Sunday, September 30, 2007
John Hathaway, the manager of the Tocqueville
Gold Fund (TGLDX) had a take in Barron's on why gold can move higher that I don't recall hearing before. Perhaps people have been saying essentially the same thing but still I thought this was interesting.
He said "the disparity between the amount of paper that has been created since 1980 and the amount of gold that has been produced since then is just enormous." So we have had a much larger increase in the supply of money compared to the supply of gold. FWIW, Hathaway thinks gold can go quite a bit higher.
I have been writing about having gold exposure one way or another since I started this site, three years ago yesterday by the way. The idea that it can zig when stocks zag has been tested a little bit of late. I own several things in the mix that I think/hope provide offset to domestic stocks. When the market is roaring I would expect gold to lag but sometimes, like the month just ending, gold does even better than stocks.
Maybe a way to think of it is that gold may not a great hedge for market events but could offer a lot more protection against an external shock like a terror attack. If that line of thought makes sense to you then it may be possible that there will be long periods of time where it does very little as was the case from February of this year until August. Personally I do not think this is a bad thing but some folks will not be patient enough to endure sideways action for that long.
I am no gold bug but I do believe that a diversified portfolio needs to include exposure to something that gets mined or to a company that does mining. The theme has been a huge contributor to gains in the last few years and I think will continue to be very important for the next several years.
A reader asked what currencies I think will rise the most against the dollar and how to invest in them. The thing behind the thing for my currency exposure is not to game the forex market. I believe in foreign exposure to stocks, bonds and cash. The best diversification would probably a currency from either a surplus economy or a commodity based economy. Rydex has eight single country currency ETFs and iShares has three ETNs. Beyond those it gets difficult to access single countries. I use short term government bonds from Norway, but not for everyone, as a proxy for the krone. The minimum buy is $100,000 which is easy if you are buying for a bunch of people, pretty tough for an individual.
Everbank has various products but I personally am not a fan of locking into a CD. I think you can buy $10,000 worth of many single currencies in an account without buying a CD but I do not know the particulars.
I Tivo the Saturday morning Fox shows so I can fast forward through the political commentary (if I wasn't black balled from their channel before I am now, eh?). On this week's Cashin' In I only watched Trapper's picks during the last two minutes and I got a chuckle when he picked the double short ETF that I use and have written about so often of late.
He actually called it a double short fund.
Also from Barron's Trader column, there was a short write up on Smithfield Foods (SFD), apparently the company is having a problem with "swine fever at some of its Romanian hog farms." How many Romanian hog farms do they have? I'm not sure why that cracks me up but it does.
If you have been reading blogs for a while you might recall the blog called Inventing Money, written anonymously by Slash, which as been on hiatus for quite a while. Well he back posting again, stop on by and check it out.
The picture is from New Zealand. They may not quite have their current account where they want it but they are not wanting for scenery.