Bank Analyst & Commentator Opinions
Date: July 21, 2008
Bank Analyst & Commentator OpinionsInformation has been redacted from the articles as they originally appeared and some information has been bolded for emphasis.
11 ways Wall Street brainwashes you
We all like to think of ourselves as the masters of our thoughts, but our brains work in ways that leave us vulnerable to being duped, even when we know it's happening.
MarketWatch
7/17/08
Yes, Wall Street's got a great con game going, but it works only because its 95 million investors are willing victims who love playing along, actually letting Wall Street get away with it.
I call it "Brainwashing 101 for Dummies." ... But I've got the 11 rules of Brainwashing 101 for Dummies for you -- everything you need to know about the big con....
- You know you're (almost) never wrong.
"Big Mistakes" calls it "confirmation bias," another name for cognitive dissonance, the unconscious need your brain has to stick with what you already know as The Truth (even when it's been secretly planted there by Wall Street's clever ad campaigns). - Your "mental accountant" is an embezzler.
Your brain loves so-called mental accounting. A dollar looks different "depending on where it comes from, where it's kept, or how it's spent,"... You spend tax refunds fast, but you hang on to stock inherited from Grandma.... - You hate to lose more than love to win.
Psychologists call it "prospect theory." We investors hate to lose so much we often sell winners to lock in profits. But we hang on to losers, praying for a miracle. - You throw good money after bad.
Here's a familiar example: First blunder, pay too much for a house. Second, fail to get out at the top. Third, turn down a bid because it's less than you paid. You're stuck paying down a big, bad mortgage instead of cutting your losses. - Decision paralysis keeps you from acting.
How your brain labels options changes the outcome: ... Labeling confusion leads to decision paralysis: Your brain locks up, doing nothing, and you lose again. - You don't sweat the small stuff.
With bigness bias, you ignore small numbers such as brokerage commissions and fund fees. Big mistake. This is why more Wall Street bankers, brokers and fund managers own more yachts and make dozens of times more than the average clueless investor. - You focus on things that matter too little.
Like a cruise missile, your brain locks on anchors, specific events that loom big in your brain, blinding you to important stuff. If you focus too much on a major catastrophe like the dot-com crash, you might ignore the power of compounding and dollar cost averaging in building long-term wealth. - Your biggest saboteur is overconfidence.
The investor's No. 1 mistake: You think you know more than you do and have all the skills to beat the averages. Wrong. You're no match for the high-tech quant traders buying and selling millions all day long. - Follow the herd -- into the sea.
The trend is not your friend. Yet you insist on following the other sheep, even when you know they're also being manipulated. You buy at the top and sell at the bottom, losing at both ends. And Wall Street gets rich off your naiveté. - Yes, you can know too much!
Information overload is a killer, confusing your brain.... The Street panders to your delusions of superiority because that makes you vulnerable. - The joke's on you. Knowing new rules makes brainwashing easier.
This is the most amazing outcome of all: today investors are even more willing to let Wall Street take advantage of them, making Wall Street richer.
Investors live in a self-induced trance world. That's why I call neuroeconomics Brainwashing 101 for Dummies.
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The Credit Crisis Is Going to Get Worse
Theodore J. Forstmann
Wall Street Journal
By Brian M. Carney
7/5/08
Twenty years ago, Ted Forstmann contributed a scathing - and prescient - op-ed to this newspaper warning that the junk-bond craze was about to end badly... "Every week, with ever-increasing levels of irresponsibility, many billions of dollars in American assets are being saddled with debt that has virtually no chance of being repaid."
Within a year, the junk-bond market had collapsed... Mr. Forstmann sees even worse trouble coming today....
"We are in a credit crisis the likes of which I've never seen in my lifetime," Mr. Forstmann warns. He adds: "The credit problems in this country are considerably worse than people have said or know... "
Mr. Forstmann denies being an expert in the capital markets. But he does have some experience with them. He was present at the creation of the private-equity business. The firm he co-founded... was for a time the most successful private-equity firm in the world.... For two years after Mr. Forstmann wrote his 1988 op-ed, Forstmann Little sat on $2 billion in uninvested funds, waiting for the right opportunities. Savvy investments ...helped make Mr. Forstmann a billionaire....
