My High Dividend Stocks Blog http://myhighdividendstocks.posterous.com Most recent posts at My High Dividend Stocks Blog posterous.com Thu, 17 Nov 2011 12:05:06 -0800 Central Banks in Scramble to Buy Gold http://myhighdividendstocks.posterous.com/central-banks-in-scramble-to-buy-gold http://myhighdividendstocks.posterous.com/central-banks-in-scramble-to-buy-gold Central banks around the world are buying gold to diversify the foreign exchange reserves. They are scared of the dominoes falling. Europe will likely be the first domino to fall, then the US, and then Asia. All central bankers are Keynesians by their nature. They believe that government deficits overcome recessions. They create fiat money out-of-thin-air to buy mostly government bonds. But this increases the money supply (inflation) which normally leads to higher prices of goods. When goods prices rises massively there is societal discord and strife.

Central bankers dislike gold, but they hold it to preserve some figment of monetary legitimacy. They hold it like a housewife holds a toilet brush; with nose pinched and at arms length. It is a hated but necessary tool. That is why John Maynard Keynes called gold "a barbarous relic". Gold can't created at the whim of some anti-capitalist central banker to fund the deficits of bankrupt socialist governments.

http://blogs.wsj.com/marketbeat/2011/11/17/central-banks-in-scramble-to-buy-g...

Some central bankers are positioning their country's for the post-US-dollar-as-the-world's-reserve-currency world. When the music stops they don't want to be holding a central bank full of US I.O.U.s.

You should have 20-30% of your net worth in physical precious metal coins. They will hold their purchasing power through crisis.

There will be a time many years from now when you should sell some to pay off your mortgage. When central bankers cease to inflate their money supplies for real, then a depression will ensue that will contract the money supply (deflation). All prices will fall. The purchasing power of the domestic will rise and fixed rate loans will be harder to pay back. Think of the US deflationary depression in 1930-1933.

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Mon, 31 Oct 2011 20:47:24 -0700 A scary chart for Keynesians on Halloween http://myhighdividendstocks.posterous.com/a-scary-chart-for-keynesians-on-halloween http://myhighdividendstocks.posterous.com/a-scary-chart-for-keynesians-on-halloween
The scariest chart ever - to a Keynesian!!
 
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Fri, 14 Oct 2011 12:58:36 -0700 TIP OF THE WEEK - Gold is a crisis hedge. Own some before the next crisis. http://myhighdividendstocks.posterous.com/tip-of-the-week-gold-is-a-crisis-hedge-own-so http://myhighdividendstocks.posterous.com/tip-of-the-week-gold-is-a-crisis-hedge-own-so

Gold is a crisis hedge.  Own some before the next crisis.

Jason Brizic

October 14th, 2011

Gold is a crisis hedge.  Rich people buy gold when they are fearful.

There are several good reasons for the wealthy to be fearful right now.  They own more that 80% of all stocks and bonds.  The European sovereign debt crisis is real, the USA will be bankrupted by welfare and warfare programs, and the Chinese economic bubble is going to pop.  Bonds aren’t safe, stocks aren’t safe, and interest rates are at historic lows in many economies.  Gold is a refuge from these crisis events that will not be solved through political means.

The gold price will continue to go up so long as central bankers run their printing presses.  Central bankers such as Ben Bernanke believe in Keynesian economics.  Keynesian economics can be summed up in four words: “Deficit Spending Overcomes Recessions”.  It doesn’t work, but they is what they believe and they are in charge of governments and central banks.

The Federal Reserve under Ben Bernanke has tripled the monetary base since 2008.

Image001

Most of this money is being held by the large commercial banks as excess reserves.  It is not being loaned into the economy.

Image002

Despite gold’s price increases it has not increased in proportion with the inflation of the monetary base.  It has not risen as much because most of the money created by the Federal Reserve has not flowed into the economy to increase the prices of everything.  The newly created money is locked away in the excess reserves of the large commercial banks.  If they were to lend it out, then prices would rise more than the 300% increase in the monetary base due to fractional reserve banking process.  Basically, one dollar added to the monetary base could become 7-10 more dollars in the M1 money supply (depending on how profligate the bankers loans are).

These are the best gold prices since the July-August 2011 timeframe.  Take this opportunity to make your first purchases of some gold coins.  Politicians will announce solutions to the sovereign debt crisis, the FED will announce better economic numbers, and the Chinese will deny they are in a bubble until it obviously pops.  Don’t believe them.  Greece will default.  They are the first domino to fall.  Nobody talks about the Medicare and Social Security unfunded liabilities.  They are too huge.  They are dozens of trillions of dollars.  The Chinese mercantilists have been inflating they currency and their economy.  When they stop their will be a severe recession in China.

Go to www.apmex.com and take a look at the one ounce gold coins from your country’s mint.  Then buy one if you have none already.  I had a good experience with American Precious Metals Exchange in the past.  I get no commissions or anything from them.

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Thu, 06 Oct 2011 12:23:38 -0700 Reasons why you should own gold in your investment assets. http://myhighdividendstocks.posterous.com/reasons-why-you-should-own-gold-in-your-inves http://myhighdividendstocks.posterous.com/reasons-why-you-should-own-gold-in-your-inves

Big government statists who believe in Keynesian economics hate gold.  They write articles to persuade you not to buy the metal which has severed as money for most of the past 5,000 years.  Here is an article by Yale/Harvard trained Fareed Zakaria.  Mr. Zakaria is a current contributor to the dying Times magazine.

Precious metals are a crisis hedge.  There really is a crisis that is at the boiling over point.  The government debt crisis brought on by decades of Keynesian deficit spending is happening now.  They will print more money to attempt to stop the crisis money printing caused.  Keynesian central bankers and governments are pouring gas on the fire to put it out.  Mr. Zakaria is trying to convince you that it will put the fire out.

All that's gold doesn't glitter <http://globalpublicsquare.blogs.cnn.com/2011/10/03/why-gold-might-be-a-bad-investment/>

By Fareed Zakaria, CNN

What do Hugo Chavez and Glenn Beck have in common? The socialist/populist president of Venezuela and the right-wing talk show host often have strange ideas - just not the same ones. But it turns out, they are both gold bugs.

Now, many people have been investing in gold. But Hugo Chavez wants to horde it literally, physically. The Venezuelan government controls the world's 15th largest stockpile of gold: about 365 tons. But, like most gold investors, it doesn't really have that gold. At least not physically. More than half of Venezuela's reserves are held overseas in London, New York and Zurich. If you ever visit the New York federal reserve, you can even see it in the underground vaults, neatly labelled as Venezuela's.

You are not investing in gold if you do not take physical ownership of it.  Many people are trading paper promises in gold such as the gold ETF (GLD).  I don’t like Hugo Chavez, but he’d be wise to repatriate the Venezuelan government’s gold to Venezuela.

Mr. Chavez, as you know, doesn't like the West; he doesn't like this predicament. So he's announced he wants his gold. But how do you transport 211 tons of gold across the seas? Well, by spending lots of money. You have to insure against a gold heist, like the one in The Italian Job <http://www.italianjobmovie.com/> . Experts say Mr. Chavez could spend at least 4% of the total value of his gold on insurance, with more on security and transport. Add it all up and you could get about half a billion dollars. That's serious money for any country, let alone one that has negative growth rates as does Venezuela these days.

The Venezuelan government could transport the gold in a ship across the sea.  And they could pay for it with fiat money that their central bank could print to buy insurance against a heist.  Economic growth rates measured by changes in GDP is just another Keynesian aggregated number compiled by salaried bureaucrats.  It is true that the standard of living is going down in Venezuela, but it is due to socialism’s effects.  Keynesians believe that government spending adds to an economy.  In reality, government spending must come from the money that consumers planned on spending themselves or from the investments that individuals would have made themselves.  It doesn’t add to the economy; it just redirects money into unprofitable government programs.

What in the World is Hugo Chavez thinking?

Actually: He's not alone. From the ancient times of Egypt's Tutankhamun to the Gold Rush in the mid-19th century, right through to the modern day, we've always been attracted to gold. Who can ever forget the appropriately named Auric Goldfinger, from the James Bond movie, who said, "This is gold, Mr. Bond. All my life I've admired its color, its brilliance, its divine heaviness."

Mr. Goldfinger forgot to mention its rarity, divisibility, purity, durability, and portability.  These are some of the qualities that make good mediums of exchange (money).

There are many who share Mr. Goldfinger's sentiments around the globe. especially in times of confusion and uncertainty about governments. People worry that governments are keeping interest rates too low, that will cause inflation and could weaken the dollar and other currencies.

There is a very real soverign debt crisis (read government debt crisis) at hand.  It is the result of decades of Keynesian economic policies.  Keynesians believe that government spending is productive especially in a time of recession/depression.  A free market in interest rates would be higher than they are now.  There will be massive price inflation when the commercial banks loan out their $1.7 trillion in excess reserves.  The dollar will continue to decline until the Federal Reserve stiffs the US Treasury at some point in the future.

The answer: Store Gold - something that has always been seen as a solid, substantial hedge against inflation. If everything else collapses, the theory goes, gold will hold its value. For this reason, in the last decade gold prices have risen more than 600%. Is this a rational response to legitimate fears of inflation? Or are we in the middle of a bubble?

Gold is only a crisis hedge (this includes massive price inflation like 20-30% per annum and hyperinflation).  Gold does not hedge against run of the mill FED inflation of 2-3% per annum.  There is a real crisis in the financial system and in government debt service.  There is no bubble in gold until the FED stiffs the US Treasury and causes a 1930-1933 deflation (aka the Great Depression).

There are signs that suggest a bubble. The fact is, global demand for gold in industry and jewelry has actually declined by 18% since 2004. And yet over the same period prices have surged. So it's clear that the market is flooded with speculators who see gold as an investment, not as a usable currency or product.

The decline in demand for jewelry is no surprise.  This is basic economics.  If the price of a good such as jewelry goes up, then the demand for that good goes down (all other things being equal).  The price of gold is being driven up because there is a real increase in demand at the current prices.  Some investors realize that the price will continue to go up as long as the FED keeps creating digital dollars for bailouts.  I’ll save my defense of speculators for another article.  In short, they minimize price swings through their actions.  If you can’t wait, then read Walter Block’s chapter on speculators available for free at http://mises.org/resources/3490/Defending-the-Undefendable .

What's really changed in the last few years is access. It's easier to buy gold over the internet than it is stocks or shares. In places like Abu Dhabi and some European cities, you can buy grams of gold at ATM-style dispensers. All over the world, there's a new Gold Rush. You switch on the TV and commercials warn you that the end of the world is coming and that you need to put your money in gold. Glenn Beck says that if you haven't switched your savings to gold, you're nuts. And Donald Trump is now accepting gold bars instead of wire transfers for luxury condos.

This is not true.  It is not easier to buy gold online; it is slightly harder because you usually need to use a bank wire to buy at good prices.  Buying a gold ETF like GLD is just as easy as buying stocks, but that isn’t buying gold that will be physically delivered to you.  The gold ATMs are so limited in distribution that they are just novelties at this point.  When they start showing up next to Redbox video rentals then maybe I’ll consider gold becoming a bubble.  There is a new gold rush because the crisis is going to be as bad or worse than the Great Depression.  Almost no one owns gold presently despite all the TV commercials.  It represents less than 1% of financial assets.  Donald Trump is wise to accept gold bars as payment.

I recommend that you own 20% - 30% of your net worth in precious metals that you physically posses.  If you have a net worth of $100,000, then that means you should own between $20,000 and $30,000 in precious metals.  I would keep 80% in gold and only 20% in silver.  Silver is much more volatile than gold.  Buy one ounce or tenth ounce gold coins printed by the mint of the country you reside in.  Your precious metals are not a hedge against inflation.  They are a hedge against massive inflation caused by a rapidly expanding money supply.  They are useless in a hyperinflation (which I don’t think will happen), but valuable in the aftermath to capitalize a business or to pay off debts by selling off a few ounces.

Most investment advisors will only advise 5% of your net worth at the maximum because they have no understanding of economics.  That leaves 95% in dollar denominated assets.  This is unwise.

This is bizarre. A lot of it is simply scaremongering. The truth is that for two and half decades, between 1980 and the mid 2000s - gold prices actually declined. Unlike many other commodities which actually have an end use - oil, minerals - gold is just a symbol, and as such its price rises have to do more with psychology and emotion than reason. So, when it falls out of fashion, the price could really collapse. The next time you watch Goldfinger or you hear of the antics of a Hugo Chavez or a Donald Trump, be a little wary.

The price of gold did in fact decline as price inflation rose from 1980 to the mid 2000s.  There was no perceived crisis then.  This is why it is only a crisis hedge.  Gold doesn’t hedge you against non-crisis levels of price inflation.  Gold is a commodity; it has an end use as jewelry, in electronics, and as a crisis hedge.  It is possible that it will serve as money again in the future, but even if it doesn’t it still has value and can be exchanged for other fiat monies (Yen, Dollars, Euro, Pounds, etc.).

The price of gold will go down during a deflationary depression.  When the FED ceases to buy US treasury bonds and (gasp!) sells some of its assets the money supply will fall.  A falling money supply is called deflation.  It hasn’t happened since 1933.  As the money supply shrinks many banks will collapse.  The small and medium sized banks will collapse because the FED won’t be bailing them out.  The biggest banks will probably survive because the FED protects them.  The dollar will strengthen in purchasing power and gold will fall.  Printed currency in your possession is king in a true deflationary depression.  Digital money in your savings, retirement accounts, and checking accounts will be disappearing when your bank dies.  There is no FDIC protect as this point in time (remember the FED stiffed the US treasury which funds the FDIC).  You should always have some currency at home in a safe with your precious metals.

Gold isn't a stock with real earnings. It isn't a bond with interest payments. It isn't oil. It won't help you drive a car; it won't help you light a fire. Yes, you can wear it, but you can't eat it. If doomsday really arrives, a can of baked beans might be worth a lot more than a brick of gold

We are in a bear market.  Many stocks will suffer a loss of real earnings.  Bonds are in a bubble.  Oil will decline in price until the banks begin to increase lending, then it will shoot upward with the massive price inflation.  US dollars won’t help you drive a car; they won’t help you light a fire.  Wait a minute.  US dollars might be useful for lighting a fire during a hyperinflation.  You can’t eat US dollars either.

You should buy storable goods that you will use or consume in the future now while prices are relatively cheap.  Once you have a good supply of storable goods in your basement or storage areas start consuming them and replenishing them in a rotation.  Do this before you buy gold.  Then buy gold and have some currency on hand.  Most people are in such bad financial shape that they probably shouldn’t own any gold because they haven’t taken care of their immediate needs first (such as water, food, and basic consumables).  A typical gold bar is 400 ounces.  The ultrarich might own a few bars, but no one else.  This is hyperbole.  Buy the beans now while their cheap.

Here is some of the Wikipedia entry for Fareed Zakaria who is the author of the article I just refuted.  http://en.wikipedia.org/wiki/Fareed_Zakaria  Yale and Harvard graduates are thoroughly schooled in Keynesian economics and Council on Foreign Relations one-world-government ideologies such as socialism and national socialism.  He is not an advocate of individual freedom and unfettered voluntary exchange.  He was born into the political class that has everything to lose when Keynesian policies fail.  Don’t forget this.

Early life

Zakaria was born in Mumbai (then Bombay), Maharashtra, India, to a Konkani Muslim family.[3] His father, Rafiq Zakaria, was a politician associated with the Indian National Congress and an Islamic scholar. His mother, Fatima Zakaria, was for a time the editor of the Sunday Times of India.

Zakaria attended the Cathedral and John Connon School in Mumbai. He received a Bachelor of Arts from Yale University,[1] where he was president of the Yale Political Union, editor-in-chief of the Yale Political Monthly, a member of the Scroll and Key society, and a member of the Party of the Right. He later earned a Doctor of Philosophy in political science from Harvard University in 1993,[1] where he studied under Samuel P. Huntington and Stanley Hoffmann.

Career

After directing a research project on American foreign policy at Harvard, Zakaria became managing editor of Foreign Affairs magazine in 1992. In October 2000, he was named editor of Newsweek International,[1] and wrote a weekly foreign affairs column. In August 2010 it was announced that he was moving from Newsweek to Time magazine, to serve as a contributing editor and columnist.[4]

He has written on a variety of subjects for the New York Times, the Wall Street Journal, The New Yorker, and as a wine columnist for the web magazine Slate.[5][6]

Zakaria is the author of From Wealth to Power: The Unusual Origins of America's World Role (Princeton, 1998), The Future of Freedom (Norton, 2003), and The Post-American World (2008); he has also co-edited The American Encounter: The United States and the Making of the Modern World (Basic Books).

In 2007, Foreign Policy and Prospect magazines named him one of the 100 leading public intellectuals in the world.[7]

Zakaria was a news analyst with ABC's This Week with George Stephanopoulos (2002–2007); he hosted the weekly TV news show, Foreign Exchange with Fareed Zakaria on PBS (2005–2008); his weekly show, Fareed Zakaria GPS (Global Public Square) premiered on CNN in June 2008.[1] It airs on Sundays at 10:00am and 1:00pm Eastern Daylight Time.

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Sun, 17 Jul 2011 17:08:42 -0700 It Ain't Money If I Can't Print It! http://myhighdividendstocks.posterous.com/it-aint-money-if-i-cant-print-it http://myhighdividendstocks.posterous.com/it-aint-money-if-i-cant-print-it

It Ain't Money If I Can't Print It!
by Peter Schiff

Recently by Peter Schiff: Don't be Fooled by Political Posturing
   
I have been forecasting with near certainty that QE2 would not be the end of the Fed's money-printing program. My suspicions were confirmed in both the Fed minutes on Tuesday and Fed Chairman Ben Bernanke's semi-annual testimony to Congress yesterday. The former laid out the conditions upon which a new round of inflation would be launched, and the latter re-emphasized – in case anyone still doubted – that Mr. Bernanke has no regard for the principles of a sound currency.


Tuesday's release of the Fed minutes contained the first indication that a third round of quantitative easing (QE3) is being considered. The notes described unanimous agreement that QE2 should be completed, along with the following comment: "depending on how economic conditions evolve, the Committee might have to consider providing additional monetary policy stimulus, especially if economic growth remained too slow to meaningfully reduce the unemployment rate in the medium run." Since the unemployment situation is deteriorating, and by all accounts will continue to do so, the Fed is essentially pledging to keep the spigot turned on. The committee also decided to look only at current "overall inflation" in making their judgments, as opposed to "inflation trends." Since new dollars take awhile to circulate around the economy and raise prices, this means the Fed is sure to be too late in tightening once inflation starts to run away, causing more dislocations in the American economy.

If anyone had lingering faith that Mr. Bernanke actually has a plan to end the US government's addiction to cheap money, the Chairman's semi-annual testimony to Congress should have washed it away. In addition to claiming that his money-printing has helped the US economy, Bernanke told Congress that gold is not money, people buying gold are not concerned about inflation, and the external value of the dollar has no influence on its domestic purchasing power. He even took a moment to stump for President Obama's plan to raise the debt ceiling.

 
By claiming that gold is not money, the Chairman demonstrates his ignorance of much of monetary history. He told Congressman Ron Paul that he had no idea why central banks hold gold, before speculating that it might have something to do with tradition. Yes, traditionally gold is money, which is precisely why central banks hold it. And gold is money because central bankers like Mr. Bernanke cannot be trusted with a paper substitute.

Bernanke further disputes the facts by claiming that the only reason people are buying gold is to hedge against uncertainty, or "tail risks" as he calls them. My advice to the Chairman is to ask the people who are actually buying it. As someone who has been buying gold myself for a decade, I can assure him that my gold buying has nothing to do with "uncertainty." In fact, it's just the opposite. I am buying gold because of what is certain, not what is uncertain. I am certain that Mr. Bernanke's incompetence will destroy the value of the dollar and unleash runaway inflation.

If it were true that people bought gold to protect themselves from market uncertainty, as the Chairman claims, then the metal should have spiked in the midst of the '08 credit crunch. Instead, it fell along with most other assets. People instinctively fled into US dollars and Treasuries because of their long record of stability. What Bernanke doesn't understand is that his irresponsible monetary policy is undermining that faith in US assets, built up over generations. That is what's driving gold: easy money, negative interest rates, and quantitative easing.

 
Finally, by claiming that the dollar's exchange rate has no effect on domestic prices, Mr. Bernanke demonstrates that he probably lacks the competence to be a bank teller, let alone Chairman of the Federal Reserve. A weaker dollar means Americans have to pay more for imported goods. But it also means domestic producers have to pay more for raw materials and imported components, which raises domestic production costs as well. It also means that more domestically produced goods are exported, reducing the supply and raising the price of what is left for Americans to consume. This is Econ 101.

Given the Chairman's confusion on the basics of economics, perhaps it's no surprise that he's put quantitative easing right back on the table, where, despite prior rhetoric, it has been all along. The Fed has always known that QE3 is coming; it's just looking for an excuse to launch it.

 
The problem is that fighting a recession with QE is like fighting a fire with gasoline. As the flames of recession reignite, more QE, while dousing it momentarily, will only produce an even larger economic inferno.

At one point, Bernanke said, "The right analogy for not raising the debt ceiling is going out and having a spending spree on your credit card and then refusing to pay the bill." He's got the analogy right, but his conclusions are completely wrong. Yes, Congress has gone on a spending spree and it's time to pay up. But raising the debt ceiling is like taking out a Mastercard to pay the Visa... it just makes the problem worse. If you or I go out one night, get drunk, and run up a huge credit card bill, we know that the way to fix it is to buckle down and pay it back. We might postpone vacation plans or put off buying a new car, we might cancel our cable TV subscription or gym membership. The point is that we would have to reduce current consumption to make up for the overspending in the past.

Obama claims that raising the debt ceiling is about getting a hold of the federal debt. Have you ever heard of anyone getting out of debt by taking on more debt? Has anyone ever reduced their debt without reducing current consumption? How can the Fed Chairman endorse such a preposterous idea?

Bernanke actually went a step further and warned against reducing current federal spending too sharply, claiming that such a move might impede the "recovery." He apparently believes that it is the role of the Congress to go on spending sprees, and his role to pay the mounting bills with freshly printed dollars. The fact that this formula has produced larger and larger economic crises does not seem to bother him. I guess ignorance is bliss.


July 15, 2011

Peter Schiff is president of Euro Pacific Capital and author of The Little Book of Bull Moves in Bear Markets and Crash Proof: How to Profit from the Coming Economic Collapse. His latest book is How an Economy Grows and Why It Crashes.

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Fri, 08 Jul 2011 11:28:01 -0700 TIP OF THE WEEK - The Usefulness of Bollinger Bands http://myhighdividendstocks.posterous.com/tip-of-the-week-the-usefulness-of-bollinger-b http://myhighdividendstocks.posterous.com/tip-of-the-week-the-usefulness-of-bollinger-b

The Usefulness of Bollinger Bands

Jason Brizic

June 8, 2011

Bollinger Bands are a technical trading tool created by John Bollinger in the early 1980s. They arose from the need for adaptive trading bands and the observation that volatility was dynamic, not static as was widely believed at the time.

The purpose of Bollinger Bands is to provide a relative definition of high and low. By definition prices are high at the upper band and low at the lower band. This definition can aid in rigorous pattern recognition and is useful in comparing price action to the action of indicators to arrive at systematic trading decisions.

Bollinger Bands consist of a set of three curves drawn in relation to securities prices. The middle band is a measure of the intermediate-term trend, usually a simple moving average, that serves as the base for the upper band and lower band. The interval between the upper and lower bands and the middle band is determined by volatility, typically the standard deviation of the same data that were used for the average. The default parameters, 20 periods and two standard deviations, may be adjusted to suit your purposes.

You can use Bollinger Bands to help you time your purchase of high dividend stocks, commodities, and contrarian stocks.  Price bottoms tend to occur when the stock price lifts off the long downward slide down the lower band.  Price tops tend to occur when the stock price falls from hitting its head on the top of the upper band.  I use the MACD and CCI in conjunction with the Bollinger Bands to confirm a top or bottom because just using the Bollinger Band alone can get you burned (the UNG example below).

I use Bollinger Bands when I create free charts on www.stockcharts.com.

Here are the steps I take to setup my charts in less than 10 seconds:

  1. Leave the Type of chart: set to SharpChart.
  2. Type in the ticker symbol and click Go.
  3. Change the Period to Weekly.
  4. Scroll down to Chart Attributes; change Size to Landscape.
  5. Check the following checkboxes: Full Quote, Price Labels,
  6. Uncheck the Log Scale checkbox.
  7. Scroll down to the Overlays area.  Change the one that says –None- to Bollinger Bands
  8. Scroll down to the Indicators area.  Change the one that says RSI to CCI

I discovered the usefulness of Bollinger Bands when I tried to time the recent bottom in the gold price back in 2008  Here is the 3 year gold price chart:

Image002

http://stockcharts.com/h-sc/ui?s=$GOLD&p=W&b=5&g=0&id=p99091791121

When was the best time to buy gold on this chart? $681 in late October 2008.  What happened right after that point?  The price lifted off the bottom Bollinger Band.  The CCI was deep in the red and the MACD turned upward from negative territory.  Those confirmed the bottom.  I bought at $820.

The natural gas ETF trading as UNG provides a good example of how the solely relying on the Bollinger Bands alone can trick you into buying too high.  Look at this chart:

Image003

http://stockcharts.com/h-sc/ui?s=UNG&p=W&b=5&g=0&id=p99958479096

Wow!  This fund has lost a lot of money.  The price of UNG lifted off the bottom Bollinger Band many times, but never enough to bust through the middle band.  The CCI and MACD indicators were good at around March 2009, but the price didn’t break through the middle BB.  Knowing the fundamentals of UNG were horrible was enough to stay away from the fund.  However, just carefully examining the technicals was also enough.

I use the fundamentals to decide to buy or sell.  Then I use the technicals to time my entry or exit.  I will write about the CCI and MACD in upcoming tips of the week.

The fundamentals of Safe Bulkers were strong during the big market crash of 2008-2009.  You could have used Bollinger Bands to get this gem at around $3.00 per share.

Image004

http://stockcharts.com/h-sc/ui?s=SB&p=W&b=5&g=0&id=p24023572905

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Mon, 25 Apr 2011 11:41:59 -0700 Debunking Anti-Gold Propaganda. http://myhighdividendstocks.posterous.com/debunking-anti-gold-propaganda http://myhighdividendstocks.posterous.com/debunking-anti-gold-propaganda

Debunking Anti-Gold Propaganda

by Doug Casey
Casey Research

Recently by Doug Casey: Keeping Capital in a Depression

 

 

 

A meme is now circulating that gold is in a bubble and that it's time for the wise investor to sell. To me, that’s a ridiculous notion. Certainly a premature one.

It pays to remain as objective as you can be when analyzing any investment. People have a tendency to fall in love with an asset class, usually because it’s treated them so well. We saw that happen, most recently, with Internet stocks in the late ’90s and houses up to 2007. Investment bubbles are driven primarily by emotion, although there's always some rationale for the emotion to latch on to. Perversely, when it comes to investing, reason is recruited mainly to provide cover for passion and preconception.

In the same way, people tend to hate certain investments unreasonably, usually at the bottom of a bear market, after they've lost a lot of money and thinking about the asset means reliving the pain and loss. Love-and-hate cycles occur for all investment classes.

But there’s only one investment I can think of that many people either love or hate reflexively, almost without regard to market performance: gold. And, to a lesser degree, silver. It’s strange that these two metals provoke such powerful psychological reactions – especially among people who dislike them. Nobody has an instinctive hatred of iron, copper, aluminum or cobalt. The reason, of course, is that the main use of gold has always been as money. And people have strong feelings about money. Let’s spend a moment looking at how gold’s fundamentals fit in with the psychology of the current market.

What Gold Is – and Why It’s Hated

Let me first disclose that I’ve always been favorably inclined toward gold, simply because I think money is a good thing. Not everyone feels that way, however. Some, with a Platonic view, think that money and commercial activity in general are degrading and beneath the “better” sort of people – although they’re a little hazy about how mankind rose above the level of living hand-to-mouth, grubbing for roots and berries. Some think it’s “the root of all evil,” a view that reflects a certain attitude toward the material world in general. Some (who have actually read St. Paul) think it’s just the love of money that’s the root of all evil. Some others see the utility of money but think it should be controlled somehow – as if only the proper authorities knew how to manage the dangerous substance.

From an economic viewpoint, however, money is just a medium of exchange and a store of value. Efforts to turn it into a political football invariably are a sign of a hidden agenda or perhaps a psychological aberration. But, that said, money does have a moral as well as an economic significance. And it’s important to get that out in the open and have it understood. My view is that money is a high moral good. It represents all the good things you hope to have, do and provide in the future. In a manner of speaking, it’s distilled life. That’s why it’s important to have a sound money, one that isn’t subject to political manipulation.

Over the centuries many things have been used as money, prominently including cows, salt and seashells. Aristotle thought about this in the 4th century BCE and arrived at the five characteristics of a good money:

  • It should be durable (which is why, say, wheat isn’t a good money – it rots).
  • It should be divisible (which is why artwork isn’t a good money – you can’t cut up the Mona Lisa for change).
  • It should be convenient (which is why lead isn’t a good money – it just takes too much to be of value).
  • It should be consistent (which is one reason why land can’t be money – each piece is different).
  • And it should have value in itself (which is why paper money leads to trouble).

Of the 92 naturally occurring elements, gold (secondarily silver) has proved the best money. It’s not magic or superstition, any more than it is for iron to be best for building bridges and aluminum for building airplanes.

Of course we do use paper as money today, but only because it recently served as a receipt for actual money. Paper money (currency) historically has a half-life that depends on a number of factors. But it rarely lasts longer than the government that issues it. Gold is the best money because it doesn’t need to be “faith-based” or rely on a government.

There’s much more that can be said on this topic, and it’s important to grasp the essentials in order to understand the controversy about whether or not gold is in a bubble. But this isn’t the place for an extended explanation.

Keep these things in mind, though, as you listen to the current blather from talking heads about where gold is going. Most of them are just journalists, reporters that are parroting what they heard someone else say. And the “someone else” is usually a political apologist who works for a government. Or a hack economist who works for a bank, the IMF or a similar institution with an interest in the status quo of the last few generations. You should treat almost everything you hear about finance or economics in the popular media as no more than entertainment.

So let’s take some recent statements, assertions and opinions that have been promulgated in the media and analyze them. Many impress me as completely uninformed, even stupid. But since they’re floating around in the infosphere, I suppose they need to be addressed.

Misinformation and Disinformation

Gold is expensive.

This objection is worth considering – for any asset. In fact, it’s critical. We can determine the price of almost anything fairly easily today, but figuring out its value is as hard as it’s ever been. From the founding of the U.S. until 1933, the dollar was defined as 1/20th of an ounce of gold. From 1933 it was redefined as 1/35th of an ounce. After the 1971 dollar devaluation, the official price of the metal was raised to $42.22 – but that official number is meaningless, since nobody buys or sells the metal at that price. More importantly, people have gotten into the habit of giving the price of gold in dollars, rather than the value of the dollar in gold. But that’s another subject.

Here’s the crux of the argument. Before the creation of the Federal Reserve in 1913, a $20 bill was just a receipt for the deposit of one ounce of gold with the Treasury. The U.S. official money supply equated more or less with the amount of gold. Now, however, dollars are being created by the trillion, and nobody really knows how many more of them are going to be shazammed into existence.

It is hard to determine the value of anything when the inch marks on your yardstick keep drifting closer and closer together.

The smart money is long gone from gold.

This is an interesting assertion that I find based on nothing at all. Who really is the smart money? How do you really know that? And how do you know exactly what they own (except for, usually, many months after the fact) or what they plan on buying or selling? The fact is that very few billionaires (John Paulson perhaps best known of them) have declared a major position in the metal. Gold and gold stocks, as the following chart shows, are only a tiny proportion of the financial world’s assets, either absolutely or relative to where they've been in the past:

Image002

Gold is risky.

Risk is largely a function of price. And, as a general rule, the higher the price the higher the risk, simply because the supply is likely to go up and the demand to go down – leading to a lower price. So, yes, gold is riskier now, at $1,400, than it was at $700 or at $200. But even when it was at $35, there was a well-known financial commentator named Eliot Janeway (I always thought he was a fool and a blowhard) who was crowing that if the U.S. government didn’t support it at $35, it would fall to $8.

In any event, risk is relative. Stocks are very risky today. Bonds are ultra risky. Real estate is in an ongoing bear market. And the dollar is on its way to reaching its intrinsic value.

Yes, gold is risky at $1,400. But it is actually less risky than most alternatives.

Gold pays no interest.

This is kind of true. But only in the sense that a $100 bill pays no interest. You can get interest from anything that functions as money if it is lent out. Interest is the time premium of money. You will not get interest from either your $100 or from your gold unless you lend them to someone. But both the dollars and the gold will earn interest if you lend them out. The problem is that once you make a loan (even to a bank, in the form of a savings account), you may not even get your principal back, much less the interest.

Gold pays no dividends.

Of course it doesn’t. It also doesn't yield chocolate syrup. It’s a ridiculous objection, because only corporations pay dividends. It’s like expecting your Toyota in the driveway to pay a dividend, when only the corporation in Japan can do so. But if you want dividends related to gold, you can buy a successful gold mining stock.

Gold costs you insurance and storage.

This is arguably true. But it’s really a sophistic misdirection to which many people uncritically nod in agreement. You may very well want to insure and professionally store your gold. Just as you might your jewelry, your artwork and most valuable things you own. It’s even true of the share certificates for stocks you may own. It’s true of the assets in your mutual fund (where you pay for custody, plus a management fee).

You can avoid the cost of insurance and storage by burying gold in a safe place – something that’s not a practical option with most other valuable assets. But maybe you really don’t want to store and insure your gold, because the government may prove a greater threat than any common thief. And if you pay storage and insurance, they’ll definitely know how much you have and where it is.

Gold has no real use.

This assertion stems from a lack of knowledge of basic chemistry as well as economics. Yes, of course people have always liked gold for jewelry, and that’s a genuine use. It’s also good for dentistry and micro-circuitry. Owners of paper money, however, have found the stuff to be absolutely worthless hundreds of times in many score of countries.

In point of fact, gold is useful because it is the most malleable, the most ductile and the most corrosion resistant of all metals. That means it’s finding new uses literally every day. It’s also the second most conductive of heat and electricity, and the second most reflective (after silver). Gold is a hi-tech metal for these reasons. It can do things no other substance can and is part of the reason your computer works so well.

But all these reasons are strictly secondary, because gold’s main use has always been (and I’ll wager will be again) as money. Money is its highest and best use, and it’s an extremely important one.

The U.S. can, or will, sell its gold to pay its debt, depressing the market.

I find this assertion completely unrealistic. The U.S. government reports that it owns 265 million ounces of gold. Let’s say that’s worth about $400 billion right now. I’m afraid that’s chicken feed in today’s world. It’s only a quarter of this year’s federal deficit alone. It’s only half of one year’s trade deficit. It represents only about 5% of the dollars outside the U.S. The U.S. government may be the largest holder of gold in the world, but it owns less than 5% of the approximately 6 billion ounces above ground.

From the ‘60s until about 2000, most Western governments were selling gold from their treasuries, working on the belief it was a “barbarous relic.” Since then, governments in the advancing world – China, India, Russia and many other ex-socialist states – have been buying massive quantities.

Why? Because their main monetary asset is U.S. dollars, and they have come to realize those dollars are the unbacked liability of a bankrupt government. They’re becoming hot potatoes, Old Maid cards. But the dollars can be replaced with what? Sovereign wealth funds are using them to buy resources and industries, but those things aren’t money. And in the hands of bureaucrats, they’re guaranteed to be mismanaged. I expect a great deal of gold buying from governments around the world over the next few years. And it will be at much higher dollar prices.

High gold prices will bring on huge new production, which will depress its price.

This assertion shows a complete misunderstanding of the nature of the gold market. Gold production is now about 82.6 million ounces per year and has been trending slightly down for the last decade. That’s partly because at high prices miners tend to mine lower-grade ore. And partly because the world has been extensively explored, and most large, high-grade, easily exploited resources have already been put into production.

But new production is trivial relative to the 6 billion ounces now above ground, which only increases by about 1.3% annually. Gold isn’t consumed like wheat or even copper; its supply keeps slowly rising, like wealth in general. What really controls gold’s price is the desire of people to hold it, or hold other things – new production is a trivial influence.

That’s not to say things can’t change. The asteroids have lots of heavy metals, including gold; space exploration will make them available. Gigantic amounts of gold are dissolved in seawater and will perhaps someday be economically recoverable with biotech. It’s now possible to transmute metals, fulfilling the alchemists dream; perhaps someday this will be economic for gold. And nanotech may soon allow ultra-low-grade deposits of gold (and every other element) to be recovered profitably. But these things need not concern us as practical matters in the course of this bull market.

You should have only a small amount of gold, for insurance.

This argument is made by those who think gold is only going to be useful if civilization breaks down, when it could be an asset of last resort. In the meantime, they say, do something productive with your money…

This is poor speculative theory. The intelligent investor allocates his funds where it’s likely they’ll provide the best return, consistent with the risk, liquidity and volatility profile he wants to maintain. There are times when you should be greatly overweight in a single asset class – sometimes stocks, sometimes bonds, sometimes real estate, sometimes what-have-you. For the last 12 years, it’s been wise to be overweight in gold. You always want some gold, simply because it’s cash in the most basic form. But ten years from now, I suspect that will be a minimum. Right now it’s a maximum. The idea of keeping a constant, but insignificant, percentage in gold impresses me as poorly thought out.

Interest rates are at zero; gold will fall as they rise.

In principle, as interest rates rise, people tend to prefer holding currency deposits. So they tend to sell other assets, including gold, to own interest-earning cash. But there are other factors at work. What if the nominal interest rate is 20%, but the rate of currency depreciation is 40%? Then the real interest rate is minus 20%. This is more or less what happened in the late ‘70s, when both nominal rates and gold went up together. Right now governments all over the world are suppressing rates even while they’re greatly increasing the amount of money outstanding; this will eventually (read: soon) result in both much higher rates and a much higher general price level. At some point high real rates will be a factor in ending the gold bull market, but that time is many months or years in the future.

Gold sentiment is at an all-time high.

Although gold prices are at an all-time high in nominal terms, they are still nowhere near their highs in real terms, of about $2,500 (depending on how much credibility you give the government’s CPI numbers), reached in 1980. Gold sentiment is still quite subdued among the public; most of them barely know it even exists.

Some journalists like to point out that since there are a few (five, perhaps) gold dispensing machines in the world, including one in the U.S., that there’s a gold mania afoot. That’s ridiculous, although it shows a slowly awakening interest among people with assets.

Journalists also point to the numerous ads on late-night TV offering to buy old gold jewelry (generally at around a 50% discount from its metal value) as a sign of a gold bubble. But this is even more ridiculous, since the ads are inducing the unsophisticated, cash-strapped booboisie to sell the metal, not buy it.

You’ll know sentiment is at a high when major brokerage firms are hyping newly minted gold products, and Slime Magazine (if it still exists) has a cover showing a golden bull tearing apart the New York Stock Exchange. We’re a long way from that point.

Mining stocks are risky.

This is absolutely true. In general, mining is a horrible business. It requires gigantic fixed capital expense to build the mine, but only after numerous, expensive and unpredictable permitting issues are handled. Then the operation is immovable and subject to every political risk imaginable, not infrequently including nationalization. Add in continual and formidable technical issues of every description, compounded by unpredictable fluctuations in the price of the end product. Mining is a horrible business, and you’ll never find Graham-Dodd investors buying mining stocks.

All these problems (and many more that aren’t germane to this brief article), however, make them excellent speculative vehicles from time to time.

Mineral exploration stocks are very, very risky.

This is very, very true. There are thousands of little public companies, and some are just a couple steps up from a prospector wandering around with a mule. Others are fairly sophisticated, hi-tech operations. Exploration companies are often classed with mining companies, but they are actually very different animals. They aren’t so much running a business as engaging in a very expensive and long-odds treasure hunt.

That’s the bad news. The good news is that they are not only risky but extraordinarily volatile. The most you can lose is 100%, but the market cyclically goes up 10 to 1, with some stocks moving 1,000 to 1. That kind of volatility can be your best friend. Speculating in these issues, however, requires both expertise and a good sense of market timing. But they’re likely to be at the epicenter of the gold bubble when it arrives – even though few actually have any gold, except in their names.

Warren Buffett is a huge gold bear.

This is true, but irrelevant – entirely apart from suffering from the logical fallacy called “argument from authority.” But, nonetheless, when the world’s most successful investor speaks, it’s worth listening. Here's what Buffett recently said about gold in an interview with Ben Stein, another goldphobe: "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all – not some, all – of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"

I’ve long considered Buffett an idiot savant – a genius at buying stocks but at nothing else. His statement is quite accurate, but completely meaningless. The same could be said of the U.S. dollar money supply – or even of the world inventory of steel and copper. These things represent potential but are not businesses or productive assets in themselves. Buffett is certainly not stupid, but he’s a shameless and intellectually dishonest sophist. And although a great investor, he’s neither an economist or someone who believes in free markets.

Gold is a religious statement.

Actually, since most religions have an otherworldly orientation, they’re at least subtly (and often stridently) anti-gold. But it is true that some promoters of gold seem to have an Elmer Gantry-like style. That, however, can be said of True Believers in anything, whether or not the belief itself has merit. In point of fact, I think it’s more true to say goldphobes suffer from a kind of religious hysteria, fervently believing in collectivism in general and the state in particular, with no regard to counter-arguments. Someone who understands why gold is money and why it is currently a good speculative vehicle is hardly making a religious statement. More likely he’s taking a scientific approach to economics and thinking for himself.

So Where Are We?

So these are some of the more egregious arguments against gold that are being brought forward today. Most of them are propounded by knaves, fools or the uninformed.

My own view should be clear from the responses I’ve given above. But let me clarify it a bit further. Historically – actually just up until the decades after World War I, when world governments started issuing paper currency with no relation to gold – the metal was cash, and it was used as money everywhere, on a daily basis. I believe that will again be the case in the fairly near future.

The question is: At what price will that occur, relative to other things? It’s not just a question of picking a dollar price, because the relative value of many things – houses, food, commodities, labor – have been distorted by a very long period of currency inflation, increased taxation and very burdensome regulation that started at the beginning of the last depression. Especially with the fantastic leaps in technology now being made and breathtaking advances that will soon occur, it’s hard to be sure exactly how values will realign after the Greater Depression ends. And we can’t know the exact manner in which it will end. Especially when you factor in the rise of China and India.

A guess? I’ll say the equivalent of about $5,000 an ounce of today’s dollars. And I feel pretty good about that number, considering where we are in the current gold bull market. Classic bull markets have three stages. We’ve long since left the “Stealth” stage – when few people even remembered gold existed, and those who did mocked the idea of owning it. We’re about to leave the “Wall of Worry” stage, when people notice it and the bulls and bears battle back and forth. I’ll conjecture that within the next year we’ll enter the “Mania” stage – when everybody, including governments, is buying gold, out of greed and fear. But also out of prudence.

The policies of Bernanke and Obama – but also of almost every other central bank and government in the world – are not just wrong. These people are, perversely, doing just the opposite of what should be done to cure the problems that have built up over decades. One consequence of their actions will be to ignite numerous other bubbles in various markets and countries. I expect the biggest bubble will be in gold, and the wildest one in mining and exploration stocks.

