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  • Does China Really Have 1,000 Tons Of Gold Locked Up In Shadow Financing Deals? [View article]
    I think the reason the report was given such weight is in part due to the source. The WGC is an advocacy group for the gold industry, with the miners as it's members. It is unlikely to include unsupported conjecture with negative consequences to the gold price in its report.
    Apr 19 10:25 AM | 2 Likes Like |Link to Comment
  • Kinross Gold: The Disappearing Reserves [View article]
    "do not confuse impairments with decreasing reserves - it is a different thing"

    It may be a different thing but they are totally connected. In fact impairments are the financial statement reflection of those lower reserves.
    Apr 16 06:12 PM | 1 Like Like |Link to Comment
  • Buy The Gold Stock Space Irrespective Of The Price Of Gold [View article]
    Its not a very good argument for the gold miners. Just because analysts know that $1,000 is a possibility does not mean they have that price in their price target models. However I do agree with the general thesis. Look at the price of most of the major gold miners the last time gold was at $1,000. They were a lot higher than now. The soaring costs of mining (well outpacing general inflation) was due to a bottle neck in inputs, including equipment, supplies and labor, as companies expanded. Those costs will come down now as companies cut back expansion and renegotiate contractor terms.

    That said, of course a sudden and dramatic drop in gold price would take miners down with it in the short term at least (as we are seeing today)
    Apr 15 12:45 PM | 1 Like Like |Link to Comment
  • Why I Strongly Disagree With Goldman's Bearish Gold Call - Buy The GLD [View article]
    I read an interesting report last night written almost exactly 5 years ago by none other than Jeffrey Currie, the man at Goldman behind the bearish call on gold. At that time he was bullish on gold (then at $930/oz) and rightly so. His main thesis was that real interest rates are the most important driver of gold price movements in the medium term (ie. years/decades). His current forecast starts with projections from other Goldman departments forecasting an accelerating US economy which would mean a return to more normal interest rates. So I think his forecast is a reasonable one IF you believe the case for a much stronger economy.

    And that's what I see as the flaw in the Goldman forecast. Their economic forecast, like so many others, expects an eventual return to a typical post-war recovery. I don't think we get that this time. History seems to show that recoveries from credit crises are always much longer and more drawn out than any other type of downturn. Although some deleveraging may have already taken place on household and corporate balance sheets, we've really just transferred it to government balance sheets. So collectively there is still a lot of deleveraging to take place and that will be a drag on growth for years to come.

    We may in fact get higher interest rates but I think not without inflation to go with it and that means real interest rates will stay low which should support gold prices.

    As a matter of interest, in that Currie report from 2009 he has a table of real interest rates (defined as 10 year T-bill yield less inflation expectations) vs gold price and according to that table the current real rate as defined is approx. negative 0.5%, which is supportive of a gold price (in 2008 $$) of $1,365. I figure that's around $1,500 in current $$.
    Mar 28 10:03 AM | 2 Likes Like |Link to Comment
  • Key Recessionary Indicators Continue Positive [View article]
    The above analysis makes a good case for why a recession is likely not on the horizon. The problem for me is the equity market is priced not for an economy that will simply avoid a recession, but for an economy ready to take off. Investors have been anticipating that eventually we will have a typical post-war recovery with a return to robust growth, and the market seems to have priced this scenario in. We don't need a recession for markets to go down from here, the economy only has to fall short of the optimistic growth expectations built into today's stock prices.
    Mar 26 10:20 AM | 1 Like Like |Link to Comment
  • Amazon's Pullback From $400 Is A Buying Opportunity [View article]
    "No analyst, out of the near 40 following the stock, have a sell rating."

    To quote Warren Buffet, "you pay a high price for a cheery consensus".
    Mar 5 01:02 PM | 7 Likes Like |Link to Comment
  • Amazon: May Well Surprise The Market [View article]
    "The surprise will be at the bottom line..."
    I think you need to quantify what constitutes a surprise. Forget about what analysts are predicting for next quarter or next year, the stock price clearly suggests investors already expect massive improvements in the bottom line.

    Assuming they can maintain current revenue growth of 20% and that long term earnings growth usually follows revenue, that implies earnings growth of 20%. Assigning a neither optimistic nor pessimistic PEG ratio of 1 gives a PE ratio of 20. So what does that imply about the current expectations for "normalized earnings? At the current price of $360, that implies investors see normalized earnings of $18/share.