Mr. Forstmann's argument about the present crisis starts with the money supply. After Sept. 11, 2001, the Federal Reserve pumped so much money into the financial system that it distorted the incentives and the decision making of everyone in finance.... Short-term interest rates went to zero in real terms and then into negative territory. When real interest rates are negative, borrowing money is effectively free - the debt loses value faster than the interest adds up....
Straightforward economics tells us that when you print too much money, it loses value and prices go up. That's been happening too. But Mr. Forstmann is most concerned with a different, more subtle effect of the oversupply of money. When it becomes too plentiful, bankers and other financial intermediaries end up taking on more and more risk for less return....
"I don't know when money was ever this inexpensive in the history of this country. But not in modern times, that's for sure."...
But it would be a mistake to dismiss Mr. Forstmann's pessimism too quickly. After all, he knows something about both credit and crises.
"You've got [Treasury Secretary Henry] Paulson saying 'Oh, you see the good news is it's over.'" The problem, according to Mr. Forstmann, is that it's far from over. "I think we're in about the second inning of this." And of course, the credit crisis wasn't even supposed to last this long....
One reason is that the proliferation of new financial instruments has left the system more closely intertwined than ever, making a workout, or even a shakeout, much more difficult.... This circular creation of new credit, used to buy more newly created debt, all financed by ultracheap money and all betting with each other, has left the major firms hopelessly intertwined. "It's very interrelated," he says, locking his fingers together. "There's trillions and trillions of dollars that slosh around between all these places and if
"Buffett once told me there are three 'I's in every cycle. The 'innovator,' that's the first 'I.' After the innovator comes the 'imitator.' And after the imitator in the cycle comes the idiot. Which makes way for an innovator again." So when Mr. Forstmann says we're at the end of an era, it's another way of saying that he's afraid that the idiots have made their entrance.
"We're in the third 'I' for sure," he interjects an hour after first introducing the "rule." "And that always leads to something. Innovators don't just show up. Some disaster takes place because of the idiots, and then an innovator says, oh, look at this, I can do this, that or the other thing." That disaster is now.
In other words, "In order to fix what's going on in the United States there's going to have to be a certain amount of pain. The market's going to have to clear somehow. . . and it's hard for me to believe that it gets fixed without" upheaval in the financial system, the economy and the country as a whole. "Things are going to fail. Enterprises are going to fail. The economy is going to slow," he warns....
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A Sampling of Advisory Opinion
Let Us Count the Ways
Twenty-Five Reasons We Remain Cautious by Atlantic Advisors
Barron's
By Bennet Sedacca
7/7/08
July 1: Risks remain high [because]:
- Stocks are firmly in a downtrend -- From the market peak on October 11, 2007 the Standard & Poor's 500 is down roughly 20%.
- Corporate spreads are widening, quickly.
- [Many are] saying, "All is well, buy America." The crowd's usually wrong at extremes.
- European equities are taking out the lows of the year. European large-cap stocks peaked June 20, 2007 and now are down more than 28%.
- The capital-raising window is closed ...[for most] new corporate deals.
- Forward projected earnings are far above reality. This creates a false sense of security in stock prices.
- While much of the move in financials is done, it should spread to other industries. Financial companies provided credit to consumers in all forms (credit cards, mortgages, etc.). Credit is the [consumer's] oxygen....Once the oxygen gets cut off, the consequences to the consumer [are] dire.
- Well-managed companies should do well in any environment, but if they're not able to meet even their own projections, what can we expect from companies managed less well?
- In the election year of the presidential cycle, extra fiscal and monetary stimulus is usually applied by the incumbent party to 'juice' the economy...after the election, this extra stimulus is removed and the hard work of making changes usually begins.
- Mortgages cannot be refinanced, credit card balances are maxed, retirement savings are now being tapped, and existing portfolio values are declining.
- Corporate buybacks are gone. Buybacks have dropped to a bare $1 billion per day on average.
- Net equity issuance is very high -- especially in the finance area, where new capital is needed just to stay in business.
