The Dines Letter – Thoughts on Mr. Dines and the 2008 Annual Forecast Issue

by JDH on January 15, 2008

NOTE: This commentary originally published January 15, 2008. For a more current commentary, please see comments on The Dines Letter 2010 Annual Forecast Issue.

I don’t typically comment during the week, but since our old friend Mr. Dines issued his 2008 Annual Forecast Issue today, I thought I would comment.

First, let me get my biases out of the way: I have subscribed to The Dines Letter since 1999. I made lots of money on his internet recommendations, but unfortunately lost a lot of that by not selling soon enough. I made lots of money in 2005 and 2006 on his uranium stocks, but lost a lot of money in 2007 by not selling soon enough.

It is my humble opinion that Mr. Dines is very good at identifying long term trends, and he is good at picking buy points, but he is not great and knowing when to sell. (The classic example being a stock that shall remain namelss, but is well know to all of his followers, that fell almost 80% from it’s peak in 2007 without any sell recommendations; in fact, the stock remained on his “Good Grade” list of conservative investors, and remains there to this day).

I’m further amazed by the fact that most of the stocks on his Supervised Lists are rated as a “Hold”.  Perhaps there should be some “Sells” on the list?

However, I will give him credit for this: his Annual Forecast Issues tend to be reasonably accurate. Try this exercise: Pull out the Annual Forecast Issues for the last few years. Read them, and compare them to what happened during the year. Ignore everything he writes during the year. Ignore all IWBs and regular newsletters. Based on my quick scan of his past Annual Forecast Issues, they tend to be more accurate than his regular letters.

Why is this? Probably because it is impossible to be accurate if you try to produce something every three weeks. (I produce this blog every week, and my predictions leave something to be desired……). However, if you lock yourself in a room for a month and look only at the big picture, it’s much easier to grasp the big trends, and that’s the value of this issue.

I found the chart at the bottom of page 30 to be quite interesting. The worst performing sector last year, down 26%, were the uranium stocks. Gold bullion was the best. Uranium stocks last had a down year in 2002 (down 11%), followed by a gain of 118% in 2003.

My point: if something fell yesterday, it is possible that it will recover today, so uranium may be a good investment in 2008.

Or maybe not.

I found most interesting the discussion of silver. I said on Saturday that I thought gold was overbought. In fact, just after the open on Tuesday I sold all of my AEM.TO – Agnico Eagle Mines Ltd. (I didn’t bother doing a covered write; I just sold it). That looks like a good move, since it was up when I sold it, and closed the day down 3.74%. This may be an indication that profits will now be taken in gold, and the “smart money” may be moving into silver.

Of course the newsletter today had pages and pages of Dinesisms, and was largely a re-hash of what he has said before.

However, I think it still has value, if for nothing more than to give us a big picture perspective.

I’m sure if I did a survey of the readership of this blog, the typical attitude towards Mr. Dines would be something like this:

“I made lots of money from his advice in the past, but he has lost his touch. He doesn’t know when to sell, so I’m not renewing my subscription.” As I said earlier, it’s true; uraniums were overbought in 2007, and we should have sold sooner.

However, the fault lies with Mr. Dines, but also with us. We had profits and we didn’t take them, and we have no-one to blame for that than ourselves.

So, here’s my prediction for 2008:

At the end of this year, many readers of this blog will be saying:

“Mr. Dines seems to have regained his touch. His thoughts on gold and silver were bang on, and look, even uranium picked up this year. Maybe he’s not as stupid as we thought he was earlier this year.”

I still plan to think for myself, but Mr. Dines will continue to be one of the many sources I will consult to help form my own opinions.

See you Saturday.

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