Metals With McGuirk: Google and Gold, Silver as a Teenager
...all that I don't know about Google, I DO know about Gold.
G'day. Gold continued to march higher during the Asian time zone and was left alone in Europe; silver still hasn't broken up through its recent intraday high at 9.42 a few months ago and Lisa's Steelers had another big win making our 15-1 bet to win the Superbowl look pretty good. Not a bad long weekend for some, I'm sure.
I've only had a few cursory glances at the market since Comex closed on Friday as we have been decidedly distracted by local events. Today's mumblings will be short.
I reckon gold needs a breather for no other reason than it's been all one way traffic of late and there's too many people talking of $600 in quick time. I hope they are correct. I reckon we see back into the low 540's again, soon and probably this week. I won't trade my physical gold holdings or my core metal equity portfolio. The risk is just too great of "missing out." There are plenty of people still looking for $480 to buy gold and are now $80 under water. Sure they may get it down there, but who needs the angst? If the reasons are compelling to buy gold, then buy it! I'm talking physical, not paper gold. Gold is not at 25 year highs- gold at 525 in 1987 equals about $1200 in inflation adjusted dollars. Don't believe all you read in the Financial Review or Wall Street Journal - The mainstream media are at best plain outright wrong, definitely disingenuous and at worst outright deceptive in their assertions - do the math yourselves.
Paper gold is gonna be very volatile and many paper gold players will get whipped in and out, especially those with no appreciation of the physical market. So many paper gold traders sell when they should buy and vice versa. Paper gold is very different to physical gold and, unlike the last 20 years, the physical gold market is starting to flex its muscle. The physical market stopped gold at $540 last week and should be there again.
Silver is bloody cheap for the gazillionth time. The gold/silver ratio is back nudging 62 and I reckon that's a gimme, but I am hoping for 66-68 to max out my position. Target within the next decade is 12-16 silver ounces per gold ounce, just my opinion and never advice.
I was interested in what Toddo and Vitaliy were on about with Google (GOOG) and Gold and thought I would just throw my two cents worth into the mix. Google and Gold are trading close enough to parity and, judging from all accounts GOOG is headed way higher if one listens to the "analysts" and chatterboxes of the world. I am indifferent to GOOG. I wouldn't own them with your money let alone mine, especially when I can own an ounce of gold at the same price. GOOG is speculative at ANY price. Owning Physical Gold is real money and NEVER speculative. People do not own physical gold as speculation; they do it as an inflationary hedge, an infinite store of wealth or to look pretty. Lisa reckons a piece of Google paper wouldn't look very pretty hanging around her neck either. People speculate with paper gold, not physical gold. Humour me for a second or two.
I know bugger all about Google and quite frankly don't want to. I use Google all the time and have never paid them a cent. Where do their earnings come from?? What kind of PE is GOOG? Have people forgotten the mania of 1995-2000??? I dunno about the whole tech thing so call me an idiot, but if I am not mistaken, GOOG is a great man-made INVENTION, whatever it is, but it is just a thing- let's call it Intellectual Property. It's just someone's idea that is converted to a machine. They have the best "thing" out there (at present) and so it is worth whatever someone is willing to pay for a share. The point is, some other smart bloke or chick could come along and out-Google Google. Someone else might/will build a better mousetrap and then Google's value disappears up its own bum. Google could/will be "trumped" and then what??? Think RCA (Record Company of America) back in the 1930's, railways, autos, Television or Compact Disc or any number of "technology" that was the next "big thing." Inventions are just inventions that can and will ALWAYS be trumped by something else. Sure, Google might be "worth" lots today but just watch out for the "trump card" that destroys it or the realization sets in that the share price, which is supposed to be a PV of future cash flows, is ghastly overvalued.
On the other hand, all that I don't know about Google, I DO know about Gold.
Physical Gold cannot be "man-made" or invented. Its physical properties cannot be replicated. It is produced by nature in finite supply. It has been valued and coveted for thousands of years. Vitaliy reckons it hasn't kept pace with inflation the past 20 years and that may be true in a nominal sense. But as I always have said - an ounce of gold is an ounce of gold no matter what you "pay" for it. What is overlooked is the artificial supply created by gold leasing, forward selling and derivatives that effectively depressed the metal price. It provided bargains to physical metal buyers and accumulators in fiat dollar terms. I've written a million times about what makes gold the one true infinite money and store of wealth so I won't bore you with rehashing it. Alchemists have tried for ages and cannot "invent" gold. Physical gold cannot be "trumped." It is the top of the totem pole when it comes to financial instruments. It owes no one and has no master.
Google is man-made invention, an idea that anyone could come up with - gold is a natural element unable to be replicated by anyone or anything. What would you prefer to own if it costs the same amount of today's paper dollars??
I see that new highs in Lead, Zinc and Copper have been breached. That's nice and I guess that there will be some that will say that it is bearish for silver due to the fact that most silver production comes as a by product of such mining. That is sadly mistaken, IMO. The supply/demand deficit in silver over the last 30 years and the massive depletion of global stockpiles will easily absorb any minor increase in silver production as people ramp up base metal production to take advantage of these higher prices. Silver as a teenager is a certainty, IMO, and 2006 will probably get us there. It is only a 40% increase from here and if anyone doubts that it can occur, just have a look at basically any other "real asset" on the planet over the last few years. A 40% increase is nothing- look at Rhodium!!
But let's not dwell on the less important aspects of life.
The U.S. holiday provided a timely "night off" for us down here, but one that Lisa and I didn't use to catch up on some much needed sleep. "Tomorrow is promised to no one" as Todd is fond of reminding us, something that was brought home to us in the starkest of fashion on Sunday afternoon.
Minyans might recall that Lisa and I went away to a big 3 day party a few weeks back, the highlight being the costume party on the Saturday night which was one of life's great experiences. The people with whom we partied are what my youngest brother refers to as "the family." It is a diverse group of people who, through one reason or another, found them providing each other with a network of love and support that any "traditional" family should aspire to. Little bro' Greg, being gay and from a strict Irish-Catholic household, was included in this incredible group of people that for the last 15 years understood, accepted, guided and supported him through all of life's trials that, I am ashamed to admit, he couldn't come to his own blood for. Obviously, my relationship with Greg has improved significantly over the last 5-8 years and the simple fact that we were invited to their annual party signifies that Lisa and I are now accepted as part of "the family." That is something in itself.
On Sunday afternoon a member of "the family" died suddenly. No warning, no nothing. Nick Gibson, a registered nurse and a big strong bloke who looked after himself better than most, was just sitting around on the sofa like any other person relaxing at home. He just toppled over and died of a brain aneurism. At 31 years of age that is just not supposed to happen. James, his partner of 5 years, had just ducked up the road to grab a few bits and pieces for dinner and was gone for maybe 10 minutes. Friends living only 5 doors away, who are also paramedics, were on the scene within seconds of James. They all worked hard on their good mate, but there was nothing that could be done to save him.
Nick and James are among the first people from "the family" that Lisa and I met. Both are good men, wonderfully friendly with open hearts and minds. Nick will be missed by Lisa and I for sure, but nowhere near what James and Greg and the rest of "the family" will experience. For once, I can be there for Greg at a time when he needs it. It is a chance for everyone to show how much we care for each other. That is the only positive in such a tragedy.
Typically, no one is to wear black to the memorial service on Thursday and the "more colourful the better" is the request from the family. Afterwards, we'll all gather at James' and Nick's place and toss back a few beers or maybe something a little stronger, and toast the life of one of the world's good guys.
"Tomorrow is promised to no one" takes on new meaning after the last day or two.
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