Likening the market to the online Halo war game that pits the human race against alien invaders, John Kaiser of Kaiser Bottom Fish Online voiced concerns about the structure of equity markets at the World Resource Investment conference in Vancouver over June 6-7.
Kaiser argued that destructive innovations have turned the markets into a similarly high-stakes game. Speaking of the flash crash on May 6 that saw the Dow Jones Industrial Average nosedive by 700 points in mere minutes before suddenly rebounding, he said that such events have caused ordinary people to back away from the markets.
"You can't really play the market anymore - it's a war game," he said.
Kaiser counselled the audience to decide between being a trader or a longer-term investor and noted that ordinary investors aren't the only ones who are spooked. "There's a palpable fear in the industry that we're going to go down again."
That fear, fed by worries about the European debt crisis, has weighed on the market, and coupled with the start of the summer doldrums, it all made for sparse attendance at the conference (although traffic did pick up on the second day).
It also meant that gold - which hit a record high of US$1,251.20 per oz. in New York the day after the conference ended - was the watchword.
But while many speakers extolled the yellow metal, they were also in agreement on its limits. Most advocated owning some bullion, but like Border Gold's Michael Levy or Kitco's Jon Nadler, advised buying gold not as an investment to make money but as an insurance policy to preserve purchasing power in case other investments go south.
Much to the chagrin of some goldbugs, a debate about the gold market between Nadler and Frank Holmes of U.S. Global Investors did not give sway to the theory that gold markets are manipulated and suppressed. Instead, Nadler dismissed the "blatant book-talking" of some hucksters, promoters, newsletter writers and companies who constantly predict US$5,000 an oz. gold. He said that the gold market is too small and liquid to play a large role in the monetary system and pointed to the phenomenal increase in the gold price in recent years as proof that the gold market is not suppressed.
Holmes, meanwhile, noted that all markets - including gold and silver - are managed. But he also argued against those who believe there's a bubble forming when it comes to gold, which he noted is nowhere near its 1980 peak in real terms. His advice on gold? "If you're not long, you'll be wrong."
Like the others, Kaiser sees the long-term trend for gold - which he called a largely useless commodity that therefore has no real price ceiling -- as positive in real terms. But he pointed out that no one knows when aggregating demand for gold will drive the price higher.
Newsletter writers Brent Cook of Exploration Insights and David and Eric Coffin of HRA Advisories were part of the gold chorus, singing the metal's praises as a hedge against continuing uncertainty.
On a panel on Europe's debt crisis, gold was seen as one of the primary opportunities to come out of the mess. David Coffin said in addition to gold, selective gold juniors were also a good bet.
In a separate talk, Eric Coffin noted that the strong gold price is the reason why the junior market has remained unusually strong during the current correction - usually when there's a pullback the TSX Venture index falls by about twice as much as the main board.
Among those who are cautious in the short term, Brent Cook said he was staying away from base metals, and that if the market goes down as much as some think it will, juniors stand a good chance of "getting slaughtered."
Jim Letourneau of the Big Picture Speculator also predicted a rocky short-term market and recommended against buying stocks in the second half of the year. Letourneau is looking for signs of organic growth from China (the most likely place for this to show up) to denote a turnaround.
Another fact of life that everyone agreed on: continuing volatility in the markets is the new normal.
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