It's hilarious how after years of moving sideways, an article from Morningstar comes out and proclaims that gold will have a dull future, when in reality all Morningstar is describing is gold's dull recent history.
Such a statement would have been much more useful and laudatory in 2011, not 2013. Guys like Soros are on record calling a gold top in 2011...it's guys like that that we should really be listening to, not has-been news organizations like Morningstar.
Google (GOOG) discloses chairman Eric Schmidt plans to sell 3.2M Class A shares, or 42% of his stake in the company, over the course of 2013 through a Rule 10b5-1 trading plan. The sale will encompass nearly 1% of Google's outstanding shares, and 3.2% of their voting power. (8-K) [View news story]
"No, I don't want social security to fail. But we should stop worrying about a debt that our country owes to us. Either way (lowering the debt or hurting the economy), we lose. So pondering about it is maddening."
No, what is maddening is that we allowed us to get into this situation in the first place. We DO need to think about it, and we DO need a workable solution, and we DO need it sooner than later.
The Internet Radio Fairness Act Will Fail [View article]
Great article. Hard to follow, but your point became clear by the end.
I haven't looked at the numbers closely for P, have always assumed that the problem was price discrimination between IP delivery and other forms of delivery. I've learned by reading your article that the problem may indeed be that P is giving away product, much like most of the dot-com busts in the late 90s.
Paul Van Eeden On Why Gold Is Overvalued [View article]
"TGR: The value of gold is not $1,700/oz?
PvE: No. The value of gold is about $900/oz. Expectations of monetary inflation are keeping gold prices high."
I caught this too. He doesn't explain how he reached this conclusion, or quantifies the circumstances he uses as a baseline, yet somehow is able to quantify a price for gold.
Just because this guy says that gold "should" be $900/oz doesn't mean it "should" or that it "will".
The real question is how much inflation does America need? Looking at the debt and deficit, it's fairly simple to conclude that we need a lot. The Fed knows this, which is why Bernanke has spent over a year doing little else than jawboning Congress to act. The more dysfunctional Congress gets regarding the deficit, the more bullish the price of gold and the more bearish the action on the dollar.
Also, current debt levels are already unsustainable at "normal" rates. At 4%, servicing the federal debt will take up 40% of the budget. More than likely inflation will be the method used to solve this problem, and again this is bullish for gold.
This was a great read, it reaffirms my beliefs in what is occurring in Europe.
Regarding this quote:
"Herein lies the weakness of capitalism. It is administered by politicians. "
I think this is less the weakness of capitalism and more the weakness of democracy. As you mentioned, capitalism is self-correcting, but democracies are only as strong-willed and financially astute as the populace that elects their leaders.
I'm not certain a gold/Dow comparison is valid. Dow stocks are all productive vehicles, and gold is a money replacement. Two completely different types of bean.
In this sense, the gold/WTI comparison is much more valid IMO, even though WTI demand is also derivative of productivity, unlike gold.
Gold is an unique commodity. It has little utility in industry, and is widely seen as a store of value. No other commodity can claim this status to nearly the extent of gold. The only real comparisons one can make is gold/money, and then look to see where the "price" of money will head in the future. Money can be extremely, repeat, EXTEMELY volatile depending on the situation.
" The premium that investors are willing to pay for gold today (defined as the amount by which today's price exceeds the average historical real price) is almost as much as it was in early 1980, when inflation had already attained double-digit levels."
This is a tricky argument. "Historical real price" only has meaning after 1971. From 1971 to the 1980 peak, gold increased in price by several thousand percent. Depending on which benchmarks you use to compare, gold commanded an arguably lower "real price" during the 2000s lull than it did in 1971 when it began trading as a commodity. Since the 2000s low, gold has gone up by "only" several hundred percent. We are arguably at a much more difficult crossroads now than we were in the 1980s.
By your argument, gold will peak when inflation rears its head. There's little question that ZIRP, TARP, QE infinity, etc, are all inflationary policies...the only real question is when the inflation will hit. Using this logic, it would make sense to be heavy gold until the Fed raises rates precipitously to combat inflation, and that gold will probably pick up steam before reaching its eventual peak.
"...why are the phenomena you describe above not a "one time" event?"
Given overall investment yields in other markets, there's not much reason to suspect that demand for houses will diminish anytime soon. Rental yields are superb in many regions of the US.
More Dollar Weakness Could Send Precious Metals Much Higher [View article]
"This is their latest effort to reduce their trade deficit that, primarily, is the result of huge gold imports that topped 1,000 tonnes last year and was valued at over $60 billion. I doubt they'll be successful in this effort as the Indian people have a cultural affinity for the yellow metal that, importantly, has outperformed just about every other asset class over the last ten years - but they'll probably keep trying."
