Exclusive Interviews
The Aden Sisters on Money Metals, Where the Market Is Headed and Why Gold Is Going Up
By Anthony Wile - May 29, 2011

Introduction: Mary Anne and Pamela Aden are the co-editors and publishers of The Aden Forecast, an investment newsletter now in its 30th year. Their analysis, which is used by individual and institutional investors in over 40 countries, specializes in the precious metals and foreign exchange markets, as well as the U.S. and international equities and credit markets. They are also money managers. The Adens have authored dozens of reports and articles, and are speakers at investment seminars around the world. Their work has been featured in newspapers in several countries, in such publications as The Wall Street Journal, Barron's, The London Financial Times, Business Week, Smart Money, as well as CNBC and the documentary, Women of the World. Due to their consistent long term track record, The Aden Forecast was named Letter of the Year in 2010 by MarketWatch. The Adens are sisters, born in California. For the past 35 years, they have followed the world financial markets daily from their Costa Rican base.

Daily Bell: Please answer these questions as if our audience was not aware of your successful forecasting and all-around investment accuracy. Some of these questions are "tough ones" and if you don't want to answer, we'll surely understand! We'll address them to both of you and label your responses from the "Aden Sisters" rather than from one or the other … You two are among the most successful of modern analysts. Why?

Aden Sisters: We have been dedicated to the markets and we do our best. We are honest with the people and we have a certain way of looking at the markets that we have been refining over the years. We have been doing this since 1976 and have reported what we see and then we say what to do about it.

Daily Bell: Why did you give a long-term buy signal in 2002 for gold?

Aden Sisters: There were a number of factors, but it started with the psychological aspect and it felt so bare and gloomy. Then our indicators, which we have fine tuned over the years, were starting to be oversold and they were turning up. The fundamentals looked like things had changed as well because following 9/11, you may recall, a lot of spending started happening. The whole environment was changing, which in our mind was all very bullish for gold and silver. Everyone loved to hate gold at the time and our indicators turned bullish for the first time, so we took it one step at a time and it ended up developing well with each step going up. When gold hit a record high there were no more steps. Also, in 2005 a peculiar thing happened when the dollar and gold went in opposite directions.

Daily Bell: In 2008, your model was 55% cash. Why? And why did you keep it that way until the market bottomed out? How did you know?

Aden Sisters: We went high in cash because again there were fundamental and technical indications that the market was going to be coming down. We did not anticipate that the financial crash was going to be so severe; we didn't think something that bad was coming. But we did think a decline was coming so we moved to cash and as you know the decline was very bad in 2008 and it affected all of the markets. So, by having a heavy cash position and having sold some things prior, it turned out pretty well, even though we did take some losses but not compared to other money managers we know.

Daily Bell: Do you follow an Austrian business model? Why don't mainstream economists do so?

Aden Sisters: The people we first worked with were very much following the Austrian model, but they were economists. The economy obviously plays a huge role in what we do but, but to say we follow a strict model would not be correct. As for mainstream economists, they have a choice and this one isn't working very well, which is Keynesian primarily. It might have started out with good intentions but it's not working.

Daily Bell: Let's get some background. Where were you two born and where did you grow up?

Aden Sisters: We were born and raised in Long Beach, California. We were working in the financial area when we lived there, in our early 20s and then moved here and starting working with John Brion, a Boeing engineer who had retired to San Jose. He was such an enthusiastic teacher and we were very eager students. We studied the financial markets with him and that is really where we got started and got a solid background.

Daily Bell: You live in Costa Rica, why did you choose to stay there?

Aden Sisters: Our mother is Costa Rican, so ever since we were kids we have come back and forth on vacations, etc. Initially we came to stay for about a year but we got involved with the markets and became fascinated as we still are today. We both got married and had children and this became home.

Daily Bell: Tell us about Jerome Smith.

Aden Sisters: Jerome Smith, if you recall, was a very well known, famous 'silver guru.' The metal prices were moving up and silver was soaring, and we were always hoping to meet him, as we knew he was living in Costa Rica. We finally met and ended up going to work for a couple of years in his research department. We started the newsletter during that time.

Daily Bell: Did the Hunt Brothers really try to corner the silver market?

Aden Sisters: At the time, they claimed they were influenced by Jerome Smith and that's what made them want to corner the market. Silver rose an extra $20 in those days to a $50 level. That last ride from $30 to $50 was totally abnormal. Knowing they were influenced by Jerome's writing, it seems they did try to corner the market.

Daily Bell: Is the silver market manipulated? How about the gold market? Are the manipulations ending?

