Daily Archives: January 28, 2012

In the News: January 28, 2012

High-TechEmployee AntiTrust Litigation (PDF) at Lieff, Cabraser, Heimann & Bernstein,LLP
Apple,Google Must Face Antitrust Lawsuit Over Tech Employee-Poaching Ban atBloomberg
FormerGroupon sales reps countersue over tactics at Reuters
WhatMakes FPA Crescent Tick? at Morningstar
Olympuspanel clears accounting firms of blame in scandal at Reuters
TheFannie and Freddie Chronicles, Cont. at Barron’s
PaulsonDigs Deep Hole, Needs Big Returns To Recoup Losses at Barron’s
Digitalmusic sales top physical sales at CNNMoney
Milkfutures: Better than gold at CNNMoney
FHAsays: It’s ok to flip that house at CNNMoney
Yourcell phone is out of your control at CNNMoney
Gold,Silver Move Towards 3-4% Weekly Gains; Time To Sell Miners? at Barron’s
GoldETF almost a sell at MarketWatch
What’sbehind Netflix’s 22% spike? at CNNMoney
Is the ETFbubble about to burst? At CNNMoney
GoldIs The Hottest Currency In The World at Forbes
BePrepared To Sell Your Soul If You Use Google at Forbes
MerrillLynch Hit With $1 Million Fine For Employee Note Collections at Forbes
The Big401(k) Match Mistake at Forbes
ThePitfalls Of Variable Annuities at Forbes
FacingSEC Charges, Ex-Fannie Chief Daniel Mudd Resigns At Fortress at Forbes
Whathappens when you walk away from your home? at Reuters
Questioningthe Volcker Rule at The Atlantic

Thoughts on Gold

A reader says:
“There’s a reason Gold is the hottest in the world.Investors are simply losing faith in ALL fiat currencies. Hence, they areturning to one thing that has always been real money – GOLD!”
Our Take:
We don’t know about the far distant future of gold,governments and profligate spending. However, we’ve always enjoyed a historical perspective on the topic of “realmoney.”  We’ve pulled a few quotes fromRichard Russell’s Dow Theory Letterson the topic of “real money” in the same vein as described above.
The US is on a treadmill to disaster via the creation ofdebt. In time (and the time is moving very rapidly now) the debt will destroyalmost ALL forms of investments. Gold will withstand the destruction, becausereal money is never destroyed.” 
Dow TheoryLetters.  Issue 736. August 7, 1978. Page5.
Coming up in a month, a year, a few years (I can’t time it)is the BIG PROBLEM, the problem that I’ve warned about for a long time. How doyou get people to hold paper “money” when they have increasing doubts about itsworth? The answer: you must make it CONVERTIBLE into real money-gold.”
Dow TheoryLetters.  Issue 766. September 26, 1979. Page1.
My job now seems to be to try to save my subscribers fromthe deceitfulness and greediness of our own Government. So I talk about thetechnical position of gold, of where WC are, of whether gold is still a buy andwhether it will take 900 or 1000 paper dollars to buy an ounce of real moneysay six months or maybe even three months from now.” 
Dow Theory Letters.  Issue 774. January 16, 1980. Page 7.
‘How can the Government ever be bankrupt if it is able to createmoney?’ The answer is that the Government could only be bankrupt if no onewould accept that money. And of course, that possibility is the reason why manysurvivalists will ‘never be without some kind of a position in real money -gold.’” 
Dow Theory Letters. Issue 805.March 25, 1981. Page 3.
Why could gold be bullish? Two opposing reasons: first,with a potential crisis in the world monetary system, people turn to real moneyas an insurance policy. Gold is real money. Second. With unbearable deficits facingthe US over coming years, politicians will be tempted to ‘print’ (monetize)some of those deficits (and suppose Edward Kennedy gets in in ‘84).
Dow TheoryLetters. Issue 841. August 11, 1982. Page 6.
Now, we’re not suggesting that the ultimate consequence ofprofligate spending isn’t coming.  Additionally,we’ve made a call for a secular bull market (as opposed to a cyclical bullmarket) in gold on September28, 2010 and silver on September5, 2009 .  However, much of thearguments during and after the peak in the price of gold are the same as today. 
Additionally, nothing has changed that was said about profligatespending at the peak in the price of gold in 1980 or the period from 1981 to1999, a time when the price of gold was in a declining trend.  Therefore, we have little to help us distinguish the difference between huge government spending when gold is rising and when gold is falling.  We’re sticking to the view that Dewey and Dakins’ assertion that gold vacillates in a 50 to 54-year cycle is right on target (our 2009 review of their work here). 


We’re opting for the view that goldexperiences good times and bad rather than the view that our nation is comingto an end.  After all, the redemption ofour gold, as with all forms of insurance, is not something that we look forwardto.