Jase

Buffett's Financial Bets

He's a smart lad, indeed. But his kindness or soundness of character aren't what one ought to pay attention to in the end. What matters is his judgment. As of late, he's been making more than his fair share of mistakes. Long term investments are oftentimes short-term trades gone awry. In that respect, Buffet has been making a lot of investments of late. I've been short BRK/B since last year, I intend to cover my position at some stage. Oddly, when I do, I'll be going long BRK/B for my children's college fund. "I like buying quality merchandise when it is marked down." I couldn't agree with you more, Warren.

12 Reasons to Short Gold

Louis, shorting gold is the right trade. Though it's astoundingly far from the mean, the oil/gold ratio still has room to run before reverting, so careful not to enter a short too early. DZZ is a buy on a breakdown to $11 to $14. Considering going long Canadian dollars, also.

This Is Just the Beginning

Yank,

You've missed my point:

1. I do hold Gold, there's a place for it in my portfolio. I just don't worship it. It's a dead store of wealth as it generates nothing for me;

2. Brown was right in 2001, the US Dollar Index had topped out that year and it was an excellent year to dump gold. You mention that he dumped it at $250/oz. What you fail to mention is that the $250 referred to "2001 US Dollars", the buying power of a US Dollar in 2001 was over 40% more than is today. It's incorrect to compare gold's $1000/oz price in 2008 and think that gold appreciated by 400% since 2001. It absolutely did not. If it did, then an ounce of gold would buy 4x as much oil as it did in 2001. It does not, not even close. If the gold/oil ratio is anything to go by, oil is set to rocket and gold set to dump when viewed over the next 24 months.

As for your XLF comments, if it goes to zero, you won't have a vault to store your yellow metal, nor a functioning country. I suggest you lads sort out that problem in a hurry.

I maintain that the XLF will outperform gold, on a % basis, over the next 24 to 36 months. Gold belongs back below $500/oz, ready for the next generation of suckers.

This Is Just the Beginning

Ron,

Thanks for the feedback. There are few indicators that together suggest that gold's upside is limited, the technical reason I commented on is just one such indicator. The gold/oil ratio, the US Dollar Index, interest rates, various sentiment indicators--all these paint a similar picture.

As far as I'm concerned, gold is a dead store of wealth. It doesn't interest me, save for its place as part of balanced/diversified portfolio (I hold about about 8% of my wealth in the form of bullion: 0% silver, 3% gold, 5% platinum. To me, holding gold via an ETN like GLD is missing the point entirely.)

If push comes to shove and the US dollar begins to decline substantially (personally, I believe it will eclipse 95 to 103 on the US Dollar Index before any such reversal materializes), then a balanced investor shouldn't be hurt materially by this. Holding ones wealth in a single currency is a stupid, stupid idea. 40% of my portfolio in is Canadian Dollars, about 25% in US Dollars, the balance is in a mix of Francs and Sterling (yes, Sterling--never, ever bet against the United Kingdom long term.). I'm also holding crude oil in several of these currencies as a hedge. Australian Dollars, Brazilian Real, Canadian Dollars--currencies from resource-rich nations, are a good way to protect oneself from future chaos. I consider currency losses a small price to pay for a good night's sleep. As you get older, such things matter.

I like the US Financial sector from a 5-year point of view. I like crude oil (and the solar sector, for that matter) over that same time-frame. I still really like tech and especially the digital content industries, longer term. 2009 and 2010 is the time to pick up some of these assets. You complained when they were too expensive, now they're really inexpensive. Buy something, learn technical analysis, and sit tight.

Peter makes some excellent points, but the fact of the matter is... the world isn't going to end. Let things worsen, those living life within their means (be it those with assets of 100k or 100M) shouldn't be affected in the least. If you're an entrepreneur, now is the time to build. If you have a job, now is the time to work harder for your company to improve its competitiveness globally. If you are young, now is the time to educate yourself. If you're no-so-young, enjoy yourself, you've earned it.

The cycle playing out right now is just that, a cycle. It's the logical end to the actions that were made during the past several decades. The reasons for it aren't important--they can't be changed. Focus on what you can control. Blue skies will return, they always do. Until then, go build something.


On Feb 08 10:20 PM ron_paulite wrote:

> Hi Jase
>
> Good contrarian view. Gold is in for a rough ride. I'm always
> very cautious when every pundit is saying the same thing, and now
> almost everybody, including all the Wall St investment banks, are
> saying Gold will go up -- and that's scary.
>
> Yes, I don't believe Gold has completed decoupled from the Dollar
> -- although lately that seems to be the case.
> But if the Dollar strengthens, even if Gold can still go up (as it
> has been doing so lately), its upside is limited.
> On the other hand, the Dollar weakens, Gold will go up by quite a
> bit.
>
>

This Is Just the Beginning

Gold broken out? You must be kidding me. It's pierced the declining tops line, but it has yet to confirm the move. It's more likely to break $800 than it is to break $1000.

Is Electronic Arts a Clear Case of Institutional Manipulation?

What nonsense. This is a short candidate on its next breach of $18 to $19. Next stop: below $9. Technically broken. Sound dramatic? Check in with me in a few months.

