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David at Imperial Beach

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  • Why Aren't Gold Prices Rising? [View article]
    "First, the supply of gold bullion in the marketplace has declined this year because gold miners have pulled back on exploration." Actually, not true. Gold miners have pulled back on exploration, but they've continued to sell from production as much gold as ever, perhaps even more! Q2'14 they sold 765 tonnes, compared to only 732 tonnes in Q2'13. 765 tonnes is actually a record when compared to the last 8 quarters. Last quarter, in Q1'14 their production number was 713, which compares to only 686 tonnes in Q1'13. After hedging, the numbers are even more dramatic: Q2'14 = 815 vs Q2'13 = 719; Q1'14 = 722 vs Q1'13 = 676. Some of the miners held back some of their production last year (-15 tonnes in Q2'13 and -11 tonnes in Q1'13), and now they are selling it this year (in Q1'14 they sold 9 tonnes over production, and in Q2 they sold 50.)

    Where supply was actually cut back due to lower prices was in recycling, and it was done last year: In 2013 they were only able to find 1267 tonnes to recycle versus 1634 tonnes in 2012 and 1659 in 2011.

    In addition to cutting back on exploration, miners have been closing down mines that are too costly to mine at these prices and moving production to richer ores. Continuing to produce at this rate will not be possible for long, but so far we've not seen any dramatic cutback like we've seen in recycling. Thus, gold stays in equilibrium at $1300 an ounce.

    Gold demand is not rising. Your reading of the WGC report was flawed. Gold demand was 4702 tonnes in 2011, 4585 in 2012 and only 4065 in 2013. In 2014, Q2 demand is 972 versus 1148 in Q2 last year. Q1 this year was up slightly over last year (1078 tonnes versus 1064 tonnes) but not enough to make up the shortfall in Q2. Demand has shrunk by 162 tonnes so far in 2014. Don't worry though, not all of that demand went away entirely, it just went underground. Smuggling gold into India has become a national sport. And in China, non-reporting ports have been opened up, resulting in the WGC/Reuters methodology becoming less comprehensive.

    The WGC gold report is a bit strange in that it shows "Gold demand" numbers and also "Total demand". Total demand is always equal to Total supply. Gold demand is the summation of all the demand categories. The difference is reported as "OTC Investment and stock flows". This category consists of non-reporting entities that hold gold in stock but are not end users of gold. They are not considered part of gold demand even though they often buy considerable quantities of gold. Like ETFs and central banks, they often sell considerable quantities as well. There is no breakdown of OTC Investment and stock flows. It's a computed quantity, not based upon reports of transactions. Therefore, you will also find smuggling activity and other discrepancies showing up here.
    Aug 21 11:16 AM | 1 Like Like |Link to Comment
  • Why I'm Staying Away From A Long-Term Investment In Tesla [View article]
    An investor could also use Bollinger bands as a guide. Buy when the stock gets to the lower edge of its trading range, and sell at the corresponding high points.
    Aug 21 04:15 AM | Likes Like |Link to Comment
  • Amazon: Profit Is Not In The Dictionary [View article]
    That's not going to work out too well fellas. Inflation is only single digits percent per year, but a heavily overvalued stock in the triple digits can fall by 90% or more in only a single year. When momo turns into nomo, then investors start saying "where's the beef?"
    Aug 21 03:44 AM | Likes Like |Link to Comment
  • Mobileye: Love The Company, Hate The Valuation; Significant Downside Ahead [View article]
    Well, obviously it was the existing shareholders that took the bulk of the money. That feels like a red flag to me. The instigators took 80% of the $1B that was raised, and only left less than a fifth ($193.7M) to run the company with. Most of us wouldn't even consider buying into an established company where insiders were bailing out to the tune of $800M in the last quarter. Plus they left the company with a loss for the quarter. What's up with that?

