Posts Tagged ‘gold’

Investment advice for Ron Paul

December 30, 2011 Comments off

Rocky never provides investment advice. But for once he’ll violate this  rule and offer some advice to Congressman Ron Paul.

Members of Congress must file financial disclosure forms which show all of their assets and investments. Rocky studied Rep. Paul’s portfolio from 2003 to the present.

Ron Paul’s portfolio violates every principle of sound money management. It is not prudent. It is not sensible. It is volatile. It is speculative. And it may give a window into Ron Paul’s perspective on the economy and free enterprise.

From 2003 to the present, Ron Paul’s stock portfolio owned only gold stocks. He owned some real estate. He had some cash. And he owned mutual funds that make money ONLY WHEN the stock market declines. He did not own any gold bullion. And more recently, he purchased more gold mining stocks and added to his bearish bets on the stock market using leveraged bearish funds.

In 2003, the value of his portfolio was between $860,000 and $2,300,00. (The disclosure form only provides a range of  values.)  In 2010, his portfolio grew to $2.4 million and $5.5 million.  (Gold stocks have declined between 15% and 30% in 2011, so his portfolio has declined commensurately. He will declare that loss next year.)

So, over an an 8-year period his portfolio has appreciated by about 12%/year. (And after this year’s losses for gold mining stocks, it will be a bit less than that.)

Not so bad, eh?


If, instead of being such a wiseguy, he had instead just purchased gold bullion, his return would have been 55% better — returning an impressive 18.5% per year!  (It’s very strange that Ron Paul doesn’t own any bullion. And a skeptic might wonder whether he owns bullion, but failed to disclose it.)

[Disclosure: If one extrapolates the profile of his portfolio, one must conclude that he either nailed the bottom of the gold market, or he has really lousy long term performance. Remember that (even after this 10 year old rally) gold has appreciated at only about 5% for the past 30 years, while stocks have returned about 11%, and long bonds have returned high single digits. More troubling, however, is the notion that a  President of the United States would personally profit from a DECLINING stock market and a declining economy! Even Barack Obama’s assets include some S&P Index Funds….]


Rocky’s (latest) view on gold

August 23, 2011 5 comments

Knowing that he’s been a gold bull for years, Rocky’s friends keep asking: “What you do think of gold, NOW?” (These people actually think that Rocky and certain other TV commentators can  predict the future.)

Rocky’s answer: “I have no idea, and have NEVER had any idea about what the price of gold will do tomorrow.”

But does he still own gold?

“Yes, and I also own some stocks. And I own some real estate. And I own some bonds. And I own a copy of last week’s People Magazine. And I have no idea what the price of these will do tomorrow either.  My experience has been that pundits who claim perfect knowledge of the future are generally either liars or idiots. (Whoopi Goldberg is the exception to this rule.)  What I’m doing is called diversification.”

But when will he sell gold?

“The PRICE of gold is irrelevant. As I’ve written on this blog, I will sell gold when the gold story (or more accurately, the market’s perception of the gold story) changes!  Gold’s ascent is a confluence of negative real interest rates; undisciplined central bank behavior; a growing loss of confidence in government policies and financial systems; loss of Swiss bank secrecy; an accumulation of economic wealth by individuals in parts of the world without stable property rights and rule of law. Can gold drop $100 tomorrow? Sure it can! Can gold drop $300 next week? Sure it can!  Can gold drop $1000 next year? Sure it can! But so long as these FUNDAMENTAL  factors remain in place, the underpinnings and demand for hard assets that are beyond the reach of governments will remain.”

“Almost all of my really smart friends are very bearish right now. They all think this move is idiotic. Many think this is a bubble. And eventually they will be right. But eventually could be a really really long time. And it could include a trip to unimaginably higher prices first.  Their skepticism is not predictive of anything.  And importantly, they are not betting that gold will decline either. All it tells you is that they aren’t long gold and missed this move.  I’ll admit that I get nervous when prices rise quickly.  And historically, buying after a sharp rally isn’t a good idea. But why should any of this market chatter affect my long-term porfolio construction/diversification?  After all, I’m not afraid to admit that I have absolutely no idea what prices will do tomorrow.”

[Disclosure: Rocky NEVER gives investment advice. He’s owned gold for a long time. And he owns some hedges that will protect him if gold drops sharply while he’s asleep. And some day, he will sell his gold. But whether it’s at $2,000/oz or $10,000/oz is out of his control. It’s in the control of  millions of other investors around the world, and how they react to the policies of their central banks and governments.]

