Gold is the ultimate safe haven. This is especially true in this high debt, low interest rate stagflationary period that we live in. As real rates are negative and likely to stay this way forever and the Asians cleverly look for ways to protect their wealth, gold is likely to benefit. I think that QE3 is coming and it may come in combination with some big housing / mortgage reduction plan to be financed by money printing. This will send gold flying again. I've played with GG and like what it is doing today but generally speaking I believe that gold is likely to outperform gold stocks. There are two reasons for this. Gold stocks are stocks and their performance will depend on the equity markets. I think that gold is likely to outperform the broad equity indices. Then gold stocks are going to face higher costs + demands for payments from governments looking to participate in the gold upside. At the extreme, some people in South Africa are calling for the nationalization of the country's resource industries. Venezuela just did this but SA is much more important in the gold business. I believe that current economic conditions will force people to look for safe assets. My analysis of gold prices suggests that there is hardly any ''safety insurance'' priced in currently. As this gets priced in over time and some gold companies experience political problems, gold should outperform. I am sure that there are some junior names out there that are very good but I really don't know much about that. I can only comment on the industry broadly.
Today In Commodities: Asset Appreciation [View article]
I wouldn't short any commodity here. QE3 is coming or so it seems. GS and JP are calling for it and the so called hawks at the FED are actually doves and will easily be convinced to vote for it. When QE3 comes you don't want to be short anything except for the dollar. This is currency debasement at its best.
I like Palladium ... basically a QE3 play. Got this one right last time and took profit at the absolute high. Entered it again at the low (pure luck of course) and think it will go up. The economy is weak. This should result in lower car sales and then we'll have less industrial demand for palladium and platinum. Still they are both good hedges for currency debasement. I think gold is likely to outperform both but just playing a bit. I think Platinum can be 10% cheaper than gold - think it has been there before and likely to happen again. The reason I chose Palladium is because it is the cheapest of them. Silver is a better bet I think but again you have to try different things, gets boring otherwise. All of them will do well, led by Gold and Silver.
The Correction In Gold Is Underway; Buy Back In At $1,600 [View article]
Well, do you still think we get 1600 gents? With the FED committed to money printing, even shares are going up. Look at the stock market, the worse the data, the better the stock market. This is because the market can hear Helicopter Ben flying to the rescue and he is carrying cash by the ton. This is usually called debt monetization. We are not going to hear this word from the Fed and are likely to listen to some complicated nonsense by a million Ph.D.'s. Why do you need a Ph.D. to print money.
Dec 1993 average gold price 383 Dec 1993 average platinum price 380 Was gold a bubble then? The point is that gold is a precious metal and not used in industry much. Platinum (and its cheaper cousin palladium) are used in industry. This is where most platinum gets used. In weak economic conditions platinum tends to underperform gold because its industrial demand suffers.
If you know of such mines that can recoup their costs in 2-3 years, I suggest you invest in them. If you are so worried about gold prices, you can buy a put option to hedge your price risk. The fact is that actually there is no gold to be found. CNBc has a program on gold and they showed one mine where you need to go 2.2 miles below the surface to find any gold. It has become that difficult. India has always bought gold and this is nothing new.
You are so right about the cost of making paper dollars. This is why the government will ''produce'' so many dollars and trillions of $ will be out there chasing whatever goods are on offer. You can imagine what this will do to the purchasing power of $'s. Be ready to inflation. Even the Fed says that it is 3.6% but it is of course higher than that. Been to the supermarket lately? In the UK they don't bother about hiking prices by 2-3% now ... more like 10-20%. Of course, inflation is coming down!
The Big Bad Banks: Now The Best Investments Going [View article]
This is the reason why Paulson and Tepper bought BAC and they lost their shirts. If BAC goes to $2 or $10 the same arguments apply. How do you know at what price you buy. The same rational applies if the price is $100! The point is that the government is not likely to allow BAC to go down but they surely can allow the shareholders to lose everything. There is no way to figure out what BAC has on their balance sheet. Buying BAC is not investing but pure gambling. Nothing wrong with this but make sure you understand this when you buy BAC and don't fool yourself that you know what is going on there.
Don't worry about inflation. They are going to change the calculations again and inflation will be low. In the UK, for example, the government started including the price of internet dating sites in the CPI calculation. All sorts of tricks will be employed to show that inflation is very very low. Have you read about Argentina They have inflation at about 25% I think. This was also the number calculated by the office responsible for CPI statistics. One good day the president fired everybody in the this office and hire new ''more reliable'' scientists. Since then the inflation is down by 10-15%. I think that the ''scientists'' that calculate inflation in the US, UK and Europe are not going to be that stupid and lose their jobs. Instead they will calculate the ''correct'' inflation and that is it. So, inflation is trending down. Be happy. Of course, gold going up 30% is a bubble and food going up like there is no tomorrow can be blamed on speculators, not on central banks.
