In a recent Bloomberg interview, commodities bull Jim Rogers said he's not buying gold at current prices – though he still owns plenty – because he doesn't like buying any asset at all-time highs. Rogers said he may buy more if the price drops, as he expects this bull market to eventually push gold to around $2,000 an ounce (adjusted for inflation).
Gold is typically seen as "disaster insurance," so it should increase as markets and the dollar decline. When asked why gold and stocks are rising in tandem, Rogers pointed to the government printing money... All of that money has to go somewhere, and much of it is ending up in the market. When the government turns on the presses, it destroys the dollar, making gold more attractive.
And although the market has enjoyed an amazing rally since March, Rogers said the gains are ficticious because the dollar has fallen by nearly the same amount. In contrast, the falling dollar makes the gains in gold real.
I frankly don't care about the gold price. When people start talking about it, my eyes glaze over and I get bored and sleepy. I've been buying gold bullion coins for years as savings and will continue to do so for the rest of my life, regardless of the dollar-denominated price.
But I understand gold is hot, and you need to obsess about it. So I figure maybe you want to know how to think about the gold price right now. It's only human (though it's not the smartest way to operate, I promise you). I don't approve, not one bit, but here goes nothin'...
Currently, buyers outnumber sellers by a factor of 10 to one. And the public is starting to catch "gold fever," as evidenced by widespread media headlines and pawn-shop commercials on TV.
The more novice investors chase the gold market up, the greater the chance it's nearing a top. And while they may not be buying – yet – they're definitely taking an interest. Take this snippet from today's issue of Dennis Gartman's Gartman Letter:
We shall begin our comments noting here that we have never... in the 25+ years of writing [The Gartman Letter] each day... given more interviews regarding any other facet of the capital markets than we've given in the past 48 hours regarding gold. Never, not ever!
Massive price dislocations are the norm in gold stocks, which can return multiples more than the metal itself. Our friend, John Doody, one of the world's foremost gold stock experts, has been following mining stocks for decades. His proprietary program for picking winning mining stocks has produced an unparalelled track record. If anyone can make you wealthy in this gold bull market, it's John. To learn more, click here...
If I were you, I'd be very, very careful buying gold stocks. In fact, I know of only one gold/natural resources opportunity that is definitely, unquestionably trading for at least a 20% discount to its net asset value. I back this up with some simple arithmetic in the October issue of Extreme Value, which comes out tomorrow after the market closes.
I've just returned from six days and thousands of miles of traveling and research on this one stock. I know the company has plenty of gold because I randomly picked rocks up off the ground at one of its exploration projects last week and saw visible gold with my own eyes. This little stock is my No. 1 pick among all gold and natural-resource stocks and represents the best risk/reward proposition among all Extreme Value stocks. You have less than 24 hours to be among the first to read this new report. Click here to get access...
I live on the West Coast, a haven for leftist busybodies of every stripe and color. They think all you need to do is forbid everyone from doing everything, and the world will be perfectly childproofed – even for the adults!
The most recent example is a proposition in Seattle to ban the sale of 29 beers and wines in a six-square-mile area of the city. The reason: so homeless people will drink less. The official line was they wanted to "decrease the number of people who were drunk on public streets and sidewalks."
Can you imagine anything more stupid than trying to get someone who lives in a box behind a dumpster and probably lost touch with reality in 1978 to stop drinking? As if these people aren't going to drink whatever alcoholic beverages aren't banned.
But it's not just the Seattle politicians and their moronic constituents who want to reprogram the human race to their liking. Komrade Obama's proposed national soft drink tax is nothing but social engineering via the tax code.
Contrary to the usual corporate approach of getting into bed with politicians at the first sign of trouble, the soft drink industry, as represented by the leading product's CEO, is not taking any crap about the absurd rationale for Komrade Obama's new tax...
Muhtar Kent, CEO of Coca-Cola, wrote an op-ed for the Wall Street Journal today, saying his company's products don't make people fat – being lazy makes them fat. Kent is "talking his book," as the proposed soft drink tax would kill Coke's bottom line, but he's right... Americans need to stop whining and blaming other people for their problems. Can you imagine blaming anyone but yourself for stuffing your face full of food? It's ridiculous, but you know an army of politicos stands ready to seize upon the opportunity to, er, seize upon our wallets. Read Kent's piece here.
Despite the huge market rally we've seen since March, our newest analyst, Frank Curzio, is bullish right now. Frank is developing a new advisory for us, Penny Stock Specialist. In his latest issue, Frank outlines his contrarian take on the market... He thinks the government will continue to spend recklessly, throwing money at every problem. And investors have plenty of cash on the sidelines to buy the dips. Plus, earnings and economic data will be upbeat in the coming months compared to last year.
Frank's found a list of stocks trading for less than $10 that will outperform the market. He believes these stocks will make his readers 50% gains over the next six months. He just sent his research to Alliance members last night. If you're a member of our Alliance, let us know what you think here.
If you're not an Alliance member and you're interested in Frank's research, it will be available to the public next month. We'll keep you updated.
Mortgage analyst Mark Hanson says in his daily e-mail today that among the 56 million people with a mortgage in this country, more than half don't have enough equity to sell their home and buy another one. In other words, more than half the country's mortgages are effectively underwater.
On the whole, Nevada's homeowners owe 115% of the value of their homes. Hanson offers a solution for the housing glut there: bulldozers and gasoline.
New highs: Morgan Stanley Emerging Markets (EDD), Managers Fremont Bond Fund (MBDFX), Vanguard Inflation Protected Securities (VIPSX), Keyera Facilities (KEY-UN.TO), Coca-Cola (KO), Sprott Resources (SCP.TO), European Goldfields (EGFDF.PK), Silvercorp Metals (SVM), Silver Wheaton (SLW), Jinshan (JIN.TO), Nevsun Resources (NSU).
In today's mailbag... People gettin' chesty with The Man. Send us your e-mails at feedback@stansberryresearch.com.
"I guess Frans must be black from his comment about illegal search and seizures. I suppose instead of abolishing racist practices of the past we should enforce them on those who did not experience them. I learned at a young age that 2 wrongs don't make a right and an illegal search on anyone regardless of race is wrong. The American Revolution was unique in many ways and one of them was the lack of revenge on the British Loyalists. America did not have a guillotine in place like in France or the firing squads like in Cuba and Russia. Let's do what's right and force the Fed's and politicians to do what's right instead of trying to equalize misery." – Paid-up subscriber Trevor Hansen
"The 'amusement' only is well worth the cost of my free subscription to S&A Digest??? Thanks so much, Porter, Dan, Sean and the rest of the gang!" – Paid-up subscriber Steve
"u really have a bunch of 'sheeple' reading ur comments. these blind yes sir people really piss me off. when the cops whip ur ass for not agreeing to an illegal search as defined be the constitution as has happened to many people we are no longer free but live in a police state." – Paid-up subscriber Jerry Cook
Ferris comment: It might still be the home of the brave, but it is definitely not the land of the free, and hasn't been for a long time.
Regards,
Dan Ferris and Sean Goldsmith
Medford, Oregon, and Baltimore, Maryland
October 8, 2009