Guess Who’s Betting On Inflation!
If you’ve been reading the popular press for the past 6 months, there’s been a slew of articles talking about deflation. I’ve been somewhat skeptical of the long term probability of deflation and have been investing in gold and commodities in anticipation of inflation. Looks like I was a little early to the game (which, on Wall Street is just the same as being wrong!).
Now however, it looks like we are warming up the printing presses and gold has hit $1,000 twice in a week in anticipation of future inflation. Legendary hedge fund manager John Paulson, who made $2.5 Billion last year from his trades, has been betting heavily on gold and his fund has nearly 50% of its assets in gold or gold-related investments like gold mining stocks and ETFs. The gold ETF, GLD reportedly makes up 30% of his fund! He has also taken a large 12% stake in AngloGold Ashanti (ANGJ.J) making him the largest shareholder. According to Reuters, this is not a bet on the company being acquired but rather a bet on inflationary pressures pushing up the price of gold. As opposed to the popular theory of rising prices being a cause of inflation, I like to consider it as an effect of inflation, which is caused by printing money, a side-effect of fiat currency. If you’re unaware about the effects of inflation and how it can ravage the economic (and social) structure of a society, I strongly recommend watching the excellent videos on hyper-inflation.
Another fund which has done well with the gold mining ETF is David Einhorn’s Greenlight Capital, which picked it up at the lowest point of last year and which has more than doubled its investment so far. They both join China in being bullish on gold. Between Paulson’s bullion dollar gold ETF purchase and China’s multi-billion gold bullion purchase, it’s no wonder gold prices have been trending upwards.
If you found this post helpful, consider donating to my coffee fund!![[del.icio.us]](http://images.del.icio.us/static/img/delicious.small.gif){kind=small}
- The End of Cheap $1000 Gold? Todayâs guest post comes from Bruce, CEO of Superior Gold. Last year I wrote an article for Living Off Dividends & Passive Income outlining 10 reasons why gold would break $1000. It was a conservative estimate at the time, which was achieved later in the year. Since then the Dow......
- Demand For Gold Tops $100 Billion! Looks like I'm not alone in my enthusiasm for gold. For the first time ever, annual demand for gold exceeded $100 billion! According to the WSJ: Demand for gold surpassed $100 billion last year for the first time ever, amid increased industrial and jewelry consumption and investors' purchase of the......
- Which Dividend Stocks Are Worth Looking At? The market has been defying gravity this summer, with the S&P500 up 49% since March. But most of the appreciation has been in what I consider lower quality stocks. Many homebuilders with doubtful prospects have doubled from their recent lows, while stocks that are somewhat recession proof like McDonalds, Walmart,......
Related Websites
- New Way to Buy Gold Online in Canada - Scotiabank Opens Gold and Silver eStore With the recent rally in gold prices, maybe you've found that your favourite gold dealers were backed up with 3 and 4 week waits on delivery. Now there's another alternative for Canadian clients - you can purchase gold directly, online, through Scotiabank's foreign exchange division, ScotiaMocatta. It's not surprising that......
- 07/22 - ETF Trading - No Trades Today Late-day selling pushed the market lower yesterday. The broader market is moving back to oversold (see the updated chart for SPY below - notice the low RSI(2) reading). And since the broader market is below its 200 day moving average, we'll patiently wait for a stock market rebound to trigger......
- 08/18 - ETF Trading - SPY, SDS, FXI, FXP The market rebounded yesterday, generating several short trading opportunities. Consider taking a short trading position in SPY or FXI should either etf close higher today. If you're unable to short SPY or FXI, take a long trading position in the inverse etfs - SDS or FXP. However, follow the etf......
[All content is copyright of Living Off Dividends & Passive Income]
September 13th, 2009 at 11:58 am
I’ve been learning alot lately about the cultural (i.e., US) perception of inflation and deflation arguments. I’m amazed at how many people in the US make judgments about what is a numeric economic issue and imbue it with cultural connotations which may be real, but are certainly not necessary components of an inflation prediction. To link up right-wing/ gun-loving/ survivalists/ gold-bugs all under the same banner and call them crazy (as if these are all the same people, anyway) and associate all inflation-calls to these people is just nuts. Only in the US does that happen. People outside the US are unburdened by such a cultural apparatus and can better see what inflation is plain and simple, I think. For someone to make an inflation call is not at all the same thing as being any of the above or having anything to do with any of the above. I’m not a staunch defender of inflation as if it were some ethical position – don’t get me wrong. I actually have no idea now on how this economic situation will play out. I just think there’s a lot of cultural noise that gets in the way of seeing economic issues clearly.
September 13th, 2009 at 12:08 pm
thats a very astute observation. people also say that gold has been a lousy investment for 30 years (or they used to say so 4 years ago) and so they’re not interested in hearing any other differing opinion.