Bubbles, bubbles, everywhere…

October 28, 2010 1 comment

Google Hits on "Bubble"

Rocky noticed that his friends see bubbles in bonds, in gold, in stocks, in cotton, sugar and grain prices.  In fact, his friends see bubbles EVERYWHERE! 

It appears that there may be a bubble in bubbles. And a look at “Google Trends” confirms this bubble. However, this bubble-in-bubbles popped early in 2010 — on the 50th Anniversary of Bubble Wrap!


[Disclosure: Rocky never gives investment advice. When asked  if or when the current “bubbles” will burst, he started foaming at the mouth.]

Gold-plated arbitrage

October 14, 2010 2 comments

Rocky found some fool’s gold buried in today’s Producer Price Index data.

The year-over-year change in “Karat Gold Jewelry Prices” was 12.1% Whereas the year-over-year change in “Costume Jewelry Prices” was a modest 0.9%.

According to Wikipedia, “Costume jewelry (also called fashion jewelry, junk jewelry, fake jewelry, or fallalery) is jewelry manufactured as ornamentation to complement a particular fashionable costume or garment.”

Since the Government sees fit to include the “all important” costume jewelry price in the PPI, Rocky smells an arbitrage for an upcoming Trophy Wife birthday present.

Rocky currently owns  gold in his investment portfolio, but this price discrepancy suggests that he should consider a “short gold / long fake gold” swap for Trophy Wife’s jewelry box portfolio.

[Disclosure: As they say on TV: “We’re trained professionals. Don’t try this yourselves at home!]

Gold: Manic Parabolic Blow Off Time

October 5, 2010 3 comments

As regular readers know, Rocky has held a bullish speculative position in gold  for many months.  If today’s behavior continues for a few more days, Rocky believes that gold may be finally entering the Manic Parabolic Blow-Off Phase “MPBOP.”

The MPBOP  is the most profitable phase of any bull market, and despite what experts on CNBC say,  it’s  impossible to know how long it will last — nor how high prices can go during the terminal stages of a MPBOP.  Rocky speaks from experience having been on the wrong side of the internet MPBOP. (He was an avowed hater of the Pets.Com puppet, but he got revenge when the stock eventually went to zero.)  This experience means Rocky wouldn’t scoff at $1500/oz or even $1800/oz  gold by year-end. 

Sadly, after the parabolic blow-off phase comes the “gravity still exists” phase, where people re-discover that gold is just a shiny piece of metal that makes an excellent dental crown. Which means prices will decline. By a lot.

Many people party on New Year’s Eve without worrying about how they feel on New Year’s Day.  But not Rocky! Rocky remains long gold, but he’s beginning to think about his ultimate exit strategy. Parachutes? Ejection seats? Hari Kari? Here’s his latest thinking (posted on the blog Daily Speculations):

[Disclosures: Rocky really has no clue what gold prices will do tomorrow or the days after tomorrow and his ruminations are not investment advice. He does, however, believe in the Laws of Gravity and the First Law of Rocky: In every “macro market” (indices, bonds, commodities), all prices WILL be seen at least twice. The only unknowns are: (1) how long it takes and (2) how far prices go, before the price is re-visited. Additionally, while Rocky currently remains long gold, he also owns hedges against the proven risk that he’s more-than-occasionally wrong.]

Gold vs. Gold Stocks: Trophy Wife speaks

May 10, 2010 8 comments

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.]

Getting married in India & the price of gold

November 3, 2009 2 comments

gold ringThe Central Bank of India announced this morning that they purchased 200 metric tonnes of gold from the International Monetary Fund. See:

This is ostensibly bullish for the price of gold. But is it bullish for Blue Nile stock? (NILE)

Rocky does the math:
1 Tonne = 32,151 Troy Ounces
1 Troy Ounce = 31.10 Grams

 This fashionable Blue Nile wedding ring contains 1.6 grams of gold:

Rocky’s X-22 computer calculates that the Indian Central Bank just bought enough gold for “only” 125 MILLION wedding bands. Since the population of India is 1.1 BILLION, the Indian Central Bank is sensibly planning ahead.

[Disclosure: Rocky has been, is, and may continue to be, long gold bullion. But he may change his mind if he reads that scientists have finally succeeded in turning lead into gold.]