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Friday, October 23, 2009
Thursday, October 22, 2009
7 Reasons Gold Will Surpass $2,500 - And Inflation Isn’t One of Them
By Money Morning on October 21, 2009
We’ve all heard that inflation drives up gold prices. When inflation is on the rise, investors buy more gold to hedge their portfolios.
And, with all the government bailouts and stimulus packages, it’s hard to deny that inflation is coming. After all, the money supply has more than doubled since October.
Yet few people realize that inflation may be the least of the reasons why gold prices will push higher.
Since bottoming out in 2001, gold prices have risen by nearly 300% and have twice targeted the $1000 mark. And that’s happened in a relatively “inflation-free zone.”
There are other forces at work here. This report will show you exactly why inflation is only a small part of the gold story. And, we’ll identify the best ways to profit from the coming gold rush.
Gold Trend #1: Gold Mine Production is Decreasing.
Annual worldwide mine production of gold has decreased by 9.3% since 2001. Considering gold prices have nearly quadrupled since then, why isn’t more gold being produced? The answer is simple. Resources are being depleted and their quality is diminishing. And, when a discovery is made, it takes about 7-10 years to get a mine permitted and into production - making it difficult to quickly ramp up gold production.
Gold Trend #2: Gold is Getting Harder to Find.
Fewer and fewer large gold discoveries are being made every year. And the discoveries that are being made tend to be in more remote and less geopolitically attractive areas. Considering that the risks to opening any gold mine are considerable, mining companies just aren’t interested in mining in areas that have significant political and geographical drawbacks. As a result, miners are having difficulty replacing depleted resources.
Gold Trend #3: Investment Demand for Gold.
Large institutional investors, such as hedge and pension funds, are making large allocations to gold and gold shares. Individual investors are also getting in on the action, with gold exchange-traded funds (ETFs) gaining influence. SPDR Gold Trust (GLD: 103.745 0.00 0.00%), the largest physically backed ETF on the planet, is now the 6th biggest holder of gold bullion with more than 1000 tons. That is helping to facilitate and spread the ownership of gold by individuals. In fact, in the first half of 2009 investment demand for gold is up 150% over the first half of 2008, according to the World Gold Council.
Gold Trend #5: Push for Gold-backed Currencies.
As investors the world over lose faith in their government’s ability to contain the financial and economic crises, many are calling for gold backed currencies - much like the U.S. dollar was until the early 1970’s. Even Zimbabwe, which a year ago had hyperinflation running at 231 million percent annually, is now considering reintroducing its Zimbabwe dollar, but this time fully backed by assets, including gold. In order for this to happen, countries would have to purchase enough gold to back all their currency - putting extreme pressure on the gold supply.
Gold Trend #6: Asian Demand for Gold is Exploding.
Asia, with its more than two and a half billion people, has a major impact on investment demand. Asians have a long-standing cultural affinity for gold as a store of wealth. India is the world’s largest gold consumer. For the last 50 years, until 2009, the Chinese government has forbidden its citizens from owning gold. But now China is encouraging its citizens to buy silver - which automatically draws more attention to gold. Today, Chinese investors even have access to gold-linked checking accounts. As a result, demand for gold in mainland China is expected to triple in the next few years.
Gold Trend #7: Gold is in a Secular Bull Market.
Gold’s price has increased every single year since 2001. This is a clear signal that we are currently in the middle of a secular bull market for gold. A secular bull market typically last about 17 years and ends with a mania stage where investors throw the concept of supply and demand out the window and frantically invest in gold. We’ve seen this same pattern repeat itself over the last hundred years of investment history and we’re about to see a major run up in gold prices. The gold market is very small in relation to the currency, bond or stock markets, so when investors start to pile in, look out. Prices will go through the roof - making the tech and housing bubbles seem small in comparison.
How to Play the Gold Rally
There are a few ways to play the rise in gold prices. You can buy investments backed by gold or you can invest in gold miners themselves.
To play gold prices directly, invest in the SPDR Gold Trust (GLD: 103.745 0.00 0.00%) Each unit of this ETF represents 1/10th of an ounce of gold. It’s highly liquid, and provides you with the quickest and easiest way to get exposure to gold. It’s also the lowest risk option, without the storage costs associated with buying physical bullion.
Next up on the risk scale is the Market Vectors Gold Miners ETF (GDX: 47.39 0.00 0.00%). This investment vehicle tracks the world’s major gold and silver producers. While more volatile than GLD, the leverage offered based on the gold price and profitability makes this an attractive option. And you have the added benefit of owning some 30 precious metals producers all wrapped into one simple investment.
Barrick Gold Corporation (ABX: 38.10 0.00 0.00%) is the world’s largest gold miner. With lots of liquidity, it draws considerable interest, in particular from big money institutional investors. Keep in mind, ABX carries more risk than the two previous options, as you have exposure to a single company. But this gold mining behemoth is sure to pay off big as gold rises and eventually soars.
