Tuesday, September 27, 2011

Famed Investor Wouldn't Be Surprised by 40% Drop in Gold Prices (GLD)

September 26, 2011 12:36 PM EDT

After moving 28 percent higher from June to early September, gold is now down about 17 percent to below $1,600 per ounce.


And one person of note thinks there's more downside in store -- much more downside.


In a CNBC interview Monday, "Gloom, Boom, and Doom Report" author and contrarian investor Marc Faber thinks gold could bottom at $1,500 per ounce, but sees the metal dropping to as low as $1,000 to $1,200 per ounce should $1,500 not hold. Faber said he wouldn't be surprised to see a 40 percent drop in gold.


While Faber said short-term market action might push gold higher, he's still bearish on the long-term potential for gold and equities. He said a longer slow down will follow the current recovery.


Though much media attention has been focused on Greek debt, Faber says markets slumping can be traced to a slowdown in China. "You have a capital goods level where capital spending increases dramatically and companies keep spending to a high level, but because of the acceleration, it can lead to recession simply by the economy growing at a steady rate, and I think we are at this point in China," Faber said.


Gold is off nearly $33 to $1,605.10 per ounce on the COMEX. The gold-tracking ETF, SPDR Gold Shares (NYSE: GLD), is 2.5 percent lower on the session.


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Gold: Still a Safeguard Against Problems in the Financial Markets - Daily Reckoning - American Edition

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We don’t mean to frighten you today, dear reader, but an influential gentleman whose opinion we respect thinks it might end up going much lower.


Heh, not that he’s selling.


Gold traded as low as $1,532 overnight before recovering to $1,603 as of this writing.


That’s a $50 loss tacked onto Friday’s $100 loss. Even examining the action in the context of a one-year chart, it looks dramatic…


Spot Prive of Gold Over the Last 12 Months


As of today, people who want to trade gold on the Comex once again have to post additional margin to their accounts.


Fueling the drop on Friday was an announcement by Comex parent CME Group: Gold margins were rising 21%. In addition, silver margins were raised 18% and copper, 16%.


An initial position on a 100-ounce gold contract will cost $11,475 up front.


This is the third margin increase for gold since August. Put together, the increases have totaled 55%.


And today? The Shanghai Gold Exchange is following the Comex’s lead and raising margin requirements on precious metals.


“Even with the recent correction,” comments Byron King, “gold is still priced within its long-term trading range” — as evidenced by this chart:


Gold Price Since 2000


At $1,500, gold would remain within the “channel” that’s been in place for nearly three years.


“We overshot on the upside when we went over $1,900,” Vancouver veteran Marc Faber told CNBC today. “We’re now close to bottoming at $1,500” — the bottom of the aforementioned channel, as it turns out.


But… “If that doesn’t hold, it could bottom to between $1,100-1,200.”


Not that Faber is worried. He’s been buying in since — well, probably around the same time we recommended our Trade of the Decade at the start of 2000, when gold was near $300.


So here’s a little historical perspective: Gold first broke through $1,000 in March 2008, touching $1,010 briefly. That turned out to be a high point that wouldn’t be exceeded for 18 months.


By November, the Panic of 2008 was in full swing, and gold was at $715. That’s a 29% drop.


By September 2009, gold had reclaimed $1,000…and didn’t look back.


“With history as our guide,” says Matt Insley at Daily Resource Hunter, “it’s clear that gold’s been doing this sort of thing all along its massive run-up — since 2005 it’s seen five similar corrections.”


So what now? Are we in line for another $29% drop… which would take us to $1,350? Or something steeper, as Marc Faber warns about? Will it take another 18 months for gold to reclaim the old highs and break through $1,900?


The good news is that you don’t have to know the answers to these questions to continue feeling confident about holding gold. “Nothing has changed since last week in the physical gold market,” Mr. Insley continues. “There wasn’t a mother lode discovery, and there’s clearly no substitute. So other than a market correction, gold is still high on our list of investable resources.”


“I’d buy every month a little bit of gold,” Faber advised back on Sept. 6, when gold was at its (for now) all-time high of $1,921. “When you buy gold, it’s an insurance against systematic failure and problems in the financial markets.”


Of which we still have plenty.


Addison Wiggin
for The Daily Reckoning

Author Image for Addison Wiggin

Addison Wiggin is the executive publisher of Agora Financial, LLC, a fiercely independent economic forecasting and financial research firm. He’s the creator and editorial director of Agora Financial’s daily 5 Min. Forecast and editorial director of The Daily Reckoning. Wiggin is the founder of Agora Entertainment, executive producer and co-writer of I.O.U.S.A., which was nominated for the Grand Jury Prize at the 2008 Sundance Film Festival, the 2009 Critics Choice Award for Best Documentary Feature, and was also shortlisted for a 2009 Academy Award. He is the author of the companion book of the film I.O.U.S.A.and his second edition of The Demise of the Dollar… and Why it’s Even Better for Your Investments was just fully revised and updated. Wiggin is a three-time New York Times best-selling author whose work has been recognized by The New York Times Magazine, The Economist, Worth, The New York Times, The Washington Post as well as major network news programs. He also co-authored international bestsellers Financial Reckoning Day and Empire of Debt with Bill Bonner.