Have We Reached an Historic Buying Opportunity?

Hayweed,

While we're at it, let's have a chat about 'looser' vs. 'loser':

looser: not firm, taut, or rigid
loser: you

Opportunities in a High Correlation World

Geoff,

Excellent article. To what extent do large currency fluctuations contribute to this increased correlation? At the beginning of 2006, 2007, 2008, and 2009, the value of US Dollar Index was at ~90, ~83, ~76, and ~81 respectively. Those are massive % swings. The run-up from its lows of 70.70 in March 2008 to its recent high of 88.46 in November of 2008 is an astounding, if not unprecedented, percentage gain. Surely this must influence your correlation results. My question is, how?

Microsoft Windows 7: The Tech Sector Impact

I've installed the beta of Windows 7. The interface and user experience are lousy. It's simply the version of Windows that MS intended to ship when Vista went out the door. I've been short MSFT since $27/share. It will break below $13 per share before the year is out. Their product pipeline has a few potential winners but these imbeciles always nip and tuck and shape new ideas to fit old molds. New products are doomed as MS as they don't have the guts to start over again. Backward compatibility=reduced innovation. No earnings growth, no innovation, flush with cash and desperately looking to buy value, layoffs, the whole story is dark. Will MSFT fall? I argue that it already has.

Banks: The Final Countdown?

What's the consensus for the financials during this 4-day inauguration trading week? TA points to a retest or break of November lows, but the market rarely does what we anticipate--anyone care to provide a case for a large bullish move/recovery for the financials this week? If so, upside targets for XLF, UYG, FAS? If not, what support levels must hold for each of these?

Lookee Here: An IPO Filing!

Two words: short candidate. (No pun intended.)

Apple Drops MacWorld: Good Move, But Likely to Start Another Steve Jobs Rumor

Dream on? I began my short position at $161 back on September 8th. I've covered only a partial portion of my position (at $86/share; then added to my short again at $112). Do you have any idea of how many longs are trapped above $120 per share? You've had two failed moves to attempt to capture the old floor at $115.44. Go on, pull up a chart of AAPL. Notice the pending death cross of the 200MA over the 600MA? The pissy 50-day moving average is now just north of $100/share. Let me guess, you think the lows were put in at $79.14? You're ready to cite how iPhones sales are such and such, and the monthly revenue from iPhones contracts are going to fatten up that balance sheet, and the future is all lollipops and unicorns and rainbows blah blah. Here's a newflash, homeslice: it's all priced in--that's *why* it traded at $180 to $200 all those months ago. Do yourself a favour: sell your stock or go short. 12-times current forward is at around $60/share--I wouldn't even think about touching AAPL until those levels are reached. Wouldn't surprise me to see it trading in the high 40's or 50's at some point in 2009 on ratings/revenue downgrades. Whatever the case, good luck with your trades.


On Dec 17 12:16 PM brewer wrote:

> "I look forward to covering my short AAPL position at around those
> levels."
>
> Dream on.

Apple Drops MacWorld: Good Move, But Likely to Start Another Steve Jobs Rumor

Arbitrage Cons.,

Re. "... will go down with Thomas Edison"--that's a bit of a stretch. Taking nothing away from Jobs' ability to dream, design, think, simplify, outsmart, incessantly craft, and relentlessly persist... placing him in the same category as Edison, in my view, is a grossly inaccurate comparison. Names that perhaps ought to accompany Edison (or perhaps names that Edison ought to accompany, in no particular order) might include: Bardeen, Brattain, Shockley, Townes, Schawlow, Maiman, Tesla, Babbage, Turing, S. Christie, J. Fleming, Kemeny, Kurtz--you get the idea, this is a long list.

I acknowledge that my list is comprised of arbitrary names whose contributions vary considerably. Steve Jobs is an entrepreneur, calling him an inventor is unfair to those who truly invent. While Jobs created the first Apple computer, true elegance in computer design was first demonstrated by Jef Raskin. Jef Raskin is the real, long forgotten, creator of the Macintosh computer. Many are surprised to learn that on several occasions Jobs actually attempted to thwart the Macintosh development efforts at Apple.

Yes, Jobs is a vicious CEO and shrewd businessman, an excellent designer, and a master of aesthetics. He is, however, not an inventor.

Glad to hear that you were able to pick up Apple at $16 when it rose from the ashes. I look forward to covering my short AAPL position at around those levels.

John Hussman: The Market Is Not in Uncharted Territory

Roga,

Listen, I'm having trouble with a math problem. Can you help me prove this: "Every even integer greater than 2 can be written as the sum of two primes."

Thanks

Four Commonsense Clues to a Genuine Market Bottom

Sean M,

Take a look at Jeff Rubin's (CIBC World Markets) report that attempts to provide hard evidence that each major economic downturn this century was immediately preceded by a spike in oil prices. Note that I'm not saying that *I* believe that this is the case, I'm just pointing out a potential body of evidence that argues the point counter to yours. Make up your own mind. Here's the link to the report:

research.cibcwm.com/ec...

The chart/data that I'm citing is found at the bottom of page 4.