09.29.08

How to Buy and Own Gold – The Layman’s Guide to Escaping the Dollar

Posted in Investing, Politics at 6:26 am

For nearly 40 years, the government and Federal Reserve has been destroying the value of your money. If you’re like me, you don’t support any bailout plans which effectively give money to criminals at the expense of a worse dollar and higher cost-of-living.

This post is not meant to discuss those issues – it’s here to discuss one solution for your personal savings – how to hedge on some gold (and silver) to preserve personal net worth in the case that the dollar gets further devalued. Having followed gold for a while, but not knowing many ways to actually own good bullion, I finally did some research.

Here’s how you can buy and own gold and silver:

1. BullionVault.com. This is a service that will store gold for you in your choice of three vaults in three different countries (US, UK, and Switzerland [my preferred choice]). It is similar to the popular GoldMoney.com but with better rates and an easier application process. You can purchase the gold from others and will get commissions for selling as well.

   There are many free ways of putting money into BullionVault, such as using their BillPay system, but if you are in a hurry, you can wire it in with a fee.

2. CEF or GTU (I like CEF). These are Canadian Gold Royalty Trusts, which means that they give big dividends (Canadian energy trusts don’t have to pay taxes if they redistribute their income… for now until 2011). With these, you have some new tax forms to do and it can get complicated. See this link for a bit more on these trusts: http://www.dividenddetective.com/canadian_royalty_trusts.htm

   Now here’s the trick when buying CEF or GTU: Around last week, there was a 7% premium (ie http://www.centralfund.com/Nav%20Form.htm – they own $1.446B of assets [mostly gold/silver bullion], but the market cap for the fund is $1.56B. Just take 1.446 and divide by 1.56. The good days to buy are when this premium is less than 10%). If the premium is over 10%, then there are too many shares outstanding for the amount of gold they have, and you are buying into an overbought situation.

   You cannot get physical gold delivery from CEF. You can only sell the fund back for dollars.

3. GoldMoney.com – Open an account here, buy gold or silver at a premium, and they keep it safe in France and Switzerland. They charge you fees for wiring money in and out, and also fees for storage. I haven’t seen a bad review out there on them, so long as you know the fees and premiums you’re going to be paying. I don’t see any free way to transfer money into GoldMoney like BullionVault (above) — you must wire it in at a fee.
   
4. Perth Mint Certificates (Australian Mint) – They’ll hold your gold too – www.perthmint.com.au/investment_certificate.aspx – I’m just not so sure I trust the Australian Government with my gold.
5. Buy coins and lock em up in your gun safe – These guys are reputable and right here in Inglewood, CA – GoldDealer.com. Tulving.com is also well-known. Risks include robbery and US Government confiscating it (google “Gold Confiscation Act”). See also Friday’s news: http://biz.yahoo.com/ap/080926/mint_gold_coins.html … wtf?
6. Everbank Gold Select – www.everbank.com/001Metals.aspx – I have done very little research on this one, but it sounds quite interesting. Anyone have any thoughts? It might compare better to #2 and #3
7. ETFs, such as GLD, DGP, and a billion others. GLD is 10% backed by REAL metal gold. This is why I’m not as huge on it – when the shit hits the fan, will they be able to keep up?
8. Added a new one – Gold Mining Companies’ stocks. Often times, the mining companies own a lot of gold too, which you will then indirectly own. You, of course, will not be able to get physical delivery.

Please post any comments, links to reviews of the stores/funds, and other ideas. Gold and silver are only ONE way of getting into precious metals, it’s still rather speculative, and there are many other commodities that you should research as well.

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01.22.08

Fed Cuts Interest Rate to 0% In Emergency Effort

Posted in Investing, Rants at 6:46 pm

August 5, 2008 — The Federal Reserve cut the benchmark interest rate by 1.5% to a new target lending rate of 0% yesterday, the Federal Open Market Committee said in a statement in Washington. It’s the largest reduction since the Fed began using the rate as primary tool of fiscal policy around 1990.

“Broader financial market conditions have continued to deteriorate and credit has tightened further for some businesses and households,” the Fed said in a statement in Washington. The FOMC took the action “in view of a weakening of the economic outlook and increasing downside risks to growth.”

The Fed continued, “After a long review of our inflationary data, the determination has been made that inflation does not exist.” When asked about $5.00/gallon gasoline and skyrocketing rental costs, the Fed declined comment, merely stating that energy costs are not part of inflation data.

John Thompson, Senior Staff Analyst at RBB Associates, believes that this will solve the country’s economic woes. “Interest rates are a thing of the past. We no longer believe that they are necessary, since we can print as many greenbacks as needed to pay for our luxaries, Mexican labor, and cluster bombs. As long as the government continues to spend this money, it will exchange hands and wealth will be generated an infinite amount.”

When asked about the Euro reaching an all-time high of 1 Euro to 8 US Dollars, Thompson remarked that “European central banking will soon follow suit to eliminate interest rates and order will be restored. Clearly they will want to keep pace with the most powerful economy in the world.”

Despite panic among treasury traders, the Dow Jones closed up at 12,753.53 points. Most impressive gains were in the services sector, which were up 3.4%, despite data showing that nobody has had work for 4 months.