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Monday, September 26, 2011

Gold’s free fall is far from over, expert warns

Gold prices are down more than 10% in the past week. How are big gold-related stocks faring? CNBC's Courtney Reagan takes a look.

Earlier this month, the price of gold skyrocketed to $1,900 an ounce. Today, the gold meltdown continued, as the price plummeted another 2 percent to $1,600 an ounce.

So much for all those commercials for investing in gold. And the slide is not over, Marc Faber, author of the Gloom Boom & Doom Report.

"We overshot on the upside when we went over $1,900," the fund manager, who has 25 percent of his portfolio in gold, told CNBC.

More from CNBC:

"We're now close to bottoming at $1,500, and if that doesn't hold it could bottom to between $1,100-$1,200."

Faber, who said that the recent sell-off had come about following nervousness about industrial metals, added that a 40 percent correction wouldn't surprise him.

U.S. gold suffered its biggest daily drop in more than five years on Friday.

Recent falls in the price of gold came after a sustained rally which saw some predict that prices would hit $2,000 or even higher.

While gold is considered a safe-haven investment, investors have been turning to the U.S. dollar and Treasury securities.

Gold has lost 10% of its value in the past month. Fund manager and market bear Marc Faber tells CNBC prices are headed lower.


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Wednesday, September 21, 2011

Q&A: Marc Faber, Global investment analyst - Business Standard

A renowned global investor and author of The Gloom, Boom & Doom report, Marc Faber, believes the BSE Sensex may not go down to the 8,000 levels, but it would come down from the current levels. He spoke to Jitendra Kumar Gupta on gold prices and the economic crisis, which he believes could be bigger than the one seen in 2008. Edited excerpts:


About six to eight months earlier, many economists were saying a dollar crisis may only be seen by 2012 or 2013. Is the time shortening, in the light of renewed concerns over the US and EU economies?
We never really had a recovery in the Western world. The stock markets went up because of the money printing and support in 2009. My view is that they can probably muddle through for another two-three years by piling up the fiscal deficit or printing more money. I do not know when it will happen in 2012 or in 2018, but the next crisis will be worse than the one in 2008. I do not think it will happen overnight but I think, over time, the value of paper money will fall in a low interest and high inflationary scenario.


Has QE3 (the third round of quantitative easing, in the US) started and what do you expect from it?
This time, I think they may not make an official announcement. But some kind of a silent QE3 is already underway, considering that M1 growth (cash and near-cash deposits) has accelerated to the fastest expansion in 35 years. I have no idea what the Keynesian interventionists, led by Bernanke, Krugman & Co will come up with next, except that they will further pursue their erroneous economic policies. The only question is how far they will move and what the impact might be on asset markets.


What does this mean for the various asset classes, especially on commodity prices?
I think cash and bonds are not very desirable. Equity and precious metals look okay. However, there will be more volatility. The prices of anything, whether commodity or stocks, depend on many factors. As far as commodities are concerned, I think the global economy is slowing significantly and the demand for industrial commodities will not grow that fast.


Can Indian markets remain insulated from what could happen in the Western world?
Indian and global markets are correlated. If the global markets slow down, the Indian markets, too, would slow down.


What is your asset allocation at this point?
I have 25 per cent in real estate and real estate-related equities here in Asia, 25 per cent in gold, 25 per cent in stocks and 25 per cent in cash.


Is it possible for Indian markets to drift lower, below 2008-09 levels?
I think the Indian markets will not go lower to those 2008 levels, but would go lower from the current levels to, may be, 12,000-15,000 levels. From their low in 2009, the Indian markets till recently rose to 21,000, which is almost 100 per cent returns. I do not call this a bear market rally, but a bull market. We now have had the beginning of a bear market.


Are you looking at adding equities at current levels?
How can I buy more equities if I think the markets will go lower? For someone who has no equities at all, I would tell to start buying near 12,000-levels. And, if someone has 100 per cent of his money in stock, then I will say, sell some of it.


Is there more upside in gold?
I have a reason. I have been writing every month that people should accumulate gold. Yes, there is more room for gold to appreciate further. Most people do not own gold. Most people think gold prices are very high. Today, the gold price is cheaper than in the 1980s when it was around $400 an ounce, considering the increase in global monetary base and the US money printing.


