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THE VALUE VIEW GOLD REPORT
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Sometimes one has serious things
to say. Sometimes one does not have something really important
to say. Then one wakes up, and the whole world makes one feel
like totally insecure. What is one to do? Should one put all
the money in Google or Yahoo!? Should one diversify by putting
half in Yahoo! and half in Google? Perhaps buying three more
condominiums is the real answer, diversifying by only one each
in any particular Florida city.
What brought on all this insecurity was the shocking news on
Bloomberg radio this morning. Yahoo! reported only eight cents
per share in earnings. How can that be? The Street thought is
would be more. The news of the tumbling price of the stock surely
was bringing people around the world to their knees, their individual
worlds crushed under this disappointment. No longer would memories
of that Chicago team not winning the World Series be so important.
Here, right in our ears, was real tragedy.
At this point any good author would insert some important statistics
on the valuation of Yahoo!. Certainly important ratios like price-to-sales
versus the market should be reviewed. But why? Any stock trading
at or anywhere near thirty dollars and earning only eight cents
in a whole quarter does not justify any serious analysis. The
whole concept of valuation on such a stock is on par with trying
to ice fish in July. Go ahead, just shove your shed out onto
the lake and see what happens.
Finally though, rationality took hold. In this news was the answer.
The answer which had been sought for months was now clear. All
the money goes on Google. After all, they are in a real business.
A business that is on par with a cure for cancer, or those new
square golf balls.
Part of this insecurity sprung from an article in The Wall Street
Journal on the day before, Wednesday, "Coal Stockpiles Sink
20% Below Normal Levels." Such shocking news should require
a warning note on the front page. You know, "Beware. Shocking
news of coal shortage is on page B2A. This article may contain
news bothersome to insecure individuals." Maybe some important
trial lawyer will hopefully file a class action on the behalf
of all those individuals lacking security, providing us protection
against such inhumane violations in the future.
For years so many of us had relied on the wisdom of the Federal
Reserve and the Street to give guidance to our lives. Security
was provided in knowing that the internet meant never a shortage
of anything, and global competition meant prices could not go
up. We need to remember number three also, that gasoline prices
do not matter as they are not part of the cost of living.
Technology, meaning the internet and computers, was such a productivity
miracle that no shortages should occur. No matter how much was
consumed, technology would keep advancing the art of production
in a way that means more of everything would always be available.
What were these coal companies missing? Did they not know that
technology could turn an old ton of coal into two tons of new
coal? Where were their PCs? Where were their PCDs? Where were
their iPods? But right there in the article, "14% less than
they had on hand a year ago."
And then we find out that the railroads can not ship all the
coal everyone wants. How can that be? Don't they have the internet
at railroads? Maybe they need to buy another router or server
or something. Technology was supposed to make such bottlenecks
impossible. Technology was to convert one railway into two railways.
Or, maybe we don't understand the miracle of technology. And
then there is the mystery of coal prices going up in global markets.
How can that be? Global markets and competition are supposed
to keep prices low. Well, apparently the Chinese and a few others
forgot to read those reports. They are competing for coal by
bidding up the prices. Insecurity is being piled upon insecurity.
Why did those coal companies not dig more coal mines? Why did
those coal companies not buy more equipment to dig coal? Why
did those railroads not order more cars and build more track?
Why did they not spend more money on the internet? Why? Because
this country, the U.S., has been squandering its capital on building
houses. What nations needs factories, coal mines, rail roads
or the like when it is busy building 3000+ square foot houses?
Why waste capital on producing real stuff when money needs to
be spent on technology to allow the processing of a mortgage
application in 7 seconds rather than 15 seconds?
No wonder all this insecurity developed. Our misunderstanding
of economics is the root of the problem. Certainly building another
condominium project is more important than another plant to generate
electricity, or a factory in North Carolina so people can have
jobs.
This day is the last straw. No more worrying about the $500 billion
trade deficit of the U.S. No more worrying about the $1.2 trillion
that the U.S. government owes foreign investors. No more worrying
about the Chinese government financing the U.S. government deficit.
All this worry does is create insecurity. Just buy Google and
not worry anymore must be the answer.
At least the Russians have the banking problem rather than the
U.S. In the same devastating issue of The Wall Street Journal
was an article on Russian banks. Apparently they do not have
deposit insurance and the banking system currently reminds one
of the song that goes, "Oops, there goes another rubber
tree plant," or something like that.
Those silly Russians putting their money in banks anyway. Where
have they been? Don't they know about growth stocks mutual funds?
Don't they know that they could put their money into Google or
Yahoo!? Certainly a Russian with a couple of million roubles
to invest would not put that money into Gold when they could
buy Google.
Insecurity will soon be gone once we all put our money into Google.
Why own that Gold and Silver? Just makes you insecure. Means
you really do not understand technology and economics. We now
know that David Morgan has it backwards. A shortage does not
mean the price of Silver should go up. A shortage means that
the price should go down. Quick, someone call David and warn
him.
Technology, the internet and global competition mean that prices
can not rise. Don't tell him about coal. It would just make him
insecure. Tell him to switch from Silver to the new opportunity
in "drive by real estate" while there is still time.
Maybe though some of you like your insecurity. Maybe you enjoy
owning Gold and Silver. Despite technology, the internet and
global competition, Gold and Silver make some sense for you.
What to tell you? How to arrest your fears? Maybe you just want
to keep buying Gold despite what we have learned today. Well,
if you do enjoy your own personal insecurity, we give you one
piece of wisdom. Focus on wisely buying your Gold and Silver.
Buy when the others are not. Buy on dips. Forget buying the day
CNBC is talking about Gold going up. They never seem to talk
about Silver, so what to tell you about that is hard to discern.
In closing, some seriousness. This chart comes from our weekly
TRADING THOUGHTS. Buying on those dips, when others are moaning
their holdings, is a workable strategy. Just remember the fundamental
rule of present value. Only a lower prices raises future returns!
July 8, 2004
Ned W. Schmidt
Ned W. Schmidt, CFA, CEBS is publisher of THE VALUE VIEW GOLD
REPORT. That report now includes a weekly message, TRADING THOUGHTS,
to help investors identify timely points for buying Gold and
Silver.
His monumental report, "$1,265 GOLD," with 255 pages
and 98 graphs, is now widely known, and is available at www.amazon.com
or from the author. This work has now been read by investors
in over twelve countries around the world. Ned welcomes your
comments and questions. His mission in life is to rescue investors
from the abyss of financial assets and the coming collapse of
the U.S. dollar. He can be contacted at nwschmidt@earthlink.net.
Copyright ©2004 Ned W.
Schmidt. All Rights Reserved.
________________
321gold Inc