John McCain, former Republican Presidential Candidate and Congressman, was overheard saying “0% interest rates should get us through this election, at which point Mitt Romney will win the Presidency and we can continue to do the Federal Reserve’s biddings. The draft won’t be far off, and we’ll no longer have to worry about economics ever again”

A representative of the middle class was sought for comment, but none could be found.

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12.16.07

Good Riddance Smart Money Magazine – A Smart Money Review

Posted in Book Reviews, Investing, Rants at 11:19 pm

Dear Smart Money Magazine Editors,

For three years, I’ve been a loyal subscriber and reader of Smart Money Magazine. It was always a well-written magazine with solid advice. The articles and stock picks were often winners, and the writers always gave compelling arguments and entertaining insight.

However, over these years, I’ve come to watch your magazine turn into a pile of non-technical financial fluff with egregious amounts of cardboard inserts, advertisement-fueled centerfolds, and consumer-driven spending spree recommendations.

I could handle the tripling of cardboard inserts and ads over the past year. My first mission upon opening a newly arrived Smart Money was to tear out all cardboard and throw it away. Seriously though, if I’m a subscriber to your magazine, how many damned business reply mail cards do I need to re-subscribe to the mag? Isn’t one enough?

I could also handle the annoying centerfold-style articles that span four pages so that Smart Money can sell monstrous ads to Genworth Financial and T. Rowe Price. But as much as I love looking like a complete jackass while gawking over an enormous centerfold on a crowded airplane, I prefer to keep my centerfolds in magazines that do NOT sport pictures of Ben Bernanke.

However, the tipping point for my frustration with your publication came in the December 2007, with the cover article Best of Everything — 9 New Splurges You Deserve.

Let me tell you Smart Money hypocrites something – if I am subscribed to something titled Smart Money Magazine, chances are that I don’t want to read your recommendations for a 3,450 dollar fucking watch. How dare you insult me with your half-assed third of a page to recommend plasma TVs! And I certainly don’t need you telling me where to get a road bike or silk scarves of all things. You call this SMART money?

If I want to find the best television, guess where the last place I’m going to look for advice is: that’s right, a financial magazine. If I needed a buying guide, I would go get Consumer Fucking Reports, not your joke of a monthly publication.

So essentially, the money I’ve paid you this past year to give me financial advice has gone towards receiving advertisements and learning how to piss away my money on your recommended product-placement-driven luxary goods?

Well guess what Smart Money – I’m done with you. My subscription ended with that December edition and you will not be receiving any more money from me. Good luck with your spa bathrobe recommendations to your moron customers who sit in debt while I read how to actually properly SAVE money from your competition.

Sincerely,
Mike Roberto
Hermosa Beach, CA

So I’m now on a mission to find a REAL financial magazine, something with real technical analysis, a worldview, written and edited by people who aren’t complete sell-outs. I’m currently thinking of getting The Economist, which is an England-based weekly news magazine. Despite being less financial-based, having four times the content will more than make up for Smart Money’s monthly blundering babble.

Any recommendations would be appreciated.

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11.15.07

Starbucks Investors Enroll in Business 101

Posted in Investing at 9:40 pm

Higher prices means greater profit but less customers. You don’t say!

Starbucks can say goodbye to the casual shopper. Joe Sixpack is in debt up to his eyeballs and can’t afford the mortgage, let alone a $5 latte. I think it’s safe to say he’ll be switching to Folgers in his cup this year.

I haven’t liked SBUX for years. See you in the mid-teens by mid-2008, Folgers is in aisle 5.

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10.30.06

Shares of Mittal Steel (MT) Sold at $41.91

Posted in Investing at 12:06 pm

On January 18, 2006, I purchased a whopping 25 shares of Mittal Steel (MT) for $27.92. My target price was a zealous $40.

After going through various ups and downs with the company, I decided to put a 5% trailing stop loss when the stock neared the high 39s. I tightened it to 4% shortly thereafter.

After a drop over the weekend, the stock sold at $41.91 this morning.

My gain was 50.1%, or a gain of $349.75. However, I will be heavily taxed due to my buying it in January.

I bought this stock when getting back into investing after a very long lay-off. It was obviously a great purchase, and definitely entertaining to watch the dramatic news as Mittal bought Arcelor Steel in hostile fashion (my style).

I will continue to watch MT. If it cycles again, you can be assured that I’ll buy it under $30. The steel industry is fun to follow, as it consolidates and the players become bigger and more efficient. Lakshmi Mittal is a total badass, and I have no problem investing in him, possibly for the long-term next time.

As you can see from the chart, I learned my lesson earlier on. Regardless of the amount of money, a 50% gain is nothing to laugh about. Hell, a 20% gain is nothing to laugh about. I could have re-bought at my original position with way more stock and sold it again. Thus, I learned to use the trailing stop loss to stop my greed.

My future strategies will be to invest in solid companies that are currently disliked by the mainstream — a contrarian view that I love, right out of Benjamin Graham’s arsenal. I will continue to be greedy, but only on the buying side. If a stock isn’t cheap enough for me to buy, then I won’t do it. I will greedily lower my buying price. But for selling, I will be smart and take my gains if they’re big while I can.

Charting software used is Charter, from my good man Frank over at www.technicator.net

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