The Big Bad Banks: Now The Best Investments Going [View article]
I don't think that financial stocks are attractive even at the current lower valuation. These are some of the reasons: 1. Book value - not everything there is marked to market and we really don't know what the banks really have on their balance sheet. 2. Conterparty credit risk - all banks have it and especially the ones with large IB operations. In case the crisis gets even worse, this can cause huge losses. 3. The financial industry is the story of yesterday and not of tomorrow. Executives with large egos and even larger bonuses rule the sector without generating much shareholder value. This industry is likely to restructure further, fire more people and become smaller. The restructuring charges will be high. 4. The current economic conditions are terrible for banks. Fed funds at 0 for another two years guarantees low margins for banks. Banks always benefit from a steep yield curve and the curve has flattened. Earnings are going to be bad. 5. Markets have been so volatile and unpredictable that the trading desks are not doing well. Customer business is down while their prop business is not doing great + they are forced to take less risk now. 6. The appetite to bail out banks is much lower. Don't forget that some hedge funds bought banks thinking that either the economy recovers or the government pumps more money into banks. Neither of these outcomes is materializing and share prices have been decimated. 7. Legals risks are huge. We simply don't know what type of lawsuits will be out there next year and this is not just BAC. I heard some clueless guy on CNBC (one of their regular idea generating fools) claim that BAC is a good buy because it was guaranteed that 5 years later prices would be higher. People were saying the same about Lehman and look at LEH now. If you really want to buy banks, avoid banks with large investment banking units. These departments are not run for the benefit of shareholders and don't contribute much to the share price, while being very risky. Avoid banks with substantial mortgage and legal risks (BAC and GS are right there). Choose some sleepy regional players with good private banking and sound balance sheet.
Gold Bubble? It's All About The Dollar [View article]
I think that many negative views on gold are simply a refusal to accept the fact that gold has been the best investment out there. Gold has gone up while real estate and equities have gone down. Even cash has done poorly due to inflation. Government bonds have gone up but nothing like gold. Keeping your money in cash guarantees that you lose 3.6% annually due to inflation and this is the official government inflation which is not a true representative of the real inflation out there. I am sure you have noticed some different inflation in the supermarket. I don't think that we need the world to end in order for gold prices to go up. Even in the unlikely event that we see some economic recovery in the US, the level of debt is such that it can only be paid by money printing. This is a very likely outcome and will cause gold prices to go further up. It will also cause inflation and further losses for the people keeping their saving in CD's or savings accounts - a very sad story as the Fed criminally punishes the best members of society - the ones who save and live within their means.
Gold is not a bubble. The Wells Fargo team that published the report is totally clueless. The reasons why gold is going up are still there and not likely to disappear soon. The explanations why it is a bubble are usually along the following lines: 1. Gold is a bubble because it is a bubble. 2. Gold is a bubble because its price has gone up a lot (but so has AAPL and is AAPL a bubble or just a good investment). 3. Gold is a bubble because it generates no income. All these arguments are just naive and really have nothing to do with the things that drive prices higher. 1) needs no comment - it is just a refusal to accept the fact that gold has been the best investment out there. 2) is another silly argument and the AAPL story tells you that not everything that goes up will go down. There are successes in this world and somethings go up for a long time and go up by a lot. 3) is an argument of a different nature. While gold doesn't yield income, the same is true about cash as the Fed keeps rates at zero. Actually, due to inflation (currently at 3.6%), cash loses purchasing power and you are guaranteed losses by keeping savings in cash. Even the 10 yr government notes have negative real yields. This is often called financial repression and is manufactured by the Fed and their massive manipulation of the government bond market. This and the Fed's money printing with abandon is likely to cause the value of the formerly mighty dollar to drop further and propel gold prices higher. Keeping money in cash (not just dollars but other fiat currencies as well) is one of the riskiest trades out there as central banks usually respond to any type of problem by printing money. I think that gold is the best investment out there. Silver is also good but a lot more volatile and has an industrial element which may cause further volatility if we see further economic weakness. I am very bullish on both gold and silver.
people that got in on monday will be up money soon ... the way things are this is almost certain. feel free to disagree and keep things in equities, suffer huge volatility and lose money finally.
Gold: The Best Safe Haven We Have [View article]
I've played with GG and like what it is doing today but generally speaking I believe that gold is likely to outperform gold stocks. There are two reasons for this. Gold stocks are stocks and their performance will depend on the equity markets. I think that gold is likely to outperform the broad equity indices. Then gold stocks are going to face higher costs + demands for payments from governments looking to participate in the gold upside. At the extreme, some people in South Africa are calling for the nationalization of the country's resource industries. Venezuela just did this but SA is much more important in the gold business. I believe that current economic conditions will force people to look for safe assets. My analysis of gold prices suggests that there is hardly any ''safety insurance'' priced in currently. As this gets priced in over time and some gold companies experience political problems, gold should outperform.
