It was only a matter of time before someone did. Michael Levy has done the typcial skeptic one better, though: he seems to calls gold's entire bull market a mania. Interestingly, the comments left are mostly supportive towards him.
Hmmm....interesting article and probably applicable to most investors. I believe most investors play the "Bigger Fools Theory" of investment: hoping someone will come along and buy their asset at a higher price than they paid for it with no consideration as to it's underlying value. As a result, we have the modern stock market and it's bizzare evaluations such as "Price/Earnings" ratio and the like - which are, for the most part, meaningless. I mean, what do I care what the price of a stock is? What I really care is what is it's "Net Tangible Value": the replacement value of that share. Then...I ask myself, "Do the company officers print stock and use it like cash" - thus diluting the wealth of each share? And..."What kind of dividend does the stock pay compared to what i payed for it?" Finally, I as..."Can I trust the financial auditors?" (No).
When all these questions are asked and their answers examined, even trading the "Bluest of the Blue Chip" stocks is not much unlike trading Baseball cards. This is why I no longer buy stocks - I buy precious metals.
Nevertheless, Precious metals can be over-valued, too, and when their price far exceeds the cost of their mining, refinement, minting and distribution, then a bubble starts to form. Right now, my calculations show that gold is one hell of a bargain at $1092/Oz [I have read the Income Statements of the Tier I miners and crunched the numbers]. Furthermore, since this level of profitability was, for the most part, a result of Place Mining, then it can reasonably be expected that the cost to provide Gold will only increase in the years ahead seeing that the great Placer Deposits are quickly being exploited (and the Tier I companies are returning to hard-rock mining).
Your $1,092 price point did hold up as a bargain level, that's for sure. Thanks, John, for making a point that's missed by analysts who are solely demand-focused. Among their ranks are the ones calling for $800 gold right now.
Gold could easily go back to $800 for a short time - and this would make me very happy for I'd buy a lot more! Nevertheless, sooner or later, I believe Gold is going to Bubble - and it's going to be ugly. For the last 30 years, seems like all I've seen are bubbles: Gold (1980), Junk Bonds, Tech Stocks, Real Estate, Baseball cards....you name it. Fortunately, I've been able to avoid everyone of these bubbles - just walked away - to the dismay of my friends and colleagues at the time the bubbles were inflating. Yeah...it can be said I lest a lot of money on the table, but I didn't get burned either and I slept well at night, too. Hey...and I also made some money along the way! Been totally out of stocks since early 1998.
The worst peace of investment advice I have ever heard was "Don't argue with the tape". I can't disagree more. When a bubble is inflating, If people would just stop and ask themselves, "Why the hell is this happening...for what reason...and where's the value?", then the world would be a lot better place - and near Bubble Free. People have got to learn when to walk away: if "it looks too good to be true" then that's when they should walk away. Unfortunately, most people seem have a short-term historical perspective and they forget.
As a result, when Gold goes into a hyper Bubble, you can bet the primary theme will be "It's different this time!" (unlike all the other times, ya' know). Like 1980, I bet gold and Silver rise so fast that Comex limits are hit and trading is stopped for the day...and then repeated on the next day, and the next. It's about this time that I bail.
What will set it off, I'm not so sure. Maybe it will be like 1979 where there was nothing but inflation, higher crude prices and international strife - all topped by the Xmas invasion of Afghanistan which triggered the hyper-bubble on the next trading day. Or...maybe it will be something a bit different. Who knows?
Anyways, thanks for making this Blog...I have really enjoyed it and hope to see you post more as the next Gold Bubble draws near.
After watching the gold market for some time, I'm convinced that gold is in a nascent bubble. This blog will watch the gold market, supply commentary, sometimes mention gold stocks, and keep a watch on the world of gold speculation. It's going to be a wild ride for some time now.
The Enter Stage Right article that kicked off this blog contains a fuller explanation of my reasoning: it's here.
As an update to it, for those familiar with its contents, the U.S. dollar carry trade is unwinding but gold hasn't been hammered all that much as of yet. The resultant decline has been at the correction level.
Disclaimer
Although I try to maintain a detached viewpoint on this blog, I do have opinions that are almost certainly influenced by what I've done with my own money. For the record, I am long gold-exploration stocks.