Will that hold true for silver, too?
Gold and silver will move in the same direction, but I prefer gold, though I have friends who prefer silver.


What will drive the gold price?
Gold bottomed out in late January and peaked out on August 23. My first thought was that the closely correlated move between treasury bonds (T-bonds) and gold was illogical. Then, I considered that investors panicked into T-bonds because of a scare that the financial system would implode (flight to safety). For the same reasons, investors rushed into gold. In other words, the gold buyers were not buying gold because of inflation fears but because they were afraid of a systemic failure.


I think it is important for investors to understand the role of gold as an insurance against a systemic failure and not necessarily as a hedge against inflation. I should add that I own gold for both reasons, believing that it will perform well in both an inflationary and deflationary environment. In addition, I am not selling any gold but traders should realise the gold price is extremely overbought and that it could easily drop toward the 200-day moving average – that is, between $1,500 and $1,600 (not a prediction). As I just said, I am not selling my gold because I expect much higher prices in future. But, near term, both T-bonds and gold appear vulnerable to a more serious correction.


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Investing in a little light research could prove to be lucrative - The National

Richard Dean

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Just finished a cracking book on how to make money like Warren Buffett: The Little Book of Value Investing by Christopher Browne.

Most books on Mr Buffett - and I've read a few - are by some third-rate author desperately struggling to cash in on the great man's celebrity. Not this one. Browne's father worked closely with the Sage of Omaha, acting as stockbroker when Mr Buffett bought Berkshire Hathaway half a century ago. Young Christopher inherited Mr Buffett's investing principles along with the Browne family firm, and used both to great effect.

Christopher Browne died in 2009. His legacy: millions of dollars; an estate in the Hamptons; and a pocket guide to get-rich-slow.

The Little Book argues that making money in the market is easy. First, avoid so-called growth stocks that are darlings of the financial press (think Groupon today, or pretty much any over-hyped tech stock of the 1990s). Second, invest in solid, stodgy companies with stable earnings - but only when the share price is low. "Buy stocks as you would buy groceries - when they are on sale."

All well and good in Nebraska. But can it work in the Gulf region?

Let's find out.

Here's one of Browne's bargain-hunting tricks: find companies with a price/book (P/B) ratio below 1. In simple terms, book value is the cash you'd be left with if you shut the company tomorrow, selling all the assets and paying all the debts. If the book value is more than the firm's stock market value, you could be on to a winner.

I took Browne's advice and ran a search of all 200 companies in Bloomberg's GCC stock market index (for the record, I searched using tangible book value, a more stringent measure that strips out fluffy assets such as goodwill). Here's a list of the 10 cheapest stocks in the Gulf right now, by price/book value: Abu Dhabi National Hotels 0.31; Dubai Investments 0.33; Deyaar 0.40; Sudan Telecom 0.42; Agility 0.52; RAK Ceramics 0.53; Sorouh 0.54; Emaar 0.55; United Development Company 0.66; Union National Bank 0.67 (source: Bloomberg).

Browne warns this is only a rough guide to finding value stocks - plenty of bad companies have had low P/B ratios. But if we scratch below the surface of the Gulf's cheapest three shares, we find at least two of them stand up to scrutiny:

Abu Dhabi National Hotels (ADNH) I've been a big fan of this stock for a while, so I got a warm, fuzzy glow when it topped the book value charts. ADNH owns and manages hotels across the emirates. It is well run, with a track record of profitability dating back to the 1970s. The hotel division is the bedrock of the business, but it actually generates more revenue from a catering joint-venture with the global firm Compass. Analysts predict a steady increase in revenue and profit, as Abu Dhabi's tourism sector grows, and rate the stock a buy.

With a price/earnings ratio of just 7 based on next year's forecast earnings, ADNH looks a strong candidate.

Dubai Investments Mr Buffett would surely love this company. Dubai Investments owns the kind of old-fashioned, stable, cash-generating businesses he covets: a glass factory; a dairy farm; a drug maker; aluminium extrusion; edible oil. The list goes on.

Sure, Dubai Investments has faced challenges lately. Profit slumped to Dh239 million (US$65m) in the first half of this year - down almost 50 per cent year-on-year. The Dubai property slowdown and the Arab Spring have both taken their toll.

But neither presents a long-term threat. Analysts at TAIB bank have a "buy" rating on the stock, forecasting net profit of Dh1 billion by 2013.

That equates to a mouth-watering price/earnings ratio of less than 3, based on today's market value.

Deyaar Development Here we see the limitations of book value laid bare. On the surface, Deyaar looks like a screaming buy - a property portfolio trading a discount of 60 per cent.