- We are at war -- on multiple fronts.
- Oil above $100 is very bearish. This is like an extra tax on...consumers.
- The savings rate is zero. The personal-savings rate [was] between 5% and 10% from 1960-1985. It has steadily declined since, and now hovers around 0%. Retirement isn't possible when you have no savings.
- The U.S. is actually one of the best-performing markets in the world this year.
- Companies from GM to Ford to Lehman are technically insolvent.
- Level III Assets continue to grow.
- The "credit rot" is spreading from sub-prime to prime/autos/credit cards.
- The dollar index is a measure of our currency against a basket of foreign currencies. The index has now declined from 120 in early 2002 to a new all-time low of 72. Our ability to buy things from the rest of the world is getting more difficult.
- The Federal Reserve's balance sheet is impaired after accepting low-quality securities from investment banks in exchange for nearly $400 billion in Treasuries.
- Mutual-fund equity cash [is] low. Normal cash levels used to be around 7% to 8%, but has steadily declined to under 4% now. This means that when investors want to sell their mutual funds, managers that need to honor those redemption requests [won't] have any cash to satisfy the demand...creat[ing] downward pressure on equity prices.
- Individual investors are now taking money from their retirement accounts just to live. That's just sad.
- Technically, the market is on the verge of breaking down. We've reached and crossed some important technical levels watched by many investors/traders.
- We've broken the 200-week moving average in the Dow Jones Industrial Average for the first time since 2003, a very long-term and bearish sign.
If I am wrong for being cautious, all I will have lost is opportunity, not capital.
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Bank for International Settlements Sees Economy Near 'Tipping Point'
Wall Street Journal
By Paul Hannon and Nina Koeppen
6/30/08
The global economy may be close to a "tipping point" that could see it enter a slowdown so severe that it transforms the current period of rising inflation into a period of falling prices, the Bank for International Settlements said Monday.
In its annual report, the central bank for central banks said the impact of rising food and energy prices on consumers' incomes, combined with heavy household debts and a pullback in bank lending, may lead to a slowdown in global growth that "could prove to be much greater and longer-lasting than would be required to keep inflation under control."...
The BIS said the U.S. economy is most at risk from problems in the financial system. But it added that there are "suspicions that a number of other countries with low household savings rates might be similarly, if less significantly, affected."
And it warned that while the U.S. dollar's depreciation against other major currencies has so far been "remarkably orderly," that might not continue to be the case." Foreign investors in U.S. dollar assets have seen big losses," it said. "While unlikely...a sudden rush for the exits cannot be ruled out completely."
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Gold markets - $1,000/oz by early fall
Merrill Lynch - Gold & Precious Metals Weekly
7/2008
Last week, the gold price raced ahead 4.98% to end Friday at $928/oz. Bullion benefited from a higher oil price (fanning inflationary fears) and a slumping US$. This strength caught us off guard as the June-July period is usually marked by low fabrication demand for bullion. Still though, bullion remains in a "perfect storm" environment and sharp upward spikes should not be unexpected. For H1'08 (from Dec. 31/07 to June 30/08), the bullion price registered a solid 11.0% gain ending the quarter at $926/oz (though it did reach an all time high of $1,031/oz on March 16th. Silver rose 17.7% during H1'08 at $17.42/oz. Silver peaked at a 28 year high of $20.82/oz in mid March on the back of speculative buying. Year to date in 2008, bullion has average $910/oz, up 38.3% yoy, and just below our 2008 gold price forecast of $925/oz. We continue to believe bullion will rise to the $1,000/oz level by early fall on renewed fabrication demand.
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Citigroup says long-term gold price could double or even triple
Citigroup suggests that inflation and the fabrication outlook favor gold
MineWeb
By Dorothy Kosich - 6/30/08
Citigroup forecasts that "gold is likely to regain $1,000/oz by end-08 and to work higher through 2009-2010."
In their recent Gold Commodity Update, Citigroup metals analysts John H. Hill and Graham Wark also predicted that "longer term, we believe that gold is capable of doubling or tripling from current levels."
