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David Einhorn, the hedge fund manager who had warned on Lehman Brothers' precarious finances, on Monday said he is buying gold and betting that interest rates will rise as he lambasted the U.S. government's financial chiefs for short-sighted policy decisions.
The exploding size of the national deficit, which reflects government policies that have simply rewarded bad behavior with massive bailouts, will make gold and gold stocks as well as call options on higher rates good investments, said Einhorn.
Speaking at the fifth Annual Value Investing Congress in New York, Einhorn had harsh criticism for Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.
"Although our leaders ought to be making some serious choices, they appear too trapped in short-termism and special interests to make them," he said, calling Bernanke and Geithner "quintessential short-term decision makers.
"They explicitly do whatever it takes to solve one problem at a time and deal with the unintendend consequences later."
The exploding size of the national deficit, which reflects government policies that have simply rewarded bad behavior with massive bailouts, will make gold and gold stocks as well as call options on higher rates good investments, said Einhorn.
Speaking at the fifth Annual Value Investing Congress in New York, Einhorn had harsh criticism for Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.
"Although our leaders ought to be making some serious choices, they appear too trapped in short-termism and special interests to make them," he said, calling Bernanke and Geithner "quintessential short-term decision makers.
"They explicitly do whatever it takes to solve one problem at a time and deal with the unintendend consequences later."
- Reuters
South Florida condominium prices already have dropped up to 88 percent from their 2006 peak, and the meltdown isn't over yet.
So says real estate consultant Jack McCabe, who has earned the reputation as South Florida's top residential real estate analyst.
He told Bloomberg that condos which sold for $1,000 per square foot in 2006 now command prices of only $125 to $350.
And he says prices could ultimately drop to $100 a foot, less than half the condos' construction costs and a level last seen 20 years ago.
"If you're thinking you can come here and buy and sell condos for a profit in less than five years, you're sadly mistaken," McCabe, whose clients have included Credit Suisse and Pulte Homes, told Bloomberg.
So says real estate consultant Jack McCabe, who has earned the reputation as South Florida's top residential real estate analyst.
He told Bloomberg that condos which sold for $1,000 per square foot in 2006 now command prices of only $125 to $350.
And he says prices could ultimately drop to $100 a foot, less than half the condos' construction costs and a level last seen 20 years ago.
"If you're thinking you can come here and buy and sell condos for a profit in less than five years, you're sadly mistaken," McCabe, whose clients have included Credit Suisse and Pulte Homes, told Bloomberg.
- Newsmax
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My Favorite Ways to Hold Cash
By Tom Dyson Tuesday, October 20, 2009 My Favorite Ways to Hold Cash -
Why Cash Just Became My Favorite Investment
By Tom Dyson Monday, October 19, 2009 Why Cash Just Became My Favorite Investment -
The Only Sure Thing We Know About Gold and the U.S. Dollar
By Jeff Clark Saturday, October 17, 2009 The Only Sure Thing We Know About Gold and the U.S. Dollar -
Money-Compounding Machines in India
By Rahul Saraogi Friday, October 16, 2009 Money-Compounding Machines in India -
The Federal Reserve Is Openly Telling You to Buy Gold and Silver
By Porter Stansberry Thursday, October 15, 2009 The Federal Reserve Is Openly Telling You to Buy Gold and Silver
Gold Guru: "$1,000 Is the New Floor for Gold"
By Dr. Steve SjuggerudWednesday, October 21, 2009
"$1,000 an ounce is thought by some to be gold's ceiling..." John Doody wrote last week to his subscribers. "We see it as now the FLOOR."
When John Doody talks about gold, I listen...
This year, his Top Ten List of gold stocks is up over 100%. John says his Top Ten list has averaged a 30% annual return since the start of his newsletter, Gold Stock Analyst. John has been writing Gold Stock Analyst for about 15 years.
One thing I like about this former economics professor is that it's all about the numbers to him... It's not about conspiracy theories like it is with so many gold bugs. For example, John will actually tell you when gold stocks are overpriced according to his model – imagine that with dyed-in-the-wool gold bugs!
So why does John think gold will keep going up now, when many others say it's bumping up against its ceiling? I asked John that yesterday...
It's simple, he said, if you just compare the price of gold to interest rates.
In short, when interest rates are high, then gold (which pays no interest) falls. And when interest rates are low (like they are now), gold rises. To keep it apples to apples over time, John subtracts inflation from interest rates.
In the 1980s and 1990s, you earned high rates of interest on your cash. So gold was flat for those two decades. Plain as day.
But for much of this decade and the decade of the 1970s, you typically earned NEGATIVE interest on your cash (after you subtracted inflation). So gold has soared.
John sees those negative real interest rates continuing. So gold will keep rising. Simple as that.
For the specifics, currently, the consensus inflation rate forecast for the first half of 2010 is around 2%. But banks basically pay you no interest. So you have a choice: Own gold, which pays no interest. Or hold cash, which pays you NEGATIVE interest, when you take inflation into account.
Yesterday, John explained that since the Federal Reserve will likely keep interest rates very low for a very long period of time, gold can keep going higher.
I asked John if gold had become too popular these days. He said absolutely not...
"Look, hedge funds are just starting to get into gold. Retail investors haven't bought. CNBC calls gold a bad inflation hedge. Central banks haven't bought. If gold was popular, I'd have a hundred thousand subscribers, not a couple thousand. We've got a long way to go. $1,000 isn't the ceiling... it's the new floor."
John ran the numbers, and in a sneak preview of his upcoming issue, he proves how the price of gold has "beaten" inflation fivefold since it first started freely trading 40 years ago.
