Finerman? on the Fast Money show does not understand. Gold isn't necessarily just an inflation trade as Finerman believes. She is afraid of Gold "look out below" on inflation expectations. She is clueless.
Gold does well in environments when fiat money is being abused and vulnerable and being debased. Can we say with certainty that is exactly what is happening in the U.S., Japan, Europe and China, yes, China? The answer in my opinion is definitively Yes.
Meanwhile Paulson, billionaire hedge manager, is launching a gold fund.
I should not have sold my miners earlier. I am now scaling in very gradually into Gold miners.
A great site to learn about gold stocks is Gold Versus Paper
Showing posts with label Gold. Show all posts
Showing posts with label Gold. Show all posts
Thursday, November 19, 2009
Saturday, November 14, 2009
Richard Russell - 6 Reasons to Own Gold
(1) Interest rates are at zero, which means the ‘opportunity cost’ of owning gold now is highly favorable. You sacrifice no yield in owning gold vs. Treasury bills. T-bills pay you nothing, so you might as well have your money in gold.
(2) The Bernanke Fed will evidently stop at nothing in its all-out attempt to ‘jump start’ the wobbly US economy. This means spending and building debt at a never-seen-before rate. This will result in inflation. The Fed can create fiat money - any quantity at will, but it cannot direct where that money will go. So far, the money is not going into the economy, banks remain reluctant to lend and consumers are reluctant to spend.
The newly-created money has been going into bank reserves and into the stock market. Stocks have been rising on an ocean of liquidity. The sinking dollar has been a huge help to the big Dow-type stocks which benefit from their ability to export. This is resulting in world-wide central bank inflation as the banks seek to devalue their money in an effort to keep the dollar strong.
(3) The world’s central banks are now seeking to protect themselves from a falling dollar by buying gold. After years of selling gold, ironically, the central banks are now buying gold. In today’s Wall Street Journal we see the headline, ‘Central Banks Join A New Gold Rush’. This is indeed ironic. In swapping their own paper for gold, many central banks are admitting that gold is superior to the very paper they are creating out of thin air.
(4) Many nations are now seeking to boost the ratio of gold to paper in their reserves. The US has the largest ratio of gold to junk fiat paper, 77.4%. But the US stupidly only places the value of our gold at $42.22 an ounce. If the US marked our gold to market, it would be a tremendous help to our government’s balance sheet. But the US prefers to live in a fantasy world where gold is worth less than $50 an ounce!
Germany has 69.2% of its reserves in gold.
Italy has 66.6%.
France has 70.6%.
UK has 17.6% (after idiotically selling most of its gold near the low below $300 an ounce).
Japan has 2.3% of its reserves in gold.
India has 4.0%.
Russia has 4.3%.
China has 1.9%.
India has 4.0%.
Russia has 4.3%.
China has 1.9%.
It’s easy to see that Russia, India and China are low on gold. All three would like to at least double the percentage of gold in their reserves. The race is on for these central banks to accumulate gold without running the price of gold sky-high.
(5) In the US, literally no one owns gold. Rather, US citizens are selling their gold (jewelry) to companies who are advertising that they’ll buy ‘your overpriced’ gold for cash.
(6) A few nations are actively promoting the ownership of gold. China, the world’s biggest miner of gold, has been encouraging its people to buy gold. In London, Harrod’s department store is now selling gold coins and bars to anyone who has the paper to buy gold. Within a year or so, I expect public buying of gold to reach a crescendo. Interestingly, most Americans have never seen a gold coin.”
Friday, November 6, 2009
Sold All Gold Miners Today
With the euphoria around Gold and Gold Miners and the market nearing a top, I think Gold is going to underperform over the short term. Either way, taking 20%+ profits and moving to the sidelines is a wise move.
Thursday, November 5, 2009
Taking Profits In Gold Miners
While Gold certainly has a long way to go upwards, the bullishness for the yellow metal has gotten out of control. Following my contrarian investment philosophy, we got into Gold a few months ago when market participants were still high on equities and rode this smooth wave up for over 20% gains. Now that the masses are joining in the trade, I think it's time to step away from this trade for a while and wait for a correction.