But hold on. Last year, Deyaar racked up losses of Dh2.3bn - more than its market value - mainly due to write-downs and impairments. It's creeping back into profit this year as it completes tower blocks in Dubai, but doubts remain about what kind of company Deyaar will look like in five years.

Saeed Al Qatami, the chief executive, says the new strategy is to focus on low and middle-income housing in the UAE and surrounding region.

Investors and analysts are yet to be convinced.

Irfan Ellam at Al Mal Capital has a "hold" recommendation on the stock. He notes the attractive P/B ratio, but says a "lack of strategic clarity" makes it hard to see where long-term growth is coming from.

Richard Dean hosts Tonight on Dubai Eye 103.8 FM and is the author of Sink or Swim? How to Stay Afloat in Tough Economic Times: Business Lessons from the UAE. He does not own any of the shares mentioned in this article.

business@thenational.ae


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Tuesday, September 20, 2011

Marc Faber Sees No Bubble in Gold as Central Banks Print Money - San Francisco Chronicle

Gold's rally above $1,900 an ounce shows no signs of a "bubble" as central banks continue to boost money supply that has helped spur bullion to a record, according to investor Marc Faber.

"I don't think that gold is in a bubble," Faber, publisher of the Gloom, Boom and Doom report, said in a phone interview yesterday from Chiang Mai, Thailand. "When you buy gold, it's an insurance against systematic failure and problems in the financial markets."

Faber's comments come amid predictions gold may tumble after surging 35 percent this year and touching a record $1,913.50 an ounce on Aug. 23, as investors sought haven asset amid declining equities and weakening currencies. Speculative demand from investors had pushed the gold market into a "bubble that is poised to burst," Wells Fargo & Co. analysts led by Dean Junkans said in a report last month.

"I'd buy every month a little bit of gold," Faber said.

Manufacturing slowed in the U.S. Europe and Asia, adding to signs of slowing global growth that may force central banks to step up stimulus measures.

The Federal Reserve completed its second round of so-called quantitative easing in June, whereby the central bank purchased $600 billion of Treasuries from November 2010, after injecting $1.25 trillion in the first round. Goldman Sachs Group Inc. and Citigroup Inc. see the Bank of England restarting bond buying as early as this week as the economic recovery weakens and bank- funding costs increase.

Gold Holdings

Holdings in exchange-traded products backed by gold rose to a record 2,217 tons on Aug. 8, and stood at 2,142.4 tons as of yesterday. Bloomberg data show. Trade volume in Comex gold futures and options rose on Aug. 24 to a record 593,405 contracts, according to Jeremy Hughes, Singapore-based spokesman of CME Group Inc.

Spot gold gained 0.6 percent to $1,912.38 an ounce as of 1:33 p.m. Singapore time.

Prices may slump as much as 30 percent from a record as the dollar "outperforms" its counterparts, damping demand for bullion as an alternative currency, Stanley Crouch, the chief investment officer of Aegis Capital Corp., said Aug. 24.


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Young investors shouldn't avoid stock market, its opportunities - STLtoday.com

You can learn a lot from your parents, but when it comes to investing, you may want to be skeptical about mimicking them.

A recent survey of Generation Y shows that many 18- to 30-year-olds have been so unnerved by the savagery of the stock market in the past few years that they are investing as conservatively as their parents and grandparents. These young adults have watched their parents struggle the past few years and are so afraid of the stock market that they are determined to keep their savings safe.

For grandparents, it makes sense to be careful about the stock market. For parents about to retire, moderating stock market exposure is also smart. But people in their 20s who handle money as if they were 50- or 60-year-olds could be making a grave mistake.

Young investors may be playing it so safe with 401(k)s and other retirement savings that they will position themselves for a train wreck. By retirement, they will be far short of money.

According to the MFS Investing Sentiment Survey by the Research Collaborative, 40 percent of Generation Y has concluded, "I will never feel comfortable investing in the stock market."

"Never" is a long time. But if you are among this group and have been warned by parents to stay clear of stocks, this is why you may want to reconsider.

First, it is true that the stock market can be brutal, and you have just witnessed one of the fiercest periods in stock market history. Stocks declined 49 percent in 2000-2001; then, just as your parents recovered what they lost during that horrible bear market, the financial crisis arrived late in 2007 and destroyed 57 percent.

You may have heard your parents curse stocks and mourn the losses in their 401(k)s. Their stress may have been intensified by the worst job market of their lifetime or a home plunging in value.

Boomers went through much of their adulthood believing the stock market was a sure thing. In the 1980s, it delivered gains of 17.6 percent a year on average, according to Ibbotson data. In the '90s, it was 18.2 percent. As boomers approached retirement, one in four had 90 percent of their 401(k) money invested in stocks, a dangerous amount for someone close to retirement but not necessarily for someone with 40 or 50 years of saving ahead of them.

