Posted by Ray on October 6, 2009 under Main | 
I have been reading this all over the internet over the past couple of days mostly from folks who receive the Webbot Prediction alert, or whatever it is called. Essentially, this program scans the internet for predictions of the future based on some algorithmic method. It was first developed in the 1990’s to find hot stocks, but then was used for such useful things as finding out the end of the world.
Now, do I believe such predictions? No. Basically, the creator even says its accuracy is as about as good as flipping a coin, so I guess we are all just as good as this multimillion dollar program if we just have a mere quarter in our pocket. Could something happen on October 25, 2009? Sure, who knows. Certainly the news today is not encouraging and the DXY is in dangerous territory again, but a complete collapse is not really likely in the near-term. There is simply too much liquidity in the market right now.
However, the value of that liquidity is a completely different question and issue. The value of the USD can fall to zero in one tick, we know that to be a fact, but even that is unlikely. As stated before, I believe we are in more danger of a bank run than a collapse of the currency in the near-term, but even that seems to have sorted itself out. In fact, what has saved all the currencies of the world, including the USD, is the fact that they all printed their way out of this mess almost equally debasing their own currencies. Even though that is a true statement it is also true that the US is definitely guilty of printing more money than most other countries and it is also true that we have poor leadership and dismal fiscal policies which is why the USD is the poster child of a weak currency.
Super power or not, we are in the last throws of glory days thanks to decades of selfishness and political indifference to fiscal sensibility. You cannot borrow and spend your way to prosperity, regardless of what Ben Bernanke, Barney Frank, Nancy Pelosi and Obama thinks. This means that we will eventually suffer the decay of currency collapse, perhaps “soon” and that depends on your definition of soon, but it is unlikely on October 25, 2009.
I would encourage you to be prepared for currency devaluation, because we are experiencing it now in a very small way, by investing in hard assets such as gold, silver, palladium, and platinum. I believe that silver and palladium represent the best value at this time, silver is at $17 when gold just made a fresh high, the last time gold was at $1030 silver was at $20/oz. Palladium could easily be trading higher given the green push we are in and the rarity of the metal. Either way, if you won it and things do get worse and the headlines are true, you will have your wealth preserved and protected.
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Posted by Ray on September 2, 2009 under Main |
Everyone is talking about gold over the past 24 hours mostly because it went parabolic today. Those who follow me know that I am a big gold fan, but we are seeing many others jumping onto the bandwagon about the yellow metal. The big question is why is it having these giant leaps and will it continue.
I believe you are seeing gold increase because of economic uncertainty and the fact that it has strong fundamentals right now. I am not sure if it will break above the $1,000 mark and hold, it has always sold off when it reaches this area. However, based on the action we are seeing I do believe now is the time it will break and hold that threshold. I believe that China is the driving factor behind the sharp increase lately as they diversify their holdings and are hedging their dollar assets.
Another rumor, strictly a rumor from where I stand, is that the Chinese will revalue their currency and perhaps peg it to the Euro as the EU is now China’s largest trade partner. People cite the movement in the CNY for the latest rumor, but I do not know if that is really going to happen. I do think it could happen, but who really knows, rumors are just rumors. If this did happen then gold would go parabolic overnight and the dollar would take a bath, but I do not foresee this happening. Regardless, what we do know is that if you owned gold for some time you have done very well.
I think what we are seeing is a lot of short covering and the Chinese middle class stepping up to the plate and buying gold. All throughout history China and India have been huge fans of gold and many believe it brings luck, but more importantly they see it as money. Whether it brings luck or not, who knows, but what we do know is that the population of both China and India could easily suck up existing supplies if they are indeed buying the metal.
Surprisingly we saw gold and silver hold up very well in the face of a strengthening dollar, which is unusual, a few days ago. Usually when the dollar increases all precious metals take a nice nose dive, but not lately, although the strength in the dollar is not very impressive to say the least. I think that people are moving towards gold as a safe haven as they realize that gold has maintained its value this year and that the crisis is still not over yet. Having gold during uncertain economic times has always been a good bet and that, in my opinion, is what we are seeing.
In the recent past I said I liked gold and recommended picking it up under $960 an ounce. It did go below that mark so I hope people did buy it, but I am not so wild about buying it after such a sharp move upwards today. I think we will see a selloff tomorrow for those taking profits and after the selloff I would then consider buying it, no specific price target, but I would dollar cost average in. While I am bullish on gold, I am more bullish about silver.
