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Monday, May 11, 2009

GOLD: Bob Brinker's Moneytalk, Sunday May 10, 2009

Sunday, Bob Brinker's major topic on Moneytalk was GOLD.

Caller Michael said: “If the present U.S. Government’s legal price of gold that I understand to be $42.22 a troy ounce. Is that still the legal price of gold today?”

Bob Brinker replied: “The price of gold is traded in the free market. A troy ounce of gold right now is $907.”

Michael continued: “Okay. I understand a decision was handed down on April 17, 1984 by the Supreme Court that ruled that gold bullion values, as far as commerce, are limited $42.22 an ounce. Is that still valid?”

Bob Brinker replied: “The Supreme Court does not have the authority to mandate the price of gold…. to the tell the world the price of gold. Firstly, gold is a global metal. It is traded all over the world – in the capital cities of all of the financial centers…..Gold is a freely traded entity, and right now it is trading at $907 per troy ounce……The U.S government has no authority to whatsoever to determine what the price of gold is. It is determined in a publicly traded global marketplace……

.....Actually you can go back to the early 1970’s under President Richard Nixon, and you will find that what was done under President Nixon was basically the gold standard, such as it was, was thrown out the window. We now have a paper currency….The U.S. dollar. ….The U.S. dollar is not backed by Gold…..not backed by silver. It says on the bill “In God We Trust,” but in fact, that’s not who you trust in when you acquire a dollar bill or any other denomination. You trust in the United States of America, through its Treasury Department to honor this paper. You also trust everyone you’re dealing with to honor this paper. If they don’t honor this paper, then it becomes wall paper. It’s that simple.”

Honeybee EC: I've heard Brinker make the statement before that "you don't trust in God." I find this rather shocking. Who is he to make judgments about what/who people are "trusting." Millions pray to God every day for the United States of America and its leaders -- that would certainly include its currency. Is Brinker offended that those words are there? That's his right as a citizen, but his cheapshot demeaning of the words on his "financial" program is obnoxious and out of place, in my opinion.

Caller Randy asked:
"Is all the gold ever mined by mankind 55 by 55 at the base by 185 feet tall? Basically that amounts to little under than half the size of the Washington Monument all the gold ever mined by mankind would fit would be about that size?"

Brinker replied:
"Let me get my measuring rod out before I answer that, what was your other point?"

Randy continued,
"Well my point is that's not a lot of gold considering world economy, if that's all the gold ever mined by mankind, how can we have a gold standard? Gold would have to be, maybe to be dramatic, $50,000 an ounce somewhere along the way."

Brinker replied:
"That's all interesting, but reality is, there is a political reason that trumps everything else as to why you are not going to have a gold standard and it's why the United States has long gone from the gold standard..... I don't care, it doesn't matter how much gold is out there. These politicians won't go along with a gold standard because they don't want to be disciplined in their spending, and that's the point.....

.....These politicians in Washington are just spendthrifts…..They spend money they don’t have. They spend money they have no idea it’s going to come from…..And consequently, they don’t have any interest in being restricted by a gold standard…..These politicians don’t want to be disciplined in their spending…..They want free spending. We owe over $11trillion right now. It’s on its way to $20trillion, if you believe the CBO. There is no fiscal responsibility or even concept of it in this particular set of people we have in Washington. Which, by the way, are very similar in their thought process on spending to the people we’ve had in Washington in a long time. I have expressed my profound disappointment in the GOP from 2001 through 2006 inclusive. Six years of total control in the White House and the house and a majority in the Senate. And they spent the United States into oblivion, including prescription drugs for Medicare with no funding provided. It was a nightmare. And now, the other side of the aisle is continuing this hideous policy.

U.S. DOLLAR IS ONLY "PAPER": Bob Brinker said:
"It [U.S. currency] is worth what it says on the cover of the bill and if people will accept it....Today they will accept it, but tomorrow, who knows. Because the reality is, that they debase the currency when they go on a printing spree which they are on right now -- they are on out of necessity because of what happened to the economy -- the more they print of the paper currency that is not backed by silver or gold, the more they debase the outstanding amount of currency that is out there.....