Specifically, this call also ties in with my expectation that the dollar may rally, leading to a drop in commodities, and a correction in stocks. I'm not going to short this metal but step to the sidelines.
Specifically, this call also ties in with my expectation that the dollar may rally, leading to a drop in commodities, and a correction in stocks. I'm not going to short this metal but step to the sidelines.
Tuesday, November 3, 2009
Gold Target 1250 to 1300
A classic inverse head and shoulders pattern projects the Gold price to 1250 to 1300. Strong technical support, strong central banker emerging interest, strong public sentiment, strong Chinese demand. Good luck to the two major institutions that are rumored to be short this currency.
Gold & the Indians
We've been fortunate to be long this rally in Gold entering GLD at 920 and building positions in the Gold Miner Smallcaps which are rocketing higher today. Favorite: New Gold NGD among the small miners.
Today marks a further confirmation. The bull market in Gold for central bankers just got started today. The forces of demand are gathering steam.
I have a 26% sector allocation to Gold in my portfolio, mostly in the miners and small caps which are really option plays on Gold. The emerging market central bankers are now realizing that they need to be long this commodity.
Much has been made about Gold's move higher by those that don't get it. Gold is not necessarily an inflation play, nor a deflation play, although I believe the miners are both, given deflationary trends in production costs and inflationary trends in pricing.
What Gold is simply, is a holding that gains in value when government policies erode the value of paper money. Secondly it is a store of value and the only currency that has survived over 5000 years. In an era where every major currency is a questionable value, Gold is the rock.
Today marks a further confirmation. The bull market in Gold for central bankers just got started today. The forces of demand are gathering steam.
I have a 26% sector allocation to Gold in my portfolio, mostly in the miners and small caps which are really option plays on Gold. The emerging market central bankers are now realizing that they need to be long this commodity.
Much has been made about Gold's move higher by those that don't get it. Gold is not necessarily an inflation play, nor a deflation play, although I believe the miners are both, given deflationary trends in production costs and inflationary trends in pricing.
What Gold is simply, is a holding that gains in value when government policies erode the value of paper money. Secondly it is a store of value and the only currency that has survived over 5000 years. In an era where every major currency is a questionable value, Gold is the rock.
Thursday, October 29, 2009
Gold & Treasury Bubbles
We are in the midst of yet another bubble yet it's very difficult to recognize bubbles until they burst. No, the bubble isn't Gold, it's U.S. Treasuries.
John Paulson presented a simple, but compelling case for Gold. First, the monetary base has exploded in a way we've never seen before. The monetary base is essentially the Federal Reserve Bank's currency and reserves. The Fed, by buying up securities in this crisis, has pumped a lot of money into the economy.
As Paulson explained, that's because this base money has not yet been lent out and multiplied throughout the economy. Yet the monetary base and money supply are highly correlated, "almost 1-to-1 between the two," Paulson said.
That means that as the monetary base expands, the money supply surely follows, though there is a lag. (Money supply is a broader measure of money than just the monetary base, as it includes personal deposits and more. The monetary base is like a kind of monetary yeast. It makes money supply rise.)
If money supply grows faster than the economy, that will create inflation, says Paulson. As it is impossible for the economy to grow anywhere near that vertical spike in the monetary base, Paulson contends inflation is coming.
The U.S. is not alone in its money-printing exercise. The supply of most currencies is expanding rapidly – even the normally tame Swiss franc. In the race of paper currencies, they are all dogs. Hence Paulson's interest in gold, which no government can make on a whim.
Therefore, in the context of the exploding monetary base, gold seems relatively cheap. In other words, as the money supply rises, so does the price of gold, eventually. As a result, says Paulson, "gold has been a perfect hedge against inflation."
There is some slippage over time. The gold price can change faster or slower than the money supply. But when the market gets worried about inflation, the gold price usually changes much faster – as happened in the 1970s. In 1973 – to pick a typical year – inflation was 9% and gold rose 67%. That was a pattern common in the 1970s.
