Tuesday, July 9, 2013
Monday, July 8, 2013
Dow Will Hit 60,000 in 20 Years: Ron Baron
http://finance.yahoo.com/news/dow-hit-60-000-20-124549767.html
"Money is running from bonds and gold. I think people investing in bonds can have significant capital depreciation over the next several years," he said in an interview.
"Companies have almost doubled their earnings in the past 13 years while stock prices have increased only about 25 percent," he said.
On June 20, a day when investors were heading for the hills and the market was down sharply, Ron Baron's Baron Capital saw its strongest inflows of the year.
The markets plunged that day after Federal Reserve Chairman Ben Bernanke indicated the central bank was getting ready to exit its extreme monetary easing program.
When asked about the recent equity market sell-off that accompanied Fed
fears, the renowned buy-and-hold investor stressed buying and selling
on news is not a good strategy.
(Read More: One Eye on Earnings, the Other on Bonds ) "Money is running from bonds and gold. I think people investing in bonds can have significant capital depreciation over the next several years," he said in an interview.
"Everyone thinks they are advantaged by trading on news. They are not.
This is why the average investor in mutual funds makes 3 percent per
year while the average mutual fund earns 7 percent per year." Baron
added.
"Investors who base their buy and sell decisions on
current news generally sell and buy at exactly the wrong times. It's
crazy," he continued."Companies have almost doubled their earnings in the past 13 years while stock prices have increased only about 25 percent," he said.
Expecting stock market returns for the next 20 years to approximate the 7 percent annual returns earned by U.S. stocks for generations, Baron quoted Albert Einstein that "the most powerful force in the universe is compound interest."
He said in his opinion based on the compounding effect, "the Dow Jones will be 30,000 in 10 years, 60,000 in 20 years."
Baron is putting his money behind his words. Tuesday, July 2, 2013
Mish Buys a Basket of Miners
http://globaleconomicanalysis.blogspot.com/2013/06/mish-buys-basket-of-miners.html
Most of my investment funds are under management at Sitka Pacific. I also have investments with GoldMoney and some other assets from my late wife Joanne.
I believe precious metal miners represent true value, but I cannot state when the market will come to the same conclusion.
Last week I bought a basket of miners with a significant amount of money. Many of these stocks are also held in various Sitka Pacific strategies.
Mish Miner Basket
General Comments
As you can see, most of the investment is with major mining companies that pay substantial dividends. PEs are trailing, not optimistic or unrealistic forward estimates. Price per book value is low in most cases. Each symbol is a clickable link to Yahoo!Finance statistics.
Gold Stock Comments
Silver Stock Comments
As you can see I weighted the basket 82% gold to 18% silver which reflects my belief that gold is a far safer play. None of these picks constitutes a recommendation in any way. Please do your own due diligence.
Most of my investment funds are under management at Sitka Pacific. I also have investments with GoldMoney and some other assets from my late wife Joanne.
I believe precious metal miners represent true value, but I cannot state when the market will come to the same conclusion.
Last week I bought a basket of miners with a significant amount of money. Many of these stocks are also held in various Sitka Pacific strategies.
Mish Miner Basket
| Symbol | Average Price | Initial Weight | PE | Dividend | Yield |
|---|---|---|---|---|---|
| NEM | $34.08 | 30% | 10.06 | $1.40 | 4.10% |
| GG | $29.18 | 15% | 15.70 | $0.60 | 2.10% |
| ABX | $20.64 | 15% | NA | $0.80 | 4.00% |
| GDX | $29.60 | 10% | 11.00 | NA | 1.20% |
| GLDX | $16.73 | 5% | NA | NA | 6.52% |
| HMY | $4.08 | 5% | 11.73 | $0.10 | 2.30% |
| SBGL | $3.38 | 2% | NA | NA | NA |
| SLW | $23.72 | 9% | 14.22 | $0.48 | 2.00% |
| PAAS | $12.65 | 9% | 42.38 | $0.50 | 4.10% |
General Comments
As you can see, most of the investment is with major mining companies that pay substantial dividends. PEs are trailing, not optimistic or unrealistic forward estimates. Price per book value is low in most cases. Each symbol is a clickable link to Yahoo!Finance statistics.
Gold Stock Comments
- NEM - Newmont Mining: My best value play and weighted accordingly. Price/book is a mere 1.19 and I have no reason to believe book value is overstated. Trailing PE is 10.04 and the dividend yield is 4.10%. What's not to like?
- GG - Goldcorp: A major Canadian gold miner with a respectable PE and dividend. Goldcorp trades right at book value (.99 to be precise).
