Reinhard

Gold Bulls Should Stay Away from Gold Stocks

There are several factors why sometimes mining shares can be good investments, and sometimes gold itself.
- Falling oil prices have been mentioned above, and more generically, any deflationary wave can be good for mining stocks. Imagine the current period lasts for two years, where gold drops 10% and other prices drop in the aggregate by 20%. Here, mines actually make you money, while gold not. And the observed leverage can change in a hurry.
- Tax considerations, availbility in IRAs, safety of your investment are other considerations. Especially if the U.S. government goes hostile. Under certain circumstances, I rather trust mining executives.
- Mining companies seem risky, but therefore one should receive a "required rate of return" for lending mining companies money for their operations. If not, nobody would lend them eventually. So, if mines make a profit in the long-run, the investor should be able to earn a real return in the long run. Gold itself just preserves its real value in the long-run. In adverse times for gold, e.g. when it went from $850 to $250, large mining companies might not have lost 70% (including dividends), but could hold their ground.

So best is to own mining shares as well as gold, and rebalance occasionally between them.

Active ETFs: A Race to the Starting Line

I agree that an actively managed ETF would be a huge development. Although some ETFs that have futures or trade inversely seem to have adopted some complex strategies already. Of great advantage seems to be the tax situation. I heard that if the investor holds the ETF for longer than a year, he has to pay only the long-term capital gains tax rate. This even if the fund uses options, shorts which are normally taxed at short-term rates. Similar with frequent trading of the fund manager, would a long-term investor be shielded from the short-term capital gains taxes? This almost sounds too good to be true, and every active manager would want to open an ETF. I certainly would want to. But am I correctly informed? Or will the IRS close in on this and adapt rules similar to mutual funds in that there will be short-term capital gains distributions required?

Investing Like Buffett: Why NovaGold is a Buy

Well, he is basically saying that by assuming only 10% of the entire resource. So the remaining 90% have to cover the cost, the real opportunity cost of our capital, and whatever is not mined. Sounds not too far off. They should be able to squeeze out profits of a few hundred dollars per ounce of gold. Hopefully.

Is Robert Toll's Honesty Keeping Shares Above Water?

I thought the two main reasons commonly cited were that the high-end people wouldn't be affected, and that TOL was continuing to develop while the other homebuilders were taking write-offs. Both reasons would make TOL rather more vulnerable going forward.

Kellog is Not an Agriculture Play

I agree with the article that many companies in the food sector get squeezed by rising input costs and can't make up fast enough by raising their selling prices. However, the question is how will they do going forward. It is certainly possible that they keep continuously raising their selling prices, and at some point we will get a pull-back in the commodities. Then, the companies might surprise with their earnings for a while.

Ron Paul Supporters Claim Hand in News Corp 'Rout'

When dealing with punitive actions in a free market, one should be careful, since after all the product is fungible, and the value will still be the present value of all future cash flows. Short-selling the stock will hardly drive it down much, since someone else will just buy more. But there is something to say about the price multiple one puts on a stock, and about possible lower future earnings due to a damaged reputation. The first is equivalent to avoiding Phillip Morris, if one is against smoking. You will still pay a 7x multiple to earn money, but you might not pay 10x because you don't feel good for holding them as an investment. If many people won't touch NWS stock for the next ten years, it will dent slightly the marginal buyer.

The second is more important. If Ron Paul supporters are among sponsors of FOX, they will be reluctant to pay as much as on other channels. Same, if they get bombarded by supporters. Also, all FOX related companies will be bogged down by complaints which will disrupt their business.

The main impact will be how long supporters will keep up the continuous e-mailing and calling. If they can keep this up continuously for a year, NWS' earnings will be affected at the end of the year.

Value of Gold Over the Ages

What's mostly wrong with this graph, IMHO, is the "adjusted for inflation" part, since they most likely use a CPI (consumer price index). First, the CPI is always understated by governments having an agenda (so they can pay out smaller entitlement payments). Second, even if it was right, it is not the correct measure of adjusting for the price of gold, since gold is a hard asset, while consumer products get cheaper due to efficiency of production.
The right measure is the money-supply which measures the rate of creation of money and credit. This is the rate at which money loses its value compared to something that isn't much created or destroyed (gold). This would tilt the above graph downwards and make gold cheaper than it looks. Why should gold have a value at all? It has a utility as medium of exchange and storage of wealth, and is probably worth a certain proportion of our total wealth, depending on how much we trust other investments and paper money. If paper money is created at a rate of 7%, the interest rates should be at least 7%. At 10%, one can still stay ahead of the devaluation. If interest rates are only 5%, paper money loses its relevance as an investment, and people will wake up and rather hold gold. This is why gold fluctuates and doesn't go exactly inversely to the money-supply.