January 17, 2008
In Search of a Non-Nutty Goldbug
The beauty (and bane) of the Internet is that you can easily go back and see a time-stamped version of what various experts / analysts / pundits / bloggers were saying about something. I’m interested to know if there is *anyone* out there who was saying that gold was a buy during the early 1998 to late 2001 period. Here’s the rub: they didn’t say anything about gold being a buy *before* then or *after* then — they were only adamant about gold being a bargain in the $250 to $300 range, but no higher. Does such a person exist?
Cat: | Time: 10:34 am (utc+8)
January 17th, 2008 at 11:10 am
Yes, Jonathan Hoenig (capitalistpig.com) and Teresa Lo were on an E*Trade radio show called The Trade, and they called it right there on the spot in December 2001.
January 17th, 2008 at 11:48 am
Trader Pete: What were they saying throughout the 80’s and 90’s though and since then? I’m looking for someone who is known for stone-cold, sober, deeply informed analysis, not a chart-gazer. Lo isn’t known for her grasp of fundamental valuation, is she?
January 17th, 2008 at 12:16 pm
I have not personally followed Hoening, but I do know that even though Teresa is mainly a technical trader, she worked for years at an investment dealer that specializes in mining finance. The group she worked with were instrumental in the formation of Kinross Gold (which she recommended on the show) and Yamana Gold (Cramer’s favorite).
She says that gold is “diabolical”, very difficult to trade, and therefore, the regular person should make it part of a balanced portfolio. Putting all eggs in one basket is always tempting, but destructive.
January 17th, 2008 at 12:48 pm
Trader Pete: Do you know exactly what she did at that investment dealer? Title? Role? Position? (She and I have a rather complicated and unfortunate history.)
It would be interesting to review her recommendations over time, but it’s impossible given her frequent and schizophrenic reincarnations on the Web — I’ve lost count of her appearances at various different URLs. :)
January 17th, 2008 at 12:58 pm
Maybe you can ask her.
January 17th, 2008 at 1:06 pm
I remember Teresa selling Bre-X stock certificates for souvenirs. To the best of my recollection, she started off trading juniors on the VSE, a snake pit if ever there was one. But what does fundamental valuation have to do with gold? It is darn near a pure speculation.
January 17th, 2008 at 1:11 pm
Interesting stuff about how the GLD impacted this market. All of a sudden, arm chair gold bugs can get in the pits cheaply, fast, often, and with less risk than futures. Oh yeah, and in that market you don’t see XOM hedging - its not really that liquid compared to other futures markets. So, with this ETF you have all this pent up retail demand. A bull is a bull and retail would’ve gotten in even if they had to open a futures account or go through a bullion dealer or full service broker. But not on the scale they have now. This is also real easy for institutions as well.
http://bespokeinvest.typepad.com/bespoke/2008/01/etf-fever.html#comments
http://online.wsj.com/article/SB119949017783168719.html
January 17th, 2008 at 1:19 pm
@Trader Pete: Our unfortunate history prevents me from asking her, that’s why I asked you.
@libertas: Yes, she sent me one back in the day and I still have it in a box somewhere. Someone must have thought that gold represented value during that period, but I see what you mean about it being “darn near a pure speculation.”
@chad: Yep, I agree, and I thought about it at the time that GLD appeared (Incep Date: Nov. 18, 2004). The same is true, to a lesser extent, with SLV.
January 17th, 2008 at 1:43 pm
Leaving aside the question of Teresa, I doubt that there is such a person. Gold as a reliable store of value simply doesn’t hold up; it is way more volatile than currency purchasing power and is still down something like 75% from its previous peak in real dollar-based terms. It just has this aura (pun intentional) left over from its centuries of use as money. Many people realise that the money supply is out of control and believe that gold will save them from the inevitable hyperinflation. IMO, money supply out of control cuts both ways and deflation is more likely as non-bank credit creation collapses. However, I can’t see gold ever resuming a currency role in either scenario. You gotta believe, you gotta be nutty to be a gold buy and holder. Non-nutty traders use the nutters as patsies.
January 17th, 2008 at 2:00 pm
Sure, Eric Jenzsen of itulip.com had a very cogent analysis calling BOTH the top of the .com bubble and the bottom of gold. Read it yourself here:
http://www.itulip.com/gold.htm
January 17th, 2008 at 2:21 pm
libertas: I largely agree with you about gold never being able to resume its currency role. But I’d still like to find someone who pounded the table for gold at that time, and only that time, as a sensible investment.
January 17th, 2008 at 2:28 pm
Michael: Thanks for the link. Once I copy and paste the article from that awful background, I will read it. :)
January 17th, 2008 at 3:02 pm
Marc Faber, as early as 2001 in the Barron’s roundtable he was a Gold bull. His book Tomorrow’s Gold has a publication date of December 2002.
