Tuesday, November 3, 2009


Marc Faber: ‘Gold a Bargain Compared to S&P500′

Well known economic analyst Marc Faber still likes gold, especially when compared to equity prices. In his October 2009 Gloom Boom & Doom report, Faber discusses his long-term outlook for the shiny yellow metal:

Some pundits will argue that precious metals are expensive, but this isn’t my view. Why would anyone not own some gold, rather than US dollars, when interest rates are near zero? Dollars can and will be printed en masse, whereas the supply of precious metals is extremely limited.

For those still trying to decide whether gold/silver, Marc Faber lays out a pretty simple and effective argument. In addition to the historical evidence for a depreciating dollar, the current policies instituted by the Obama administration, The Fed and Treasury clearly point to not only continued degradation of the US dollar, but an acceleration in its declining purchasing power. Dr. Faber is not saying one should put all of their net worth into gold, but securing at least a part of personal assets with precious metals will certainly not hurt. Though Faber focuses on the US dollar in this particular GBD Report, he has repeatedly stated that gold will rise against most paper currencies for the same reasons as described above. (more)

Here are 10 compelling reasons why gold is going to do well this year.

The Stimulus Effect: Including $1 trillion in cash infusions, the stimulus plan will pump $9.7 trillion into the economy, according to Bloomberg. As the Globe & Mail reports flatly, “Many believe that the monetary stimulus efforts will cause a spike in inflation,” driving gold higher.

COMEX Traders Predict $1,600 Gold… by December: If gold trades at or above $1,600 by December, some 100,000 call option contracts will be “in the money.” Big-money players Goldman Sachs and JPMorgan are reportedly helping to drive the action, ahead of a huge purchase of gold futures contracts. (more)

When to Sell Your Gold

I think we’re still in the early stages of what could become a gold mania. While there are a lot more people talking about gold now and the gold price is close to all-time highs, it remains an underowned asset. Only a small fraction of investors own any gold at all. Hardly any institutions own any gold, either. As we now have 10 years of market-beating data for gold, it’s going to attract more attention.

I think that attention will eventually carry it to a price of $2,000-3,000 pretty easily — maybe more. So far, gold has had a steady march up since 2000. The last leg, the mania phase, always has a rapid and explosive move before it’s all over. We’re not there yet.

As for what will pull gold back down, I think a strong economic recovery could derail gold’s story for a time, but as long as the U.S. dollar makes its way to new depths over time, I think the gold price will drift higher. (more)

BNN With Larry Berman

click here to watch

It is Japan we should be worrying about, not America

he rocketing cost of insuring against the bankruptcy of the Japanese state is telling us that the model has smashed into the buffers. Credit default swaps (CDS) on five-year Japanese debt have risen from 35 to 63 basis points since early September. Japan has suddenly decoupled from Germany (21), France (22), the US (22), and even Britain (47).

Regime-change in Tokyo and the arrival of Yukio Hatoyama's neophyte Democrats – raising $550bn (£333bn) to help fund their blitz on welfare and the "new social policy" – have concentrated the minds of investors at long last. "Markets are worried that Japan is going to hit a brick wall: the sums are gargantuan," said Albert Edwards, a Japan-veteran at Société Générale. (more)

Analyst Calls for General Fraud Audit of Goldman Sachs Mortgage Securitizations

Do not mess with Janet Tavakoli.

Yesterday, I linked to an anonymous blogger/Goldman apologist who wrote that Tavakoli "has always been more bark than bite. Being provocative is part of her shtick."

Janet has since written a further analysis of the Goldman-AIG situation. She not only has bit, and pretty much tore the Goldman apologist's leg off, but she is glowering at Goldman so fiercely that if I were Goldman I really wouldn't move in her direction, and I would really keep my mouth shut and try to get the same out of Goldman apologists. Goldman should consider itself lucky that she is only arguing that: (more)

Peter Schiff on Fox Business: Double-Dip Recession

Hedge Giant Jones Turns Gold Bug

Hedge fund icon Paul Tudor Jones has turned bullish on gold, based on concern of rising inflation and expectations of strong demand from central banks and exchange traded funds.

“I have never been a gold bug,” Jones, head of Tudor Investment, wrote in a letter to investors obtained by Bloomberg.

“It is just an asset that, like everything else in life, has its time and place. And now is that time.”

Jones is joined in his bullishness toward gold by two other hedge fund heavies, John Paulson and David Einhorn. The precious metal has risen to record highs above $1,070 an ounce in recent days. (more)