- ABX - Barrick Gold Corporation: Another major Canadian gold miner with a respectable dividend. Earnings were negative last quarter due to writedowns. Dividend appears solid. Price/per book is a mere .88 (less than book value).
- GDX - Market Vectors Gold Miners ETF. Rather than pick too many additional stocks and following them all, I put 10% of my basket into a gold miners ETF basket.
- GLDX - Global X Gold Explorers ETF. This is a speculative play on gold explorers. Some of the companies in the ETF are likely to go bust. Hopefully some will strike it big. I weighted this according to risk, with only 5% of my basket.
- HMY: Harmony Gold Mining Company Limited: This is a South African mining company that stands to appreciate from its gold mining operations and also from a falling Rand.
- SBGL - Sibanye Gold Limited: This is another South African miner and arguably my most speculative play. It is weighted accordingly at 2% of the basket.
Silver Stock Comments
- SLW - Silver Wheaton Corp: SLW has a respectable PE and pays a reasonable dividend. It is a play on the price of silver which I expect to recover at some point.
- PAAS - Pan American Silver Corp: PAAS is a major silver producer with a nice dividend yield of 4.10%. Pan American is trading at 68% of book value.
As you can see I weighted the basket 82% gold to 18% silver which reflects my belief that gold is a far safer play. None of these picks constitutes a recommendation in any way. Please do your own due diligence.
Whip inflation now
http://en.wikipedia.org/wiki/Whip_inflation_now
Whip Inflation Now (WIN) was an attempt to spur a grassroots movement to combat inflation, by encouraging personal savings and disciplined spending habits in combination with public measures, urged by U.S. President Gerald Ford. People who supported the mandatory and voluntary measures were encouraged to wear "WIN" buttons,[1] perhaps in hope of evoking in peacetime the kind of solidarity and voluntarism symbolized by the V-campaign during World War II.
The campaign began in earnest with the establishment by the 93rd Congress, of the National Commission on Inflation, which Ford closed with an address to the American people, asking them to send him a list of ten inflation-reducing ideas.[2] Ten days later, Ford declared inflation "public enemy number one" before Congress on October 8, 1974, in a speech entitled "Whip Inflation Now", announcing a series of proposals for public and private steps intended to directly affect supply and demand, in order to bring inflation under control. "WIN" buttons immediately became objects of ridicule; skeptics wore the buttons upside down, explaining that "NIM" stood for "No Immediate Miracles," or "Nonstop Inflation Merry-go-round," or "Need Immediate Money."
In his book The Age of Turbulence, Alan Greenspan as the Chairman of the Council of Economic Advisors recalled thinking "This is unbelievably stupid" when Whip Inflation Now was first presented to the White House. According to historian Yanek Mieczkowski, the public campaign was never meant to be the centerpiece of the anti-inflation program.[3]
Whip Inflation Now (WIN) was an attempt to spur a grassroots movement to combat inflation, by encouraging personal savings and disciplined spending habits in combination with public measures, urged by U.S. President Gerald Ford. People who supported the mandatory and voluntary measures were encouraged to wear "WIN" buttons,[1] perhaps in hope of evoking in peacetime the kind of solidarity and voluntarism symbolized by the V-campaign during World War II.
The campaign began in earnest with the establishment by the 93rd Congress, of the National Commission on Inflation, which Ford closed with an address to the American people, asking them to send him a list of ten inflation-reducing ideas.[2] Ten days later, Ford declared inflation "public enemy number one" before Congress on October 8, 1974, in a speech entitled "Whip Inflation Now", announcing a series of proposals for public and private steps intended to directly affect supply and demand, in order to bring inflation under control. "WIN" buttons immediately became objects of ridicule; skeptics wore the buttons upside down, explaining that "NIM" stood for "No Immediate Miracles," or "Nonstop Inflation Merry-go-round," or "Need Immediate Money."
In his book The Age of Turbulence, Alan Greenspan as the Chairman of the Council of Economic Advisors recalled thinking "This is unbelievably stupid" when Whip Inflation Now was first presented to the White House. According to historian Yanek Mieczkowski, the public campaign was never meant to be the centerpiece of the anti-inflation program.[3]
Ritholz on Gold and on Making Predictions
http://globaleconomicanalysis.blogspot.com/2013/07/ritholz-on-gold-and-on-making.html
Grave Dancing
Ritholtz claims to be agnostic regarding gold. I suggest his current hyperbole proves otherwise, even though he once liked the metal.
For the record, Ritholtz is a good guy, we just happen to disagree regarding gold.
