Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
As I go back to the top of this thread and re-read it I am reminded what a great discussion board this is. Thanks for all your viewpoints and thanks for MFO for creating an "off topic" section.
The sharing of view points is priceless. For me, it is often the "off topics" that drive my investing decisions with respect to my choice of mutual funds.
Thanks again for everyone's input! This has become a very long thread and worth re-reading.
Most of our stuff is on cruise control and I'm being very cautious overall. At the same time, I'm more than willing to take a flyer here or there for sh*ts and giggles. And in all honesty, it's starting to smell like things are going to get very interesting over the near term and I smell an opportunity. I'm heavy cash, TIPs, dividend payers, pm's and commodities.
Here's a read from a local coin dealer that happens to publish quite often in Numismatic News. By this I mean that while I don't agree with him on all things, he does carry a high degree of credibility.
You'll want to check his Outlook Newsletter, but the most recent that I picked up today was 11/30 while the one on the website is 11/2. He's calling for gold $2000 by May with silver at $60. He's a bit dire for taste, but he's a very smart guy.
Louise Yamada, who I respect an awful lot, has made similar calls...here's her take on precious metals: "“Gold continues to be in an uptrend in our work. You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475…Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective…we could see $5,200 on gold.”
On the dollar: "The US Dollar as we all know doesn’t stop going down. Literally, we’re going on 10 years of declines:
“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!
In other words you had a rally in 2009 that carried 25%, then in early 2010 the rally was only 19% and the second one in 2010 was only 7% and this time you haven’t even seen 7% with the crisis that has evolved. So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven. Bear in mind that the 80 level for the US dollar is a major 34 year resistance level now having broken down through that in 2006, 2007. So our longer-term declining dollar profile remains in place.”
I agree, I've always liked her and she makes a great case that I've been preaching since about '02. The 200 DMA is still unbroken. Also, most natural resource bull markets run about 15 years or so and she notes that bear mkt in gold ran 20. That would mean that the bull market should last until 2017-2022. Curious as the Austerity is being predicted to last until about 2023.
Here's an article that is interesting. Note the charts comparing the price of real estate or stocks in gold vs. the dollar.
Enjoyed your comments re: some people's mad love of gold; frustration over mostly bailing out bad guys; bogus supply-side tax-cut arguments; disappointment over the infrastructure plan having been shot down; the dismal growth economic outlook if austerity-hawks continue to rule. Agree!
Can't say I see the logic behind your saying that the lack of spending is because bankers aren't lending. Sure, that's part of it, but isn't the lack of spending more due to the behavior of consumers, and their reluctance to spend? . . . reluctance for various reasons: either being unemployed, wanting to pay down debt, realizing they need to build up nest-eggs, stagnant wage growth, lack of confidence due to volatile global markets and political uncertainty?
Can't come close to understanding your fear of the US not being able to pay off its government bonds/"unfunded liabilities", or the specter of hyper inflation resulting from massively "printing money". It seems like a contradiction to fear, on the one hand, that the government may renege on its obligations, and then on the other hand to say that they may print too much money.
More specifically, you said: "I've heard it estimated, that they will effectively have to print so many dollars to keep these promises, that they will halve its value over the next ten years." For that to happen, US inflation would have to average almost 7% a year for the next decade! How is that going to happen as long as consumer demand is stagnant, investment stays low due to excess capacity, unemployment remains high, and governments are following austerity budgets?
"Printing money" is just a metaphor, right? Money that sits in the Fed's reserves (like the QE money) is not going to cause inflation unless someone is actually spending it, is it?
The timing of when to convert to real stuff may also be a strategy of many sovereigns (countries) and central banks. They hold gold reserves and have been accumulating gold reserves. Their ability to print money (QEs) moves gold higher but it may also provide a mechanism to purchase gold.
If you could print "rono-dinaros" or I could print "bee-rinmenbis" you and I might be tempted to buy some gold with these soon to be worthless pieces of paper. Buying gold at $2K/oz with some of the QE in the system seem like a logical hedge for the issuers of the QE. My thought is that the Fed and central banks are providing gold reserves for themselves and their sovereigns with some of this QE.
