Sweep the Leg Wrote: ------------------------------------------------------- > ManMythLegend Wrote: > -------------------------------------------------- > ----- > > He’s just echoing the hedge fund manager > Paulson > > who called for $5,000 Gold. > > No, I actually had no idea he was calling for > $5,000 gold. I was too busy laughing at him for > buying fake Chinese tree companies. > > $5,000 is a popular number out there with many > gold investors though. That seems to be the lower > end of the estimate range in a optimal bullish > gold environment, say 3-5 years out. > > Personally, I feel a little better about $3,000. How do you feel about the idea that $3,000/oz implies that an Olympic pool sized hunk of metal would be worth 1/3 of the world equity market and 1/6 of the world bond market? > Edit: And about the significant pullback this > week, CME has hiked gold margins twice in as many > weeks. 22% last week and 27% yesterday. Why did it not pull back on the hike last week then? They are hiking margins because the trading is becoming more volatile. There is not some CME conspiracy to drive down the price.
Dwight Wrote: ------------------------------------------------------- > How do you feel about the idea that $3,000/oz > implies that an Olympic pool sized hunk of metal > would be worth 1/3 of the world equity market and > 1/6 of the world bond market? I feel like your analysis is slightly off. If gold goes to $3,000 then there are going to be major problems on a global scale. I would expect the equity market would have signficantly decreased while gold prices increase making the proportion much larger. How does that make me feel? Scared. > Why did it not pull back on the hike last week > then? > > They are hiking margins because the trading is > becoming more volatile. There is not some CME > conspiracy to drive down the price. During silver’s run up earlier this year they increased margins seven times in six weeks. It’s a cummulative effect. People can deal with additional margin requirements here and there, but keep raising their capital requirements and they’re going to have to sell off some assets. It’s pretty straightforward. As to conspiracy theories, I think the CME is covering their own ass, not trying to torpedo the gold market. It is strange though, they don’t reduce margins when things settle down. Ask silver traders how that’s going.
------------------------------------------------------- > Sweep the Leg Wrote: > -------------------------------------------------- > ----- > > ManMythLegend Wrote: > > > -------------------------------------------------- > > > ----- > > > He’s just echoing the hedge fund manager > > Paulson > > > who called for $5,000 Gold. > > > > No, I actually had no idea he was calling for > > $5,000 gold. I was too busy laughing at him > for > > buying fake Chinese tree companies. > > > > $5,000 is a popular number out there with many > > gold investors though. That seems to be the > lower > > end of the estimate range in a optimal bullish > > gold environment, say 3-5 years out. > > > > Personally, I feel a little better about > $3,000. Well why $3,000? Any particular reason why gold should get to $3,000 an ounce? I guess the point I’m trying to make is that really gold has no intrinsic value, though obviously it is somewhere north of $0. For an object that has no value of its own, I can’t see how you can even pick a price target - I mean, why not $100,000 an ounce? Would gold be over-valued at $100,000 an ounce, and if so, why? And then, what’s the real difference between $100,000 and $3,000? Or $5,000? Or $10,000?
Sweep the Leg Wrote: ------------------------------------------------------- > I feel like your analysis is slightly off. If > gold goes to $3,000 then there are going to be > major problems on a global scale. I would expect > the equity market would have signficantly > decreased while gold prices increase making the > proportion much larger. How does that make me > feel? Scared. How is my analysis off? I am comparing the value of gold today - which you say should be $3,000 an oz implying all gold in the world is worth $15T total - to the value of every single publicly floated company in the world combined, which is about $50T as valued by the stock market. If you think that all of the world equity markets are massively overvalued then why not just put in huge short positions on every single equity out there? At least that way you don’t have to depend on some other greater fool speculator buying something from you after your investment (gold) has gone parabolic.