....So far, the dollar has benefited because other currencies have been in dire straights. The situation is Europe has been just incredibly disastrous from a financial standpoint, and the Euro has suffered versus the dollar. And the pound sterling has been through the ringer......."

......But I think certainly the Chinese have come out with an idea this year that is worth examining. It is definitely worth examining, and that is to establish a global currency. Because if you had a global currency, then you would get rid of the risk that your country, be it the United States or any other country, could go on a fiscally irresponsible tear. That's the problem you have right now. If you have your money in any particular government currency right now, whether it be the dollar or any other currency right now, you run the risk that your political going to go on a fiscally irresponsible tear and debase your currency. Why should you take that risk? If you could have a global currency that had rules and regulations that prohibited that kind of abuse, then you could wide up with a much safer piece of paper. That's all this is, it's paper."

Caller Andy asked: "Would you recommend buying physical gold?"

Brinker replied:
"I think that's a hedge....If you feel you want to have a hedge in your portfolio of "X" %, just in case you get into an inflationary spiral, then yes, I think that is exactly the role it plays. We started talking about this on Moneytalk years ago actually for people that want to put on a hedge, we recommended that they look at the Exchange Traded Fund that had come out years ago, the ticker symbol on that fund is GLD.......That was the fund that we recommended for those that wanted to have a hedge in their portfolio against the risk of inflation. That has done pretty well....It's around $90 a share. And I must say that those shares have done very, very well. We first mentioned them when they were trading around 50-55 dollars a share and I think that is the role that that has played."

Honeybee EC: Bob Brinker once again took credit for making a recommendation on Moneytalk to buy gold for a hedge. That is something that he has never done!! Here is the article I wrote in October 2007 -- the first time Brinker "misled" his audience about his gold advice [LINK]

What he HAS done over many years is tell Moneytalk callers that he did not own gold and had never recommended buying it, but that IF they believed they needed a hedge against inflation and were determined to buy a small amount of gold as a “hedge,” he would suggest using the gold ETF: GLD.

The truth is, Brinker has NEVER told a Moneytalk caller that he had any recommendations on GLD!

The truth is, Brinker has NEVER had an "on the books" recommendation in Marketimer to buy gold.

The truth is, Brinker added GLD to Marketimer Individual Issues List this month -- May 2009. This Marketimer short list of stocks and ETF recommendations are entirely "off the books" and never accounted for in his official performance record.

Here are some of David Korn's comments from his latest newsletter:

David Korn said: "For years, Bob bashed the gold bugs. In the 1980s ­ early 1990s he was right. Then gold started a huge move and rallied significantly in the last few years. Bob avoided gold, usually saying that it was a hedge for inflation."

David Korn said: "Bob apparently is now listing GLD in his newsletter, at least in the individual issue section. A couple of points on that. First, when he does not include a recommendation in his model portfolio, he has a win/win scenario. If it goes down, it doesn't hurt his reported performance of his newsletter and he never has to mention it again (i.e. QQQQ). If it goes up, he can brag about how he mentioned it in his newsletter. Not a bad marketing ploy."

David Korn said: "What did I tell you. Bob has been bearish on gold for as long as I can remember, but here he is crowing about something he mentioned but certainly didn't recommend as a position he would take. I am sensitive to this issue because I established a position in gold bullion a few months ago, but had to sell quickly at a profit when my stop loss was taken out earlier than I would have liked. I have been looking for a time to add to a position, but now that Brinker is sort of, kind of, (but not really) recommending it, I view it as a contrarian call. That is, I think Brinker is late to the game and only now after an incredible secular bull market rise, has he put it in his newsletter --- even if it is as a "hedge." This contrarian view is further buttressed by sentiment data collected by Mark Hulbert who, coincidentally, published a piece the day after Brinker published his May Marketimer entitled, "Contrarian analysis bodes ill for gold." Read the article at this url:" [LINK]
Free issue of David Korn's newsletter and Retirement Advisor [LINK]

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