My conspiratorial mind thinks that if Yamada and others are correct, getting $5k/oz for our little yellow friend would go along way towards paying off indebtedness of all kinds. Every investor who believes gold is going to the moon will aid in this process. I believe this is one way of attacking the world's debt problem...print money...buy gold with the printed money...this will create a scarcity and a demand for gold which forces gold higher...the average investor steps in transferring their wealth into gold at $3K,$4K,$5K/oz...central banks and the Fed sell gold at a predetermine level ($5K/oz)...Fed and CBs pay off sovereign debt...this floods the market with gold...the price of gold tumbles...The Fed and CBs buy gold back on the cheap. All in a days (decade) work.
I believe small investors need to have a strategy that out foxes the foxes. Taking profits along the way so that when things reverse (gold fall from grace) we, small investors, aren't left holding a lot of worthless rocks...or worse, worthless paper.
Sound like you may be out of Europe and Emerging Markets for now? Perhaps ok for the short term, but not for the longer term. A small position would seem to be in order, at least for me. I've been holding gold for sometime now, first with my 1976 Olympic $100 Canadian gold coins and some GLD since 2007 where I've been writing covered calls and getting a nice dividend since I haven't been called yet. Best to you and a successful future.
Help me to understand what you're saying, please. I don't understand how the QE programs could have been used to buy gold.
I believe I'm correct in saying that the Fed could, if it wanted to, simply buy gold with new electronic dollars. It's the QE part that I don't understand.
Didn't the Fed's QE programs entail the buying of long-maturity bonds from the banks and crediting those banks with equal values of interest-paying reserves that were then on deposit with the Fed? I know that people called this "printing money", however, the total amount of money that the banks held was the same before and after these operations.
In any case, how could the Fed have used spent the reserve assets owned by the banks and bought gold with them? What's the connection here?
Separate question: Are there any mutual funds that you think are good at timing the gold market in the way you suggest? Who might these foxes be?
Reply to @Ginko: Like I said, my thoughts here are probably better kept to myself (conspiracies live in the shadows of my mind). Its my doubting side and it probably is full of flawed thinking but humor me a little.
Let's say I'm a too big too fail bank or a highly indebted country. Central banks and the Fed have the ability to assist these two entities with their insolvency problems. Banks and countries have assets. US banks assets were pretty smelly so the Fed back filled with paper reserves to help get the banks healthy again. I contend that the Fed's actions also inflated equity and commodity prices. I also believe that banks bought assets with some of these reserves eventually selling at orchestrated higher levels.
Countries have assets as well. Let's say they are in the form land or reserves of oil, timber, copper, or gold. These reserves could be sold to help pay off a country's debt. A more efficient way to do this would be to sells these assets when they are most valuable. ECB (European Central Bank) will be dealing primarily with sovereign insolvency. My feeling is that the ECB's actions will cause consequences that will be quite different than they have been so far.
My conspiracy theory is that the ECB's QE might impact the price of gold more so than the Fed QEs did. If this is the case and the consequence is that gold moves higher as a result than this orchestrated QE would be very beneficial to a country that has lots of debt and wants to pay off that debt by selling some gold reserves. The QE create a price momentum for gold. Private investors pile in and the price soars. Sovereign sell at elevated price levels and pay off lots more debt with the smaller amount of gold.
My gold allocation is presently in PRPFX, VGPMX and USAGX. Right now gold mining stocks are a bit under priced compared to physical gold. I try to maintain 10% overall portfolio allocation to PM.
Maybe others will have some suggestion of mutual fund managers who incorporate gold using a timing strategy.
Comments
As I go back to the top of this thread and re-read it I am reminded what a great discussion board this is. Thanks for all your viewpoints and thanks for MFO for creating an "off topic" section.
The sharing of view points is priceless. For me, it is often the "off topics" that drive my investing decisions with respect to my choice of mutual funds.
Thanks again for everyone's input! This has become a very long thread and worth re-reading.