The Citi global metals forecasts have an upward bias, at $906/$950/1000 average in 2008/09/10....
"Despite extensive hand-wringing, the 'floor in the dollar' has inflicted minimal damage," the analysts noted. "We believe the drivers of the gold bull market remain intact, heading into a favorable period."...
"We see gold as well-positioned heading into Autumn, when fabrication tends to heighten the market," they added....
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Barclays warns of a financial storm as Federal Reserve's credibility crumbles
US central bank accused of unleashing an inflation shock that will rock financial markets, reports Ambrose Evans-Pritchard
Daily Telegraph
By Ambrose Evans-Pritchard
6/27/08
Barclays Capital has advised clients to batten down the hatches for a worldwide financial storm, warning that the US Federal Reserve has allowed the inflation genie out of the bottle and let its credibility fall "below zero".
"We're in a nasty environment," said Tim Bond, the bank's chief equity strategist. "There is an inflation shock underway. This is going to be very negative for financial assets. We are going into tortoise mood and are retreating into our shell. Investors will do well if they can preserve their wealth."
Barclays Capital said in its closely-watched Global Outlook that US headline inflation would hit 5.5pc by August and the Fed will have to raise interest rates six times by the end of next year to prevent a wage-spiral. If it hesitates, the bond markets will take matters into their own hands. "This is the first test for central banks in 30 years and they have fluffed it. They have zero credibility, and the Fed is negative if that's possible. It has lost all credibility," said Mr Bond.
The grim verdict on Ben Bernanke's Fed was underscored by the markets yesterday as the dollar fell against the euro following the bank's dovish policy statement on Wednesday.
Traders said the Fed seemed to be rowing back from rate rises. The effect was to propel oil to $138 a barrel, confirming its role as a sort of "anti-dollar" and as a market reproach to Washington's easy-money policies.
The Fed's stimulus is being transmitted to the 45-odd countries linked to the dollar around world. The result is surging commodity prices. Global inflation has jumped from 3.2pc to 5pc over the last year.
Mr Bond said the emerging world is now on the cusp of a serious crisis. "Inflation is out of control in Asia. Vietnam has already blown up. The policy response is to shoot the messenger, like the developed central banks in the late 1960s and 1970s," he said.
"They will have to slam on the brakes. There is going to be a deep global recession over the next three years as policy-makers try to get inflation back in the box."
Barclays Capital recommends outright "short" positions on Asian bonds, warning that yields could jump 200 to 300 basis points. The currencies of trade-deficit states like India should be sold. The US yield curve is likely to "steepen" with a vengeance, causing a bloodbath for bond holders.
David Woo, the bank's currency chief, said the Fed's policy of benign neglect towards the dollar had been stymied by oil, which is now eating deep into the country's standard of living. "The world has changed all of a sudden. The market is going to push the Fed into a tightening stance," he said.
The bank said the full damage from the global banking crisis would take another year to unfold....
A small chorus of City bankers dissent from the view that inflation is the chief danger in the US and other rich OECD countries....Bernard Connolly, global strategist at Banque AIG, said inflation targeting by central banks had become a "totemism that threatens to crush the world economy"...
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RBS issues global stock and credit crash alert
Daily Telegraph
By Ambrose Evans-Pritchard
6/18/08
The Royal Bank of Scotland has advised clients to brace for a full-fledged crash in global stock and credit markets over the next three months as inflation paralyses the major central banks. "A very nasty period is soon to be upon us - be prepared," said Bob Janjuah, the bank's credit strategist.
A report by the bank's research team warns that the S&P 500 index of Wall Street equities is likely to fall by more than 300 points to around 1050 by September as "all the chickens come home to roost" from the excesses of the global boom, with contagion spreading across Europe and emerging markets. Such a slide on world bourses would amount to one of the worst bear markets over the last century...."Cash is the key safe haven. This is about not losing your money, and not losing your job," said Mr Janjuah, who became a City star after his grim warnings last year about the credit crisis proved all too accurate....
"The Fed is in panic mode. The massive credibility chasms down which the Fed and maybe even the ECB will plummet when they fail to hike rates in the face of higher inflation will combine to give us a big sell-off in risky assets," he said....