When will I sell out of gold and gold stocks? Of course, they don’t ring a bell at either the top or the bottom of the market. But I expect to be a seller when there really is a bubble, a mania, in all things gold-related. There’s a good chance that will coincide to some degree with a real bottom in conventional stocks. I don’t know what level that might be on the DJIA, but I’d think its average dividend yield might then be in the 6 to 8% area.

The bottom line is that gold and its friends are no longer cheap, but they have a long way – in both time and price – to run. Until they're done, I suggest you be right and sit tight.


If you take the time to learn more about gold and silver, you’ll realize quickly that both still have a long way to go in this bull market. And with China – and other countries – ready to dump the flailing U.S. dollar, it’s imperative to protect yourself with precious metals. Learn more about China’s secret plot here.

April 23, 2011

Doug Casey (send him mail) is a best-selling author and chairman of Casey Research, LLC., publishers of Casey’s International Speculator.

Copyright © 2001 Casey and Associates

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Thu, 14 Apr 2011 13:01:19 -0700 Your Gold Coins. http://myhighdividendstocks.posterous.com/your-gold-coins http://myhighdividendstocks.posterous.com/your-gold-coins

Your Gold Coins

Gary North

Reality Check (April 12, 2011)

If you did what Bill Bonner and I have been recommending for a decade, you own gold. Bonner began promoting the purchase of gold in the year 2000. I strongly promoted this for my subscribers after September 11, 2001, when the Federal Reserve began pumping up the monetary base in earnest. Neither of us has ever stopped recommending holding money in gold.

I have stressed holding coins, especially tenth-ounce American gold eagles.

I am writing this for those readers who did what I recommended, have quadrupled their money (on paper and in digits), but who may be getting cold feet.

There are good reasons for buying gold. But you should have an exit strategy in mind. You need to consider this.

http://www.garynorth.com/public/7880.cfm

We are told by the mainstream financial media, which never told investors to buy gold over the last decade, that gold is in the final phase of a bubble market. But how can any market be a bubble market when the mainstream financial media are not running report after report on the bubble, telling readers and viewers about how much money people are making.

What mainstream financial outlet warned investors loud and clear, issue after issue, in 1999 that the dot.com market was a bubble? I told my subscribers in February and March of 2000 that it was, and that they should get out. But I published a newsletter. I was not mainstream.

What major outlet warned people in 2006-2007 that the real estate market was a bubble, that wise investors were getting out? I did in November 2005.

Bubbles always continue for months or even years after old timers say they will pop. Old timers have trouble estimating the fear of the buyers at being left out and the fear of lenders at being left out. The two sides -- debtors and lenders -- keep the dance of doom going much longer than old timers can imagine possible. But eventually the dance ends.

I spoke at Lew Rockwell's conference. One of the speakers is a banker. He lives in Las Vegas. He was taught by Austrian School economist Murray Rothbard. He earned a masters degree in economics. Then he went into banking.

As an Austrian School economist, he understands the business cycle. He understands that the Federal Reserve system has pumped money into the economy, creating a housing bubble since 1996. He knows this boom will bust.

He has no illusions about this housing market. Compared to him, I have been Pollyanna. He spoke of the mental outlook of the builders in Las Vegas. They all know it can't go on, but they are determined to party until it does. "Then they will declare bankruptcy and start over," he said. This is their exit strategy.

He was correct. It happened. He lost his job as a Las Vegas banker. He is now a senior staff member at the Mises Institute.

I went on to write the following:

I think a squeeze is coming that will affect the entire banking system. The madness of bankers has become unprecedented. They have forgotten about loan diversification. They have been caught up in Greenspan's counter-cyclical policy of lowering the federal funds rate. Now this policy is being reversed. Rates are climbing. This will contract the loan market. Banks will wind up sitting on top of bad loans of all kinds because the American economy is now housing-sale driven.

http://www.lewrockwell.com/north/north416.html

But I was on the fringes of the investment community. The bubble was about to burst, but the media attracted viewers and readers by staying on the bandwagon. To call attention to what should have been obvious would have reduced the audience. The editors knew better.

So, when I read articles about gold in a true bubble market, I know it isn't. The salaried reporters with no savings, underwater in their homes, and in a dying industry are merely writing what their editors think will sell.

What sells? Articles that confirm what conventional viewers and readers want to hear, namely, that they were not really losers by staying out of the gold market (they were), and that those who buy good now will lose everything (they won't), and that now is a good time to buy stocks and bonds (it hasn't been ever since March 2000).

Mark Faber, who recommends owning gold as a hedge against a declining dollar, recently wrote this: "In my opinion the Fed funds rate should be at 5% . . . That will provide real interest rates. I don't think the Fed will increase interest rates to a positive real rate. So, I'd say to an investor, he should have at least 20 to 30 percent of his money in precious metals."

When asked about his opinion about renewed fears of a bubble forming in the gold market, the student of the Austrian School of economics theory scoffed at the pundits who say the gold trade has become crowded. Faber said he routinely sees less than 5% of attendees at his speaking engagements raise their hands during his casual sentiment polls regarding the precious metals. Sometimes he sees no hands raised, he said.

http://bit.ly/FaberGold

There are many ways to own gold. The ones that most investors choose, and which most investors will rush into during the final phase of the bubble, is in fact not gold. It is a promise to invest in gold. It could be an ETF, which is a form of derivative. It may be a commodity futures contract -- another promise.

But what about gold, in contrast to a promise -- "cross my leveraged heart and hope to die" -- to invest in gold on your behalf?

Gold coins are gold.

WHY GOLD COINS?

The problem with today's economy is that it is built on promises and trust. It is therefore built on debt.

In the United States, the financial promises always come back to these:

1. The Federal Reserve System will remain the lender of last resort. 2. The Federal Deposit Insurance Corporation (FDIC) will pay off all bank accounts up to $250,000. 3. The U.S government stands behind the FDIC's promise with a $600 billion line of credit. 4. The government can get this money from the Federal Reserve System, if necessary.

The problem with these promises is this: the ultimate insurer -- the FED -- can fulfill its obligations in a deflationary crisis only by hyperinflation. That means that the only sure guarantee against the systemic failure of the American banking system is the destruction of the dollar.

If we get the latter, do you want promises to pay gold, which can be settled legally by the payment of digital dollars? Or do you want coins where you can get your hands on them?

On the other hand, if the FED ever refuses to create money, and if the banking system then begins to implode, do you want promises to pay that were issued by a limited liability corporation, such as a futures exchange?

In between hyperinflation and a deflationary banking collapse, people can buy and sell promises to pay gold. They can pay 28% on all profits (no capital gains protection). They can become self-conscious speculators. There is nothing wrong with this.

But what if you are speculating against long-term price deflation? Then you want paper money. But paper money leaves you at the mercy of the Federal Reserve System and the commercial banking system. Mass inflation could appear rapidly (up to 20% price increases), followed by hyperinflation (anything from 20% to infinity).

What if you want an asset that will do well in mass inflation or hyperinflation, but which will not do as badly as most other leveraged capital assets in a banking collapse?

I keep getting this answer: gold coins.

BUT WHICH GOLD COINS?

That depends on what you are trying to hedge against.

If you are a national living in a country whose mint produces gold coins, buy those gold coins. If you are ever in an emergency situation where you need gold fast, and you want to barter it for something you really need, the person on the other side of the transaction will recognize the mint's stamp. He will be more likely to barter.

Do you want a one-ounce coin? Not if you are bartering for small items. You want the smallest-weight coin that your national mint produces. On the other hand, if you want gold as an investment, for which you plan to exchange your coins for digits in a bank, you should buy the most common one-ounce coin with the lowest premium: the Krugerrand. This low premium is consistent. You buy low; you sell low.

If you want something in between, buy a one-ounce coin from your national mint.

The tenth-ounce American eagle commands a premium above the one-ounce eagle these days. This could go away in a selling panic. Be aware of this investment threat.

Americans do not have a true free market with coins produced by the U.S. Mint. Ron Paul held hearings on this issue recently. The Mint keeps getting back-logged with orders during panic-driven periods. It sells only to coin dealers. This creates a premium for coins when these logjams occur. You can read about the problems here:

http://bit.ly/TooFewCoins

PROCRASTINATORS PAY PREMIUMS

Most people listen to a story for years before taking action. This has surely been true of the story of gold. When Gordon Brown, as Chancellor of the Exchequer, sold off half of Britain's gold, 1999-2002, he depressed the world price. He sold it at an average price of $276 per ounce.

http://bit.ly/BrownGold

This was a massive transfer of wealth from the British government to other central banks, which bought most of the gold. This kept down the market price, as central banks shifted demand from the private markets to the Bank of England's bars of gold.

This was the last chance for gold speculators to get in on the deal cheap. Not many people did, of course, because not many people ever buy close to the bottom of any market.

So, gold has steadily moved higher over the last decade. Still, the procrastinators procrastinate.