A central theme in investing is to select a mixture of stocks and bonds based on how close you are to retirement. At your parents' age, you must be cautious, perhaps investing no more than 40 or 50 percent of retirement money in stocks so a loss doesn't hit you just before you retire.

But in your 20s, you are likely to enjoy plenty of good years in the stock market if you keep adding a little money from each paycheck to your 401(k) or an IRA. Though you could suffer losses in the current rough period, over many years your early deposits in stock mutual funds in a 401(k) or IRA are likely to grow well. Historically, despite the awful periods in the market, stocks have gained 9.9 percent on average annually since 1926, and bonds have gained 5.5 percent, according to Ibbotson.

A look back at history may provide courage. During the Great Depression, stocks crashed hard. The market dropped 86 percent and took more than 15 years to recover. It was a disaster for many people near retirement. An investor who put $10,000 into the stock market just before the crash had just $6,000 10 years later. But if you had been 25 years old and invested $10,000 in the stock market just before the crash, you would have had about $210,340 at retirement 40 years later. Time is on your side if you invest in stocks. You are investing in the long-term growth of the economy.

But you may say: Why take the chance?

You wouldn't have to if you were willing to save huge portions of your pay every year. But most people can't stash enough into a savings account or safe U.S. bonds. Let's say you are 30, you save $5,000 a year and earn the historical averages on your investments until retirement. In a savings account, you would accumulate about $247,000 by the time you retire. In Treasury bonds, you would have about $720,600, and in stocks, $2.3 million. If you divided your money half in stocks and half in bonds, you would have about $1.5 million.

Perhaps $720,600 sounds like plenty to you. But remember, inflation requires you to have much more money in the future than you would today for a comparable standard of living. If you are used to living on $50,000 a year at age 30, you might need about $114,000 a year by retirement.

Try http://www.calcxml.com/calculators/ret05?sknequalsresults.


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Investing in IT fills the wallet - Politico

Never has it been more vital for the federal government to do more with less. Agencies are busy scouring their budgets for waste and their operations for inefficiencies. So what is the role of information technology in making government work better and more efficiently for America’s families?

We have had amazing success in rooting out waste in technology in the past two years. The administration has slashed costs for planned IT projects by $3 billion while delivering functional services at a much faster rate and embarked on a massive initiative to shut down and consolidate excess data centers. We’re also moving to the cloud and improving IT acquisition practices. And our work in cutting waste is not nearly finished.

Continue Reading It has never been more important to cut costs wisely in a way that allows us to invest in our future and provide our citizens what they need most from government during these trying economic times.

So how do we achieve the seemingly disparate goals of reducing costs yet investing to achieve more? The experience in the private sector over the past couple of decades shows that the right investments in IT spending can yield huge gains in productivity and ultimately reductions in costs in many other areas.

If you just look at IT as optional spending, you are missing an important point: IT is a tool by which you can save other costs. Investing in IT can bring you productivity gains and offset other costs. This allows organizations — private and public — to do what we need most in challenging environments, to do more with less.

Just take the reduction of paper-based processes like the move to electronic transactions at the Treasury Department. For decades, the federal government managed its financial transactions through paper processes that are slow and inefficient. By leveraging technology to do vendor billing and payment transactions electronically, Treasury projects the government will save more than $500 million and eliminate 835 million paper-based transactions in the first five years. This is just one example of how investing correctly in IT can lower friction in the way citizens and businesses interact with government — all while saving money.


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Gold and Silver Stocks

By: Fred Sheehan | Sat, Sep 17, 2011

The prices of gold and silver shares are derived from the price of their reference metals. The referral method has gone astray, akin to a renegade ETF.


Osiris Investment Partners L.P. in Boston, under the authorship of Principal and Managing Member Paul Stuka, wrote to clients on August 18, 2011. The XAU Gold Index was down 6% for the year-to-date, and the GDXJ Gold Stocks Index of smaller gold miners had fallen 10%. On that same mid-August date, gold - the real stuff that hardly anyone owns but of which everyone within the media's range is expected to express an opinion - had risen 26% in 2011.


The gap between gold and the diggers will close - when is hard to say. In which direction we will discover. The view here is that the stewardship of paper currencies, the medium in which gold, silver, and oil (crude, canola, and palm) are priced, has never been in worse hands. This is saying less than might be thought since it was not until 1971 that official money went untethered from impartial restraint (usually, gold). Alas, the world is slow to grasp central banks are peopled by political hacks (as Senator Harry Reid called then-Federal Reserve Chairman Alan Greenspan in 2005, but equally true of today's empty suit) so now is the time to make money.