    Like you say, it looks like an excellent company with an excellent product idea and they even have customers lined up at the door. But the price stinks to the point that it's questionable how much upside is left. And it looks to me like the management cares more about getting their venture money back instead of actually running the company. If I buy into it, I'd like to think that the founders still have plenty of skin in the game and are interested in more than just moving on to the next great venture on the horizon. I'd also like to think that they have more in mind for their visual recognition algorithms than just an automotive application. I'd like to think that I'm buying more than just a one product company. I want a pony, not just a pony ride.
    Aug 21 02:29 AM | 1 Like Like |Link to Comment
  • Mobileye Shares Rally After Obama Administration Announces New ADAS Initiatives [View article]
    Adoption rate probably depends on how enthusiastic insurance companies are about this technology. If they're willing to give a discount on liability insurance for cars equipped with an aftermarket ADAS warning system the adoption rate will be much quicker than otherwise.
    Aug 20 04:32 PM | Likes Like |Link to Comment
  • Silver Prices Will Remain Rangebound [View article]
    It's not really any mystery why silver prices have remained range bound. Industrial activity hasn't really picked up nearly as much as the Fed would like everybody to believe. Last year there was record physical demand for such discretionary categories as jewelry and coins as the prices fell. This year, that demand has fallen off. Silver also doesn't have any central banks buying silver, like they do gold. Prices fell because short term traders/investors decided to sell and move their money into stocks, which were skyrocketing at the time. In order to get those investors back, stocks are going to have to fall, and that will most likely happen when interest rates rise. (I know, higher interest rates are supposed to be bad for metals, but once the rise has been priced in and all the investors have left, then the metals can't go any lower. It's yet another case where the market moves on the rumor, and corrects on the fact.)
    Aug 20 03:04 PM | 1 Like Like |Link to Comment
  • Silver Prices Will Remain Rangebound [View article]
    The headline CPI does include consumer level energy prices (gasoline, heating oil, and natural gas). Energy and food is excluded from the "core CPI" number. The Fed actually uses the PCE, not the CPI. That index is even less sensitive to the more volatile components of inflation. No measure of inflation includes non-consumer level prices such as processing and wages.
    Aug 20 02:36 PM | Likes Like |Link to Comment
  • Disney Might Go To $100 As Quickly As You Can Blink Your Eyelids [View article]
    Any news on the Amazon boycott of Disney products?
    Aug 20 02:21 PM | Likes Like |Link to Comment
  • Markel Corp. Willing To Go Places Berkshire Hathaway Is Not? [View article]
    The company doesn't appear to be going too far out on a limb with Google. The main thing though, is that Google doesn't pay a dividend. The Buffett strategy at Berkshire was/is to buy companies with dividends in preference to bonds for the income that an insurance company needs to pay out on future claims. If they had bought Apple, they would have gotten a dividend, with a yield of 2.10%. Holding BRK.A or BRK.B has the same drawback, no dividends.

    I notice that Google is not the only high tech company they have bought. They also hold (NASDAQ:INTC) (NYSE:ORCL) and (NASDAQ:CSCO).
    Aug 20 02:10 PM | 1 Like Like |Link to Comment
  • Tesla Announces 'Infinite Warranty'... Pros And Cons [View article]
    I'm actually in and out of TSLA more based upon how I think the market will support such a high flyer. If the Nasdaq is doing less well than the Dow, that's not a good sign and I usually pull out until the market starts looking more normal.
    Aug 20 01:33 PM | 1 Like Like |Link to Comment
  • Tesla Announces 'Infinite Warranty'... Pros And Cons [View article]
    We have no numbers to judge on just yet. I'm not a Musk mind-reader (wish I were) but I'm guessing that the current reserve is looking a bit thin by now. They have been pretty aggressive with warranty work. I also know Musk likes to be proactive in addressing any media issues.
    Aug 20 01:30 PM | 4 Likes Like |Link to Comment
  • Warren Buffett Hates Bonds, Loves Cash [View article]
    It doesn't "have to" any more than a coin that's landed on its head 10 times in a row has to land on its tail on the 11th toss. What we can say with certainty is that no bull market ever lasts forever, and that the Fed is changing the rules of the game, so it's reasonable to bet that a market crash is imminent, or at least more likely. But the Fed could always change its mind tomorrow and send the market flying yet higher.
    Aug 20 01:09 PM | 4 Likes Like |Link to Comment
  • Warren Buffett Hates Bonds, Loves Cash [View article]
    Calling Buffett senile is going a bit too far. He still does what he does very well. It's just that his bargain hunting for value companies and harvesting dividend pennies is guaranteed to underperform in growth-oriented stock markets, and he also doesn't hedge sufficiently against inflation by holding a reasonable gold reserve. And his methods are less effective with the large size of the portfolio he is now managing because he can no longer concentrate on small cap stocks where the most growth is. If we ever get back to high interest rates he would also underperform because he should be buying bonds when interest rates are high.
    Aug 20 01:01 PM | 1 Like Like |Link to Comment
  • Warren Buffett Hates Bonds, Loves Cash [View article]
    "If we could all go back 20 years or more, we'd go back and cash in our portfolios and invest it all in Berkshire Hathaway."

    I too, am a non-communicant at the Church of Warren. (NASDAQ:QQQ) has beaten (NYSE:BRK.B) since 2002. (NYSEARCA:GLD) has beaten it since its inception in 2004. Since the crash of 2009, Berkshire Hathaway is not demonstrably better than (NYSEARCA:SPY), and sometimes SPY wins. (Unfortunately QQQ wasn't available until 2002 and GLD wasn't available until 2004). In 1994 I hope I would have been a good enough investor to put my money in (NASDAQ:MSFT), not Berkshire Hathaway. Even if I had held Microsoft to this day, I would still have beaten Berkshire Hathaway by a mile.
    Aug 20 12:45 PM | 1 Like Like |Link to Comment
  • Solar + Storage Is Close To An Inflection Point [View article]
    That isn't too big a flaw. Only lithium ion technology is far enough along to be building a gigafactory for. Investors should realize that even the gigafactory will provide only a token amount of storage capacity compared to the vast amount that would be required to, say, balance the German grid. It will be enough to set a few houses and factories free from the grid, but it won't have near enough weight to provide adequate balance to the grid itself. The real promise comes when Tesla decides to branch out from automobiles and start building gigafactories specifically for stationary storage.

    In the meantime, look to non-battery storage solutions too. Compressed air and water pumping schemes have the most promise, but they require specific landscape features.
    Aug 20 11:56 AM | 1 Like Like |Link to Comment