I don't mean Joe Lunchbucket and Tom Temp. The vast majority of Americans have no liquid savings above a few thousand dollars in the bank. Fewer than 50% have pensions of any size, and the money in these tax-deferred accounts are not at their disposal. The funds they can invest in are not related to gold. They are categories that will keep the fund managers from a lawsuit when markets collapse: American stocks, American bonds, and Treasury debt.

Gold is an investment asset. It therefore will not become popular short of an economic collapse -- hyperinflation followed by a depression. The average person owns no gold coins, nor will he anytime soon.

Where would he buy them? How could 100 million households buy a single gold coin per household? This would be impossible. There are only a few small coin stores in any community. They are mostly mom-and-pop outfits. The U.S. Mint could not meet the demand.

When Wal-Mart has a gold coin section in the jewelry department, then we can start talking about a possible bubble in gold. Not until then.

As more people on the fringe of the Tea Party find out about American gold eagles, they will start buying. This will force up the coins' premiums.

As word gets out about the scarcity of small-weight gold coins, there will be more interest in owning them.

As word gets out that the Federal Reserve's exit plan is a myth, they will start looking for hedges. Gold is a hedge against serious price inflation.

The government is working hard for existing gold coin owners. The government clearly cannot bring the budget deficit under control. Congress has no intention of doing so. When the government can borrow $1.6 trillion a year at rates as low as four-one-hundredths of a percent (90-day) to under 3% (7 years), why should we expect Congress to cut spending?

CONCLUSION

If you have yet to buy a single gold coin, buy a tenth-ounce American eagle to get started. That will not bankrupt you. It will get you over the hump.

Most Americans will never take this initial step. Those who procrastinate will pay a high premium when they at last think: "Maybe I really do need some gold." If you don't know where to start looking, start here:

http://bit.ly/GoldEagles

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http://files.posterous.com/user_profile_pics/697493/v_for_vendetta_guy_fawkes_mask11.jpg http://posterous.com/users/4wuf4tt8LZzb Jason Brizic myhighdividendstocks Jason Brizic
Fri, 11 Feb 2011 11:41:00 -0800 TIP OF THE WEEK - Four Important Tickers to Monitor on a Weekly Basis. They Affect Your Wealth. http://myhighdividendstocks.posterous.com/tip-of-the-week-four-important-tickers-to-mon http://myhighdividendstocks.posterous.com/tip-of-the-week-four-important-tickers-to-mon Four Important Tickers to Monitor on a Weekly Basis. They Affect Your Wealth.
Jason Brizic
Feb. 11, 2011

Last week's tip of the week focused on how I like to setup my chart views and indicators on www.stockcharts.com . Click on this link to read last week's tip of the week (http://bit.ly/LastTotW ). This week I would like to offer you my list of favorite tickers that I monitor using StockCharts.com and briefly why. This will save you time looking them up.

S&P 500 index - Use ticker $SPX. This ticker returns the S&P 500 large cap index. It is more representative of the US stock market than the Dow Jones Industrial Average of 30 stocks. The Dow is abnormally high because AIG was replaced by Kraft Foods. Big losers like AIG don't fall out of the S&P500 so easily. Consider the S&P 500 to be the market your trying to beat with your high dividend stock portfolio.
http://bit.ly/3yrSP500 Gold - Use ticker $GOLD. This ticker returns the price of gold at the end of the day. Physical gold coins belong in your investment plans as a crisis hedge and non-correlator. Unfortunately you can't see the intraday price of gold with this one. Use www.kitco.com or symbol GLD on Google Finance or stockcharts.com to see gold's intraday moves. Remember to multiply GLD's price times ten to get the price of gold. GLD does have one advantage over the kitco.com spot prices - GLD includes volume info.
http://bit.ly/3yrGold Oil - Use ticker $WTIC. WTIC stands for west Texas intermediate crude otherwise known as light crude oil. We can use oil as a non-correlator in our high dividend stock portfolios. So it is important to know the recent price of oil has been before you purchase any energy related ETFs, oil stocks, or energy related mutual funds. Also, many oil related stocks have high dividends above 6%. You can factor the oil price into your decision to buy high dividend oil stocks.
http://bit.ly/3yrOil Commodities - Use ticker $CCI. The Continuous Commodities Index (CCI) is an index of commodities which is not dominated by oil. It includes other commodities such as grains, meats, tropicals, and metals. For more info on this commodity index please go here: http://www.zealllc.com/2008/commcycl.htm. Commodities are good non-correlators for your portfolio and some of them like copper are leading economic indicators. Price inflation also hits commodities first. It is important to monitor them. The CCI lets you view them as a group.
http://bit.ly/3yrCommodities For more tips, go here:

http://www.myhighdividendstocks.com/category/tip-of-the-week

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Thu, 27 Jan 2011 13:46:31 -0800 Don't Put Off Your First Gold Purchase. A Buying Opportunity Awaits. http://myhighdividendstocks.posterous.com/dont-put-off-your-first-gold-purchase-a-buyin http://myhighdividendstocks.posterous.com/dont-put-off-your-first-gold-purchase-a-buyin

There is a place in your investment portfolio for non-correlators to the stock market.  I believe you should own 5% – 30% of your net worth in non-correlators.  For most people this means gold, silver, agricultural commodities, and energy (e.g. oil, coal, and natural gas).  This article is specifically about purchasing gold or silver coins.  I recommend that you buy gold before silver.  Central banks to not purchase and store silver.  If you feel you must own silver, then limit it to 20% of your precious metals dollar total.  For example, if you have $7,000 to purchase PMs, then buy 4 ounces of gold (80% @ $1,400/oz) and 46 ounces of silver (20% @ $30/oz.).  Follow Burt Blumert’s rules: "Buy the best. Pay cash. Take delivery."

MarketWatch sent an interviewer to interview Parker Vogt of Camino Coin Company in Burlingame, California. This was Burt Blumert's company. He gave it to Vogt, an employee. How's that for a legacy!

The reporter has such a thick accent that I had difficulty following her narration. She is obviously reading a script. It's not a good script. But Vogt is very good.

The margins at Camino are low.

http://www.marketwatch.com/video/asset/bullion-coin-investing-may-cost-you/97CFE159-0178-43F2-962B-A1F1E5CC5256

Do not buy the gold ETFs.  Buy physical gold coins and take delivery of them.

The price of gold has declined for nearly four weeks.  If you don’t own any physical gold coins, then you should prepare to buy some while the price is declining.  I think that the price might continue to decline almost to the 200 moving average at around $1,260 per ounce.  We won’t get a slide in gold of -25% like in 2008 unless the entire stock market flounders.  A stock market crash is unlikely in the absence another financial panic.  There is a financial panic coming, but there is no buildup to it right now in the worldwide media.  The problems in the financial systems have not been solved.  Central banks are printing trillions of dollars, euros, and other fiat currencies.  Gold will rebound.  Take the opportunity to buy some while it is relatively cheap.

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Subscribe today to www.myhighdividendstocks.com/feed to discover high dividend stocks with earning power and strong balance sheets.  Along the way you will also learn to diversity your investment portfolio with non-correlators to the stock market such as gold.

Be seeing you!

P.M. Kitco Metals Roundup: Gold Ends Solidly Lower, hits 4-Month Low, on Technical Selling

27 January 2010, 02:06 p.m.
By Jim Wyckoff
Of Kitco News
http://www.kitco.com/

(Kitco News) - Comex gold futures prices closed solidly lower, near the daily low and hit a fresh nearly four-month low Thursday. Fresh technical selling amid waning safe-haven demand pressured gold prices. Comex gold last traded down $14.80 at $1,318.20 an ounce. Spot gold last traded down $26.70 at $1,320.00.

The gold market is seeing reduced safe-haven investment demand, what with the U.S. stock indexes trading near multi-year highs, no fresh headline news regarding European Union financial problems, and no major geopolitical flare-ups occurring. Indeed, investors worldwide have gained a better appetite for taking risk, which is hampering the safe-haven gold market. However, the gold market is still just one step away from a solid price rebound or an extended rally should a significant geopolitical or financial market event suddenly and unexpectedly appear in the news headlines.

Lower crude oil futures prices Thursday, which hit a fresh seven-week low, also worked to pressure the precious metals markets. Crude oil has seen bearish near-term technicals develop that do suggest more downside price pressure in the near term, and that's also an underlying bearish factor for gold.

The U.S. dollar index traded weaker again Thursday and hit another fresh 2.5-month low. The dollar index bears have downside near-term technical momentum and if the index remains on a downward path in the near term, look for gold prices to at least see limited selling interest. Gold bulls have been disappointed recently that the yellow metal has not seen more upside support from the weaker dollar index.

The London P.M. gold fix was $1,334.50 versus the previous P.M. fixing of $1,328.00.

Technically, February Comex gold futures prices closed nearer the session low Thursday and scored a bearish "outside day" down on the daily bar chart. Serious near-term technical damage has been inflicted in gold recently. Prices are in a four-week-old downtrend on the daily bar chart. A bearish head-and-shoulders top reversal pattern is also playing out on the daily bar chart.