Money is to be made by holding anti-dollars. Federal Reserve Chairman Ben S. Bernanke continues to decompose before our eyes, stating on September 8, 2011, that the United States is blessed with lower inflation than other countries and "Low inflation means that the buying power of the dollar, in terms of domestic goods and services, remains stable over time." It does not take a trial lawyer to see the inconsequentiality, inconsistency, or mendacity in that labored claim. Ben may be fishing turtles from the local creek, painting his barbarous equations on their backs, and selling them at the local five-and-dime (which would still be overvaluing his scholarship by at least a nickel), but shoppers at local farmer's markets are paying the price for purchasing with dollars.


Osiris Investment Partners went on to write: "[S]ince the early 1980s, when the XAU Index was first constructed, until the fall of 2008, this ratio remained in a range of .16 to .38, even during the depths of the gold bear market. [That is the ratio of the XAU Gold Stock Index divided by the price of an ounce of gold in U.S. dollars. - FJS] During the financial crisis of 2008, this ratio dropped briefly to .09. Since that time, it has traded up to .16, but it has never exceeded the former floor. As I write today the ratio is .114. In other words, the gold shares are currently the cheapest that they have ever been, excluding a one-month period in the fall of 2008. On a fundamental basis, gold stocks have historically traded at 10 times or more annual cash flow. We are presently seeing many companies priced at one to three times potential forward cash flow, if they can execute their plan. Clearly, not all of them will realize the potential. However, many will."


Of the cash flow, Erste Group, (Erste Bank, Vienna: "In Gold We Trust;" July, 2011; Ronald-Peter Stoferle), estimates the "aggregate free cash flow of the 16 companies in the Gold Bugs Index will amount to [$8.5 billion] this year and will increase to [$14 billion] by 2013." Erste Group continues: "The companies in the Gold Bugs Index currently command an estimated 2011 [price-to-earnings ratio of] 14x, which is expected to fall to 12x in 2012. This is extremely low in terms of its own history (average PE 2000-2010: 33x) and in relation to many other sectors." (The Gold Bugs Index consists of 16 mining companies that do not hedge their gold production. This is not necessarily true of the miners in the XAU Index.)


Potential investor seek the potential catalyst. What might that be?


First, the correlation among sectors in the S&P 500 has never been greater. ETFs and high-frequency trading rule the waves. Machines trade stocks in bulk, with little distinction among industries and companies. Such periods of over-zealous gimmickry and of intimidated investors are often good times to buy stocks that will later assert their superior characteristics.


Second, gold- and silver-mining shares are underowned in relation to one-stop-shopping ETFs. The miners know this. Shareholders have enlightened management: they need to pay out dividends to distinguish themselves as real companies. Recently, Newmont Mining stated it will increase its dividend by twenty cents per share for every $100 rise in the price of gold. Gold Resource Corporation has set a target of paying out one-third of its cash flow in dividends to shareholders.


Third, the argument of whether the world is inflating or deflating is tangential to the price of gold. Better expressing the "price of gold": how many units of paper currency (such as the dollar) does it cost to buy an ounce of gold? (We are returning, now, to the reference metal). Gold has performed better in deflations than inflations, but the cause and effect that this relationship addresses ("gold is an inflation hedge") may be misleading. Monetary, military, and political chaos have more often corresponded with deflationary than inflationary times. The real story is that gold is money but only speaks up when the credibility of states and their currencies deteriorate.


Fourth, the proportion of people who own gold and silver is small. (Particularly so in the United States, but that is not the point, here.) This is the greatest flaw of the "gold in a bubble" chorus. There has been no panic into gold, or, more likely for the Average Joe, into gold shares. At some point, the sight of Bernanke may be worth a quick $500-an-ounce trading profit. It should be, already.


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Monday, September 19, 2011

Global Leaders in Precious Metals Mining and Investing Convene in Colorado Springs

September 15, 2011 06:02 PM Eastern Daylight Time  The Denver Gold Group welcomes the world’s leading gold and silver producers to the 2011 Denver Gold Forum at The Broadmoor Hotel and Resort, Sept. 18-21


DENVER--(BUSINESS WIRE)--The 2011 Denver Gold Forum, the world's premier precious metals investment conference, will convene at The Broadmoor Hotel and Resort in Colorado Springs, Colo., Sept. 18-21, 2011. The 3-day conference features more than 150 international senior and emerging producers and explorers of gold, silver and other precious metals. Corporate presentations are available for free after a simple one-time registration and can be viewed in real-time or on-demand via our webcast.



“The appetite for alternative hard assets like gold and silver will be reflected by the world’s foremost institutional investors and analysts attending the Denver Gold Forum in record numbers.”