The potential for inflation this time around is greater than it was in the 1970s, given that the growth in the monetary base is so much greater than it was in the 1970s. Gold could do much better this time around, reaching "$3,000 or $4,000, or $5,000 per ounce" as Paulson said.
Future historians will look back at the present day and see clearly how this unfolded. They will see the litany of news items that pointed to the dollar losing its top perch: China and Brazil are settling up trade in their own currencies. The Russians and others are openly calling for a new monetary standard. Even mainstream outlets are discussing alternatives to a dollar-based standard, a province once solely occupied by cranks and gold bugs. Not a week goes by without these kinds of stories.
The gold supply, too, is limited against the vast pool of dollars. As Paulson points out, global money supply is 72 times the value of gold. I'm betting that gap will narrow. It only has to narrow a smidgen and the gold price flies.
As Grant eloquently put it: "Gold is a speculation. But it is a speculation on a certainty: the debasement of the currency." Gold stocks, too, are a speculation. But they are a speculation on an inevitably higher gold price.
A leveraged play on Gold are the small cap Gold Miners. Miners benefit from the inflationary pricing trends in the price of Gold while also benefiting from the deflationary trends in the production and mining of Gold.
Currently I'm Long New Gold NGD, Aurizon Mines & Newmont Mining, as well as the GDX.
John Paulson presented a simple, but compelling case for Gold. First, the monetary base has exploded in a way we've never seen before. The monetary base is essentially the Federal Reserve Bank's currency and reserves. The Fed, by buying up securities in this crisis, has pumped a lot of money into the economy.
As Paulson explained, that's because this base money has not yet been lent out and multiplied throughout the economy. Yet the monetary base and money supply are highly correlated, "almost 1-to-1 between the two," Paulson said.
That means that as the monetary base expands, the money supply surely follows, though there is a lag. (Money supply is a broader measure of money than just the monetary base, as it includes personal deposits and more. The monetary base is like a kind of monetary yeast. It makes money supply rise.)
If money supply grows faster than the economy, that will create inflation, says Paulson. As it is impossible for the economy to grow anywhere near that vertical spike in the monetary base, Paulson contends inflation is coming.
The U.S. is not alone in its money-printing exercise. The supply of most currencies is expanding rapidly – even the normally tame Swiss franc. In the race of paper currencies, they are all dogs. Hence Paulson's interest in gold, which no government can make on a whim.
Therefore, in the context of the exploding monetary base, gold seems relatively cheap. In other words, as the money supply rises, so does the price of gold, eventually. As a result, says Paulson, "gold has been a perfect hedge against inflation."
There is some slippage over time. The gold price can change faster or slower than the money supply. But when the market gets worried about inflation, the gold price usually changes much faster – as happened in the 1970s. In 1973 – to pick a typical year – inflation was 9% and gold rose 67%. That was a pattern common in the 1970s.
The potential for inflation this time around is greater than it was in the 1970s, given that the growth in the monetary base is so much greater than it was in the 1970s. Gold could do much better this time around, reaching "$3,000 or $4,000, or $5,000 per ounce" as Paulson said.
Future historians will look back at the present day and see clearly how this unfolded. They will see the litany of news items that pointed to the dollar losing its top perch: China and Brazil are settling up trade in their own currencies. The Russians and others are openly calling for a new monetary standard. Even mainstream outlets are discussing alternatives to a dollar-based standard, a province once solely occupied by cranks and gold bugs. Not a week goes by without these kinds of stories.
The gold supply, too, is limited against the vast pool of dollars. As Paulson points out, global money supply is 72 times the value of gold. I'm betting that gap will narrow. It only has to narrow a smidgen and the gold price flies.
As Grant eloquently put it: "Gold is a speculation. But it is a speculation on a certainty: the debasement of the currency." Gold stocks, too, are a speculation. But they are a speculation on an inevitably higher gold price.
A leveraged play on Gold are the small cap Gold Miners. Miners benefit from the inflationary pricing trends in the price of Gold while also benefiting from the deflationary trends in the production and mining of Gold.
Currently I'm Long New Gold NGD, Aurizon Mines & Newmont Mining, as well as the GDX.
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