We’ve all heard that inflation drives up gold prices. When inflation is on the rise, investors buy more gold to hedge their portfolios.
And, with all the government bailouts and stimulus packages, it’s hard to deny that inflation is coming. After all, the money supply has more than doubled since October.
Yet few people realize that inflation may be the least of the reasons why gold prices will push higher.
Since bottoming out in 2001, gold prices have risen by nearly 300% and have twice targeted the $1000 mark. And that’s happened in a relatively “inflation-free zone.”
There are other forces at work here. This report will show you exactly why inflation is only a small part of the gold story. And, we’ll identify the best ways to profit from the coming gold rush.
Gold Trend #1: Gold Mine Production is Decreasing.
Annual worldwide mine production of gold has decreased by 9.3% since 2001. Considering gold prices have nearly quadrupled since then, why isn’t more gold being produced? The answer is simple. Resources are being depleted and their quality is diminishing. And, when a discovery is made, it takes about 7-10 years to get a mine permitted and into production - making it difficult to quickly ramp up gold production.
Fewer and fewer large gold discoveries are being made every year. And the discoveries that are being made tend to be in more remote and less geopolitically attractive areas. Considering that the risks to opening any gold mine are considerable, mining companies just aren’t interested in mining in areas that have significant political and geographical drawbacks. As a result, miners are having difficulty replacing depleted resources.
Gold Trend #3: Investment Demand for Gold.
Large institutional investors, such as hedge and pension funds, are making large allocations to gold and gold shares. Individual investors are also getting in on the action, with gold exchange-traded funds (ETFs) gaining influence. SPDR Gold Trust (GLD: 103.745 0.00 0.00%), the largest physically backed ETF on the planet, is now the 6th biggest holder of gold bullion with more than 1000 tons. That is helping to facilitate and spread the ownership of gold by individuals. In fact, in the first half of 2009 investment demand for gold is up 150% over the first half of 2008, according to the World Gold Council.
Gold Trend #4: Central Banks are Buying Gold.
The Central Bank Gold Agreement, originally signed in 2001 and recently renewed for another five years, limits the amount of gold European central banks - including the International Monetary Fund - can sell to 400 tons per year. This means that even if governments want to sell off their gold reserves, they can’t - further straining the supply of gold on the market. The U.S., the world’s largest holder of gold, is holding on to their stash as well. Some governments are going even further: Venezuela’s Finance Ministry now requires 70% of gold produced in the country to be sold domestically. At the same time, Russia, Ecuador, Mexico and the Philippines are all buying gold. And China has increased its reserves by a staggering 76%.Gold Trend #5: Push for Gold-backed Currencies.
As investors the world over lose faith in their government’s ability to contain the financial and economic crises, many are calling for gold backed currencies - much like the U.S. dollar was until the early 1970’s. Even Zimbabwe, which a year ago had hyperinflation running at 231 million percent annually, is now considering reintroducing its Zimbabwe dollar, but this time fully backed by assets, including gold. In order for this to happen, countries would have to purchase enough gold to back all their currency - putting extreme pressure on the gold supply.
Gold Trend #6: Asian Demand for Gold is Exploding.
Asia, with its more than two and a half billion people, has a major impact on investment demand. Asians have a long-standing cultural affinity for gold as a store of wealth. India is the world’s largest gold consumer. For the last 50 years, until 2009, the Chinese government has forbidden its citizens from owning gold. But now China is encouraging its citizens to buy silver - which automatically draws more attention to gold. Today, Chinese investors even have access to gold-linked checking accounts. As a result, demand for gold in mainland China is expected to triple in the next few years.
Gold Trend #7: Gold is in a Secular Bull Market.
Gold’s price has increased every single year since 2001. This is a clear signal that we are currently in the middle of a secular bull market for gold. A secular bull market typically last about 17 years and ends with a mania stage where investors throw the concept of supply and demand out the window and frantically invest in gold. We’ve seen this same pattern repeat itself over the last hundred years of investment history and we’re about to see a major run up in gold prices. The gold market is very small in relation to the currency, bond or stock markets, so when investors start to pile in, look out. Prices will go through the roof - making the tech and housing bubbles seem small in comparison.
There are a few ways to play the rise in gold prices. You can buy investments backed by gold or you can invest in gold miners themselves.
To play gold prices directly, invest in the SPDR Gold Trust (GLD: 103.745 0.00 0.00%) Each unit of this ETF represents 1/10th of an ounce of gold. It’s highly liquid, and provides you with the quickest and easiest way to get exposure to gold. It’s also the lowest risk option, without the storage costs associated with buying physical bullion.
Next up on the risk scale is the Market Vectors Gold Miners ETF (GDX: 47.39 0.00 0.00%). This investment vehicle tracks the world’s major gold and silver producers. While more volatile than GLD, the leverage offered based on the gold price and profitability makes this an attractive option. And you have the added benefit of owning some 30 precious metals producers all wrapped into one simple investment.
Barrick Gold Corporation (ABX: 38.10 0.00 0.00%) is the world’s largest gold miner. With lots of liquidity, it draws considerable interest, in particular from big money institutional investors. Keep in mind, ABX carries more risk than the two previous options, as you have exposure to a single company. But this gold mining behemoth is sure to pay off big as gold rises and eventually soars.
Saturday, October 17, 2009
The Crisis of Credit Visualized
This person is able to explain a complex finance CRISIS into simpler
context.... Genius! He is jonathan jarvis.com and currently designing for Google's Creative Lab.
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
context.... Genius! He is jonathan jarvis.com and currently designing for Google's Creative Lab.
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.
Monday, October 5, 2009
The Truth About Jobs That No One Wants To Tell You
By Robert Reich on October 2, 2009 By Robert Reich
Unemployment will almost be certainly in double-digits next year - and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before (I’m in the last category, now that the University of California has instituted pay cuts). And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).
Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It’s already started. Next year is a mid-term election. Be prepared for worse.
So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don’t have customers aren’t going do a lot of new investing. And foreign nations also suffering high unemployment aren’t going to buy a lot of our goods and services.
And without customers, companies won’t hire. They’ll cut payrolls instead.
Which brings us to the obvious question: Who’s going to buy the stuff we make or the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.
Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.
Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.
When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.
My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.
You see? The most important thing right now is getting the jobs back, and getting the economy growing again.
People who now obsess about government debt have it backwards. The problem isn’t the debt. The problem is just the opposite. It’s that at a time like this, when consumers and businesses and exports can’t do it, government has to spend more to get Americans back to work and recharge the economy. Then - after people are working and the economy is growing - we can pay down that debt.
But if government doesn’t spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.
Unemployment will almost be certainly in double-digits next year - and may remain there for some time. And for every person who shows up as unemployed in the Bureau of Labor Statistics’ household survey, you can bet there’s another either too discouraged to look for work or working part time who’d rather have a full-time job or else taking home less pay than before (I’m in the last category, now that the University of California has instituted pay cuts). And there’s yet another person who’s more fearful that he or she will be next to lose a job.
In other words, ten percent unemployment really means twenty percent underemployment or anxious employment. All of which translates directly into late payments on mortgages, credit cards, auto and student loans, and loss of health insurance. It also means sleeplessness for tens of millions of Americans. And, of course, fewer purchases (more on this in a moment).
Unemployment of this magnitude and duration also translates into ugly politics, because fear and anxiety are fertile grounds for demagogues weilding the politics of resentment against immigrants, blacks, the poor, government leaders, business leaders, Jews, and other easy targets. It’s already started. Next year is a mid-term election. Be prepared for worse.
So why is unemployment and underemployment so high, and why is it likely to remain high for some time? Because, as noted, people who are worried about their jobs or have no jobs, and who are also trying to get out from under a pile of debt, are not going do a lot of shopping. And businesses that don’t have customers aren’t going do a lot of new investing. And foreign nations also suffering high unemployment aren’t going to buy a lot of our goods and services.
And without customers, companies won’t hire. They’ll cut payrolls instead.
Which brings us to the obvious question: Who’s going to buy the stuff we make or the services we provide, and therefore bring jobs back? There’s only one buyer left: The government.
Let me say this as clearly and forcefully as I can: The federal government should be spending even more than it already is on roads and bridges and schools and parks and everything else we need. It should make up for cutbacks at the state level, and then some. This is the only way to put Americans back to work. We did it during the Depression. It was called the WPA.
Yes, I know. Our government is already deep in debt. But let me tell you something: When one out of six Americans is unemployed or underemployed, this is no time to worry about the debt.
When I was a small boy my father told me that I and my kids and my grand-kids would be paying down the debt created by Franklin D. Roosevelt during the Depression and World War II. I didn’t even know what a debt was, but it kept me up at night.
My father was right about a lot of things, but he was wrong about this. America paid down FDR’s debt in the 1950s, when Americans went back to work, when the economy was growing again, and when our incomes grew, too. We paid taxes, and in a few years that FDR debt had shrunk to almost nothing.
You see? The most important thing right now is getting the jobs back, and getting the economy growing again.
People who now obsess about government debt have it backwards. The problem isn’t the debt. The problem is just the opposite. It’s that at a time like this, when consumers and businesses and exports can’t do it, government has to spend more to get Americans back to work and recharge the economy. Then - after people are working and the economy is growing - we can pay down that debt.
But if government doesn’t spend more right now and get Americans back to work, we could be out of work for years. And the debt will be with us even longer. And politics could get much uglier.
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