I am sure that there are some junior names out there that are very good but I really don't know much about that. I can only comment on the industry broadly.
Today In Commodities: Asset Appreciation [View article]
Gold Bubble Evolution [View article]
The Correction In Gold Is Underway; Buy Back In At $1,600 [View article]
The Correction In Gold Is Underway; Buy Back In At $1,600 [View article]
Gold Bubble Evolution [View article]
Dec 1993 average platinum price 380
Was gold a bubble then?
The point is that gold is a precious metal and not used in industry much. Platinum (and its cheaper cousin palladium) are used in industry. This is where most platinum gets used. In weak economic conditions platinum tends to underperform gold because its industrial demand suffers.
Is Gold In A Bubble? [View article]
The fact is that actually there is no gold to be found. CNBc has a program on gold and they showed one mine where you need to go 2.2 miles below the surface to find any gold. It has become that difficult.
India has always bought gold and this is nothing new.
Gold Bubble Is Epic [View article]
The Big Bad Banks: Now The Best Investments Going [View article]
There is no way to figure out what BAC has on their balance sheet. Buying BAC is not investing but pure gambling. Nothing wrong with this but make sure you understand this when you buy BAC and don't fool yourself that you know what is going on there.
Is Gold In A Bubble? [View article]
The Big Bad Banks: Now The Best Investments Going [View article]
1. Book value - not everything there is marked to market and we really don't know what the banks really have on their balance sheet.
2. Conterparty credit risk - all banks have it and especially the ones with large IB operations. In case the crisis gets even worse, this can cause huge losses.
3. The financial industry is the story of yesterday and not of tomorrow. Executives with large egos and even larger bonuses rule the sector without generating much shareholder value. This industry is likely to restructure further, fire more people and become smaller. The restructuring charges will be high.
4. The current economic conditions are terrible for banks. Fed funds at 0 for another two years guarantees low margins for banks. Banks always benefit from a steep yield curve and the curve has flattened. Earnings are going to be bad.
5. Markets have been so volatile and unpredictable that the trading desks are not doing well. Customer business is down while their prop business is not doing great + they are forced to take less risk now.
6. The appetite to bail out banks is much lower. Don't forget that some hedge funds bought banks thinking that either the economy recovers or the government pumps more money into banks. Neither of these outcomes is materializing and share prices have been decimated.
7. Legals risks are huge. We simply don't know what type of lawsuits will be out there next year and this is not just BAC.
I heard some clueless guy on CNBC (one of their regular idea generating fools) claim that BAC is a good buy because it was guaranteed that 5 years later prices would be higher. People were saying the same about Lehman and look at LEH now.
If you really want to buy banks, avoid banks with large investment banking units. These departments are not run for the benefit of shareholders and don't contribute much to the share price, while being very risky. Avoid banks with substantial mortgage and legal risks (BAC and GS are right there). Choose some sleepy regional players with good private banking and sound balance sheet.
Gold Bubble? It's All About The Dollar [View article]
I don't think that we need the world to end in order for gold prices to go up. Even in the unlikely event that we see some economic recovery in the US, the level of debt is such that it can only be paid by money printing. This is a very likely outcome and will cause gold prices to go further up. It will also cause inflation and further losses for the people keeping their saving in CD's or savings accounts - a very sad story as the Fed criminally punishes the best members of society - the ones who save and live within their means.
Is Gold In A Bubble? [View article]
1. Gold is a bubble because it is a bubble.
2. Gold is a bubble because its price has gone up a lot (but so has AAPL and is AAPL a bubble or just a good investment).
3. Gold is a bubble because it generates no income.
All these arguments are just naive and really have nothing to do with the things that drive prices higher. 1) needs no comment - it is just a refusal to accept the fact that gold has been the best investment out there. 2) is another silly argument and the AAPL story tells you that not everything that goes up will go down. There are successes in this world and somethings go up for a long time and go up by a lot. 3) is an argument of a different nature. While gold doesn't yield income, the same is true about cash as the Fed keeps rates at zero. Actually, due to inflation (currently at 3.6%), cash loses purchasing power and you are guaranteed losses by keeping savings in cash. Even the 10 yr government notes have negative real yields. This is often called financial repression and is manufactured by the Fed and their massive manipulation of the government bond market. This and the Fed's money printing with abandon is likely to cause the value of the formerly mighty dollar to drop further and propel gold prices higher. Keeping money in cash (not just dollars but other fiat currencies as well) is one of the riskiest trades out there as central banks usually respond to any type of problem by printing money.
I think that gold is the best investment out there. Silver is also good but a lot more volatile and has an industrial element which may cause further volatility if we see further economic weakness. I am very bullish on both gold and silver.
Gold Bubble Is Epic [View article]
What Would Put An End To The Gold Bull Market? [View article]