Aden Sisters: We suspect probably yes but there is no proof. We believe you have to watch and focus on the price action. This is what has worked for us. The price tells you everything. Everything is written in the market. They look forward and they'll tell you what is coming. This goes for gold too. The thing that is manipulated is mass emotion. There is a lot of emotion attached to gold and silver as well as volatility. When you see gold and copper rising together, then you really have a strong bull market. Volatility is predicable at times. Even if there is mass manipulation as many people feel, it's only going to work temporarily, even for just a few weeks. In the end, the primary fundamental trends will emerge. That we have seen repeatedly. So, manipulation is a short-term phenomenon as far as affecting a market.

Daily Bell: The Adens rank 30th out of 86 in the Hulbert database. Why don't you get the publicity of major fund managers?


Aden Sisters: Not sure, but we don't do a lot of self-promotion.

Daily Bell: Of course you have goofs, all managers do. How on earth could you not realize that former Fed Chairman Paul Volcker was going to raise rates hard and that gold was at the end of its run in 1982?

Aden Sisters: First we expected that inflation was going to continue and it was going to turn into a semi hyperinflation at the time. If you remember inflation was at 15% and interest rates were at 20% and we thought this would continue. Volker put an end to that. In 1982, we did see a change but we doubted what our own indicators were telling us and that taught us a most valuable lesson. We saw that the gold market was changing but we were still new in the business and didn't have the experience. We thought, that can't be and we over-ruled what the indicators told us. We definitely don't do that any more. We have learned that even if something does not make sense at the time, six months or a year down the road it will make sense. So, that was the reason that happened.

Daily Bell: OK, that was a rare goof. In fact, you stayed out the market pretty much for the next 20 years. What did you recommend in the meantime? Did you recommend tech stocks? Did you see the bubble?

Aden Sisters: We would have to go back and look at the 80s really. We did recommend tech stocks in the 90s and we did see the bubble coming.

Daily Bell: You must have realized that gold was going on a run back in 2001. Pretty exciting?

Aden Sisters: Well that's what we were thinking at the time, we saw this massive change taking place; in fact, we called it a new era. It took about a year or two to be sure it was really happening to be sure it was a new era. Silver wasn't really in a bull market until 2003, which included the other base metals.

Daily Bell: Are gold and silver in bubbles as the mainstream media is constantly predicting.

Aden Sisters: We don't see it as a bubble because so many people are not invested in it. You don't see the euphoria that you saw in the late 70s at all. We don't see a lot of things that are usually associated with bubbles, like the stock bubble in the late 90s. This has been the quietest bull market we have ever seen. Certainly more people are learning but so many people are not part of it is because the stock market has been rising.

Daily Bell: We figure gold and silver have another four years to run before the business cycle turns? Agree?

Aden Sisters: Yes, we would agree with that.

Daily Bell: Is there a banking power elite that turns the world out of London?

Aden Sisters: Maybe, but we can't say for sure. When you see what happened during the financial crisis you have to say yes. There are only a few people with a lot of power.

Daily Bell: Is an expanding war in the offing to take off the pressure of the exposes?

Aden Sisters: We would have to say yes, it's possible. With all the financial problems it makes sense and to keep people working.

Daily Bell: Tells us how you conduct your analysis? Technical? Top down?

Aden Sisters: We look at how the markets relate to each other, this is most important. We are technical yes. Moving averages, relative strength, leading indicators, we use these on an on-going basis all the time and market relationships. We also pay attention to current events and how they weigh into our decisions. The economy of course, what's happening, inflation, etc. We try to stay with major trends, rather than short term ones.

Daily Bell: Are we going to see more price inflation?

Aden Sisters: We think so, yes. It looks like we might have a little slow down here, there are signs popping up. But we think inflation is still coming because of all the liquidity that has been pouring in. At the same time, deflationary pressure is looming all the time, wanting everything to go down but money creation has been unprecedented so eventually it's going to have a major effect. Commodities are rising and everyone in the world wants commodities so that's also a powerful force for rising prices.

Daily Bell: Is the elite going to act and try to move to a global currency like the bancor?

Aden Sisters: It looks like they are trying to make room for that but we think it will be years before this happens.

Daily Bell: Why do you hold so much Costa Rican real estate? Is it better than gold?

Aden Sisters: (Giggling) No, we got caught up in the real estate frenzy ourselves. You know how everyone says location is everything, that's how we feel. The prices have not come down like they have in the states but they have come down. You are still seeing bargains but now you see people investing here, like Canadians with their strong dollar or the Europeans. The real estate market here is a little different than in the states but we like both real estate and gold.

