A “permanent investment,” what an intriguing concept! When I first entered this business one of my mentors, namely Lucien Hooper (securities analyst extraordinary), often spoke of permanent investments. In fact he once stated, “You should put one quarter of your investment portfolio in stocks, one quarter in bonds, one quarter in precious metals, and one quarter in farmland. His reasoning was that such a non-correlated asset allocation would grow, and preserve, capital through any multi-generational economic cycle. This morning, we focus on precious metals and farmland.
Last week a “tree fell in the forest and nobody heard it.” The headline read, “CME To Allow Gold As Collateral For All Exchange Products.” The lead paragraph was:
“U.S.-based clearing house CME Group Inc. (CME/$319.96/Market Perform) will allow physical gold to be used as collateral for margin requirements on all exchange products, a spokesman said Monday. The new global policy is effective Oct. 19 in accordance with a member's notice issued late Friday, said spokesman Jeremy Hughes in London. Clearing member firms will be allowed to post up to a maximum of $200 million worth of gold as collateral to cover performance bond, or margin, requirements, Hughes said.”
Then on Friday there was this gold-quip on the Broad Tape:
“If you’ve invested in gold, you’re about to gain a powerful ally: pension funds. ‘I think the largest institutions like our own are realizing that we barely own any [gold],’ Shayne McGuire, Director of Global Research of the Teacher Retirement System of Texas said in an interview in Hong Kong very early this morning. ‘The same thing applies to most of the pension funds which manage trillions of dollars in world wealth.’ TRS oversees $95 billion, and just opened an internally managed gold fund for the 1.3 million public education employees, and suggests other pension funds follow suit. Owning gold is ‘financial insurance,’ he said, sounding a lot like David Einhorn at the Value Investing Congress earlier this week. ‘Consider the tremendous fiscal excess that major governments have made to prevent the world economy from collapsing ... I don’t think the question really is what is gold worth but what are currencies not worth’.”
Tuesday, October 27, 2009
Jeff Saut good this week
Jeff Saut in his weekly commentary for Raymond James is right on. Read it all here but this is just a taste: