Time to get back at it!
My points to start this year:
Gold bubble? Utter nonsense—is the financial crisis over? Not by a long shot!
Last year was a year of downside surprises—this year will be a year of upside surprises.
Will Europe disintegrate? Not a Chance in heaven or hell.
- The whole world has a vested interest in healing this problem
- The Germans, always complaining in the press. HA HA HA. In reality that's just entertainment for the fools who still watch the politician-pet-dogs of the owners of our world. Just know this: If there was no Euro what would the value of the Deutschmark be? The point being the Germans for all their bellyaching would find that their wonderful top-of-class products would be far too expensive for the rest of the world. Would that be a good thing?
- Greece is full of Germans.
The wolrd is actually a simple place. Just turn down the noise from the financial commentators and you will hear the music. Turn away from the disinformation and distraction of the dust from the financial sector's spinning wheels and simplify your investing approach. Time to be like Jesse Livermore!
I've included several articles of interest below.
2012 Gold Market OutlookGold Investing News: Michelle Smith
...While there is a substantial amount of optimism about gold’s performance in 2012, there are also an abundant number of warnings that price declines—drastic ones by some accounts— are also likely, especially in the beginning of the year.
A Deutsche Bank report notes that since the onset of the financial crisis over four years ago commodity markets have to contend with increasingly frequent longer lasting episodes of heightened asset market volatility, and that risk aversion is likely to continue through 2012.
Last year undoubtedly taught a lot of investors a lesson about risk and volatility. Many had turned to gold because of its reputation as a safe haven and the fanfare surrounding that status. Those who were in the game for safety and wealth preservation were prepared to sit back for a breather and watch prices climb. Then, to their surprise, gold revealed it also has a risk personality.
Other investors prioritizing margins, such as fund managers, contributed to the shock when they liquidated positions to obtain cash and limit losses. Those sell-offs helped shake investor confidence and perpetuate concerns of a gold bubble. That shaken investor confidence may continue to weigh on the metal for sometime.
A 12th Straight Year of Gold Price Gains?
December's losses were "just noise"...
GOLD ANALYST Joe Foster has been in the mining and investment businesses for over 25 years. He is the lead investment team member for several of Van Eck's Gold ETFs, including the company's Market Vectors ETF Trust – Gold Miners ETF (GDX) and Junior Gold Miners ETF (GDXJ).
Joe Foster is frequently quoted in the Wall Street Journal and Barron's. He's also a frequent guest on CNBC and Bloomberg TV. Hard Assets Investor Managing Editor Drew Voros spoke recently with Foster on the gold market in general as well as the Gold Mining sector.
Hard Assets Investor: Do you think the Gold Price will see its twelfth straight year of positive gains in 2012?
Joe Foster: I continue to think that we're somewhere in the middle of the bull market. We're nowhere near the end. And having that outlook, I think we'll trend higher in 2012.
HAI: Do you anticipate that central banks will continue to be net buyers of gold in 2012?
Joe Foster: In 2011, central banks bought almost 500 tonnes of gold − at least that's what the estimates are saying − which is a tremendous amount of gold. And central banks are Buying Gold for the same reason that we are, for the same reason we're investing in gold-mining stocks. They see a tremendous amount of uncertainty.
They see countries that debase their currencies. They see the debt problems we've been reading about in the papers. Central banks are looking for something that's going to hold its value. The motivation for Buying Gold will continue to be there into the foreseeable future, so we expect another heavy year of central bank buying.
HAI: Why is gold suddenly so tied to the hip of the Euro?
Joe Foster: The trading pattern for gold over the past several months has been a little bit unusual compared to what we've seen in earlier phases of the cycle.
Despite all the turmoil in Europe, gold has had a high correlation with the Euro. It's not acting as a safe haven as it had earlier in 2011. It's had a split personality lately. Some days it will trade as a safe haven; some days it will trade as a risk asset. The market can't quite make up its mind how it wants to trade gold at the moment. I think that's just sort of a phase that it seems to be going through.
Junior Gold Carnage
AheadOfTheHerd: Scott Wright
...Since its low of $256 in 2001, gold has soared 640% to its high earlier this year. And with only a couple days remaining, gold is looking to close out 2011 with a 9%+ gain despite its recent selloff.
But while gold was one of the top-performing assets in all the markets this year, the same can’t be said for the stocks of the companies that bring it to market. You’d think that gold stocks would have been a sector that worked for investors in 2011 considering gold’s strength, but they had a dismal year. And this is alarming considering the nature of their business.
Exploring for and mining gold is a risky business. Mining companies are faced with geological, operational, and geopolitical risks among the many. On top of this they are slave to market risk, with the price of their product at the mercy of traders. If these companies are to be successful they need to discover economically-feasible gold deposits, and then produce the metal at low-enough costs to deliver profits for investors. And many quality miners are doing just that.
But in order to entice investors to take on the risks of owning these companies, their stocks simply must outperform gold. If they don’t materially outperform gold, then it makes no sense to own gold stocks. Investors would be better off just owning the metal.
For the most part over the course of gold’s bull gold stocks have indeed outperformed the metal. Investors have seen legendary gains in some of the elite explorers and producers, outperforming the metal by many multiples....
Even As Schiff Sells Gold, Mining Stocks Hold Their Own
Forbes: Addison Wiggin
...“In this environment, to make the big money,” says our old friend Rick Rule, “you need to enter [gold] stocks that aren’t institutional momentum favorites. Those stocks aren’t going to work.”
Instead, you need to look for “the kinds of stocks that are going to be sold to the Rio Tintos and the BHPs and the Newmonts and the Barricks of the world. The buyer this year is going to be the industry.”
Thus, “the impetus for the market in exploration stocks this year will be takeovers. The companies that have done a good job, although they may not find traction among institutional or retail investors, will be taken over by larger mining companies.
“These larger companies have both the need to replace production and the financial strength to complete the takeovers and to build out the discoveries that have been made by the juniors.”
As a result, Rick sees the majors paying substantial premiums for the juniors — more than you’d normally see.
“If the industry sees $2 billion in discounted free cash flows and they see a market cap of $600 or $700 million, they are willing to pay $1.3 billion to secure net-present value. So it’s possible that you will see 70%, 80% or even 100% premiums in bad markets, for good assets, in select names.”Options traders are already sniffing this out...
Read full article here.