“Precious metal prices are soaring in reaction to the persistent and contagious global crisis of confidence in paper assets and money,” said Tim Wood, Denver Gold Group’s Executive Director. “The appetite for alternative hard assets like gold and silver will be reflected by the world’s foremost institutional investors and analysts attending the Denver Gold Forum in record numbers.”


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The gold price yo-yo: from $1,500 to $10,000, anything is possible

Year-to-date, the yellow metal is up 30% despite taking a $100 per ounce hit over past week


If there is one asset class that has analysts and market-makers’ opinion split wide open, it’s got to be gold. The price of the yellow metal has defied gravity and has gone up 555 per cent in 10 years, from an average $283 per ounce in September 2001 to $1,854 per ounce in September 2011.


The last couple of years, during which a large proportion of the world’s investing population seems to have grown a liking for the bullion, the price of the metal has doubled, from about $930/oz in September 2009 to the current $1,830 an ounce.


The yellow metal seemed unaware that ‘experts’ were calling it a bubble since the beginning of the year, and made numerous lifetime highs in 2011 – the most recent on September 6, when it touched $1,920.30 per ounce.


“There is a slow-motion train wreck going on in Europe at the moment,”


Nick Trevethan, senior commodities strategist at ANZ, told Reuters. That means gold, which is seen as a safe haven alternative to investing in slow-moving/crashing economies of the West, or the overheating Asian economies of China and India, is perhaps going to gain further.


But as with a vehicle that is cruising at close to its top speed, the ride has begun to get bumpy. The yellow metal declined about $50 an ounce, or 2.6 per cent, yesterday to close at about $1,810 per ounce, and after having gained some momentum this morning, is range-bound between $1,820 and $1,830/oz.


“Gold prices are stuck in a sideways channel and need to decide on the direction,” said Phil Streible, Senior Market Strategist, MF Global. “If we break through the upside on $1,875/oz, then we could see the lifetime highs threated once again,” he said, but warned that, in the very short term, there is more of a downside risk than upside.


Year-to-date, the safe haven metal is up 30 per cent, despite taking a $100 per ounce hit over the past week or so, and analysts are still gunning for $2,000 per ounce by the end of the year. However, the move from $1,800 to $2,000 could be a circuitous one for the bullion bandwagon, with many experts not ruling out a drop to even $1,650 an ounce in the interim.


“It’s quite fascinating to note that gold made another lifetime high last week,” Jeffrey Rhodes, CEO and Global Head of Precious Metals, INTL Commodities DMCC, said on Dubai Eye radio this morning. “While forecasts for $2,000 an ounce by the end of the year are still in place, it could fall to $1,700 or even $1,650 per ounce before that,” he warned.


On the other hand, there are those like Marc Faber, publisher of the Gloom Boom and Doom report, who said last week that “according to some statistics, the gold price today should be worth between $6,000 per ounce and $10,000 per ounce.” Now that’s a level that the metal cannot reach without an unprecedented level of speculation, some of which may actually be on the way.


“Despite a fall in prices over the past week, the speculative market for gold and silver is starting to look more positive than it has in recent weeks,” Marc Ground, analyst at Standard Bank, said yesterday in remarks sent to ‘Emirates24|7'.


“Looking at equity markets, risk-off is definitely the order of the day.


The question is: will investors continue to seek the relative safety of the dollar and shun precious metals? Given that uncertainty concerning the health of the US economy persists, we expect investors to return to the safe-haven of gold,” he said.


Citigroup, the global banking giant, said recently that gold has a one-in-four chance of spiking to $2,500 per ounce. The investment bank had previously considered that gold had a 5 per cent probability of achieving the $2,500/oz target, but in a note published last week, it said it had increased its gold price estimates in order to accommodate the impact that global financial tension is having on the metal.


“However, we expect those tensions and concerns to dissipate over time and do not believe that (price sensitive) jewellery demand will be able to make up for the loss of investment demand once sovereign financial tensions ease,” the banks’ analysts said. – Source: emirates247.com/


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Marc Faber: Gold “probably cheaper than when it was $300” - Beacon Equity Research

As the debate moves from how high the gold price can go to whether the precious metal has become too expensive at $1,830, Marc Faber, editor of the Gloom Boom Doom Report, said the ultimate world’s reserve currency is “dirt cheap.”


Speaking with Newsmax’s MoneyNews.com, the eclectic Swiss money manager, who has called Thailand his home for more than 20 years, believes the gold price should be put into a context of its relative value against rapid devaluations of the world’s primary reserve currencies—the U.S. dollar, euro, yen, and British pound—and, now, the Swiss franc, following the SNB decision last week to peg the franc to the declining euro.


“In fact, I could make an analysis to show that the price of gold today is probably cheaper than when it was $300 per ounce based on the increase in government debt, based on the increase in monetary base in the United States and based on the expansion of wealth in Asia,” Faber explained.


