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David at Imperial Beach

 
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  • Weekly ETF Gainers / Losers [View news story]
    I like physical gold, but I'm not sold on CEFs, with the exception of bond-only funds. I hope you got (NYSEARCA:PHYS) at a larger than normal discount to NAV because CEFs usually trade at discounts to NAV.

    Now that you're in, plan to hold it until interest rates go up. Once interest rates begin to rise, gold and PHYS should rise also. That's because investors for the most part have abandoned gold for stocks and bonds. When interest rates rise, both stocks and bonds will fall. Stocks because higher interest will hit earnings, and bonds because the prices on low-yielding bonds must fall in order to bring the yield up to par. The resulting slaughter will motivate investors to come back to gold, which is currently priced just above production costs and can't fall any lower without cutting back on supply and increasing demand.
    Aug 22 07:47 PM | Likes Like |Link to Comment
  • Berkshire Hathaway Is 13% Undervalued [View article]
    Berkshire Hathaway is a CEF (closed end fund) disguised as an insurance company. It should trade at a discount to NAV as CEFs normally do. As you can easily see from the second chart, Berkshire Hathaway is trading in line with its historical discount.

    Berkshire Hathaway's discount should be somewhat deeper than other CEFs for three reasons: 1) It is harder to accurately value than a normal CEF because they do not publish their NAV. You have to go to extraordinary lengths to properly evaluate all the income streams, discount them to present value, and add them all up for an accurate enterprise value. 2) CEFs normally provide income and Berkshire Hathaway does not. Alternatively, CEFs invest in companies with potential to grow faster than the overall economy, and Berkshire Hathaway doesn't do that either. 3) It is harder to trade (NYSE:BRK.A) shares since they have never been split and are outrageously expensive. The clientele for such shares is very thin.
    Aug 22 02:16 PM | 3 Likes Like |Link to Comment
  • Gold Numbers Are In, How To Read The WGC Report [View article]
    Thanks for your comment. I agree that most American investors are too focused on the US economy. If they had not been so myopic they would never have sold off all their (NYSEARCA:GLD) holdings in 2013. That year gold demand was heavily outstripping supply until western media convinced GLD holders that the sky was falling and they should stampede to the nearest exit.
    Aug 22 01:50 PM | Likes Like |Link to Comment
  • Japan: Land Of The Setting Sun [View article]
    I'm less convinced of the author's thesis that Japan will experience hyperinflation, since their demographic is entirely different from Israel's. But I'm also much less disturbed by the final paragraph soliciting clients. This is Seeking Alpha, and many of the free articles here are written by professionals seeking clients. These professionals also usually have blogs and the articles are republished from their blogs to Seeking Alpha. If you want to see exclusive articles then you want their PRO service. You're getting free advice here, so stop complaining about the advertising.
    Aug 22 01:44 PM | Likes Like |Link to Comment
  • Japan: Land Of The Setting Sun [View article]
    Fukushima is a relatively minor problem compared to the demographic problem and the debt. Eventually all developed countries will turn to solar and wind power for most of their new energy needs.
    Aug 22 01:36 PM | 2 Likes Like |Link to Comment
  • Japan: Land Of The Setting Sun [View article]
    This is a reasonable article well within the Seeking Alpha guidelines for a free article. If you want to read exclusive articles available only on Seeking Alpha, then you need to subscribe to their PRO service.
    Aug 22 01:31 PM | Likes Like |Link to Comment
  • Japan: Land Of The Setting Sun [View article]
    That's not a reasonable conclusion. The government of Japan is still left with the problem of how to govern with unmanageable interest payments even though the interest gets paid back mostly to its own citizens. The interest payments are crowding out the rest of the budget. Just raise taxes, you say. But they did, in April. Now their economy is getting even more sluggish than before. Half their citizens are retired and not paying a lot of tax any more. The bills are falling on the young, and they're so tired that sex doesn't even seem good any more and many of them are not getting married and having babies.
    Aug 22 01:27 PM | 1 Like Like |Link to Comment
  • Cramer's Mad Money - 12 Stocks That Have Performed Better Than Google (8/21/14) [View article]
    Cramer was probably right the first time on Mobileye. The early investors robbed the company on their way out the door, and the IPO handlers got very greedy. There's not a lot of upside left, according to those who've examined the company in depth. I was going to buy into it, but now I'm having second thoughts.
    Aug 22 01:10 PM | 2 Likes Like |Link to Comment
  • Strength In Dollar Makes Gold An Opportunity [View article]
    "We also watched pricing of the commodity deflate after the minutes from the Federal Reserve's latest meeting showed that they were potentially thinking about raising rates sooner. Again, we believe just the opposite should have occurred, and gold should have walked up on these sentiments as equities are likely to be negatively affected from a rate hike."