And I certainly side with Ritholtz regarding the folly $10,000 or even $3,000 gold predictions by hyperinflationists, especially when people put timeframes on them.
But not every gold fan is a hyperinflationist or an inflationist of any kind. As a staunch deflationist, as well as someone who is definitely not agnostic regarding gold, I am proof enough.
And who is it now that is coming out of the woodwork to dance on the grave of gold? It's a Plague of Gold Bears Now Say "Gold Unsafe at Any Price".
What's the Real Long-Term Driver for Gold? Click on the preceding "Plague of Gold Bears" link to find out.
We are firmly convinced that the fundamental argument in favor of gold remains intact. There exists no back-test for the current era of finance. Never before have such enormous monetary policy experiments taken place on a global basis. If there was ever a time when monetary insurance was needed, it is today.
Gold is the only liquid investment asset that neither involves a liability nor a creditor relationship. It is the only international means of payment independent of governments, and has survived every war and national bankruptcy. Its monetary importance, which has established and manifested itself in the course of the past several centuries, is in the process of being rediscovered.
Contrary to 1979/1980, the current gold bull market will unlikely end due to a sudden strong rise in interest rates, as the balance sheets of governments, households and corporations are tainted by huge debt. In the current environment, this would lead to a deflationary depression. According to the BIS, the combined debt burden of governments, households and non-financial corporations in the 18 OECD core countries has risen from 160% of GDP in 1980 to 340% of GDP in 2012.
In order to counter the current problems in the financial sector, but also in the real economy, the Fed, the Bank of Japan, the Bank of England and the ECB are going to continue to hold interest rates at a low level. There has always been a strong link between negative real interest rates and the gold price.
Grave Dancing
Ritholtz claims to be agnostic regarding gold. I suggest his current hyperbole proves otherwise, even though he once liked the metal.
For the record, Ritholtz is a good guy, we just happen to disagree regarding gold.
And I certainly side with Ritholtz regarding the folly $10,000 or even $3,000 gold predictions by hyperinflationists, especially when people put timeframes on them.
But not every gold fan is a hyperinflationist or an inflationist of any kind. As a staunch deflationist, as well as someone who is definitely not agnostic regarding gold, I am proof enough.
And who is it now that is coming out of the woodwork to dance on the grave of gold? It's a Plague of Gold Bears Now Say "Gold Unsafe at Any Price".
What's the Real Long-Term Driver for Gold? Click on the preceding "Plague of Gold Bears" link to find out.
We are firmly convinced that the fundamental argument in favor of gold remains intact. There exists no back-test for the current era of finance. Never before have such enormous monetary policy experiments taken place on a global basis. If there was ever a time when monetary insurance was needed, it is today.
Gold is the only liquid investment asset that neither involves a liability nor a creditor relationship. It is the only international means of payment independent of governments, and has survived every war and national bankruptcy. Its monetary importance, which has established and manifested itself in the course of the past several centuries, is in the process of being rediscovered.
Contrary to 1979/1980, the current gold bull market will unlikely end due to a sudden strong rise in interest rates, as the balance sheets of governments, households and corporations are tainted by huge debt. In the current environment, this would lead to a deflationary depression. According to the BIS, the combined debt burden of governments, households and non-financial corporations in the 18 OECD core countries has risen from 160% of GDP in 1980 to 340% of GDP in 2012.
In order to counter the current problems in the financial sector, but also in the real economy, the Fed, the Bank of Japan, the Bank of England and the ECB are going to continue to hold interest rates at a low level. There has always been a strong link between negative real interest rates and the gold price.
Monday, July 1, 2013
The New York Times had the definitive take on the vicious sell off in gold (Now and Then)
The New York Times had the definitive take on the vicious sell off in gold. To summarize one of their articles:
Two
years ago gold bugs ran wild as the price of gold rose nearly six
times. But since cresting two years ago it has steadily declined, almost
by half, putting the gold bugs in flight. The most recent advisory
from a leading Wall Street firm suggests that the price will continue to
drift downward, and may ultimately settle 40% below current levels.
The
rout says a lot about consumer confidence in the worldwide recovery.
The sharply reduced rates of inflation combined with resurgence of
other, more economically productive investments, such as stocks, real
estate, and bank savings have combined to eliminate gold's allure.
This
analysis provides a good representation of the current conventional
wisdom. The only twist here is that the article from which this summary
is derived appeared in the August 29, 1976 edition of The New York
Times. At that time gold was preparing to embark on an historic rally
that would push it up more than 700% a little over three years later. Is
it possible that the history is about to repeat itself?
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