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Mike Scully

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  • Is This The Start Of A Bear Market In Gold? [View article]
    If you want to talk about a reversion to the mean, look at a long term chart of gold as a percentage of total investment assets. Investment demand may have increased quickly but it was from a miniscule amount to a tiny amount. Add in non-Western central banks like China and Russia and the buying for gold has plenty of room to run.

    If you are looking for investors anticipating a greater fool, look to the US Treasury Bond market. Treasuries "just sit there" earning a negative interest rate (very negative if you use a discount rate anywhere close to reality). No investor in their right mind is buying 30 year bonds to clip coupons for 30 years. The only buyers are central banks for political reasons and those looking to sell to the greater fool (central bank).
    Feb 25 12:30 PM | 9 Likes Like |Link to Comment
  • Sandstorm Gold 24% Off Sale [View instapost]
    Thanks for pointing this out.
    Jan 6 02:05 PM | Likes Like |Link to Comment
  • How Sandstorm Makes You A Private Equity Investor [View article]
    Sorry, I had the decimal in the wrong place. Thanks for the correction.
    Aug 6 10:35 PM | Likes Like |Link to Comment
  • How Sandstorm Makes You A Private Equity Investor [View article]
    Thanks for the insight. True, they probably won't be able to exactly replicate SLWs explosive out of the gate success. (9 baggers in 7 years aren't all that common.) My main point is that SLW proved the business model was a good one. And Sandstorm gives you access to that model at a cheaper price.

    It sounds like the second half of 2012 and 2013 are shaping up to be good years for financing these types of deals as many junior resource companies are in need of financing. Nolan has said they are seeing a lot of good opportunities and this was echoed recently by Rick Rule.

    If input costs continue to go up and commodity prices continue to rise, a good deal today may look like a "sell your soul" deal in hindsight in 5 years.
    Aug 4 12:51 PM | Likes Like |Link to Comment
  • A Return To The Gold Standard Could Destroy The Modern Economy [View article]
    There's nothing wrong with using a simplified example such as a small island of five people to demonstrate how the money system generally works.

    The problem is that the author's island example shows just how flawed his modern monetary theory is. If a sixth person moves to the island and the money supply stays fixed it's not a problem. Things just get less expensive in dollar terms. Coconuts would cost $.05 instead of $.06 because there would be more coconut harvesting (supply) with a fixed demand (number of dollars chasing coconuts). The only problem is that the shop keeper may have to change his prices and wages periodically. A money supply that grows at roughly the same rate as the population alleviates that which is what gold has done historically.

    His example of Greece is also wrong. Greece got into trouble because their government borrowed, spent and promised more money than their economic output and now they can't pay their credit card bills. This was made possible by a fiat money system based on debt. With a gold standard they never could have gotten away with that in the first place and run up such huge debts.

    To learn why gold has been money for thousands of years check out this article:
    Feb 23 12:39 PM | 13 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    Ha. A naked long is "I'll gladly pay you tuesday for a hamburger today."

    A naked long is buying a house with no money down, no savings and no job.
    Jan 31 12:25 PM | 2 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    Man, who knows. I think in the coming years the gov't will take lots of desperate measures to try to keep the system going. If they do start talking about suspending trading or nationalization or whatever, it will be with silver at much higher prices so at least we will have gotten those gains.
    Jan 28 04:47 PM | 4 Likes Like |Link to Comment
  • The Silver Singularity Is Near [View article]
    Hi Dale,
    The graph just shows silver eagles which is just one type of coin, but indicative of the coin market in general. I included the graph to make the point visually. The 38% per year increase represents all bullion coins sold worldwide.

    The dealers will sell from their stocks, but the total stocks is very small compared to potential demand. There are many naked shorts who sell silver futures contracts even though they don't hold the silver. They're banking on the fact that they will settle in cash or be able to acquire silver in the market if they need to deliver. The singularity occurs when dealer stocks run out.
    Jan 28 12:50 PM | 1 Like Like |Link to Comment
  • Gloom, Doom And Optimism: What To Do Now [View article]
    Both. is an easy way to store gold and silver in a foreign account. I'm currently researching foreign bank accounts, but I don't have a list yet. Also looking into foreign trusts.

    Check out which is a blog which discusses international diversification.
    Nov 19 05:42 PM | Likes Like |Link to Comment
  • Gloom, Doom And Optimism: What To Do Now [View article]
    Paul Isaac described US Treasuries as "return-free risk". I couldn't agree more. As people in Greece found out and Italy and Spain are discovering, bond yields can rise very rapidly when people begin to doubt a nation's ability to pay them back. Our debt to (phony) GDP is now over 100% and rising.