January 17th, 2008 at 4:10 pm
BLNYC: Isn’t Faber a perfect example of a guy who has continuously been a gold bull for the last 30 years? UPDATE: I went back and checked and Faber wasn’t a member of the Roundtable in 2001 … from the 2002 Roundtable: “… the presence of that peripatetic, pony-tailed newcomer, Hong Kong-based investment advisor Marc Faber, who stirred the pot with an industrial-strength whisk.”
Excerpt from 2002 Roundtable:
“Faber: … Investors should also allocate some of their assets to precious metals such as gold and silver.
Q: Why should gold and silver rise?
Faber: In due course people will question the value of money. I don’t think the dollar will tumble against the euro, though it may decline 10%-20%. But the dollar will drop against a basket of commodities as more and more people endorse the view that the gold standard has a lot of merit. It has built-in stabilizers that might actually solve or prevent financial excesses from happening in the future.”
I like Faber but he’s very uneven and frequently comes across as a nutter or semi-nutter at best — unfortunate because he’s a sharp and interesting guy.
January 17th, 2008 at 9:58 pm
Chairman,
I first started getting interested in gold via Thom Calandra, the now infamous former reporter from CBS Marketwatch..I think he dyed his hair green when it went thru $300/ounce…
You can read about his more recent troubles here…
http://interactive.wsj.com/documents/CalandraSEC011004.pdf
As an interesting aside I remember seeing him at a gold conference on a laptop with his Schwab account open..he seemed pretty focused…
:)
January 17th, 2008 at 10:05 pm
Linda: Calandra is worse than infamous; he’s widely reviled. Were you a subscriber? :-)
January 17th, 2008 at 10:50 pm
No sir…
January 17th, 2008 at 10:50 pm
Linda: Too bad, I hear he picked some big winners, lol.
January 17th, 2008 at 11:22 pm
CM said:
“Too bad, I hear he picked some big winners, lol.”
True story, I had forgotten about Calandra but after reading these comments, I googled his name and found a site that talked about a stock he had pumped called Ivanhoe.
A friend of mine who HAD NEVER PURCHASED A STOCK IN HIS LIFE bought into that company (at the time I had no idea how or where he got his info).
So this friend of mine proceeds to make $7K in about 4 weeks. I talked to the discount broker he used to deal with who said that when he would call in to get an update, he’d ask: “how’s my little ho doin’?”
January 18th, 2008 at 12:11 am
I’ll just offer my 2c here, being both a fairly frequent reader of Maoxian AND Teresa’s blogs…
I’ve known Teresa since 1994. So this information is not a pure quantitative assessment of her track record (that would be difficult to assemble), but rather more anecdotal. But I have watched/listened to many market commentators over the years so I feel myself capable of judging “relative value” so to speak. Her gold call in 2001 was a “pound the table” one and very good. With respect to whether she was a perma gold bull in the late 1990s - no, not that I can remember. In fact, to the contrary, I remember when gold would get near the top of its trading ranges during those years, she would often find amusement in how almost every broker in the office started to get excited, while she was skeptical about the sustainability of the pending breakout. So her “long gold” call in 2001 was a change in view (from neutral/negative to positive) and extremely well timed.
Generally I’ve found Teresa’s “macro” bottom calls to be somewhat stronger than her top calls. The problem with calling the tops (and this is certainly not true only for Teresa, but for many market commentators) is that the exuberance can last a long time. One other bottom call that sticks out in my mind (as in, I wish I had listened) was her observation of a double bottom formation completing in equities in early 2003.
January 18th, 2008 at 2:07 am
Would Jim Sinclair be considered a nutter?
http://www.jsmineset.com/
January 18th, 2008 at 3:47 am
I remember Peter Lynch recommending Barrick Gold in February 1998
January 18th, 2008 at 4:18 am
I have been following Jim Sinclair for years and he has been spot on.
It has been like reading tomorrow´s newspaper.
Dario
January 18th, 2008 at 4:55 am
most prominently: Richard Russell, Jim Rogers, DailyReckoning.com (Bill Bonner, Richard Daughty, et al), Marc Faber, and several long-standing “goldbugs” (James Turk, etc)… Russell also continuously over and over and over recommended $Silver back when it was $4.50… it is my opinion $Silver will not only outperform $GOLD in 2008, it will also be the best investment of 2008… $Silver is definitely more bang for your buck… LEAPS are good way to play…
January 18th, 2008 at 7:23 am
@Todd: Nice story about the little ho.
@TheQuant: Thanks for offering your always reasonable perspective.
@Donk & Dario: Dunno, I’ve never heard of Sinclair but I’ve bookmarked his site to look into later.
@v838: I specifically wanted to exclude those permabulls you mention and find a non-hysterical, stone-cold sober commentator.
January 18th, 2008 at 9:20 am
CM said:
“I’ve never heard of Sinclair…”
Really ? Wow, that surprises me
January 18th, 2008 at 9:28 am
Todd: Nope, I’m very disconnected … the only TV I watch is in the gym (ESPN and Bloomberg) and my travels on the Internet are very circumscribed.