Most of our stuff is on cruise control and I'm being very cautious overall. At the same time, I'm more than willing to take a flyer here or there for sh*ts and giggles. And in all honesty, it's starting to smell like things are going to get very interesting over the near term and I smell an opportunity. I'm heavy cash, TIPs, dividend payers, pm's and commodities.
Here's a read from a local coin dealer that happens to publish quite often in Numismatic News. By this I mean that while I don't agree with him on all things, he does carry a high degree of credibility.
http://www.libertycoinservice.com/
You'll want to check his Outlook Newsletter, but the most recent that I picked up today was 11/30 while the one on the website is 11/2. He's calling for gold $2000 by May with silver at $60. He's a bit dire for taste, but he's a very smart guy.
peace,
rono
Hi rono,
Louise Yamada, who I respect an awful lot, has made similar calls...here's her take on precious metals:
"“Gold continues to be in an uptrend in our work. You had a little bit of a consolidation, seasonality would suggest a rise into the fall. The primary support level remains at $1,475…Our next target is $2,000, and we did a gold special in our last piece that suggested from a very long-term perspective…we could see $5,200 on gold.”
On the dollar:
"The US Dollar as we all know doesn’t stop going down. Literally, we’re going on 10 years of declines:
“I think that one of the observations that one has to take into consideration is that with each of the Euro financial crises and our own financial crisis in 2008 to 2009, the dollar has rallied less!
In other words you had a rally in 2009 that carried 25%, then in early 2010 the rally was only 19% and the second one in 2010 was only 7% and this time you haven’t even seen 7% with the crisis that has evolved. So that suggests to us that it (the dollar) is becoming less and less considered a really safe haven. Bear in mind that the 80 level for the US dollar is a major 34 year resistance level now having broken down through that in 2006, 2007. So our longer-term declining dollar profile remains in place.”
http://video.cnbc.com/gallery/?video=3000038922
I agree, I've always liked her and she makes a great case that I've been preaching since about '02. The 200 DMA is still unbroken. Also, most natural resource bull markets run about 15 years or so and she notes that bear mkt in gold ran 20. That would mean that the bull market should last until 2017-2022. Curious as the Austerity is being predicted to last until about 2023.
Here's an article that is interesting. Note the charts comparing the price of real estate or stocks in gold vs. the dollar.
Delation vs. Inflation
http://www.gold-eagle.com/editorials_08/nuez112911.html
The question that this beggars is "When to pull the trigger and start to convert gold into real stuff?"
And here is Gary Dorsch, who I feel is as good as there is on global currencies.
http://www.gold-eagle.com/editorials_08/dorsch112911.html
And so it goes,
peace,
rono
Rono,
Enjoyed your comments re: some people's mad love of gold; frustration over mostly bailing out bad guys; bogus supply-side tax-cut arguments; disappointment over the infrastructure plan having been shot down; the dismal growth economic outlook if austerity-hawks continue to rule. Agree!
Can't say I see the logic behind your saying that the lack of spending is because bankers aren't lending.
Sure, that's part of it, but isn't the lack of spending more due to the behavior of consumers, and their reluctance to spend? . . . reluctance for various reasons: either being unemployed, wanting to pay down debt, realizing they need to build up nest-eggs, stagnant wage growth, lack of confidence due to volatile global markets and political uncertainty?
Can't come close to understanding your fear of the US not being able to pay off its government bonds/"unfunded liabilities", or the specter of hyper inflation resulting from massively "printing money".
It seems like a contradiction to fear, on the one hand, that the government may renege on its obligations, and then on the other hand to say that they may print too much money.
More specifically, you said: "I've heard it estimated, that they will effectively have to print so many dollars to keep these promises, that they will halve its value over the next ten years." For that to happen, US inflation would have to average almost 7% a year for the next decade! How is that going to happen as long as consumer demand is stagnant, investment stays low due to excess capacity, unemployment remains high, and governments are following austerity budgets?
"Printing money" is just a metaphor, right? Money that sits in the Fed's reserves (like the QE money) is not going to cause inflation unless someone is actually spending it, is it?