Gold market bulls' next near-term upside technical objective is to produce a close above solid technical resistance at this week's high of $1,352.40 in February futures. Bears' next near-term downside price objective is closing prices below psychological support at $1,300.00. First resistance is seen at $1,325.00 and then at $1,332.00. Support is seen at Thursday's low of $1,315.70 and then at $1,310.00. Wyckoff's Market Rating: 5.0.

March silver futures closed down 18.8 cents at $26.94 an ounce Thursday. Prices closed nearer the session low today and were pressured by lower gold and crude oil prices. Prices Tuesday hit a fresh seven-week low. Silver prices are in a four-week-old downtrend on the daily bar chart. Some near-term chart damage has been inflicted in silver recently.

The next downside price objective for the silver bears is closing prices below solid technical support at $26.00. Bulls' next upside price objective is producing a close above solid technical resistance at this week's high of $27.95 an ounce. First resistance is seen at $27.25 and then at $27.50. Next support is seen at Thursday's low of $26.775 and then at this week's low of $26.54. Wyckoff's Market Rating: 5.5.

March N.Y. copper closed up 670 points at 433.40 cents Thursday. Prices closed nearer the session high. The bulls had faded a bit earlier this week and needed to show fresh power, which they have done. The copper bulls have the overall near-term technical advantage. Bulls' next upside objective is pushing and closing prices above solid technical resistance at the January all-time high of 449.80 cents. The next downside price objective for the bears is closing prices below solid technical support at 410.00 cents. First resistance is seen at Thursday's high of 435.55 and then at this week's high of 437.25 cents. First support is seen at 430.00 cents and then at Thursday's low of 427.55 cents. Wyckoff's Market Rating: 7.0.

  

By Jim Wyckoff of Kitco News; jwyckoff@kitco.com

Don’t Miss a Word! Read Kitco News on the Go with Kcast Gold Live for iPad! Get it now!

 

 

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Sat, 22 Jan 2011 11:28:07 -0800 The Surprising Price of Wheat http://myhighdividendstocks.posterous.com/the-surprising-price-of-wheat http://myhighdividendstocks.posterous.com/the-surprising-price-of-wheat

The Surprising Price of Wheat

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01/20/11 Tampa, Florida – I was intrigued by the title of the essay “The Cheapest Thing on Earth” by Nathan Lewis here at The Daily Reckoning.

I was interested because I thought that such a tasty trivia tidbit could come in handy, like this morning when I could have used it as a distraction when my kids were calling me “cheap” because I wouldn’t open up my wallet and give them another king’s ransom for some new dumb reason; I forget what, but there was a lot of crying and wailing about it, whatever it was.

This is where I could have said, to throw them off, “Cheap? What do you know about cheap? Do you know what is the cheapest thing on earth? Huh? Do ya? Huh? Do ya? Yes or no?!”

Instead of providing me with the answer, he starts off with a pop quiz! Damn!

And when I say “pop” quiz, I mean exactly that, as he says, “Quick: name an asset, publicly traded, that is the cheapest in a hundred years.” Pop!

I, of course, had no idea, and instead of admitting it, I quickly read ahead, hoping to immediately find the answer, only to be surprised when he taunted me. “Houses?” he asks. “Nope. Stocks? I don’t think so. Commercial real estate? Bonds?”

By this time I was pretty peeved, and getting bored, too, as I was sure that if it was, indeed, none-of-the-above, then this was going to devolve into something about investing in something obscure, the significance of which would elude me even if you explained it to me over and over again, in a company I never heard of, and, probably, in a country I never heard of, either.

Just before I gave up reading in disgust, he dared to taunt me one more time, the bastard! “Not too many, are there?” he asks.

At this final insult, my mind screamed, “Damn you! Damn you to hell! Tell me now, or I will fire off a flaming email that will be both highly insulting and vaguely threatening!”

I could almost hear his cruel, mocking laughter as he rudely called my bluff, and further insulted me and my false bravado with, “Now here’s a tougher one. Name an asset that is near the lowest price in all of human history.”

Arrgghhh! In all of human history? By this time I am angry and distraught, mostly angry, that somebody was exposing my stupidity and ignorance!

Suddenly, I am gasping for air and screaming that if he doesn’t tell me the answer pretty soon, I am going to start hearing those voices in my head again, and (now that you mention it) if I listen really closely, I can almost hear them already, way off in the distance, screaming to be heard and obeyed.

And we all remember how it turned out the LAST time that happened.

Obviously intimidated by the sudden revelation of the strange, powerful forces he is unleashing, he quickly announces, “The answer is: wheat”!!

I admit that I personally put those two final exclamation points at the end of his sentence as an emphasis, both to indicate surprise and to remind you that there are surely significant ramifications of this “price of wheat” thing, the horrors of which I never allow myself to even think, except during sleep, and then hopefully only when I am dreaming of being with some beautiful young thing, and maybe with some of her friends, too, who are all naked and sweaty and grunting and heaving and writhing around in some surreal bacchanalia of some kind, where the only interruption is the masses of people outside wailing and crying that “The price of food is up so much that we are burning things and looting grocery stores in mindless anger and desperation, and we are looking for the Fabulous Mogambo Seer (FMS) to pledge our undying allegiance and love because he predicted that this inflationary hell is Exactly What Would Happen (EWWH) when the stupid Federal Reserve kept creating more and more fiat money, creating astonishing amounts of money, creating outrageous amounts of money, creating So Much Freaking Money (SMFM) for so, so long that We’re Freaking Doomed (WFD)!”

I can reliably report, thanks to these dreams, that the sound of people starving to death is a real “mood killer,” perhaps on a par with the horror that wheat is now at the highest price ever, even going back to Biblical times, which is probably why those old Bible-era people were always “breaking bread,” and eating unleavened wheat crackers, and consuming miscellaneous cheap wheat products instead of having, you know, a few tasty tacos or maybe a pizza once in awhile, which I figure must have been because they were very expensive or something, which is why you never hear of anybody eating them.

Anyway, I immediately used this new information-as-icebreaker at the supermarket, and told the cashier, as she rang up my groceries, “I’ll bet you don’t know that wheat is at its lowest price in recorded history, but climbing fast because the horrid Federal Reserve is still creating So Freaking Much Money (SFMM) that the terrifying, heartbreaking misery and suffering of inflation in the prices of subsistence prices of items, like wheat, is guaranteed! Guaranteed, I tells ya!”

She just dragged my frozen burrito across her laser scanner, the irritating “beep!” noise only underscoring her complete lack of interest.

I went on, helpfully adding that they also said, “Actually, the entire agriculture complex, including corn, beef, pork and beans could fit this description.”

Again the lonely “beep!” as she listlessly ran my bag of Oreo Double Stuf cookies through the beam, her face never changing, not even to make the time pass with idle conversation about, for example, how much she adores cute old guys who buy such delicious cookies, or how my eyes twinkle so charmingly, or even to say how she noticed I kept looking at her boobs. You know; anything.

Giving up, I took my groceries in hand and parted without giving anyone my usual advice, which is to “Buy gold and silver right now, using whatever money you can glean from your stupid little job, because inflation is going to eat us alive, and a weird, distorted economy will make it even more hellish, all thanks to the horrid Federal Reserve continuing to create so much excess money. And buying gold and silver is so easy that a bunch of bored, underpaid worker-bees in a low-margin business like you can do it! In fact, it’s so easy that even morons say, ‘Whee! This investing stuff is easy!’”

The Mogambo Guru
for The Daily Reckoning

Author Image for The Mogambo Guru

The Mogambo Guru

Richard Daughty (Mogambo Guru) is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the writer/publisher of the Mogambo Guru economic newsletter, an avocational exercise to better heap disrespect on those who desperately deserve it. The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning , and other fine publications.

Read more: The Surprising Price of Wheat http://dailyreckoning.com/the-surprising-price-of-wheat/#ixzz1BnH5UDUA

 
Wheatprice chart, 2000-2009
 
Be seeing you!

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Thu, 30 Dec 2010 18:15:23 -0800 Why Gold has been Money and will be Money Again http://myhighdividendstocks.posterous.com/why-gold-has-been-money-and-will-be-money-aga http://myhighdividendstocks.posterous.com/why-gold-has-been-money-and-will-be-money-aga
I'm a fan of physical gold coins.  They should comprise at least 5-30% of you non-house net worth.  Too bad there are no high dividend gold stocks.  Please enjoy this short article on why gold has historically been money.  
 
 
Every central bank in the word is inflating its money supply.  Some are inflating faster than others.  The US central bank, the Federal Reserve, is leading the way with QE2 and its massive inflation of late 2008.  The Bank of Japan is barely inflating.  That is why the Yen is stregthening versus the Dollar.
 
Enjoy the article and please click on the Google Ads to let me know you like the contents of this blog.
 
Happy New Year and be seeing you!
 
 

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