking for it to stay or fall below US$20/bbl, he called the US$40 intermediate top in oil during early 2003, the higher highs in 2004/2005, the break out in gasoline prices, he called the other metals markets with similarly uncanny accuracy (i.e. copper and silver), correctly forecasted that the US dollar index would fall to below its 1995 lows during the move that began in 2001, and although he was bearish on stocks he argued against those who were calling for a deflation in money supplies and in real estate to ensue, claiming that exactly the opposite would occur in reaction to the stock slide.

Over the years since Ed Bugos has been a financial reporter and analyst, he's attracted a large following on the Internet. Several well-known money and gold market websites regularly feature his editorials. Thousands of people each week seek Mr. Bugos' uniquely candid market perspectives. Once you've read him, you'll understand why.

Mr. Bugos spends his days studying the tape, and his evenings studying charts. He filters market-moving news globally and reports his conclusions to his clients. He has a strong foundation in the use of technical analysis, as well as in the fields of economics, financial statement interpretation, statistics, but also, in investment planning and strategy, which often involves an understanding of the political motives of governments and other players. He prides himself on delivering forward-looking analysis and outlooks for the markets he tracks.

Current outlook and hypotheses:

  • Easy money and inflation policies were far more involved and responsible for creating the magnificent stock gains of the nineties than either productivity or real earnings, but even more so during the post 2002 boom; the ongoing employment of these same policies continues to distort and prevent markets from healing on their own. In other words, a denial of the real causes of the bubble are still working to extend or deepen the bust.
  • Real earnings are likely to continue to decline, but nominal profits may continue to rise - excepting the regular pitfalls occuring on occassion as the rising costs of production thanks to inflation squeeze profit margins. Likewise, and as a result of the consequences of the various monetary policies and financial alchemy the state injects, stock market valuations are likely to continue to contract; nominal stock prices rarely fall much in an inflationary environment except when interest rates rise, which we forecast as well.
  • The Fed is increasingly caught in an inflation trap, as the slashing of rates has failed to boost the dollar's liquidity premium (subjective value). Unlike Japan, since the United States is dependent on foreign savings to sustain its inflation economics, as easy money policies no longer work to boost equity values, dollar devaluation follows. It's like clockwork in the historical record. Thus, our medium to long-term outlook is for a seventies style dollar devaluation and commodity price spiral (stagflation). Deflation is not in our forecasts at the moment, and won't be until we feel the dollar is undervalued.
  • Gold prices are to outperform most assets for the remainder of the decade.
  • However, at the moment, given that the "foreign exchange value" of the US dollar has fallen to our targets while its real (gold) value hasn't, we are less bearish on the former - in other words, we have been arguing that gold is going to complete its move to our target for this primary sequence (US$500-600/oz) without a coincident decline in the foreign exchange value of the US dollar which will catalize the increase in bond yields, the collapse in stock valuations (PE's), and may even end the real estate boom for now.
  • Our outlook for real estate assets is bullish long term but bearish medium term.
  • We anticipate the Dow to fall below 5000 before it makes it to 36000; but our real target for the Dow is 6000. Our opinion on Dow 36000 is such that there are only two ways it is likely to get there: through the process Greenspan "talks" about - productivity - and through the process Greenspan "brings" about - inflation and dollar devaluation.
  • We have begun to call a medium term top in most commodities markets except wheat, oil, gold and silver and have suggested that readers bet on the gold ratios as a result.
  • We expect gold shares (and gold) to surge during the second half of 2005 but afterwards to culminate in a primary liquidation - to mark the end of the first of three waves in the bull market in gold that has already arrived - that would see the gold share "averages" halved and which would coincide with a 30% (plus or minus) correction in the gold price.
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The Goldenbar Report
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Chief Editor/President of the Goldenbar Report
Ed Bugos is the founder, editor, and publisher of The Goldenbar Report, an analytical global market tool for the intermediate and long term investor.

Mr. Bugos launched the Goldenbar Report during 2000, after retiring from his career in the industry as a stockbroker and investment advisor. During his 12-year career, he spent his time in the following aspects of the business:

  • consulting with clients on their long term financial goals, as a financial planner, and developing a strategy to help them get there
  • structuring of (and investing in) venture capital products
  • trading in commodity and financial futures

Mr. Bugos spends most of his time working on the Report, but also pursues other ventures. He may or may not trade for his own account, or for others, but discloses any conflicts. If there is, we are obligated to report them.

Yes, it's my wedding picture

Chief Editor/President of SafeHaven.com,
and Principal of Goldenbar.com

Bruce Stratton is an entrepreneur and founder of SafeHaven.com, an Internet financial magazine whose fundamental doctrine is the Preservation of Capital - a vague notion today indeed, as vague as the Sound Money principle itself.


The 10 (original and corny!) Guiding Principles of The GoldenBar Report:

  1. Never judge 'credibility' by its cover.
  2. You can never 'guess' right if you do not have the proper perspective.
  3. Strong hands listen, weak hands speak.
  4. There is no magic potion to success in the investment business.
  5. If the government screws up, we are not all screwed. There is always something you can do to protect yourself.
  6. There will always be opportunity. In order to survive, your objective is to seek it out.
  7. All hypotheses, speculations, or assertions are always supported.
  8. We will never be afraid to say how it is, or to be wrong.
  9. We do not tell our employees how it is, they tell us.
  10. Cut losses .

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