"CNBC says that gold has only gone from a peak of $850 in 1980 to $1,050 today – for a $200 gain," he said. "So CNBC's conclusion is that gold is not a good inflation hedge... That's just plain wrong, but the people believe it."
To be brutally honest, if you plan to be a serious investor in gold stocks – and you're willing to do your homework – you're foolish if you don't read John's newsletter. John updates his unique valuation numbers every month for the 75 precious metals companies he follows. Plus, he writes up a detailed analysis about once a quarter on each company.
It is the best starting point in the business. It's the first place I go to find out how much gold each company has in the ground and what its cash flows are.
If you agree with John – that $1,000 gold is the new floor, not the ceiling – chances are, you're buying gold stocks. And if you're buying gold stocks in size, you ought to do it with John's help.
Good investing,
Steve
P.S. Until midnight tonight, you can save up to 50% on John Doody's gold stock research. To learn more, click here.
When John Doody talks about gold, I listen...
This year, his Top Ten List of gold stocks is up over 100%. John says his Top Ten list has averaged a 30% annual return since the start of his newsletter, Gold Stock Analyst. John has been writing Gold Stock Analyst for about 15 years.
One thing I like about this former economics professor is that it's all about the numbers to him... It's not about conspiracy theories like it is with so many gold bugs. For example, John will actually tell you when gold stocks are overpriced according to his model – imagine that with dyed-in-the-wool gold bugs!
So why does John think gold will keep going up now, when many others say it's bumping up against its ceiling? I asked John that yesterday...
It's simple, he said, if you just compare the price of gold to interest rates.
In short, when interest rates are high, then gold (which pays no interest) falls. And when interest rates are low (like they are now), gold rises. To keep it apples to apples over time, John subtracts inflation from interest rates.
In the 1980s and 1990s, you earned high rates of interest on your cash. So gold was flat for those two decades. Plain as day.
But for much of this decade and the decade of the 1970s, you typically earned NEGATIVE interest on your cash (after you subtracted inflation). So gold has soared.
John sees those negative real interest rates continuing. So gold will keep rising. Simple as that.
For the specifics, currently, the consensus inflation rate forecast for the first half of 2010 is around 2%. But banks basically pay you no interest. So you have a choice: Own gold, which pays no interest. Or hold cash, which pays you NEGATIVE interest, when you take inflation into account.
Yesterday, John explained that since the Federal Reserve will likely keep interest rates very low for a very long period of time, gold can keep going higher.
I asked John if gold had become too popular these days. He said absolutely not...
"Look, hedge funds are just starting to get into gold. Retail investors haven't bought. CNBC calls gold a bad inflation hedge. Central banks haven't bought. If gold was popular, I'd have a hundred thousand subscribers, not a couple thousand. We've got a long way to go. $1,000 isn't the ceiling... it's the new floor."
John ran the numbers, and in a sneak preview of his upcoming issue, he proves how the price of gold has "beaten" inflation fivefold since it first started freely trading 40 years ago.
"CNBC says that gold has only gone from a peak of $850 in 1980 to $1,050 today – for a $200 gain," he said. "So CNBC's conclusion is that gold is not a good inflation hedge... That's just plain wrong, but the people believe it."
To be brutally honest, if you plan to be a serious investor in gold stocks – and you're willing to do your homework – you're foolish if you don't read John's newsletter. John updates his unique valuation numbers every month for the 75 precious metals companies he follows. Plus, he writes up a detailed analysis about once a quarter on each company.
It is the best starting point in the business. It's the first place I go to find out how much gold each company has in the ground and what its cash flows are.
If you agree with John – that $1,000 gold is the new floor, not the ceiling – chances are, you're buying gold stocks. And if you're buying gold stocks in size, you ought to do it with John's help.
Good investing,
Steve
P.S. Until midnight tonight, you can save up to 50% on John Doody's gold stock research. To learn more, click here.
A PICTURE OF THE URANIUM BREAKOUT
This week, looking at the list of stocks hitting new yearly highs is looking at a new mining stock boom.
As we frequently mention, the Canadian Venture Index is quietly working its way higher. This is proof tiny mining companies are in an uptrend. Now consider this week's entrants to the new highs list. It's a "who's who" of digging stuff out of the ground.
Some notable names here: BHP Billiton – world's largest mining company. Peabody Energy – world's largest public coal company. Freeport-McMoRan – world's largest public copper company. Vale – world's largest iron ore company. And don't forget the big name in "nuke," Cameco (CCJ).
CCJ is the world's largest pure uranium stock. This is the stuff that powers nuclear reactors and mushroom clouds. Early this decade, uranium soared in price. This drove a big bull market in CCJ and its sector. Then, like all miners, CCJ was clobbered in 2008.
Many uranium watchers expect the commodity to go higher in the coming years. Judging by the new high in the "bell cow of uranium," that rise is getting started.
As we frequently mention, the Canadian Venture Index is quietly working its way higher. This is proof tiny mining companies are in an uptrend. Now consider this week's entrants to the new highs list. It's a "who's who" of digging stuff out of the ground.
Some notable names here: BHP Billiton – world's largest mining company. Peabody Energy – world's largest public coal company. Freeport-McMoRan – world's largest public copper company. Vale – world's largest iron ore company. And don't forget the big name in "nuke," Cameco (CCJ).
CCJ is the world's largest pure uranium stock. This is the stuff that powers nuclear reactors and mushroom clouds. Early this decade, uranium soared in price. This drove a big bull market in CCJ and its sector. Then, like all miners, CCJ was clobbered in 2008.
Many uranium watchers expect the commodity to go higher in the coming years. Judging by the new high in the "bell cow of uranium," that rise is getting started.