Last week, we mentioned George Soros and John Burbank's gold sales. We urged you not to read too much into the sales, as we weren't sure of the hedge-fund managers' strategies. Recently, Burbank appeared on Bloomberg to discuss his gold sales. Burbank has been long most commodities (including agriculture, base metals, and gold) for years. He says the recent sales are to "hedge" his portfolio.
He said people are taking risk off the table leading up to June 30 (when quantitative easing ends). But we'll only see a "temporary correction" in gold. Long term, Burbank expects commodities to be strong and sovereigns weak. He says central banks around the world know the dollar will be devalued and Congress doesn't have the stomach for austerity. This is the No. 1 reason to stay in gold. He also notes Chinese consumers' growing demand for gold, which he predicts will outgrow India's.
"Ultimately, physical gold is the story," Burbank said. "It's a scarcity story." But he's also researching junior mining stocks.
When asked when he'd buy gold again, Burbank said another government liquidity event (i.e. a third round of quantitative easing) would be an entrance point.
You can watch the Burbank interview here. We agree with everything he says. You may recall Porter's comments from last Friday's Digest...
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The principal driver of these market moves has always been the Federal Reserve. Its actions set the gold market on fire. Its money-printing drove investors into alternatives like gold and silver. |
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The Fed has announced it will stop its printing campaign as of June 30, 2011. Bernanke says that's the end of "QE2." The implication is, after that date, the bond market will have to fend for itself... the great inflation will stop and maybe even reverse. Anticipating these moves, the market has begun to act. |
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So... like you, Dan... I wouldn't be surprised to see the dollar rally or watch commodities fall over the next six weeks. I believe this correction will last through the summer and into the fall. |
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But... I think Bernanke is lying. |
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I'm certain more quantitative easing lies ahead. I'd guess the printing will start up again later this year. Even if I'm wrong about the timing, it's inevitable we'll see a lot more money-printing in 2012 – simply because it's an election year. |
And like Burbank, Porter also recommended his readers hedge their portfolios with short sales... And keep plenty of cash on hand (in Canadian, Australian, Singapore, Swiss, and Hong Kong dollars). With an end to the money-printing in sight, risk is coming off. The world, ironically, will seek the safety of the U.S. dollar... Then, more quantitative easing will prove the dollar's true value and will push them back into precious metals.
In his latest note, Jeremy Grantham also called for "risk off." He led his piece by saying...
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Lighten up on risk-taking now and don't wait for October 1 as previously recommended. But, as always, if you listen to my advice, be prepared to be early! |
About a year ago, we began publishing DailyWealth Premium, a first-of-its-kind service in the financial publishing industry. In short, subscribers paid as little as $5 per month to receive Dr. Steve Sjuggerud's cherry-picked investment ideas, every weekday morning, from among all the work we publish. If you've tried DailyWealth Premium, we'd like your thoughts. How does it compare to other financial publications you've held? Send your responses to sdw@stansberryresearch.com.
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If Intel makes a little less money this year, it's not because it screwed up or lost market share. It's because the entire global economy is depressed. Over time, the world will use more computers, more Intel chips, and the company's growth is virtually guaranteed. |
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Intel's 2008 earnings per share came in at $0.92. If you value Intel like a World Dominator, at 25-30 times earnings, the stock would be worth $23-$28 per share. It trades for less than $16 today. |
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To guarantee us a 50% discount to intrinsic value, we'd have to wait until the stock traded at less than $12 a share, a price it hasn't seen since 1996. But I think you'll do well if you BUY Intel Corporation (Nasdaq: INTC) up to $17 a share. – Dan Ferris, April 2009, Extreme Value |
Dan is up more than 50% on share price appreciation... and Intel has paid out nearly 10% in dividends since he bought. The world's largest chipmaker also raised its dividend 16% today to $0.21 a share – its second dividend boost in six months. Readers who purchased Intel on Dan's 2009 recommendation are now earning a 5.4% yield on their original investment.
Intel's CEO Paul Otellini said worldwide demand for computing is booming, and Intel should see revenue growth of over 20% this year (another record). He also said the company's strong cash flow will allow it to further increase dividends. Intel's annual dividend growth is already over five times the S&P 500 average.
Here are Dan's comments today on Intel's dividend boost...
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The quarterly dividend payout is now 33% greater than its level of six months ago, $0.158 per share. |
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Most folks don't understand it's perfectly rational to expect this kind of massive dividend growth from Intel. It's a gigantic company, one that was once growing at remarkable rates. Today, it grows more slowly, but it still earns huge profit margins (its highest ever, in fact). It's still by far the No. 1 company in its industry, with an ultra-dominant 80% market share in global semiconductors. It is four times the size of all its competitors combined. |
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It employs the greatest concentration of chip engineering talent on earth. It sets the pace of innovation. It has been sued by competitors and regulators and lost to the tune of more than $1 billion... and it still doesn't matter. It's still the World Dominating Dividend Grower of the global semiconductor industry. |
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Intel gushes free cash flow, has a financial fortress of a balance sheet, is growing, and it's paying out more than ever to shareholders via rising dividends and share repurchases. Along with the new dividend hike, Intel said it'll raise its share repurchase authorization by $10 billion... to more than $14 billion. That's enough to buy back about 11% of the outstanding shares at current prices. |
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New 52-week highs (as of 5/10/11): Western Asset High Income Opportunity Fund (HIO), BlackRock Corporate High Yield Fund (HYV), NFJ Dividend, Interest & Premium Strategy (NFJ), PowerShares Dynamic Biotech (PBE), Utilities Select Sector Fund (XLU), Pepsi (PEP), DirecTV (DTV), Sprint (S), Eli Lilly (LLY), Integrated Device Technology (IDTI), Altria Group (MO).
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May 11, 2011
Why Burbank sold gold... When gold will soar again... Jeremy Grantham says sell stocks... U.S. deficit grows... Treasury refuses to sell its gold... Intel's dividend boost...