Seeking Alpha

George Maniere's  Instablog

George Maniere
661 Followers
6 Following
Send Message
Nothing to say
  • Own Treasuries or Gold and Silver? 2 comments
    Oct 8, 2011 3:31 PM
    The drop in price of gold and silver is because they are considered to be in a bubble. In my opinion a bubble is when the underlying asset trades in high volumes at prices that are inflated to their true values. There are economists that assert that asset prices often deviate from their intrinsic values. Because it is often difficult to determine what the intrinsic value of an asset is bubbles are often seen in retrospect like when sudden drops in prices appear. They are seen as a crash or a bubble burst. It is important to recognize that prices of a bubble can fluctuate erratically and make it impossible to predict from supply and demand alone.
    The new safe havens are perceived as the dollar and US Treasuries. To prove this point the media points to that fact that gold and silver have sold off. They pointed to the strengthening of the dollar and reported that the safe haven was US Treasuries. Please see the chart of the TLT below.

    As we can see on this chart the treasuries ran up from August to October as the dollar grew stronger. However what the media failed to mention is that the United States is bankrupt! Imagine investing in US debt for 30 years. It reminds me of the old cartoon where the guy says I will gladly pay you for a hamburger next Tuesday for one today. As if he ever had any intention of paying for it in the first place. Investing in 30 year Treasuries is the ultimate bubble.
    I admit it. I have been a gold and silver bug since I was 8 years old. As far as I know I’m the only 13 year old that asked for a double eagle for my birthday present. You should have seen the look on my dad’s face when I came out with that. Back then it was a hobby and my grandma taught me the love of numismatics. Now it’s serious business.
    There are too many very smart people who couldn’t care less about gold and silver. Who am I to say they’re wrong? They chose to invest in high yielding, large cap stocks and are content to trade their positions (buy on the dips and sell on the rips) and collect their yields while they wait. In all honesty, half my portfolio is a diversified collection of these stocks. The other half however is more risky. I like SPXU and UPRO, which are plays on the S&P.
    I like the gold and silver trade. My favorite junior miner is US Gold (UXG) and while the sheep were herded into the US treasuries thanks to the talking heads, I was buying US Gold (UXG) at @.$2.22 a share and my favorite silver stock Silver Wheaton (SLW) at $27.45 a share. Please see these two charts below and notice how they correlate to the run up in the TLT.

    Please take note that as TLT hit its highs UXG hit extreme lows. Please see chart of SLW below.

    Again, please take note that as TLT hit its highs SLW hit its extreme lows.
    In conclusion, the treasuries have been very strong in the last few weeks but it won’t last. The dollar which has been beaten down has for a short bright shining moment it had its day in the sun as it was the best house on the worst block. Compared to the imminent Greek default, the contagion in Europe, the global economic slowdown and the tepid economic conditions here in the treasuries are on the way back down. Let us not forget that no matter what may come out of the mouths of the politicians a key to this administration is to keep the dollar low. This is the only way we will be able to pay off the staggering debt we have amassed. A dollar that is worth 70% of what we borrowed makes it 30% easier to pay back the debt. This will not stop. The debasement of the currency will continue.
    After gold’s parabolic move it is healthy for a stock to pull back before it begins its move up again. My expectation is for gold to rise to a minimum of $2000.00 by the end of the year and if we use the generous historic ratio of gold to silver of 50 to 1 silver will be $50.00 by the year’s end.


    Disclosure: I am long GLD, PHYS, IAU, UGL, SLV, PSLV, AGQ, SLW, UXG.
Back To George Maniere's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

This post has 2 comments:

Track new comments on this article
  •  
    George -

    Great article. Can't agree with you on everything, but love your viewpoints. Checking out UXG, for example, showed a nearly $20 mn dollar insider purchase back in February, at significantly higher prices. Wow!

    I keep on thinking how the Fed is doing what U.S. politicians and China refuse to do, which is to get the USD and CNY on reasonable levels. China just cannot compete if we're on a level monetary field. My other theory is that there's really only one obstacle (a very large obstacle) left for the U.S., and that is the Federal Government. If the 2012 elections can produce a president AND a Congress serious about compromise, we could see substantial improvements in U.S. markets and the economy.

    While I don't see a rapid appreciation in the USD (barring the complete collapse of the EU and euro), charts of the UUP show a significant bottom at $21 -- I don't see how the USD can get much lower. There's a lot of noise and hope about QE3, but I think Bernanke will avoid that unless we have some sort of major calamity.

    Portfolio: I've got a good chunk of dividend-payers, and a small bit of gold & silver. Hold GOOG too, and researching more to find viable mobile software/hardware companies, my personal interest.
    14 Oct 2011, 08:54 AM Reply Like
  •  
    Google US Gold and talk to Simon Quick and askhim 1) what's so great about US Gold (soon to be McEwen MIning and 2) ask him what's so great about Rob McEWen. If your not convinced that this stock is as sure to a sure thing as exists - take a pass.
    Regards,
    George Maniere
    http://bit.ly/pwAnc4/
    14 Oct 2011, 12:06 PM Reply Like
Full index of posts »
Latest Followers

StockTalks

  • Bob, What is going to drive FAS back up?
    Nov 9, 2011
  • I thought about the asset I would least like to hold and decided it was the dollar. I am in a sector that is ripe - precious metals and REEs
    May 25, 2011
  • I have two pots. In one pot is my "Grandpa Portfolio" MO,VZ, XOM, JNJ, ED and LMT. The rest is speculative. GMO, AVL, UURAF, SLV, GLD, TASXF
    May 25, 2011
More »

Latest Comments


Most Commented
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.