Ultimately, the bank expects the oil price spike to subside as the more powerful force of debt deflation takes hold next year.
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U.S. banks may need $65 bln new capital: Goldman
Reuters
By Jonathan Stempel
6/17/08
U.S. banks may need to raise $65 billion of additional capital to cope with mounting losses from a global credit crisis that will not peak until 2009, Goldman Sachs & Co (GS.N) analysts said on Tuesday. The new capital would be on top of $120 billion already raised by the industry...The Goldman analysts estimated that U.S. banks and thrifts have set aside $86 billion for loan losses in the three quarters since the credit crisis began.
They said the weak housing market drove the deterioration and that home prices will likely keep falling all year. It expects credit losses to peak in the first quarter of 2009, when the rate of charge-offs may be 46 percent higher than a year earlier.
Worries about credit losses have driven down banks' share prices. This has caused paper losses for many investors who infused capital into the industry, including many private equity firms and sovereign wealth funds....
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Gold to trade between $845/oz, $954.5/oz: Standard Bank
JCK India
6/13/08
...The report forecasts gold to strengthen beyond the levels of $954.50/oz, indicating the recommencement of the primary bull trend. With such a development yielding, an eventual move beyond $1,030.80/oz is expected, with a target of at least $1,055/oz....
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Inflation fears may push gold back to $1,000
Reuters UK
By Humeyra Pamuk
6/13/08
Gold is poised to climb back above $1,000 per ounce this year, as inflationary pressures and financial turmoil prompt investors to seek shelter in the metal used as a store of value....
"We're headed for inflationary times and gold has always been a safe asset to protect your wealth against inflation."...
Hathaway said gold serves as an alternative financial asset particularly when markets worry about banking issues or currencies. "I think we will see gold going above those record high levels again and that will probably be this year."...
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Why gold could hit $8,500 an ounce
MoneyWeek.com
By Dominic Frisby
6/11/08
...But now the old cad has dumped poor, dear housing and stocks for a new lover: commodities - food, metals and energy - and polite society is outraged. "How could he?" we are all saying. And that’s part of the problem - the fact that we are all suddenly talking about inflation. The genie is out of the bag and it’s going to be impossible to get him back in.
That hasn’t prevented the world’s top central bankers from going on a concerted genie-suppressing effort. Bernanke, King and Trichet have all spoke out on the subject this week. But it is too late for that. Pandora’s Box has been opened.
In the long-term it does not matter what central bankers say. What matters is what they have done. Gold and oil are going to go a lot higher. But how high? I’ll tell you. Perhaps $8,500 for gold and $400 for oil.
Here’s why...
The first thing to note is that Federal Reserve chief Ben Bernanke’s words last week and again this week did send the gold price down. We must thank him for that - he’s given us another buying opportunity. As I said before, I still see $850 an ounce, or just below, as an obvious floor, and that is where I - and probably half the world’s hedge-funds - have placed my buy-orders....
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Storms on the Horizon
PerotCharts.com
By Richard W. Fisher
6/3/08
Richard W. Fisher is the President and CEO of the Federal Reserve Bank of Dallas, one of the twelve Federal Reserve Banks. Mr. Fisher currently serves as a member of the Federal Open Market Committee. The following is an excerpt from Mr. Fisher’s speech to the Commonwealth Club of California which was presented on May 28, 2008.
I see a frightful storm brewing in the form of untethered government debt. I choose the words-"frightful storm"-deliberately to avoid hyperbole. Unless we take steps to deal with it, the long-term fiscal situation of the federal government will be unimaginably more devastating to our economic prosperity than the subprime debacle and the recent debauching of credit markets that we are now working so hard to correct.
You might wonder why a central banker would be concerned with fiscal matters. Fiscal policy is, after all, the responsibility of the Congress, not the Federal Reserve. Congress, and Congress alone, has the power to tax and spend. From this monetary policymaker’s point of view, though, deficits matter for what we do at the Fed. There are many reasons why. Economists have found that structural deficits raise long-run interest rates, complicating the Fed’s dual mandate to develop a monetary policy that promotes sustainable, noninflationary growth. The even more disturbing dark and dirty secret about deficits-especially when they careen out of control-is that they create political pressure on central bankers to adopt looser monetary policy down the road.
