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Precious Metals Investment and
the Rise of False Contrarian Gurus

By Dr. Jeffrey Lewis

The typical technical analysis based stock-slinging newsletter is written by a contrarian who denies market manipulation and often ridicules those who attempt to discuss it seriously and rationally.

Furthermore, the degree of denial and hostility faced by proponents of market manipulation theories is usually directly proportional to the amount of evidence actually underpinning the issue.

Proving a Negative is Always a Difficult Task

Of course, proving that manipulation does not actually exist in the financial markets — and especially in the precious metals markets where even the regulators like the CFTC have found sufficient cause to investigate such allegations — is very difficult. 

In addition, the fact remains that most newsletter writers are merely traders talking their own book, although admittedly the most prominent among them can maintain a powerful influence over the market’s mental space. In recent years, this mental space has suffered from an excess of horrible sentiment.

Controversy Sparks Interest in Market Gurus

The average smart money investor who comes to the market guru for advice or guidance is sophisticated, wealthy and typically allocates only a small percentage of their money and attention to the markets.

Such people usually do not like being bothered with conspiracy theories and emotional pleas, and therefore they would rather not hear about market manipulation.

Market gurus often specialize in offering penny stocks and junior miners to their newsletter readers. They need to conform to laws and regulations regarding the information they disseminate.

While a fair number of people still consider the Internet to be relatively free and unregulated, Internet publicity does not come cheap. In fact, web writers and publishers often spend lots of money and make great efforts to produce and advertise their content.

The Problems

Ignore for a moment the fact that assets like precious metals are generally mispriced and that this results in the misallocation of capital. Remember that mining companies are usually guided financially by the very same entities that collude to control the prices of their key products.

This leads to false company valuations, and ultimately the false contrarian gurus are no different from the mainstream advisor who holds the CPI or Official Labor Statistics as sacred cows. These writers can afford to mislead their readers given the small capital allocation they usually commit since most people speculate "safely" with only what funds they can afford to lose.

Also, their newsletter-reading investors often need to have confirmation from someone like them. The typical contrarian market guru tends to fit the bill, especially if they have a proven track record of successful calls and an outspoken nature.

Status Speaks Loudly

Whether it is GATA, Ted Butler, or the army of disciples who have learned to accept the same facts, they are often accused of using the market manipulation argument to sell their positions, newsletters, etc.

The big market gurus and many mainstream investment advisers have effectively taken the opposite tactic. They use the anti-conspiracy approach to bolster their status with conspiracy-wary investors.

Status salutes status. The smart money tends to warm to those who confirm their attachment to their basic understanding of the world and all that they have invested in it. A respectable investor conscious of their status will usually have the desire to work with someone of equal or higher status.

Basically, by vocally and consistently denying the existence of price suppression, the big market gurus are merely leveraging the uncertainty associated with such theories to bolster their own success and sell their newsletters.

For more articles like this, and to stay updated on the most important economic, financial, political and market events related to silver and precious metals, visit http://www.silver-coin-investor.com

 

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