Also, I must emphasize that I am not a registered investment advisor, and that I am not licensed to dispense investment advice in my jurisdiction of residence. Consequently, this is not an investment-advice blog. It shouldn't be taken as such.
In addition to the standard boilerplate caution for you to do your own due diligence should you invest or speculate, I'd like to add a special caution: gold, by far, is the asset class that elicits the most emotions. A solid consensus of experieced investment professionals considers emotionality to be a performance-hobbler. In addition to doing your own research, and/or using a licensed professional to do so, I suggest that you watch yourself. I try to myself, and the detachment I show is largely a product of it.
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/tny_au_en_usoz_2.gif)
Hmmm....interesting article and probably applicable to most investors. I believe most investors play the "Bigger Fools Theory" of investment: hoping someone will come along and buy their asset at a higher price than they paid for it with no consideration as to it's underlying value. As a result, we have the modern stock market and it's bizzare evaluations such as "Price/Earnings" ratio and the like - which are, for the most part, meaningless. I mean, what do I care what the price of a stock is? What I really care is what is it's "Net Tangible Value": the replacement value of that share. Then...I ask myself, "Do the company officers print stock and use it like cash" - thus diluting the wealth of each share? And..."What kind of dividend does the stock pay compared to what i payed for it?" Finally, I as..."Can I trust the financial auditors?" (No).
ReplyDeleteWhen all these questions are asked and their answers examined, even trading the "Bluest of the Blue Chip" stocks is not much unlike trading Baseball cards. This is why I no longer buy stocks - I buy precious metals.
Nevertheless, Precious metals can be over-valued, too, and when their price far exceeds the cost of their mining, refinement, minting and distribution, then a bubble starts to form. Right now, my calculations show that gold is one hell of a bargain at $1092/Oz [I have read the Income Statements of the Tier I miners and crunched the numbers]. Furthermore, since this level of profitability was, for the most part, a result of Place Mining, then it can reasonably be expected that the cost to provide Gold will only increase in the years ahead seeing that the great Placer Deposits are quickly being exploited (and the Tier I companies are returning to hard-rock mining).
Just my 2 cents.
Your $1,092 price point did hold up as a bargain level, that's for sure. Thanks, John, for making a point that's missed by analysts who are solely demand-focused. Among their ranks are the ones calling for $800 gold right now.
ReplyDeleteDaniel,
ReplyDeleteGold could easily go back to $800 for a short time - and this would make me very happy for I'd buy a lot more! Nevertheless, sooner or later, I believe Gold is going to Bubble - and it's going to be ugly. For the last 30 years, seems like all I've seen are bubbles: Gold (1980), Junk Bonds, Tech Stocks, Real Estate, Baseball cards....you name it. Fortunately, I've been able to avoid everyone of these bubbles - just walked away - to the dismay of my friends and colleagues at the time the bubbles were inflating. Yeah...it can be said I lest a lot of money on the table, but I didn't get burned either and I slept well at night, too. Hey...and I also made some money along the way! Been totally out of stocks since early 1998.
The worst peace of investment advice I have ever heard was "Don't argue with the tape". I can't disagree more. When a bubble is inflating, If people would just stop and ask themselves, "Why the hell is this happening...for what reason...and where's the value?", then the world would be a lot better place - and near Bubble Free. People have got to learn when to walk away: if "it looks too good to be true" then that's when they should walk away. Unfortunately, most people seem have a short-term historical perspective and they forget.
As a result, when Gold goes into a hyper Bubble, you can bet the primary theme will be "It's different this time!" (unlike all the other times, ya' know). Like 1980, I bet gold and Silver rise so fast that Comex limits are hit and trading is stopped for the day...and then repeated on the next day, and the next. It's about this time that I bail.
What will set it off, I'm not so sure. Maybe it will be like 1979 where there was nothing but inflation, higher crude prices and international strife - all topped by the Xmas invasion of Afghanistan which triggered the hyper-bubble on the next trading day. Or...maybe it will be something a bit different. Who knows?
Anyways, thanks for making this Blog...I have really enjoyed it and hope to see you post more as the next Gold Bubble draws near.
Thanks.