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Last call to board gold train at under US$1,000
Investor’s Digest
By John Embry
5/16/08
As economic and financial conditions lurch from bad to worse, the central banks and their allies have become even more brazen in their attempts to manage the gold and silver markets. The current effort to convey the message that everything is fine reached a crescendo in the aftermath of the Bear Stearns fiasco....
The brilliant Australian Bill Buckler succinctly described this...when he wrote:
"Gold is mankind’s historical money and the silent sentinel on the hill guarding the personal wealth of millions of individual men and women. It is always able to be used as money and has in fact reacted to events by climbing from about US$250 to above US$1,000 per ounce over the past six years. Gold is the immortal challenger to paper money AND credit money. But when credit money systems have their backs to the wall, as they do today on a global basis, the official monetary powers react by trying to repress (the price) of gold. This is now happening again."...
I strongly believe that the current episode will represent the last serious opportunity to acquire a sizable position in physical gold for less than US$1,000 per ounce....
...investment demand is going to continue to accelerate as greater concerns emerge about the future viability of financial assets and for that matter, paper money in general. As I have said many times in the past, all great gold bull markets are driven by this phenomenon, and the current episode is about as bad as it gets.
The more than twenty-fold move in the gold price in the ‘70’s was a direct result of people abandoning paper money in the face of runaway inflation, and I can virtually guarantee that financial and economic conditions will prove to be materially worse this time around....
However, we’re now in the midst of a financial meltdown, and I doubt very much that the resulting burgeoning investment demand will pay much attention to what time of year it is. In addition, with the market having been blitzed recently by the ant-gold gang, to sell one’s insurance against financial upheaval at this point in time doesn’t seem like a terrific idea to me
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Crude forecast to reach $225 US
CIBC predicts fuel at $2.25 a litre by 2012
By Jon Harding
April 25, 2008
Jeff Rubin, the ever-bullish oil forecaster and chief economist at CIBC World Markets, can't keep pace with crude's meteoric rise.
Four months after predicting world oil prices will soar to $150 US a barrelBy 2012, Rubin adjusted his outlook much higher Thursday -- a day crude prices declined more than $2 US a barrel as investors bolted from commodities -- in a report that stands to drive North American bicycle sales through the roof.
Rubin now says oil prices will average $150 US in 2010 and an unfathomable $225 US in 2012, with Canadian gasoline prices topping $1.40 a litre this summer but skyrocketing all the way to $2.25 by 2012.
CIBC's chief strategist has plenty of critics, but twice this decade he accurately read the tea leaves on oil's march past $80 and $100....
The basis for Rubin's argument this time? In a report titled The Age of Scarcity, he said world crude oil production has not increased in two and a half years, but rather the supply increases reported by the likes of the Paris-based International Energy Agency have come from natural gas liquids (NGLs)...
The report predicts growth in the sale of new vehicles like the $2,500 Tata and Chery models now being sold in emerging economies such as India, China and Russia means millions of new households will "suddenly have straws to start sucking at the world's rapidly shrinking oil reserves."...
Frank Atkins, an economist at the Universityof Calgary, who two years ago worked as a consultant to the Organization of Petroleum Exporting Countries, said Rubin's outlook makes sense on several fronts but contends Rubin is also selling a low-probability scenario that stands to benefit CIBC World Markets....
"I myself believe the pressure on oil should be downward but when it happens is anyone's guess. Likely when the U.S. economy stops slipping, the U.S. dollar finds its ground and people stop taking their money and buying oil futures as a safe haven."
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5 Reasons Gold is Headed to $1,500
Managers of two top-performing gold funds expect gold to soar further. Here's why, plus five stocks they expect to share the ride.
MSN.com
By Michael Brush - 4/2/08
Gold's much-heralded climb above $1,000 an ounce was pretty short-lived. Gold's long-term ascent won't be. With gold now trading closer to $900, this is a great time to load up on more exposure to bullion, which is only taking a breather before heading to $1,500 an ounce and higher.