Cheers,
Ginko
Thanks for the links rono...
On the topic of timing:
The timing of when to convert to real stuff may also be a strategy of many sovereigns (countries) and central banks. They hold gold reserves and have been accumulating gold reserves. Their ability to print money (QEs) moves gold higher but it may also provide a mechanism to purchase gold.
If you could print "rono-dinaros" or I could print "bee-rinmenbis" you and I might be tempted to buy some gold with these soon to be worthless pieces of paper. Buying gold at $2K/oz with some of the QE in the system seem like a logical hedge for the issuers of the QE. My thought is that the Fed and central banks are providing gold reserves for themselves and their sovereigns with some of this QE.
My conspiratorial mind thinks that if Yamada and others are correct, getting $5k/oz for our little yellow friend would go along way towards paying off indebtedness of all kinds. Every investor who believes gold is going to the moon will aid in this process. I believe this is one way of attacking the world's debt problem...print money...buy gold with the printed money...this will create a scarcity and a demand for gold which forces gold higher...the average investor steps in transferring their wealth into gold at $3K,$4K,$5K/oz...central banks and the Fed sell gold at a predetermine level ($5K/oz)...Fed and CBs pay off sovereign debt...this floods the market with gold...the price of gold tumbles...The Fed and CBs buy gold back on the cheap. All in a days (decade) work.
I believe small investors need to have a strategy that out foxes the foxes. Taking profits along the way so that when things reverse (gold fall from grace) we, small investors, aren't left holding a lot of worthless rocks...or worse, worthless paper.
I've been holding gold for sometime now, first with my 1976 Olympic $100 Canadian gold coins and some GLD since 2007 where I've been writing covered calls and getting a nice dividend since I haven't been called yet. Best to you and a successful future.
Bee,
Help me to understand what you're saying, please. I don't understand how the QE programs could have been used to buy gold.
I believe I'm correct in saying that the Fed could, if it wanted to, simply buy gold with new electronic dollars. It's the QE part that I don't understand.
Didn't the Fed's QE programs entail the buying of long-maturity bonds from the banks and crediting those banks with equal values of interest-paying reserves that were then on deposit with the Fed? I know that people called this "printing money", however, the total amount of money that the banks held was the same before and after these operations.
In any case, how could the Fed have used spent the reserve assets owned by the banks and bought gold with them? What's the connection here?
Separate question: Are there any mutual funds that you think are good at timing the gold market in the way you suggest? Who might these foxes be?
Ginko
Like I said, my thoughts here are probably better kept to myself (conspiracies live in the shadows of my mind). Its my doubting side and it probably is full of flawed thinking but humor me a little.
Let's say I'm a too big too fail bank or a highly indebted country. Central banks and the Fed have the ability to assist these two entities with their insolvency problems. Banks and countries have assets. US banks assets were pretty smelly so the Fed back filled with paper reserves to help get the banks healthy again. I contend that the Fed's actions also inflated equity and commodity prices. I also believe that banks bought assets with some of these reserves eventually selling at orchestrated higher levels.
Countries have assets as well. Let's say they are in the form land or reserves of oil, timber, copper, or gold. These reserves could be sold to help pay off a country's debt. A more efficient way to do this would be to sells these assets when they are most valuable. ECB (European Central Bank) will be dealing primarily with sovereign insolvency. My feeling is that the ECB's actions will cause consequences that will be quite different than they have been so far.
My conspiracy theory is that the ECB's QE might impact the price of gold more so than the Fed QEs did. If this is the case and the consequence is that gold moves higher as a result than this orchestrated QE would be very beneficial to a country that has lots of debt and wants to pay off that debt by selling some gold reserves. The QE create a price momentum for gold. Private investors pile in and the price soars. Sovereign sell at elevated price levels and pay off lots more debt with the smaller amount of gold.
My gold allocation is presently in PRPFX, VGPMX and USAGX. Right now gold mining stocks are a bit under priced compared to physical gold. I try to maintain 10% overall portfolio allocation to PM.
Maybe others will have some suggestion of mutual fund managers who incorporate gold using a timing strategy.