Spot gold reached a high of $1,923.70 per ounce on September 6, whose price has since pulled back to the $1,800-$1,850 trading range following the SNB announcement that the franc, de facto, will no longer become a refuge of the currency.


Nearly 18 months earlier on April 26, 2010, Faber told Newsmax he won’t give up his gold as long as the stewards of the U.S. dollar remain in power—as gold’s price in terms of dollars should increase commensurate with its rate of debasement, which, he said, has been at an alarmingly high rate since the collapse of Lehman Brothers in September 2008.


“I own my gold and I will never sell it, especially when I see clowns like Ben Bernanke, Larry Summers, Tim Geithner,” Faber had said.  At the time of that interview, gold closed at $1,151.10 on the COMEX, a 59% rise to today’s price of $1,830.


Today, Faber remains very cautious, recommending to his clients and followers to hedge bets on the outcome of what he calls a “failed Keynesian policy” among governments and central bankers worldwide.  On many previous interviews around the world, he has stated he speculates that U.S. equities have topped this year, emerging markets appear vulnerable to a shock, and U.S. bonds remain in a massive bubble that someday will “end badly.”


How badly?


On Feb. 27, 2011, Faber conducted an interview with Colorado-based precious metals dealer McAlvany Financial Group, and said, “I think we are all doomed. I think what will happen is that we are in the midst of a kind of a crack-up boom [a term coined by famed Austrian economist Ludwig von Mises] that is not sustainable, that eventually the economy will deteriorate, that there will be more money-printing, and then you have inflation, and a poor economy, an extreme form of stagflation, and, eventually, in that situation, countries go to war, and, as a whole, derivatives, the market, and everything will collapse, and like a computer when it crashes, you will have to reboot it.”


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Marc Faber: Invest in Gold, but Outside the US - My Loans Consolidated

In an interview with CNBC, Faber suggested that investors hold physical gold in their safe deposit box but preferably outside the United States. For over 20 days gold price rallied to its all-time high in the $1900 per ounce level. However, just days before the $200 dollar gold price correction last week, Marc Faber predicted the correction on CNBC. Below is the interview:


Americans are now waking up that the gold ETF is now bigger than the Spider ETF which mimics the S&P 500. However, Marc Faber does not think that buying gold today would be the right thing to do. Prices of precious metal has recently been in a run and he thinks that the price of precious metal should consolidate anytime or shake out the weak holders now. The market is currently experiencing a correction in gold price. However Faber believes that everybody should have some physical gold if he wants to own some cash as gold is the most honest form of cash that people can own.


When asked by CNBC what he means by physical gold and if gold ETF is ownership in physical gold, Faber answered, “It’s a claim on physical gold. But I prefer these investors hold physical gold in a safe deposit box ideally outside the US in various locations, Switzerland, Singapore, Hong Kong, Australia, Canada.”


When asked why should it be outside the United States, Faber explained, “I think it’s important today to diversify not only the various asset classes, in other words equities, bonds, gold, cash, real estate, commodities… but also the custody of your assets should be in different jurisdictions.”


Faber was asked if he thought we were in a recession right now and his answer was, “I think we never really came out of the last recession in many different sectors of the economy, although in some sectors we came out. And when you look at the world, the emerging market has continued to grow throughout the period from 2008 up to today. There is a slow down occuring in emerging economies but in the western world there is hardly any growth.”


Among other things, Faber mentions the bank of Asia. “Banks in Asia are reasonably sound,” he said, “because they never went and invested in all kinds of Greek bonds, and Portugese bonds and so on and so on.” He would not, however, buy them today as they would move lower along with the global market, but in general, he would eventually look at financial stocks, he would look at banks in emerging economies, in India, in Thailand, but possibly at some point in China.


Below is the whole interview of Marc Faber on CNBC:






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Sunday, September 18, 2011

Marc Faber On Nuclear Bombs, War And The Logical Conclusion Of Keynesianism - Business Insider





Marc Faber 82" />Remember when Paul Krugman made the ultimate Keynesian argument -- that a fake alien invasion would be great for the economy?


Marc Faber comes up with a less savory example to show how absurd Krugman's theory really is.


From King World News:


If you follow through with his thoughts then you should actually drop nuclear bombs onto the US and then you’ll have a booming economy because everything will have to be rebuilt.  That is his view, but that is not the way economics works.  You destroy something and the debt level will still be there.




Faber goes on to explain why government spending worked in WW2 but won't work now.

When the US went into World War II, total credit as a percentage of the economy was 140%. We are now, without the unfunded liabilities, at 279% and with the unfunded liabilities, probably around 800%.

The Swiss investor recommends buying gold and silver before declining standards of living and social unrest really do lead to war.



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