Fromhere

Faber: Gold a Better Buy than at $300/oz.

Bobby I agree with you.

Over long periods great companies should outperform a static asset. The issue becomes picking the great company. Gold will still be gold in 20 years, but Microsoft, KO, JNJ? How about GE, Citi, or AIG? Fyi - I bought most of my gold position in 2002 when most people thought I was nuts and it's been quite a ride. Now you can't watch TV without seeing an ad for gold, so my guess is we are in/entering the blowoff phase (which arguably can continue for a long time) and I'm starting to think about an exit.


On Nov 19 12:57 PM bobbybutte wrote:

> Fromeher i follow you
>
> But let me add something
>
> Gold was 300 when the S&P was grossly overvalued and many stocks
> like IBM had high pes
>
> Now large cap multinationals are undervalued historically for the
> most part and gold is a very crowded trade
>
> For example is 1990 gold was about 400 bucks today its over 1100
> and the 100K you invested would be be about 275 K but you have gotten
> no income
>
> But if you bought KO in 1990 at teh same pe its at now you would
> have gotten more appreciation in the last 7 years of dividends than
> golds entire cap gain was
>
> You would have been taxed less and also the 100000 you put in Ko
> would have spit you out over 200k in the past 8 years alone
>
> and your Ko would be worth 1,150,000 now
>
> Large cap multinationals are better than gold UNLESS gold is at record
> lows and stocks are overvalued like in most of this decade
>
> Remember what wise people do in the beginning fools do in the end

Faber: Gold a Better Buy than at $300/oz.

To say that buying any asset at a higher price is a better buy than a purchase of that same asset at a lower price is factually ridiculous. What Dr. Faber is really implying though, is that the bull case for gold is much stronger now than it was five years ago, which I would argue is reflected in the higher price - i.e. that's why gold has gone up so much. While I agree with his implication, which is why gold is my largest single investment currently and has been for many years, I find myself increasingly uncomfortable in a growing consensus. After all, absolute conviction is what makes market tops.

Updated Case-Shiller 100 Year Real Estate Chart

Interesting chart, but like all statistics, it is only a reliable as the underlying data. I would really like to see this chart updated using the shadow stats version of inflation as originally reported by the Feds back to 1980. I wonder how much of the recent spike is from under reported inflation (since that is the divisor) versus an increased real price. Also, is this a national average, median, mean? All real estate is local (e.g. Detroit vs. Phoenix) and there were not many suburbs in 1890, so what is really being measured?

Rating the Top 12 U.S. Banks - From Hidden Gems to Zombies

So what are the "better" banks counterparty risk to Citi and BofA... or AIG for that matter? If they file chapter 11 the whole system is most likely compromised unless the Feds guarantee the failed banks' obligations.

The Case for AIG - Patience Required

Assets get marked to market... which has been bad enough for AIG. Liabilities on the other hand are more open to interpretation and potential understatement. Does anyone know AIG's total exposure to credit default swaps? ... or specifically CDS on UBS, CIT, and other "can't fail" companies like Bear Sterns? How about AIG's counterparty risk to these companies?