Traditionally the gold to silver ration, GSR, has been tighter than it is right now. From 1792-2002 the GSR has a mean of 31, 31 ounces of silver to 1 ounce of gold, but currently we have a GSR of 63. That means that silver just about half the price it should be according to the traditional GSR. If the GSR returns to its traditional average silver should be trading at about $31.40 an ounce, double its closing price. To me that looks very bullish especially because the fundamentals are there. All the easy silver has been mined and we do not recycle it while every piece of electronics you have contain silver in order to make them work.
My point is, yes buy gold in a cautious manner, but also buy silver as you will get more bang for your buck. Essentially, silver can double in price when gold may only go up a few percentage points. It is also about diversification and if you buy precious metals then you need to diversify between them. I am currently a buyer of all precious metals in this order; palladium, silver, gold and platinum. While gold usually gets the spot light, silver and palladium usually get ignored which makes them a good buy as their prices will follow the majors, gold and platinum.
Play it safe and dollar cost average in.
I own SLV, GLD
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Posted by Ray on August 25, 2009 under Main |
I am sure you are familiar with precious metals like gold, silver and platinum, but there is one more metal that gets ignored, palladium. Palladium is a member of the platinum family and is, actually, much more rare than platinum. This metal just might be one of the best options for those looking to invest in precious metals, but it is often ignored.
The metal is ignored because it is viewed as cheap, at $290 an ounce, but it is cheap for a reason there is no demand right now. That, I believe, is about to change as automakers are looking to save money and make their products cheaper. Palladiums big brother, platinum, is used in catalytic converters to lower emissions, but at almost $1,300 an ounce it is extremely expensive. However, palladium does the same thing at 25% of the cost and it is rarer than platinum. The fact that there is a very strong possibility that automakers will dump platinum for palladium is reason enough to buy the metal, the last time this happened palladium went to the moon.
However, the story just gets better because palladium is used for other things too. For some reason palladium can hold up to 9 times its weight in hydrogen which makes it useful for those exploring hydrogen powered cars, but its ability to lower emissions also makes it desirable for those industries looking to go green. For that reason it is a nice green play, for now, while it is cheap. Also, the major suppliers of palladium are Russia and South Africa, with Russia being the primary supplier. As you know Russia can be hard to deal with so the supply could be cut off at anytime, making the case of ownership of the metal even stronger.
The metal is also used in jewelry, which may not excite you right now, but consider this, China has emerged from the economic slump and platinum is very popular there. As I just said though, platinum is very expensive which makes palladium, which has many of the same characteristics as platinum, attractive for its low cost. So far palladium has performed very well this year coming from a low of $185 to $290 at the moment, it was up today when other metals were down which makes me think Detroit is moving in its direction now.
So, this metal is a green play, an automobile play, a jewelry play and, essentially, a recovery play which makes now a very good time to be a buyer. Last year the metal was twice as expensive, but like with all metals last year it got pummeled. The biggest problem is how do you buy this metal, there is no ETF and most people do not want to buy futures contracts. The only real way to buy it is physically, which is how I own mine, or through buying companies that manufacturer it, like Stillwater Mining.
If you want to buy the physical metal it is a bit tougher because there are only 2 forms to buy it in, the Canadian coin or the Pamp Suisse bar, both are sold in 1 ounce increments. Unfortunately, Canada does not make the coin anymore and they only had 3 years of production, 2005, 2006, 2007, and the 2007 version is considered ‘rare’ and sells for a premium. Actually all Canadian palladium coins sell for $100 premium, but the Pamp version only sells about $30 to $50 over the spot price. For the best place to buy these products go to a reputable dealer either locally or on the internet, like Apmex.com, GoldenEagleCoins.com or BullionDirect.com. You can get them on Ebay, but if you do not know what you are doing go to a dealer.
Like I said, I believe that the transition to palladium is on its way and I have no idea if that is a fact or not, but what I do know is I like the price action lately. I believe that if you get in and hold it long-term you could potentially do very well. It gives you inflation protection, but you do not need inflation to profit with all the alternate ways the metal could appreciate just makes this metal too good to be true, in my opinion.
Disclaimer: I do not own any of the stocks listed, nor do I have any agreement with any website listed in this article. I do own the physical meatal and am actively adding to my position.
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