@newsuper - It’s definitely tough to put a value on gold. $3,000 is more of a technical medium term mark. But I try to consider a number of factors. Historical inflation-adjusted price, historical parabolic moves and other technicals, current demand trends, cost of oil, currency devaluation, USD hegemony, QE1…x, supply, etc. I look at the appetite for gold currently, and I think it’s only going to get greater. @Dwight - Not gold today. I’m saying $3,000 in the next 12-24 months. And at $15T, I’m comfortable comparing that to a US bond market that’s still twice that size. Equities have their own thing going on. I’m much more certain gold will trend higher over the next few years than I am on the direction of stocks. I don’t generally like to short since it’s expensive, you need to be right quickly, unlevered you can only make 100%, and I just prefer the upside to being long. Being long gold over the last ten years has paid off way better than being short the market. If the Bernake does a $1T QE3 tomorrow anyone short anything is going to get crushed.
^ Fair enough. Though the US bond market yields quite a bit more than gold and you can get your principal and interest back from it without selling your bonds to someone else who must be willing to pay ever more than the last guy… Any thoughts on this chart and why things are different this time? tinyurl.com/3p5nsmp The current gold market bubble is equal in length to the one that ended in the 1980s to within 2 weeks. The previous one went parabolic when the Hunt brothers cornered the silver market and then promptly crashed. Not sure how we could have a repeat of that sort of catalyst to get the last huge pop. Being long gold has paid off better than most things over the past years, but so did long tech in the 90s, real estate in 2000’s and Tulips in the early 1600s. Bulls make money, bears make money, and pigs get slaughtered.
Ack that’s a Tiny Url link that got bleeped out for some reason. Don’t want to post the full one because it is too long.
I see a long term secular bull market for gold and silver, not a bubble. That’s not to say it won’t come to an end at some point though.
So sweep, are you accumulating PHYS?
I have some, but not much. I’m much more bullish on silver, and for the long term I like the silver miners so that’s where most of my money is. I am going to start, very slowly, buying physical gold and silver. That’s actually going to be more for fun. I enjoy collecting and I have a safe that’s been filled with my old comic books for the last 20 years that I could put to better use.
So if you’re long the silver miners, you think they would keep pace if the USD went to hell in a hand basket? And SIVR is your physical silver holding?
Most of the miners are based outside the US, so there’s some insulation from the USD. There are definitely some significant drawbacks to the miners though. They’re stocks after all, so they tend to get dragged down with the rest of the market during rough patches. But, the upside is worth it for me. I think SLW is one of the best positioned companies out there, in any industry, at the moment. There are a lot of other factors that have led me to the miners as well. It all boils up to the fact I think there’s going to be some serious supply issues with silver in the next few years, so I like the guys that get it out of the ground. I like both SIVR and PSLV for silver ETFs. I tend to go with PSLV but it’s just personal preference. I don’t currently own either one.
SLW yes, would have been a better buy in 09’ obviously.
equity_analyst Wrote: ------------------------------------------------------- > bchadwick Wrote: > -------------------------------------------------- > ----- > > I don’t really buy that you are exposed to fiat > > just because in order to redeem your ETF > shares, > > you have to take USD for them. It’s true in a > > literal sense, but as long as things aren’t > > inflating 20% per day, one can hold fiat for > the > > short time in between trades without being > exposed > > to fiat currencies in a meaningful way. > > > > What do you think a collapse is going to look > like? > > There WILL be 20% moves in prices if the > hyperinfation/USD collapse scenario occurs, in > which case, your ETF account might show a value of > $1M USD, but when you cash out your PA, that money > will be worthless. > > It should be noted that these collapses occur in a > matter of hours, so to think you could trade in > and out and not have exposure doesn’t make sense. > > Again, this is the extreme, tail risk scenario > that we are talking about. > > In the meantime, the USD is not going anywhere and > you may make a killing in gold and silver ETF’s, > but at the end of the day, you are still exposed > to the USD when you own any of these or similar > instruments. > > As for the milk, I’ll be paying for my goods in > junk silver, if it hasn’t been confiscated by the > Federal Reserve. You guys are nuts, in a collapse like that you’ll have bigger things to worry about then the value of your assets. Anyone with a predatory mindset would just kill you and take what you have.