    In other words the implication is that when all the discretionary spending and other temporary factors that are supposedly depressing margins is removed, Amazon can earn $18/ share annually at current revenue levels. From there, if they can continue to grow revenues at 20% and maintain margins, they should be worth 20 x $18 = $360 today.

    So very roughly, that is your "surprise" threshold.

    I have no doubt (well maybe some) that Amazon will grow both earnings and margins from here but if they only fall short of already lofty expectations it could mean a lower stock price. Another possibility is that investors see any sudden improvement in margins as an admission by the company that they no longer see limitless opportunity for growth. After all this has been the mantra driving the story thus far - we are investing for the future due to the opportunities we see. I think there is a real possibility that the share price will suffer at the very time we start to see margin improvements.
    Feb 9 10:31 AM | 1 Like Like |Link to Comment
  • Bull Market Could Last Several More Years [View article]
    All the comparative examples of why this bull may have years to run are drawn from the same long secular bull market from 1982 - 2000. Of course this was a long period of disinflation and declining interest rates which generally creates a positive environment for stocks by supporting higher P/E ratios. We are facing the exact opposite environment now. Interest rates and inflation have nowhere to go but up from here (any decline would likely be the result of deteriorating economies, which at this point would clearly be bad for equities). I don't see how we get that kind of a long-run secular bull market in this environment.

    In addition to rising interest rates and the inflation that will come with any robust economic recovery, we have years of personal and sovereign deleveraging ahead of us that will act as a drag on growth, something that was not the case during the 1980s and 1990s. I think it's pure fantasy to think that kind of secular bull market lies ahead.

    In addition even in that spectacular secular bull, we had down years like 1987, 1990 and 1994. At the very least we are overdue for a significant correction.

    I would be interested to hear of other examples from history where a long secular bull market started and ran while a society was in the process of massive deleveraging.
    Dec 24 06:52 PM | Likes Like |Link to Comment
  • John Hussman: Leash The Dogma [View article]
    I think it's clear at least part of the recent rise in equities is due to the suppression of interest rates by the Fed which has pushed investors out of cash and up the risk curve. The "rush to T-bills" you describe should rates rise to 50bps will include a rush away from equities and a reversal of the wealth effect we are currently witnessing.
    Nov 5 10:59 AM | Likes Like |Link to Comment
  • Barrick's dilution may have miner shareholders fearing they're next [View news story]
    The link provided under "sparking fears" above must be some kind of joke. The author clearly has no idea what debt or deferred taxes are or the difference between them, suggesting that Goldcorp could issue equity to pay down its deferred tax liability!

    There may be genuine fears that other miners will follow Barrick and issue equity but I doubt the site linked above is taken seriously by anyone that matters.
    Nov 2 10:27 AM | Likes Like |Link to Comment
  • Amazon catches upgrade as Street cheers Q3 growth pickup [View news story]
    "Jefferies observes Amazon's op. income has topped the high end of guidance for 8 straight quarters."

    Not that hard to do when you deliberately guide conservatively.

    What's truly amazing is that guidance has been coming down for those same 8 quarters such that you now have an operating loss celebrated as a "beat".
    Oct 25 04:56 PM | 2 Likes Like |Link to Comment
  • How Ugly Will Amazon.com's Earnings Be? [View article]
    I think there's nothing that unusual about the lack of a high profile launch event. These are after all basically product updates that offer nothing dramatically new. Considering management makes a point of saying they are not about the devices but the content, it seems consistent that they wouldn't spend big bucks on a splashy press launch event.
    Sep 25 02:55 PM | 1 Like Like |Link to Comment
  • Golden Autumn For Gold Mining Stocks [View article]
    Lately gold equities have moved counter to the general market, dropping along with the price of gold every time the S&P or Dow hit new highs. I wonder if that won't reverse in a market correction.
    May 29 10:06 AM | 1 Like Like |Link to Comment
  • Arne Alsin's #1 Pick: Amazon.com [View article]
    "Amazon is making ever-increasing gross profit dollars, that's what you should key on"

    ... even though the company itself reiterates in every 10-K that operating margin is a more meaningful measure of the business than gross margin.
    May 6 11:13 AM | 2 Likes Like |Link to Comment
  • Arne Alsin's #1 Pick: Amazon.com [View article]
    Yes, the "time to get excited about investing" is AFTER a 4 year old bull market propped up by central bank money creation, as indexes hit new highs. The last time I was excited by investing was in Q1 2009.

    A cynical, cranky old man.
    May 6 11:09 AM | 4 Likes Like |Link to Comment
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