    I agree. The aphorism "buy the rumor, sell the news" applies in reverse here. Gold is being sold on every threat of an interest rate hike, but when it finally gets here we're going to see overpriced stocks and bonds fall and gold will actually rise because the rate hike's already been priced in.

    Russian central bank has been the leader among central banks buying gold and diversifying away from dollars. Total central bank gold buying amounted to 124 tonnes in Q1 and another 118 tonnes in Q2. But, of course, that doesn't include the PBOC which does not report its gold buying activity.
    Aug 22 12:59 PM | 3 Likes Like |Link to Comment
  • Gold And Deficits - The Connection Might Surprise You [View article]
    I'd be interested in knowing whether investors are more concerned about federal deficits or federal debt load. The deficit is down sharply from its peak in 2009, but that gives me no comfort because the debt is as high as ever and continues yet higher as long as the government remains in deficit and not surplus. As long as the debt remains, so do the interest payments. And the larger the interest payments the less resource the government has to actually govern with. Tax increases and budget cuts are the inevitable result. Both options are negative impacts on the economy.

    At this point, politics is so out of whack that the goobers we send to WDC aren't even talking about eliminating the deficit entirely, they're merely trying to work it down to something more "reasonable". The debt itself they refuse to talk about, even though they all know the Fed can't really raise interest rates to market rates as long as the debt remains as high as it is without precipitating a budget crisis.
    Aug 22 12:44 PM | Likes Like |Link to Comment
  • Apple's iPad Problem Is Lenovo's Wintel Tablet [View article]
    "The IBM partnership will certainly help iPad penetration in enterprise, and the hardware refresh is always good for at least a short-term boost." Investors should not assume any certainty associated with the Apple/IBM joint venture. IBM is not in a position to dictate to enterprise IT departments any more, and bundled deals fly directly counter to the BYOD trend. IBM is now a paper tiger and their bundled deals are not likely to be compelling. If I were a decision maker in an IT department I would insist that only hardware-neutral apps be implemented in line with BYOD policy. There are certainly vendors out there that are ready, willing, and able to implement their apps across multiple architectures.
    Aug 22 12:13 PM | 4 Likes Like |Link to Comment
  • Inflation, Interest Rates, And Why You Should Own Gold [View article]
    Most people in this country don't earn enough income to be paying a large income tax. Their burden is fair because they aren't profiting from the economy. It's corporations that are not paying their fair share. Their profits are obscene, yet they get tax breaks that apply only to them because they lobbied them into the tax law.
    Aug 22 11:59 AM | Likes Like |Link to Comment
  • Inflation, Interest Rates, And Why You Should Own Gold [View article]
    I agree with you. Earnings right now depend on corporations being able to borrow at scandalously low interest rates. Erase that advantage by raising rates, and earnings will fall like Wily Coyote when he chases the Roadrunner off a cliff.
    Aug 22 11:54 AM | Likes Like |Link to Comment
  • Inflation, Interest Rates, And Why You Should Own Gold [View article]
    Well, it's obvious that the federal government will have to either raise taxes or cut spending, because they can't arbitrarily cut interest payments. But it's by no means clear that they will do it evenly across all classes of individuals and leave corporations out. The corporations are the ones who are really benefiting from this economy. If the government needs to raise money, my recommendation is to go after some of the excessive profits the corporations have been reporting. Cut out most or all of the tax write-offs, exclusions, benefits, and special rules. Simplify and reform the tax code so that corporations pay the rates actually written into law already and don't let them escape most of their tax duty with special rules they have lobbied into the tax code.
    Aug 22 11:51 AM | Likes Like |Link to Comment
  • Markets take Yellen's remarks in stride [View news story]
    I really think the rate hike has already been priced into gold by now, and when it finally gets here gold will go up, not down. But it's definitely not been priced into stocks and bonds. Many people are still bidding stocks up as if earnings are going to stay higher than a kite even after interest rates go up. Others have prematurely jumped from stocks to bonds, not understanding that bonds will take a hit from higher rates too. They should be buying gold which is so cheap and abandoned by investors that it's already at its bottom and can't go any lower (at least not sustainably).
    Aug 22 11:36 AM | Likes Like |Link to Comment
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