That's the view of two gold gurus who have been correctly calling bullish advances in the yellow metal for years, most recently predicting the move to $1,000 an ounce. That was in November, when it seemed like an audacious forecast...
"There is lot more upside for gold," says Thomas Winmill, who manages the Midas Fund ... Winmill thinks gold could see $1,500 in 12 to 18 months. Frank Holmes, who manages the second-best-performing gold fund this year ... sees bullion going to $1,500 to $2,000 an ounce in the next leg up. He's not offering a time frame for that target...
Here's a look at why they think gold will see $1,500 within a year or so.
Reason No. 1: The dollar's value is declining....
Reason No. 2: More inflation on the way....
Reason No. 3: Investors will seek greater safety. Inflation is already so high that investors are losing money in traditional "safe" investments like U.S. government bonds... "Historically this has been very good for any kind of hard asset, and particularly gold," says Winmill...
Reason No. 4: Oil is getting pricier. Holmes points out that that over the past five years, gold and oil prices have moved in sync 90% of the time... Typically, this creates a 10-to-1 relationship between the price of an ounce of gold and a barrel of oil. Thus $1,000 gold makes sense when a barrel of oil is $100. But that ratio can jump to 15 to 1 when geopolitical turmoil drives other investors to the safety of gold, says Holmes... "If oil were to run to $125 a barrel because of a geopolitical event, gold would easily go to $1,500 an ounce," says Holmes.
Reason No. 5: Gold should follow other commodities. Since so many other metals, including copper and oil, have smashed their inflation-adjusted price records, why shouldn't gold follow, asks Holmes. If it does break through its inflation-adjusted high, set in 1980, it would trade north of $2,000 an ounce...
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Silver to surpass $25/oz in 2008 as investment demand offsets weak fundamentals - Adams
TheBullionDesk.com
By Perrine Faye - 4/3/08
The price of silver is likely to surpass the $25 an ounce level this year as investment demand will grow further amid financial markets turbulence, offsetting the sixth consecutive year of supply surplus, William Adams of TheBullionDesk.com said on Thursday.
"Given the malaise in the financial markets, we feel investment demand will grow further and that will keep prices trending higher, although there will be bouts of profit taking along the way," he said at the Silver 20:20 conference in London.
"$25 seems likely and we could see $30, but much will depend on how the problems in the US financial markets unfold and their impact on the dollar," he added....
"The market swung into surplus in 2003 and has remained in one since. (But) investment buying has taken up the slack," Adams said.
"But investors are going to have to keep buying to absorb slower demand and the increase in supply," he added.
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Van Eck's Foster: Gold May Hit $2,000 In Long Term
Dow Jones Newswires
By Allen Sykora - 3/25/2008
The "stars are all aligned" for a continuation of the bull market in gold, although the metal may first undergo further consolidation in the near term, says the portfolio manager of the oldest fund for gold-mining stocks in the U.S.
Several years down the road, gold prices could hit $2,000 an ounce, said Joe Foster, portfolio manager of the Van Eck International Investors Gold Fund (INIVX) launched in 1968...
"I think we're in a long-term secular bull market from gold," he said. "But markets don't go up forever in a straight line. The nature of markets is they get overbought and oversold, and gold is a volatile commodity. So it can be subject to corrections within a bull market."...
Gold is likely to remain in a bull market "probably through this decade and maybe far into the next decade...
The precious metal is often bought as a hedge against a weaker dollar and inflation as well as a safe haven in times of turmoil, whether geopolitical or financial...
While spot gold early this year broke the 1980 record of $850, the inflation-adjusted record would be above $2,000, Foster said. And the metal may hit this over the next several years, he said.
"A simple measure we use is to divide the DOW by the price of gold," he said. "When we've had these cycles in the past - like in the '70s and the '30s, that DOW/gold ratio has dropped below 5."
Thus, if this ratio were to drop to around 5 again, "you're looking at a gold price over $2,000 an ounce" based on the DOW being above 12,000.