Daily Bell: Where will gold end in 2011?

Aden Sisters: Probably at a new high by the end of the year. So hard to say and this is a guess but on the high side $2000 and on the low side $1600.

Daily Bell: Where will silver end? Is silver a better buy than gold?

Aden Sisters: Well it has been this year and it's starting to get better-priced verses gold. The bigger picture shows gold as the better investment this year. Even though silver has been out performing gold, if you were to buy right now, or in the next couple of months, you would be better off going heavier into gold than silver because gold looks to be the outperformer this year.

Daily Bell: Why aren't precious metals like other commodities or are they?

Aden Sisters: They are more special because of the monetary influence in them, especially gold. This past couple of years, people have been buying for monetary purposes, safe haven reasons, and gold gives that benefit where the other commodities don't. The other commodities have had a double bang here with the emerging markets being so powerful and buying so many commodities.

Daily Bell: Where are food prices headed?

Aden Sisters: They are heading up with all the demand we mentioned earlier. There is so much demand in the world they can't do anything else. The emerging markets are growing and the demand will continue to grow for raw materials, all commodities, including the metals. This could last a long time, a decade or so.

Daily Bell: Will there be more unrest abroad no matter whether the elite pushes for a world war or not?

Aden Sisters: You can always count on unrest in this world. Look at the Middle East and how this continues and goes on and on. It seems pretty constant.

Daily Bell: What will the world look like in ten years?

Aden Sisters: Maybe more balanced with the emerging markets. China is getting more powerful and in particular monetarily. There is a balance of power that is changing and we think this will be more evident in 10 years. That is a great question and a tough one at the same time. We will be watching.

Daily Bell: Where is oil headed?

Aden Sisters: Well if you look at the demand in China and India alone, it can only go up. The difference of what they were using 15 years ago is a clear indicator. There is no alternative energy at this time really, maybe in 10 years. As long as oil is the bloodline of the world, it's going up.

Daily Bell: Are you worried about the state of the world? Is the Anglo-American elite growing increasingly authoritarian?

Aden Sisters: Yes, they are growing more authoritarian. We are worried about the status of the world. Sometimes you think it's not as bad but then it's worse and vice versa. We try and take things as they come and deal with it. With regards to monetary policies, it's going to be interesting to see how that all unfolds.

Daily Bell: Has America seen the end of its empire?

Aden Sisters: Well when you say the end of an empire it sounds so dramatic. But since 9/11, it's sad. There is going to be a power shift, perhaps like in Great Britain. The thing that will hurt the most is that the U.S. won't be able to print money at will any more. There will be changes at home because of this and when this happens people will realize how bad things are. Most people don't think globally when it comes to money management. Most people think this is so complicated but it's really not. They have busy lives and they go to work, they don't think about much more sometimes. Much of what is happening all over the world isn't on your local news, you have to dig for information. But people are feeling repercussions and they want to know more about what's happening.

Daily Bell: Is China going to take over the world? We think it's headed down hard due to substantive price inflation.

Aden Sisters: They are going to have their ups and downs. But they may be on the way to becoming a super power.

Daily Bell: If China goes down, what happens to the world's economy?

Aden Sisters: It goes down too. When they get sick everybody gets sick.

Daily Bell: Is the EU going to survive all this? What about the euro? Is the EU a good idea?

Aden Sisters: Well we are waiting to see if it will survive. They want it to survive. Maybe they will only allow certain countries to be a part of the EU. In the end it may survive, there seems to be lots of determination for it. They might have to cut the cord on some of the weaker countries but we will see how that plays out. It's hard to believe the end of the euro but maybe a change in the euro.

Daily Bell: Is all this chaos in some sense controlled and inflicted or is it merely serendipity?

Aden Sisters: It's hard to say, it doesn't seem controlled because a lot of things are out of control. It's probably a mix.

Daily Bell: Are the powers that be inflicting misery on the world to create a closer world government? Is this merely conspiracy theory?

Aden Sisters: They're probably not inflicting misery on purpose, although there is a lot of merit to the saying, "the road to hell is paved with good intentions". It's like they mean well but it's not working out. Whether you believe conspiracy or not the end thought is, it's happening. It is hurting people, it's affecting the markets, it's making the governments bloated and beyond seriously in trouble. That goes for most western governments. It's more like putting out fires and ending up over your head.

Daily Bell: Has the Internet had an impact on the world? Has it tended to undo the more terrible plans of governments and banksters?

