Category Archives: gold

Gold Stock Indicator

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Goldman Sachs: Short Gold! Buzz Killers!

In today’s Wall Street Journal there is a piece titled “Goldman Sachs: Short Gold!” (found here).

Dagnabbit!!!!  It was only yesterday that we outlined the significance of a “stage 4 buy” indication when and if it arrives.  However, with Goldman calling to short gold, with an exclamation point no less, we may not ever get to realized the “stage 4 buy.”  what a bunch of buzz killers at Goldman Sachs.

We hope that enough people will listen to Goldman and short gold up to the gills.  Furthermore, we hope that the price of gold declines enough for us to realize the “stage 4 buy” based on our Gold Stock Indicator.  We seldom hope for anything but this is one instance where we’ve become irrational on this subject.

Below is a timeline of notable Goldman Sachs short calls that could be easily retrieved from the internet.  We admit to not looking too hard, so if you can find other short calls by Goldman, whether accurate or not, from verifiable third party sources then it would be appreciated.  However, for the ones that we’ve found, the calls to short the respective financial instrument has been uniformly inaccurate.  Stinkin’ buzz killers.

2010

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Source: Durden, Tyler. ZeroHedge. Goldman Technician Says To Short Market Unless S&P 1083 Is Recovered Today. June 30, 2010. accessed April 10, 2013. http://www.zerohedge.com/article/goldman-technician-says-short-market-unless-sp-1083-recovered-today.

2011

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Source: Gongloff, Mark. Wall Street Journal. Goldman: Short the Dollar. August 10, 2011. accessed April 10, 2013. http://blogs.wsj.com/marketbeat/2011/08/10/goldman-short-the-dollar.

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Source: Gongloff, Mark. Wall Street Journal. Goldman Says It Closes Its Short Germany Bet. December 16, 2011. accessed April 10, 2013. http://blogs.wsj.com/marketbeat/2011/12/16/goldman-says-it-closes-its-short-dax-bet.

2012

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Source: Durden, Tyler. ZeroHedge. Goldman Tells Clients To Short US 10 Year Treasurys. January 23, 2012. accessed April 10, 2013. http://www.zerohedge.com/news/goldman-tells-clients-short-us-10-year-treasurys.

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Source: Russolillo, Steven. Wall Street Journal. Goldman Sachs: Short Stocks. June 21, 2012. accessed April 10, 2013. http://blogs.wsj.com/marketbeat/2012/06/21/goldman-sachs-short-stocks.

2013

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Source: Russolillo, Steven. Wall Street Journal. Goldman Sachs: Short Gold!. April 10, 2013. accessed April 10, 2013. http://blogs.wsj.com/marketbeat/2013/04/10/goldman-sachs-short-gold.

Gold Stock Indicator

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GSI and Stage 4 Buy

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Gold Stock Indicator

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Gold Stock Indicator

On March 2, 2013, we pointed out the fact that, based on our Gold Stock indicator, there was a pattern of initial panic declines that were followed by secondary panic declines (found here).  We said the following:

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Gold Stock Indicator

The Gold Stock Indicator was relatively unchanged the week from March 11, 2013 to March 15, 2013.

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Gold Stock Indicator

Since our last posting on the topic, the Gold Stock Indicator has moved up +6.65% (found here).

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Warren Buffett Leverages Up on Inflation Hedge

On February 14, 2013, Berkshire Hathaway and investment firm 3G announced a deal to buy H.J. Heinz (HNZ) for $28 billion, or $72.50 per share. Naturally, Warren Buffett, not being one to get the short end of any stick, is investing only $4.4 billion in Heinz common stock and another $8 billion in preferred shares yielding approximately 9%.  The rest of the purchase  is being financed through investment group 3G and bank borrowing.

According to the Wall Street Journal,  Warren Buffett “…has previously expressed disdain for private-equity buyouts that employed excessive leverage.”  However, as the details of the acquisition have unfolded, it becomes apparent that the leveraged nature of the transaction is on par with the deals that Buffett has spoken out against.  So what is the motivation of Warren Buffett to engage in such a transaction? In this case, the allure of an inflation hedge that performs much better than gold in high inflation environments and that is proven to succeed after the high inflation period ends.

In the past, we have been outspoken on the matter of investing in food processing companies instead of gold and gold stocks if you want to beat inflation.  On December 17, 2008, we pushed the idea that Sysco Corporation (SYY) is an inflation hedge that will beat gold and gold stocks. Our closing remark were, “…if you're of the mind that inflation is coming down the road, with all this liquidity being injected into the economy, then SYY might be a good "long-term" hedge against inflation (found here).” 

In a December 1, 2010 article we re-iterated that value of inflation protection provided by food processors by comparing ConAgra (CAG), to Newmont Mining (NEM) during the gold bull market from 1974 to 1980.  This was a time when ConAgra exceeded Newmont Mining by 10 times.  Again, this was within the gold bull market from 1970 to 1980 (found here).

One article published as recently as September 20, 2012 was titled “Gold Stock Investors: To Beat Inflation Look to Food Processors, Producers and Distributors (found here).” In that article, we said, “As an alternative to the ‘mines’ of precious metal stock investing, we’ve recommended investing in food processors, producers and distributors that have a history prudent of dividend increasing policies to take advantage of the expectations of high inflation down the road.”

We cannot emphasis enough the fact that there are vastly superior alternatives to gold and gold stocks if you want to beat inflation.  Additionally, investment in companies like Heinz will be richly rewarded even as the period of inflation comes to an end.  This will not be the case for gold and gold stocks, as found out by gold permabulls in the period from 1980 to 1999.  This explains why Warren Buffett would be involve in the Heinz transaction, it is the appropriate alternative to buying gold or gold stocks if runaway inflation is expected down the road.

Source: 

Transaction Alert

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Gold Stock Indicator

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Downside Targets for Gold

The prevailing controversy, among gold bugs, is whether or not gold stocks have bottomed.  As our Gold Stock Indicator has indicated, so far, gold stocks have a long way to go before reaching lows similar to what occurred in 2008, on a relative basis.  This debate about gold stocks only arise out of the fact that they have fallen so much while the price of gold has been “stable.”

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Gold Stock Indicator

The end of the week performance of our Gold Stock Indicator has brought us within striking distance of the “stage 2 buy” indication.

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Gold Stock Indicator: February Performance

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Gold Stock Indicator

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