"So I don't think a $2,000 gold price is out of the question before it's said and done," Foster commented. "This would be as this evolves over the next five years. That's a very good long-term outlook."...
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Sprott Sees Financial Turmoil Pushing Gold to $2,000 an Ounce
Bloomberg.com
By Stewart Bailey - 3/10/08
Turmoil in global credit markets may lead to the collapse of a North American bank, pushing bullion prices up to $2,000 an ounce as investors seek a haven in gold, Eric Sprott said.
This year's decline in banking and brokerage stocks will worsen, said Sprott, 63, founder and chairman of Sprott Asset Management, which manages about $7 billion....
Gold has gained for seven straight years and reached a record $995.20 an ounce in New York on March 5. The precious metal rose 16 percent this year before today, compared with a 12 percent drop in the Standard & Poor's 500 Index and a 24 percent slump in the seven-member S&P 500 Investment Banking & Brokerage Index....
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Time to buy gold?
With a rough economic road ahead, U.S. stock investors are nervously asking themselves: Should I stay or should I gold?
Bankrate.com
By Jay MacDonald - 3/24/08
Gold has long been touted as the ultimate hedge against hard times. They don't call it the gold standard for nothing; central banks the world over stockpile the stuff to defend the value of their currencies...
The question is, should you buy gold now, even at historic highs of $900-plus an ounce?
"Yes, it is a buy right now," says Ashraf Laidi, chief strategist for CMC Markets. "Even though gold is at an all-time high, I think you should look into at least 10 percent to 15 percent (gold) allocation. My personal portfolio was at 10 percent; it's now at 55 percent. But I got in a long time ago."
Leo Larkin, equity metals analyst for Standard & Poor's, admits gold continues to exceed his expectations.
"I'm surprised at just how strong it has been. Even though I think it could pull back, probably if you don't own some, you still should," he says. "It's high now, but what if it's going to go higher? I believe it will."
Shayne McGuire, author of "Buy Gold Now," thinks conditions are ripe to push gold beyond reasonable expectations.
"I think gold will certainly rise into the thousands, perhaps reaching $10,000... So few people own it that just the move of people into gold will cause it to really surge. I think we're in the second or third inning of the gold rally."...
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$2,000 an ounce gold is in the cards
MarketWatch.com
3/18/08
Frank Holmes, chief executive officer at U.S. Global Investors, says that gold will hit $2,000 an ounce and that while the move won't be straight there from current levels investors should not be surprised by it.
Holmes noted that virtually all commodities have gone through their "inflation-adjusted 1980 price levels," with the notable exception of gold, and that to get to that range the price of gold would have to top $2,000 an ounce. Holmes said he expects a short-term pull-back in gold -- based on a correction he sees coming in oil and a short rally in the dollar, both of which will impact gold prices -- but that the long-term trend will be strongly upward....
With oil prices on the rise and the dollar weakening, it's a market condition that bodes well for gold, especially because gold is "not at astronomical levels yet, when compared to other commodities ... There's a lot more room."...
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Gold Beats Financial Assets as Investors Seek Haven (Update 4)
Bloomberg.com
By Millie Munshi and Pham-Duy Nguyen - 3/3/08
Gold, silver, platinum and palladium may be the best-performing financial assets this year as inflation and slowing growth erode the value of the world's major currencies, bonds and stocks. Precious metals have risen at least twice as fast as the euro and yen in 2008 and returned six to 20 times as much as U.S. Treasuries...
Gold, platinum and palladium may gain at least 24 percent this year as Federal Reserve Chairman Ben S. Bernanke prioritizes cutting interest rates over controlling consumer prices, said Ron Goodis, a trader at Equidex Brokerage Group Inc...[Gold] may rise to $1,300 an ounce by yearend, Goodis said... Silver will advance to $25 an ounce sometime this year, from today's close of $20.18, estimated David Davis, an analyst at Credit Suisse Standard Securities in Johannesburg.
The U.S. Dollar Index, which tracks the currency against six major counterparts, touched 73.354 today, the lowest since its start in 1973. Even gold traded in euros, yen and pounds reached records this year as consumer prices rose around the world, eroding the appeal of currencies as an asset...
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