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The gold bet is a way to protect

Posted on 2009-Nov-15 at 06:19 - 0 Comments - Post Comment - Link

economic growth is unlikely to pearl jewelry threaten gold prices in the near-term, and while the Federal Reserve says it expects inflation to remain low for a considerable time, Einhorn said they may be missing the point by focusing on consumer price inflation instead of asset inflation brought on by historically easy monetary policy. (See "Inflation Fears Are Overblown.")
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The gold bet is a way to protect his core long/short equity strategy, and Einhorn was warned that he is not advising investors to plow all of their assets into gold. But if people are interested in following his philosophy they'd be better served buying actual gold bullion instead of ETFs like the SPDR Gold Trust ( GLD - news - people ). For one thing, Greenlight found that physical gold was more liquid and actually cheaper to hold than a gold ETF when fees are considered. Meanwhile gold mining stocks like Goldcorp ( GG - news - people ) often don't rise as the commodity price does.

Plus, as Einhorn said to laughter from the sterling silver jewelry conference crowd, "it's fun to go down to the vault and visit the bars.

Another hedge fund manager

Posted on 2009-Nov-15 at 06:18 - 0 Comments - Post Comment - Link

Another hedge fund manager, Pershing Square Capital's Bill Ackman, took up the other side of the argument a day later at the same conference. Ackman called gold a "greater fool" investment. To make it pay off, "you need to go to a lot of  wholesale coral jewelry conferences and convince a lot of other people to buy it," Ackman said, pointing out that "[Einhorn] has done well with it, but bought it at $800 or $900," not the $1,000-plus an ounce it goes for lately.

Rather than putting money into gold as a hedge against a U.S. government credit issue or weaker dollar, Ackman said he'd prefer to protect his portfolio by owning strong companies with pricing power, like McDonald's ( MCD - news - people ).
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Pershing Square made a killing on McDonald's stock a few years ago -- Ackman said the firm sold its holdings at $56 after buying shares around $29 -- and while the stock price hasn't moved much in recent years the business has grown, leading the fund back to the Big Mac slinger.

"It's an annuity-like stream of money," Ackman said. "You're getting a piece of the price of Coca-Cola ( KO - news - people ), the price of a hamburger, and I'd rather have money coming in, no matter what currency, than sit on a pile of gold."

Julian Robertson, the billionaire founder of Tiger Management who has since invested a large portion of his fortune with the "Tiger Cub" fund managers he once mentored, came down on the same side of the debate as Ackman, calling himself an cultured pearl jewelry "anti-gold bug" in remarks Monday. Robertson was to admit that he has made money off gold, through investing with Tiger Cub Peter Palmedo's Sun Valley Gold, but still said he thinks many gold bugs are "certifiably crazy."

Gold bugs will tell you that

Posted on 2009-Nov-15 at 06:18 - 0 Comments - Post Comment - Link

Gold bugs will tell you that hard assets are a great investment at a time when the U.S. government's massive spending has the country looking at years of dollar-weakening federal deficits. Greenlight Capital founder David Einhorn made that case at the  inflatable bouncer Value Investing Congress in New York Monday. It was the respected stock picker's first foray into gold and was met with skpeticism by a pair of equally high-profile speakers -- Bill Ackman of Pershing Square and Julian Robertson of Tiger Management.

Einhorn, who famously shorted Lehman Brothers ( LEHMQ - news - people ) in 2007 because of his worries about its precarious position, downplayed his foresight on that call, but painted a bleak "big picture" for conference attendees. The lesson of Lehman is not that the firm should not have been allowed to fail, Einhorn said, but that no company should be allowed to get "too big to freshwater pearl earrings fail" in the first place. Even worse, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Tim Geithner are creating short-term stopgaps instead of long-term solutions in a worrisome case of "short-termism," he added.

In a highly critical takedown of the U.S. government response to the financial crisis, Einhorn compared the authorities to parents who return from a trip to find out their teenager threw a raging party that tore up the neighborhood, only to say "kids will be kids…now get back out there and have a good time.”

Einhorn says that he's using gold to protect his portfolio against the lingering debt and currency issues that may result from monetary and fiscal policy gone awry. "I used to shell pearl jewelry think [gold] just sits there with no yield, Einhorn said, but he prefers it to "dollars that can be printed out of thin air or dropped from a helicopter." He views gold as the highest quality monetary asset, unlike the U.S. dollar which is a liability of the Fed's balance sheet and subject to leverage.

Advocates of the tax credit

Posted on 2009-Nov-15 at 06:17 - 0 Comments - Post Comment - Link

Advocates of the tax credit argue that the incentive can turn renters into buyers. Levin agrees, to some extent. "It does create a short-term incentive for people to inflatable water games move," he writes. But the dynamic between rents and prices is such that rents will fall to compensate and as foreclosures mount that will drag former owners back into the rental pool. So far, rents have been falling in most cities, keeping pace with falling prices. With rental properties and homes for sale competing for customers, the net increase in homeowners as a result of the credit could be close to zero. Falling rents could hurt landlords like AvalonBay Communities ( AVBPRH - news - people ) and Equity Residential ( EQR - news - people ).

Tax credit boosters also claim that refunding a portion of a home's purchase price makes that wish pearl jewelry home more affordable. True, says Levin, but affordability isn't what's keeping homes on the market for months and months. To go by figures from the National Association of Realtors, home affordability is down from last year but still sharply above the average for the past two decades. Yet home sales are sluggish.

What the tax credit will almost certainly do is convince people who were thinking of buying a home to push their purchase forward to take advantage. "After all, free money is free money," says Levin. But once the credit expires, expect to behold the inflatable water games unrestrained effects of the huge inventory of foreclosed homes that banks and other lenders need to unload.

Levin figures extending

Posted on 2009-Nov-15 at 06:17 - 0 Comments - Post Comment - Link

There's a buzz among real estate people. The U.S. government may extend an $8,000 tax credit for pearl jewelry wholesale people buying homes, an incentive that has helped keep house prices afloat as foreclosed properties glut the market. The proposal would extend the refund, which began in February, through next June. If you're thinking of buying, this is good news. If you're an investor, homebuilder or realtor hoping that an extension will breathe new life into the deteriorating property industry, don't get too excited, says Josh Levin, an analyst at Citigroup.

Levin figures extending the tax credit, a politically popular move, would simply pull toward the present sales that would have taken place in the future. That wouldn't resolve what  he sees as the fundamental reason home prices are falling: there are too wish pearl gift set many homes and not enough people to live in them. That is an obstacle to rising prices that only time, not some limited-time offer, can resolve. While homebuilders such as KB Home ( KBH - news - people ) or D.R. Horton ( DHI - news - people ) might get a short-term boost, their long-term prospects are murkier.

There are maybe 2 million more homes in the U.S. than there should be, writes Levin in a recent note to clients. Low interest rates and lax lending policies by banks and mortgage outfits artificially boosted demand for homes this decade. People who would never have qualified for a mortgage, who would have otherwise remained renters, were able to buy homes. As a result, the vacancy rate in the freshwater pearl necklace U.S. is stuck near an all-time high while the homeownership rate, while down from the peak boom years, remains well above its historical average. That suggests, says Levin, that there simply aren't enough Americans who need a home to mop up the leftovers.