Home > General, Markets > Gold vs. Gold Stocks: Trophy Wife speaks

Gold vs. Gold Stocks: Trophy Wife speaks

May 10, 2010

Last week, the “VGPMX” ( the Vanguard Precious Metals & Mining Fund) lost 9.5%. However, the price of gold rose by 2.3%.

Rocky wondered whether this divergence posed a market opportunity, so he sought advice from his expert on all things shiny: Trophy Wife.

Rocky: “Do you think we should sell our gold and buy the VGPMX?

Trophy Wife: “The VGPMX is just a piece of paper with no psychic satisfaction. What good does that do for me?”

Rocky: “The VGPMX holds some of the best mining companies in the world. They generate ample free cash flow, dividends and will reflect the profitability of precious metals and mining over time.”

Trophy Wife: “At least if I get the ring, I keep the ring.”

Rocky: “Assuming that gold prices remain constant, and using an adjusted discounted cash flow analysis, the value of VGPMX represents an excellent risk return.”

Trophy Wife: “Buy me the gold ring with the diamond. It’s better than the stock market day and night.”

[Disclosure: Rocky took Trophy Wife’s sagacious advice. His investment portfolio seems stable, and his marriage is doing fine too.]

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  1. ld
    May 11, 2010 at 7:52 pm

    I’m going to remain calm. I know I said gold would double in my lifetime. Just to be clear, I intend to live many long years despite the price movements of the shiny metal. 🙂

  2. May 11, 2010 at 7:57 pm

    LD: Perhaps you should revise your prediction to “Gold will go up 1,000,000,000,000,000,0000,0000000000000% in my lifetime.” Then you can live forever….

  3. May 11, 2010 at 10:00 pm

    But I thought it was DIAMONDS that were forever, not gold 🙂

  4. May 13, 2010 at 12:27 pm

    It’s a sensitive matter to brooch at times, but does Trophy Wife provide other investment advice? I’m short on ideas at the moment, and was wondering if I should buy the the next break-out in lockets; and does she see rings or ankle bracelets as being better for long-term bonds right now?

    They say it’s a secular bling market, but I just don’t know.

  5. May 15, 2010 at 4:10 pm

    I’m siding with the wife on this one…

  6. Gregory Chan
    May 16, 2010 at 2:22 pm

    Hi Rocky,
    I can’t recall where you mentioned about the value of euro against the us dollar being around 1.20. Perhaps on MasteroftheUniverse blog. I dont’ have much experience in quantitative analysis but would like to ask you how you came about that number. Or at least a pointer in the right direction. Much appreciated if you can. Thanks.

    Greg

  7. May 17, 2010 at 7:30 am

    Gregory: Thanks for visiting the OneHonestMan blog!

    You might be referring to a comment that Rocky made regarding the “Purchasing Power Parity” valuation of the Euro. On that basis, the PPP of the Euro is around 1.17+/-. However, currencies can and will trade +/- 25% of their PPP, so the PPP is about as useful for trading/investing as a weathervane is for predicting the weather. See: http://en.wikipedia.org/wiki/Purchasing_power_parity

  8. Gregory Chan
    May 19, 2010 at 9:19 pm

    Thanks for that Rocky. I enjoy your site quite a bit.

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