MarketBeat WSJ.com's inside look at the markets June 9, 2009, 9:26 AM ET John Paulson, Gold and Gabriel Resources Article Comments (4) MarketBeat HOME PAGE By Matt Phillips There’s an interesting tidbit at the bottom of the The Journal’s Heard on the Street today. It’s pegged to a first-quarter decision to build a stake in a Toronto gold-mining company by hedge fund Paulson & Co. The fund is run by John Paulson, the investor best known for savvy bets that made him billions on the collapse in housing. The company in question is Gabriel Resources, which has spent years wrestling with environmentalists as it tries to develop its main asset. In the first quarter, John Paulson’s Paulson & Co. lifted its stake by nearly six million shares, to 18%. Other funds that are bullish on gold also are eyeing the stock, which is down 25% to 2.19 Canadian dollars ($1.96) in the past year despite the resilient gold price. Gabriel’s main asset: a majority stake in a large Romanian gold mine. The problem: That mine produces no gold. Environmentalists have long been hot under the collar, worried about potential cyanide poisoning. Their protests have helped block Gabriel’s decadelong efforts to open a modern mine at the site, known as Rosia Montana. Yet as gold fever continues to rage, the hedge funds appear to be banking on yellow trumping green. There’s a serious case to be made for gold, largely tied to worries about currency values as central banks flood markets with cash. Still, in a recent column on the possibility of a gold bubble developing, Brett Arends noted: While U.S. and other Western investors are jumping aboard the golden caravan, many in Asia — who rode it all the way from $260 an ounce — are quietly disembarking. The World Gold Council, an industry body, reports that Asian investors were actually net sellers during the first quarter, while westerners bought heavily
It becomes a matter of whether you believe Brett Arends, a career journalist, not a money manager or analyst. Everybody loves the word "bubble" without actually understanding what it is. When people are borrowing money to buy gold, and there are lines around the block to even get into a coin shop like there was in the late 1970s, then you'll be in a bubble and it will be time to sell. As of now, very few individual investors own much gold, and institutional investors own even less as a percentage of their total holdings. No bubble in sight.:bigeyes:
Yup..agree. A money manager with a long successful track record of actually managing money (my favorites are Jean-Marie Eveillard, recently retired of First Eagle Funds and Bill Gross, head of PIMCO) heavily trump "talking head" types who are merely journalists playing monday morning quarterback. Google Bill & Jean-Marie and you will learn a ton! Cloudsweeper's comments about bubbles are also right-on..when you start to see full-page newspaper ads for 1 day seminars on "How to Make $20,000/Month In The Gold Market" you will know that the bubble is fully inflated..
Thanks. People sometimes forget who these folks are. Most of the time, the person writing an article is either offering opinions or repeating something they read or heard elsewhere. They have publication deadlines to meet and editors to keep happy. Most of the time, they are journalism majors with little or no hands-on investment experience. The media is valuable for establishing facts, but when they offer advice or an opinion about the future, they should be ignored.
Howdy, Jean-Marie just retired, but this past year admitted that he had several billion in gold bullion in an NYC vault a couple of blocks from his house. It represented some 8% of the funds he managed. Gross is not a gold-bug, but a very sharp guy. I concur with cloudsweeper that we're not even close to a bubble in precious metals. That said, this is going to continue to be a very volatile and bumpy ride so just fasten your seatbelts and enjoy the ride. Folks, the official debt is some $12 trillion but that's not the problem. It's the unfunded liabilities that are between $60-70 trillion. This is social security, medicare/aid, debt service, the various trust funds, etc. Lots and lots of promises. What are their options? They will probably raise taxes and cut benefits, but they can't to anywhere near the extent needed to cover this tab. They'll be forced to monetize it. They call it Quantitative Easing, but it's essentially printing money 24/7/365 and paying off these debts with brand new funny money hot off the presses. (new definition of job security - working at the BEP). This is going to result in double digit inflation and perhaps even hyper. I doubt the latter, but the former is a given. So I'm still buying and will continue to do so. peace, rono