January 18th, 2008 at 11:36 am
CM: Adam Hamilton at zealllc.com is a long time goldbug. I came across his site probably around late 2002.
January 18th, 2008 at 11:52 am
Jonw: Thanks for reminding me of zealllc … just checked his subscription rates, $60 a month for the Speculator newsletter, $10 a month for the Intelligence one. Are you a subscriber?
January 18th, 2008 at 1:27 pm
CM: I subscribed for a few months in 2003. I believe the rates were cheaper then. Did buy a few gold stocks but lost interest as I felt the pace too slow for my style of trading.
January 18th, 2008 at 1:49 pm
Jonw: You should look into maoxian’s daily ideas, usually his box comes up with at least one idea a day, which should satisfy the more hyperactive folks. :)
January 18th, 2008 at 2:03 pm
CM: Yes, I have already subscribed to the daily ideas. I am short from the beginning of this year. I trade prices and right now the China Ultra short FXP seems to have good potential.
January 18th, 2008 at 2:10 pm
Jonw: Oh great! We’ll see if you’re one of the dozen I expect will pay money for them. :)
January 18th, 2008 at 6:45 pm
“People criticized me in 1999, when I said buy gold now because it has gone down for 20 years, it may be an opportunity to buy it and it started to move in 2001. For two years you are sitting without any reward but then it went up significantly since then.” - Marc Faber
http://www.rediff.com/money/2006/may/10faber.htm
I don’t know where all this appreciation for Faber’s opinion comes from. He supposedly called the stock market top in 2000, yet in reality he was way early. He will undoubtedly be credited with predicting the current mess, yet he’s been bearish on equities (even calling a “lifetime selling opportunity” in September 2005) throughout most of the bull market.
January 18th, 2008 at 8:37 pm
Stephan: I agree that Faber is frequently “way early” but he’s a colorful guy and gives good soundbites (similar to Jimmy Rogers) so the media love him, and the financial press isn’t known for asking tough questions to any of these guys, especially about past recommendations.
January 18th, 2008 at 10:50 pm
ive read some of the jim sinclair stuff for today…OMG…it seems, armagedon is just around the corner…but i never answer panic knocking at my door…
January 19th, 2008 at 6:17 am
“Todd: Nope, I’m very disconnected … the only TV I watch is in the gym (ESPN and Bloomberg) and my travels on the Internet are very circumscribed.” — Circumscribed? For health or religious reasons?
Faber seems more accurate than most, but he’s still dining out on fame from a 20-year-old call. Nice work if you can get it.
I won’t comment on Lo so CM doesn’t delete me.
:-)
It’s hard to find somebody who wasn’t 3, 5, 10, or even 15 years early on gold. For whatever reason, it’s an emotional subject and very few people comment on it as if it were just any other ticker symbol.
I would be very interested in your paid idea results. Not the ideas themselves, gawd no!, but the conversion rate of getting paid customers. Jonw’s comment about needing to get a hyperactive level of trading ideas in order to pay for a service also struck me.
It’s amazing to me what people will and won’t pay for. One item that comes to mind is just a data-mining and stock scoring service that is so expensive, you’d think an institution would have that access already! Little factoid services with “today’s odds up/down” and then articles by people that aren’t even familiar with most common stock anomalies. All pay services. Amazing. So I hope you have success with presenting a small number specific, actionable ideas on a regular basis.
January 19th, 2008 at 8:23 am
Bill: My exposure to the outside world is circumscribed for (mental) health reasons. :)
I expect the conversion rate will be around 5% (50 subscribers for every thousand freeloaders) … I’m not a pushy marketer and I have the unfortunate habit of telling the truth and posting actual (bad) results, which makes it hard to convince people to open their wallets.
January 19th, 2008 at 12:39 pm
Jim Sinclair is not a perma bull. He was bearish for 20 years and became publicly bullish again around 2001.
http://members.forbes.com/global/2001/1210/064.html
Dario
January 19th, 2008 at 2:16 pm
Dario: Thanks for the link. I’ve delicious’d it and have read it. Sinclair sounds like an interesting guy… a key bit from the article on timing:
“By the summer of 1999 Sinclair had invested $4 million in the lands near Bulyanhulu. He faced a sickening prospect. Gold had just hit a 21-year low of $246. Bears were predicting $150 soon, a price that could wipe out the profits from even the most efficient of Tanzania’s mines.
“I felt a pit in my stomach, like hunger,” Sinclair recalls. “When I was a young trader, I used to think that I was invincible. Now I feel the risk.”
Simple logic mitigated his fears. It costs most companies $250 (including back-office support) to extract an ounce of gold. With gold trading below cost, it made no sense for mining companies to hedge against further price reductions. Recognizing that such hedges meant that an important force pulling gold down would soon disappear, he reasoned that the bottom was near.”