Greetings from Delray Beach, Florida.

I'm writing to you this morning from a beach house that sits about two blocks from the ocean. The windows in my little red-tiled bungalow are filled with palm trees; all the furniture is made of wicker (or maybe bamboo).

It might sound like a vacation, but it isn't. (Then again, it isn't exactly tough being asked to stay in places like this.) On Friday, it's back to Nevada, and then more traveling shortly after that.

When you're used to going 110 miles an hour almost all the time, as I am, it sometimes takes a change in routine to make you realize you're exhausted. That realization happened for me on Wednesday, after a day's worth of plane travel.

Taking time out to walk along the beach, or do a little hiking in the mountains, or even something as simple as finding a quiet spot in the park and stretching out on a blanket is no small thing. Whenever I forget how important it is to step back and relax, it's only a matter of time before I'm rudely reminded again.

Occupational Hazards

It's vital to be able to "step back" from life once in a while. The same is true in business, and it's true in markets, too. For traders and investors who watch the markets closely -- who follow all the zigs and zags -- it's very easy to get overly caught up in the game.

I was reminded of this, too, by an excellent quote from the latest issue of Grant's Interest Rate Observer. (Grant's is one of my favorite reads; definitely an acquired taste, though.) Here it is:

Professionals in the change-anticipation field fare little better than the amateurs at divining the big turns, possibly because the experts overreact to the little turns. They labor under the occupational hazard of the itchy trigger finger.

That statement is so, so true. I think of the trouble as being "too clever by half."

When it comes to exploiting the "big turns," there's an aspect of humility plus wisdom that's hard to pin down. It takes humility to spot something big and obvious without getting too fancy about it, or getting too clever in the analysis. It also takes humility to take a shot and be wrong, maybe more than once. And it takes wisdom to put all the pieces together the right way.

The Importance of Sitting Tight

The other hard thing is that, most of the time, the biggest profits aren't in catching the turn anyway. Real fortunes are made with traits like patience and grit and fortitude... sticking to one's guns and not getting put off by setbacks.

Jesse Livermore put this so well in Reminiscences, he is worth quoting at length here. (Still planning to get you that report of selected quotes, by the way.)

After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight! It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. I've known many men who were right at exactly the right time, and began buying or selling stocks when prices were at their very level which should show the greatest profit. And their experience invariably matched mine -- that is, they made no real money out of it.

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance.

The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight. Old Turkey was dead right in doing and saying what he did. He had not only the courage of his convictions but the intelligent patience to sit tight.

The Weekly Perspective

One of the ways I try to "step back" on a regular basis -- when I don't have time to crash for 10 hours and skip the 24-hour news cycle in an ocean beach house, that is -- is by looking at weekly charts.

There is just something great about a weekly chart. Because each bar represents five trading days, and because the full width of the chart covers months or even years, the day-to-day "noise" just gets filtered out.

Looking at nothing but short-term charts can make you feel like the white rabbit from Alice in Wonderland after a while. I'm late! I'm late, for a very important trade! Weekly charts are the cure for that malady. If you can remember that the biggest and strongest trends are more like slow-moving glaciers than zippy little sports cars, you'll probably be better off.

So with that said, let's take a gander at some weekly charts.

Two things stand out looking at this chart. First, there is a pretty clear head-and-shoulders-type pattern that played out for the Dow over most of 2007. Second, there appears to be a psychological battleground at the 13,000 level, due to the number itself and the shape of the head-and-shoulders pattern.

For the record, some traders put more faith in pattern formations -- head-and-shoulders, wedge, pennant, flag, etc. -- than others. I'm not a huge believer in patterns, as I don't see a chart as anything more than one simple abstract history of what's happened in the past. But the pattern labels can be useful in discussion.

Notice anything interesting here? While the overall Dow is struggling, the transports have made it back to multiyear highs (all-time highs, in fact).

Without getting too complicated, what does a simple thing like this tell us? It tells us that we are still very much in the era of "stuff" being important.

By "stuff," I mean commodities, raw materials, hard assets, and so on. "Stuff" stands in contrast to "paper," which represents all the fancy wizardry the banks have gotten up to these past few years. (A mortgage security doesn't hurt when you drop it on your foot.) The strength of the Dow transports speaks to the rise of "stuff" because, well, that's what gets transported.

Here we have the Philly Bank Index, standing in as the polar opposite of "stuff." This chart looked good for pretty much all of 2006; then, in 2007, it fell off a cliff.

Notice, too, the way the volatility of the bank index has increased dramatically in 2008. You can see that in the way the bars have gotten taller and wilder. Charts for RKH (the regional bank ETF) and XLF (the financials SPDR) look much the same. The big picture for the financials has turned into a giant hairball... and to me, the idea of going long financials at this point has about as much appeal as tucking into a bowl of hairballs.

You knew we had to look at this one, right? It still boggles my mind how fickle and shortsighted the trading community can be, even among gold bugs (those who believe strongly, even fervently, in the long-term case for gold).

There's been plenty of hand-wringing over the recent retreat from gold's all-time highs. What I'd love to ask these nervous Nellies is, What are you so worried about? Nothing goes up in an absolute straight line... markets have to breathe, just like people. Inhale, exhale, repeat.

In the 1970s, gold had a massive -- and massively painful -- mid-run correction before going on to hit its all-time highs (which, adjusted for inflation, would be over $2,000 an ounce today). I don't think we'll see as much pain between here and $2,000 as we did between $500 and $1,000 an ounce back then. But even if we do, courtesy of Bernanke & co. throwing everything but the kitchen sink at gold, the volatility will make for some amazing opportunities.

The U.S. dollar chart, by the way, is as ugly as the gold chart is pretty. Think slip n' slide right into the dirt. But, woo woo, maybe we can rally the buck back to where it was, umm, two or three months ago! (Jackie Mason voice: For this you get me excited?)

And finally, the prettiest chart of all -- the iShares Brazil ETF.

Why is this chart so strong? Because Brazil sits smack-dab in the middle of two of the biggest trends of the decade: the rise of "stuff" and the rise of emerging markets.

What Brazil mines and grows and harvests, the world needs like never before. With a population just under 200 million, roughly two-thirds that of the United States, Brazil is also on the path of amazing local opportunity and long-term domestic demand growth.

When you look at a chart like this, and you see what's happened over the course of years, is your instinct to say, "Meh... that's probably just a flash in the pan." I'd certainly hope not.

Admittedly, it would be one thing to be bullish on gold or Brazil or emerging markets in general without knowing what's going on behind the scenes. If you don't know the real drivers behind a move -- if you don't have a sense of them -- then not even a long-term chart can always be trusted. But we do know what's going on behind the scenes. We know what these moves are made of.

And because that's true, we can also say with confidence that the fun is just beginning. Here's a toast to "being right and sitting tight."

Warm Regards,

JL

Your Entrance Into the Next Investment Boom

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