    The difference is that we can, and will, print money so we won't have to "default" on our loans. That means inflation will rise, and if bond rates continue to drop as you believe, the real return will become more and more negative. Inflation is already at 3.9% according to the government so you're earning (-1.8%) on your ten year. Being slowly bled dry at (-1.8%) is not my idea of investing.

    You may say that you're not planning to hold for 10 years and will sell into the market when bonds rise. Well, what if nobody (except the Fed) is planning on holding their negative returning bonds to maturity? That means there are a lot of future sellers who are looking to time the market just right. What if you can't get out in time? What if China stops buying and the yields spike up?

    It's true that bonds have been going up for 30 years, but as we learned in the housing bubble, nothing goes up forever. As I explained in my article, "Don't get caught in the Treasury Bond Trap," I believe US Treasuries are the next big bubble to bust.

    In my blog post, Government Numbers
    I explain why inflation is higher and the GDP is worse than we are led to believe, which means real yields on bonds are even worse than they appear.

    I would agree that TBT is risky because you need to get the timing right as well as the direction. I got the timing wrong so far.
    Nov 4 01:01 PM | Likes Like |Link to Comment
  • Gloom, Doom And Optimism: What To Do Now [View article]
    I do invest in blue chips, but they're generally in countries with high growth prospects and no sovereign debt problems. See point 6. I believe the worlds wealth will continue to shift from Western economies that are drowning in debt to emerging markets, especially if the dollar loses reserve currency status. That being said, I believe big US companies that have customers around the world will do better than companies that rely solely on broke US consumers to buy their product.

    As for my preference for speculative mining plays, I'm not "dire" about where the price of gold is going. I think the large gold companies will do very well, but I believe there is more upside if you find the right fledgling companies. I mitigate the risk by diversifying in many plays. Then again my risk tolerance is pretty high so I realize it's not for everyone.
    Nov 4 12:24 PM | 2 Likes Like |Link to Comment
  • Silver Liquidation Sale: Save 30%, Everything Must Go [View article]
    I just buy it online from a reputable dealer with low markups. They will mail it to you certified mail through the USPS and will buy it back when you want to sell. I've bought from and Check out and others and do some research.

    The proper coin shop could be good too but compare the markups. Buy the bullion coins not numismatics. (you can buy numismatics if you like coin collecting as a hobby but that is different than investing in gold.)

    Check out by europac to avoid some of the pitfalls.
    Sep 29 01:45 PM | 1 Like Like |Link to Comment
  • Silver Liquidation Sale: Save 30%, Everything Must Go [View article]
    I'm not familiar with CGL so I don't know. I would read the prospectus to find out their storage and auditing process and look for shady language. I trust Sprott as a respected person in the gold community. I also like the tax treatment of PSLV and PHYS but you have to pay attention to the premiums.
    Sep 29 01:34 PM | Likes Like |Link to Comment
  • Don't Get Caught in the Treasury Bond Trap [View article]
    Treasury rates may certainly head lower. It's hard to tell just how long a bubble will last.

    Let me ask you a question. Are you planning on holding your 30 year treasuries to maturity? Or are you planning to hold them for a bit to collect a few percentage points and then sell the bonds to someone who is willing to pay more for them?
    Aug 4 01:47 PM | Likes Like |Link to Comment
  • Don't Get Caught in the Treasury Bond Trap [View article]
    Sounds good at first blush. Supply and demand right?

    Unfortunately, it's not so easy to just start cranking out more gold. It takes years to explore and open a new mine. Sure some known reserves of gold that were unprofitable to mine at lower prices will be brought on to market. But also keep in mind that the cost of mining is rising along with gold prices as oil, equipment and other resources needed to process gold are getting more expensive. That's one reason gold stocks are lagging the metal right now.

    Also keep in mind that most of the gold ever mined still exists and the new yearly production is small by comparison. There is likely over 4 billion oz ever mined and an estimated 2B available in the market. Yearly production is around 90 million ounces. If gold production were to double overnight (which it won't) that would add less than 1% to the available gold supply each year. That's why I like the island analogy. If you imagine an island that's 100 square miles with lots of new buyers wanting to buy real estate, adding 1 square mile of real estate to the island won't put much of a dent in the rising prices.

    It's more likely that in a few years, gold certificates will be in the cash register when you buy the beef roasts.
    Aug 3 07:32 PM | Likes Like |Link to Comment