Dude_CFA Wrote: ------------------------------------------------------- > You just can’t say whether the price of gold is > expensive or cheap relative to it’s intrinsic > value. Therefore it is speculation and not > investment. A thesis based on macro grounds is > speculation at the end of the day - you are trying > to guess the future. Trading in gold is done on > the voting machine principle rather than the > weighing machine principle. As long as you treat > it as a speculative trade rather than an > investment then fine. From a portfolio point of > view, negative correlation properties may not > always hold although I understand the rationale > why it should versus financial assets. Problem as > we have seen is when investments do not behave as > they should and you have to explain losses to your > investors. This is my favourite post yet in this thread, I echo your sentiments exactly.
bodhisattva Wrote: ------------------------------------------------------- > Dude_CFA Wrote: > -------------------------------------------------- > ----- > > You just can’t say whether the price of gold is > > expensive or cheap relative to it’s intrinsic > > value. Therefore it is speculation and not > > investment. A thesis based on macro grounds is > > speculation at the end of the day - you are > trying > > to guess the future. Trading in gold is done on > > the voting machine principle rather than the > > weighing machine principle. As long as you > treat > > it as a speculative trade rather than an > > investment then fine. From a portfolio point of > > view, negative correlation properties may not > > always hold although I understand the rationale > > why it should versus financial assets. Problem > as > > we have seen is when investments do not behave > as > > they should and you have to explain losses to > your > > investors. > > > This is my favourite post yet in this thread, I > echo your sentiments exactly. I echo you Bodhisattava
If there was only another time in US history that was very similar to now that we could learn from…oh wait, there was… http://thecrowdedmarket.blogspot.com/2011/08/fools-gold.html
I’m deeply disappointed in this forum. If there’s ONE idea that the CFA stresses more than any other, it’s discounted cash flow. Why on earth are people going crazy for a largely useless yellow metal? The finance gods are surely laughing. Also, here’s a recent quote I found from Buffett: “Look, you could take all the gold that’s ever been mined, and it would fill a cube 67 feet in each direction. For what that’s worth at current gold prices, you could buy all – not some, all – of the farmland in the United States. Plus, you could buy 10 ExxonMobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?”
Gold is a medium of exchange that is widely accepted and is hard to tamper with, particularly in an environment where central banks have strong incentives to print up more paper currencies. The price goes up in response to two things: The value of “not being easily tampered with” is rising relative to other currencies. When other (particularly developed) economies get themselves on a more stable footing, the price is likely to go down again. It’s important to be prepared for that and treat gold as a potentially volatile asset. The difference between taking intelligent exposure and being caught in a true bubble is that the bubble mindset does not have a scenario or signals to watch for that would signal the end of a rise. Emerging markets have two dynamics: a) gold is being used by wealthier middle classes as a consumption product (jewelry) to signal success to the world. There are 2 billion plus folks in China and India alone. B) inflation in emerging markets is driving up gold hoarding there too. This can make for bubble like behavior, but, unlike real estate, many gold exposures are substantially more liquid. The CFA curriculum does spend a lot of time doing DCF analysis, but the CFA curriculum is not fundamentalist on this point. After all, if the market is efficient, why bother doing DCF. The CFA also talks a lot about portfolio construction, and a gold position is entirely consistent with a diversified portfolio. Remember also that efficiently priced nonrenewable commodities should rise at the rate of interest, so they should deliver some capital gains over time. And if they are not efficiently priced, then there is an opportunity to take a position based on a view, provided that you have taken appropriate risk controls.
mp3bu Wrote: ------------------------------------------------------- > I’m deeply disappointed in this forum. If there’s > ONE idea that the CFA stresses more than any > other, it’s discounted cash flow. Why on earth > are people going crazy for a largely useless > yellow metal? The finance gods are surely > laughing. So the CFAI churns out Sheeple? Hopefully everyone takes what they learned from the curriculum and applies it the way they best see fit. I’m extremely disappointed some people can’t recognize an opportunity just because a product doesn’t produce income. Seems rather limited to me… No one is forcing anyone to invest in gold. If it’s not something you’re comfortable with, feel free to invest elsewhere.