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REMINDER: All investment, economics, and finance related material now appears at the new IaconoResearch.com. For the time being at least, this has become a personal blog covering a variety of mostly unrelated topics.

When to Sell Your Gold and Silver

On December 14, 2010, in Commodities, Economy, by Tim

[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

As the gold price continues to regularly make new all-time highs and with the price of silver posting spectacular gains in recent months, now seems like a good time to try to answer the question of whether we are anywhere near the end of this long-term cycle and what signs one should look for when considering whether to sell your gold and silver.

Like all other secular trends, this one too will surely come to an end someday and, given the events of the last year or so, it now seems quite possible that the end may come sooner than the 2013 time frame I’ve often cited, so, giving these questions due consideration sooner rather than later makes good sense.

First and foremost, in my view, at current prices we are nowhere near the top. I’ve long said that we’d have to see prices closing in on the inflation-adjusted 1980 high for gold – roughly $2,300 an ounce today – in order to even contemplate exiting positions in precious metals for good and we remain well back of that at about $1,400 an ounce.

The other major chart criteria to look for is a “blow-off top” similar to what was seen 30 years ago and, as shown below, what we’ve seen in recent years haven’t been bubbles at all – at least not compared to what happened in 1979-1980 when the gold price moved from about $250 an ounce to its January 1980 peak of $850 an ounce in a matter of months.

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The Weekend’s Precious Metals Commentary

On November 15, 2010, in Commodities, by Tim

Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

It was another week of record highs for precious metals, but developments late in the week set the tone for a very uncertain period ahead, metal prices seeing some of their sharpest daily declines in months after new margin trading requirements were imposed for silver and rising inflation in China spurred new fears of tighter monetary policy.

More talk about the relationship between gold and paper money came from World Bank chief Robert Zoellick and more coverage of precious metals came from the mainstream media in the form of a front page New York Times story just after the gold price surged to over $1,400 an ounce, all of this followed later in the week by a plunge of almost $50.

For the week, the gold price fell 1.7 percent, from $1.392.90 an ounce to $1,368.80, while the silver price dropped 2.6 percent, from $26.75 an ounce to $26.04. For the year, both metals continue to carry impressive gains, the gold price now up 24.8 percent while silver has risen 54.3 percent, trailing only the gains made by cotton and palladium.

The most recent run-up in the gold price is again shown in the updated graphic below alongside both the 2005-2006 and 2007-2008 moves. It is important to note that this now-lengthy 2009-2010 jaunt just last week surpassed the one seen just two years ago with a rise of 38 percent versus 36 percent.

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Near Term Market Outlook

On August 9, 2010, in Bonds, Economy, Housing, Stocks, by Tim

[The following commentary is from the latest issue of the Weekend Update (Volume V, Issue 32) at Iacono Research. For subscription details, click here.]

Over the last few weeks, prices for stocks and bonds have been rising together in what is a most unusual sequence of events where, clearly, one of the two is wrong about the future direction of the economy. Typically, higher bond prices (that result in yields being pushed lower) indicate economic weakness ahead and the lack of pricing pressure, whereas, rising equity markets are typically a harbinger of stronger economic growth and higher consumer prices.

As best I can tell given the recent spate of disappointing economic reports and the beginning of the process where Wall Street economists begrudgingly revise their growth estimates lower rather than higher, the bond market is the one that has it right at this juncture. But, the stock market is now taking its cues (to some degree at least) from the recent talk about quantitative easing (i.e., money printing) and, along with the natural resource sector, prices are being bid higher in anticipation of this effort being successful, that is, at least insofar as it inflates asset prices.

One thing is certain, the economic recovery in both the U.S. and elsewhere in the world at just past the mid-point in 2010 is not what it was expected to be just a few months back when stock prices were soaring and American workers were being hired by the hundreds of thousands. Last week’s labor report was dismal given that we are supposedly more than a year into an economic recovery and the prior week’s Q2 GDP now looks even worse a week later after the latest data came in.

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It Was a Good First Half For Some…

On July 2, 2010, in Bonds, Commodities, Stocks, by Tim

In updating the graphic for the companion investment website Iacono Research at the conclusion of the second quarter the other day, I couldn’t help but notice that the last decade’s best performing mutual fund, Ken Heebner’s CGM Focus (CGMFX), didn’t do so well and the model portfolio at Iacono Research is now back out in front.

You can see why the Pimco Total Return fund (PTTRX) has become so popular in recent years – slow and steady seems to have won them a lot of new clients despite the four percent front-end loads. Of course, the real lesson in the performance data above might be that simpler is better – if you had only sold your stocks and bought dumb ‘ol gold coins back in 2000, you’d be far, far ahead of just about any other investment on the planet.

For Iacono Research subscription details (where fees are far lower than Pimco’s), click here.

Full Disclosure: Long the model portfolio at time of writing.

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This Week’s Precious Metals Commentary

On May 16, 2010, in Commodities, by Tim

[Following are excerpts from the current issue of the Weekend Update at  Iacono Research.]

Strong demand for an alternative to paper money after the European debt crisis again took a turn for the worse and leaders from both the European Union and central bank announced a $1 trillion bailout package saw the gold price surge in euro terms and go on the make new all-time highs when measured in U.S. dollars at $1,249 an ounce.

Heavy inflows to gold ETFs – more than 50 tonnes in the last seven days for the SPDR Gold Shares ETF (NYSE:GLD) – confirmed that investor interest has again ratcheted up though the silver price saw an even bigger rise. For the week, the spot gold price rose two percent, from $1,206 an ounce to $1,231, and silver gained five percent, from $18.35 an ounce to $19.34.

What has astonished many investors lately is that, while the gold price is understandably rising sharply against the euro, it is also moving higher against the U.S. dollar, something that many pundits thought to be unlikely given the historical relationship between the trade-weighted dollar and gold (an idea that I’ve railed against for some time now because there is no fundamental reason for the inverse relationship to exist). It would seem that either investors are losing confidence in all paper money or they figure that Europe’s troubles will eventually cross the Atlantic and are bidding prices higher in advance of that.

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Hedge Fund Radio Interview

On April 7, 2010, in Commodities, Personal, Stocks, by Tim

I recently did an interview with John Thomas (a.k.a. The Mad Hedge Fund Trader) that is now available over at his Hedge Fund Radio website, so, if anyone’s interested in hearing what I sound like these days, this is your chance. Here’s the intro:

Tim Iacono, is a man who lives without stocks. He does this from a remote mountain top in rural Bend, Oregon, where he has the luxury of spending his days researching long term trends in the financial markets. Maybe it is the incessant rain that keeps him working indoors so long, sifting through the grains of data he pulls off the Internet.

Whatever Tim is doing, it is working. It was his spot on calls on precious metals and commodities during the “naughties” that has enabled him to live this sought after lifestyle. When his research led him to conclude that real estate was careening off a cliff, he sold his California properties and made the move north. His successes led him to launch a blog in 2005 and an investment website in 2006. Today, The Mess Greenspan Made boasts 26,000 followers at the aggregator site www.seekingalpha.com.

With the exception of the odd commodity producer or gold mining shares, Tim has completely avoided investing in paper securities for the past decade. He believes that stocks are still in a secular bear market that has at least a few more years to play out. When government stimulus runs its course later in the year we could be in for another downdraft as severe as the debacle that ensued in 2008-2009.

Maybe it’s me, but I didn’t think my outlook was quite that negative. It’s been a while since I’ve done any sort of an interview and this one was certainly fun as John not only has one of those smooth radio voices (even with a cold when we spoke), but he’s pretty funny too.

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