Aden Sisters: The Internet has had a huge impact and more than they can believe probably. It will continue which will be interesting.

Daily Bell: Is the Internet – like the Gutenberg Press before it – causing a Renaissance and a New Reformation of sorts?

Aden Sisters: It sure seems like it. It's major. It's exposing terrible things that governments are doing and giving people an option for information.

Daily Bell: Will central banking end in your lifetime? Is central banking a good thing? Should it be done away with?

Aden Sisters: We don't think so. It seems to be a necessary evil.

Daily Bell: Should we return to a gold standard? To free banking? To competing currencies?

Aden Sisters: Yes, some kind of gold standard would create monetary discipline because right now there is no discipline. But what is to be created remains to be seen.

Daily Bell: What are the Aden Sisters working on now?

Aden Sisters: We have been asked to write a book, which we will be working on. We have two newsletters, The Aden Forecast, which keeps us very busy and we also have a new Weekly Trading Service. We attend conferences a couple times a year and other speaking engagements. All is good.

Daily Bell: Any final thoughts?

Aden Sisters: This summer should be a good time to add to gold and silver positions. We think the bull market has several more years. We also think there are a lot of people out there who seem confused and not trusting of what they hear from officials. We say try to learn more and watch for opportunity. Don't just be a victim.

Daily Bell: Thanks for sitting down and answering some tough questions! We admire your work and longevity in a tough business.

After Thoughts

Wow … what a great pleasure. Two beautiful ladies living near one another in Costa Rica and producing one of the best hard-money research resources in the business. In the case of the Aden sisters, two heads are better than one – as one head does most of the technical work and the other apparently does more of the composing.

Because they are sisters and work together out of Costa Rica, they have acquired a kind of mystique in our view. Costa Rica is not a place out of which issues much world-class monetary analysis. And why should it? Who are these two people, anyway? Did they go to Harvard? Did they have the best formal economic teaching money could buy? No and no. They learned on their own and then they proved what they learned in the most unforgiving market of all – the real world.

The Aden sisters show us once more, what we already know. Good investment analysis has nothing to do with an Ivy League background or Keynesian (socialist) analysis. It has to do with appreciating what Ludwig von Mises called "human action" – the idea that people themselves adapt to changing economic times and in doing so create a business cycle.

If you listen carefully to what the Aden sisters are saying, the business cycle itself as conceived of by Mises and his disciple FA Hayek is what drives a lot of their analysis. And well it should. Central banks print money and inflate economies. Eventually markets conclude that the over-abundance of this or that product or service is distorting the entire capitalist enterprise. Then markets crash, economies sour, and people start to buy gold and silver.

We know of at least one analyst who was so aware of this situation – and the mechanism at work – that he called the bottom of the market back in the early 2000s almost to the week. It sounds like the Aden sisters did roughly the same thing.

Investing, as the Aden sisters tell us, is not especially hard when looked at within this "macro" framework. But the sisters do us all a service by charting the ins and outs of these larger moves on a regular basis. The cycle DOES change over time. What we see happening is that first physical gold gets more expensive, and then silver (where we are now). As both metals go up in price, people start to buy paper gold and silver and ultimately at the end of the boom, even junior mining stocks get very expensive as the mania unfolds fully. Hypothetically, anyway, this is a logical progression.

Now there are some (within these pages, too!) who will explain that the market is not comprehensible and one can never anticipate therefore what the market will do. But our elves (like the Aden sisters) are Austrian oriented. And we have seen that the business cycle description authored by Mises and Hayek some 60 years ago continues, apparently, to provide a road map. In our view, the main thing that could render it useless, or at least confuse it, would be if the Anglo-American elites decide to move back to a gold-standard in the near future, which they may do. Or maybe confiscate gold or silver, which they've also done in the past.

Otherwise, it seems to us that this bull market in money metals may have longer to run. It is not a bubble as George Soros and Warren Buffet tell us occasionally because you can't have a bubble in money stuff. You can have appreciation and depreciation (relative to other goods and services) but that's not quite the same thing.

As the business cycle exists, gold and silver could go much higher. Eventually gold and silver will become less valuable within the context of other good and services. The business cycle will turn. But not, it seems, yet. That's what the Aden sisters believe, along with a number of other good hard money analysts. Who are we to deny it?

In closing, we want to say, long live the Aden sisters! Two gals from Costa Rica who know more about money than Warren Buffet, who are far more straightforward than that slippery George Soros and who have been producing common sense money analysis for decades. You can't make this stuff up!

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