Fascinating. I didn't know that India's trade deficit was largely a result of gold hoarding.
Wall Street Breakfast: Must-Know News [View article]
My understanding of SA pro is that subscribers have access to the "smarter" articles earlier than others, and after a certain amount of time, those articles become available to the general public.
Gold's Dull Future [View article]
Such a statement would have been much more useful and laudatory in 2011, not 2013. Guys like Soros are on record calling a gold top in 2011...it's guys like that that we should really be listening to, not has-been news organizations like Morningstar.
Google (GOOG) discloses chairman Eric Schmidt plans to sell 3.2M Class A shares, or 42% of his stake in the company, over the course of 2013 through a Rule 10b5-1 trading plan. The sale will encompass nearly 1% of Google's outstanding shares, and 3.2% of their voting power. (8-K) [View news story]
Heightened Risks Could See Baidu At $70 [View article]
http://seekingalpha.co...
Gold Looks Expensive [View article]
No, what is maddening is that we allowed us to get into this situation in the first place. We DO need to think about it, and we DO need a workable solution, and we DO need it sooner than later.
Profit From Chinese Gold Hoarding [View article]
The Internet Radio Fairness Act Will Fail [View article]
I haven't looked at the numbers closely for P, have always assumed that the problem was price discrimination between IP delivery and other forms of delivery. I've learned by reading your article that the problem may indeed be that P is giving away product, much like most of the dot-com busts in the late 90s.
Paul Van Eeden On Why Gold Is Overvalued [View article]
PvE: No. The value of gold is about $900/oz. Expectations of monetary inflation are keeping gold prices high."
I caught this too. He doesn't explain how he reached this conclusion, or quantifies the circumstances he uses as a baseline, yet somehow is able to quantify a price for gold.
Just because this guy says that gold "should" be $900/oz doesn't mean it "should" or that it "will".
The real question is how much inflation does America need? Looking at the debt and deficit, it's fairly simple to conclude that we need a lot. The Fed knows this, which is why Bernanke has spent over a year doing little else than jawboning Congress to act. The more dysfunctional Congress gets regarding the deficit, the more bullish the price of gold and the more bearish the action on the dollar.
Also, current debt levels are already unsustainable at "normal" rates. At 4%, servicing the federal debt will take up 40% of the budget. More than likely inflation will be the method used to solve this problem, and again this is bullish for gold.
Beware The Draghi Put [View article]
Regarding this quote:
"Herein lies the weakness of capitalism. It is administered by politicians. "
I think this is less the weakness of capitalism and more the weakness of democracy. As you mentioned, capitalism is self-correcting, but democracies are only as strong-willed and financially astute as the populace that elects their leaders.
Gold Looks Expensive [View article]
http://seekingalpha.co...
Gold Looks Expensive [View article]
In this sense, the gold/WTI comparison is much more valid IMO, even though WTI demand is also derivative of productivity, unlike gold.
Gold is an unique commodity. It has little utility in industry, and is widely seen as a store of value. No other commodity can claim this status to nearly the extent of gold. The only real comparisons one can make is gold/money, and then look to see where the "price" of money will head in the future. Money can be extremely, repeat, EXTEMELY volatile depending on the situation.
Gold Looks Expensive [View article]
This is a tricky argument. "Historical real price" only has meaning after 1971. From 1971 to the 1980 peak, gold increased in price by several thousand percent. Depending on which benchmarks you use to compare, gold commanded an arguably lower "real price" during the 2000s lull than it did in 1971 when it began trading as a commodity. Since the 2000s low, gold has gone up by "only" several hundred percent. We are arguably at a much more difficult crossroads now than we were in the 1980s.
By your argument, gold will peak when inflation rears its head. There's little question that ZIRP, TARP, QE infinity, etc, are all inflationary policies...the only real question is when the inflation will hit. Using this logic, it would make sense to be heavy gold until the Fed raises rates precipitously to combat inflation, and that gold will probably pick up steam before reaching its eventual peak.
Another Real Estate Bubble? [View article]
Given overall investment yields in other markets, there's not much reason to suspect that demand for houses will diminish anytime soon. Rental yields are superb in many regions of the US.
More Dollar Weakness Could Send Precious Metals Much Higher [View article]
Fascinating. I didn't know that India's trade deficit was largely a result of gold hoarding.
Another Real Estate Bubble? [View article]
Wall Street Breakfast: Must-Know News [View article]