Thursday, November 11, 2010

Cramer's Gold

November 11, 2010
Cramer's 'Mad Money' Recap: Gold Rush (Final)

NEW YORK (TheStreet) -- "Gold is not just another commodity," Jim Cramer told the viewers of his "Mad Money" TV show as he once again urged investors to put up to 20% of their portfolios into gold.

Unlike other commodities such as oil, grain or copper, gold is a currency, he said, adding it's what people buy when they don't trust their own currency. Cramer said it's what the Chinese and the Indian people buy first when the discover newfound wealth. "No one who's bought gold since 2001 has lost money," Cramer told viewers.

Well, there you have it. No one who's bought gold since 2001 has lost money. Fantastic news. Gold is clearly the winner of the new world. Out of curiosity, why was it absent from his list 10 years ago?

February 29, 2000
Winners of the New World

So, whom does that eliminate? First, any company that is a commodity producer simply can't be owned, no matter what. The New Economy makes those be simply a function of low-cost producer with no ability ever to raise price. This, of course, is the crying shame of the way the Fed is trying to break the economy because the only place that could stand for a little inflation is in the deflationary commodity industries.

Heaven forbid someone started stockpiling commodities back in 2000. What a stupid move that would have been in hindsight. As we know, the deflationary commodity industries were definitely no place to be putting money. Those who hoarded oil? Fools!

Can you even imagine the horror of buying Pan American Silver Corp. in 2000? I sure can't.

That's why, despite the 80% increase in the Nasdaq last year, we are looking at another record year now.

Yes sir. The Nasdaq was the only thing worth owning. No one who bought the Nasdaq since 1991 had lost money.

So there you have Cramer's advice. Buy tech in 2000. Buy gold in 2010. You cannot lose.

Don't let Alcoa concern you. The metal known as gold isn't at all like the metal known as aluminum. Gold is "mad money". Everyone knows it (with the possible exception of the credit card industry and its misguided assumption that you must pay your bills in actual legal tender).


Stagflationary Mark said...

Is it a gold bubble? Not yet

Several experts say gold still has room to run. But if you're thinking of buying, be careful: After the smart money sells, latecomers can be left holding the bag.

I can't/won't argue with that. There could be plenty more room to run. However...

In fact, I think the decade-long gold supercycle has some time to run. But we're closer to the end than the beginning, and I'm watching carefully for signs of the blowout phase before selling any of my small position in the SPDR Gold Shares(GLD).

From what I can see, he's a net seller from here who is simply trying to maximize/time his exit point. Gold bugs better hope he's the exception and not the rule.

Stagflationary Mark said...

As a side note, when I bought gold and silver in 2004 I had the exact same mentality. I backed up the truck and knew at the time I was a net seller from there on out. I chose 2006. The first parabola scraped me off.

I live by the rule that if one must panic, at least panic first. Based on the current price of gold (especially compared to aluminum) and assuming gold continues to climb, I strongly suspect that the panic out of that "safe haven" will be epic someday (just as it was in the aftermath of the last gold bubble).

Stagflationary Mark said...

It's officially pick on Cramer day, lol.

Cramer's Y2k Reprise

Apparently I was not the only one experiencing 2k deja vu!

Stagflationary Mark said...

I just can't stop.

"Unlike other commodities such as oil, grain or copper, gold is a currency, he said, adding it's what people buy when they don't trust their own currency." - Cramer

If you don't trust your currency then oil and food should be top of the list. Surely everyone must know that by now. Apparently Cramer somehow missed the currency induced rice shortage a few years ago.

Costco ran out of white rice as people hoarded it. They never did run out of gold jewelry though. Go figure.

Stagflationary Mark said...

SLV is getting hit hard today. Who is blamed?

The Kiss-of Death Cramer Indicator

This comment thread is becoming my version of Cramer twitter! ;)

Stagflationary Mark said...

Down $20.30 now WTF!!!!!!!

Can anyone explain the drop? Serious posts only no shorts please

He wants to know why gold is going down but only wants answers from those betting it will go up? Seriously?

watchtower said...

PM's have been Cramerized?!

I was wondering what had happened.

There goes my "neon rainbows and and living that honky tonk dream".

That basturd.

Stagflationary Mark said...

Do Not Sell: Stand Fast!

We are right and our investment has already paid off.

The good news: 10 people rated that post as excellent.
The bad news: It was posted two days ago.

Stagflationary Mark said...


Cramerized? Indeed.

Sorry to pick on your baby today, but you are hardly a latecomer. Picture those who just bought on Cramer's advice! First Cisco and now this? Good grief.

Angry Saver said...


The Cramer heckling is hilarious! It's also well deserved.

At the tail end of the the housing bubble, Cramer was telling people to buy the home builders. He claimed they were no longer cyclical and that they had become "land banks". The rest is history.


We've had another Robert RubinCON crossing today! I'll check with my contacts in Vegas to see if there is an over/under bet on how many times we'll cross the rubicon.

Stagflationary Mark said...

"We've had another Robert RubinCON crossing today! I'll check with my contacts in Vegas to see if there is an over/under bet on how many times we'll cross the rubicon."

It won't be official (by my count anyway) unless we actually close below 1200 on the S&P. And we won't know that it will for sure until either the end of the trading day OR unless Cramer issues another "kiss of death" by predicting a closing rally, lol.

Stagflationary Mark said...

Mish: QE II Bet Starts to Unravel

It remains to be seen if this is the start of a serious correction or just another dip-buying opportunity (in literally everything), but with sentiment sky-high and nearly everyone believing QE II is a one-way bet, I am more inclined to believe the former.

As far as gold goes, I do not expect the shellacking we saw in 2008. In fact there might not be much of a pullback at all. However, I can easily be wrong.

1. Hard assets took a serious "shellacking" today.
2. Gold is a hard asset.
3. Gold took a serious "shellacking" today.

4. Hard assets took a serious "shellacking" in 2008.
5. Gold is a hard asset.
6. Gold took a serious "shellacking" in 2008.

7. He thinks hard assets will likely experience a serious "shellacking" from here.
8. Gold is a hard asset.
9. Unlike today and 2008, gold will somehow be immune to more "shellacking" this time though.

Two words: Gold Bug

Stagflationary Mark said...

Looks like the ongoing Rubicon joke is back on track. Woohoo!

mab said...

Two words: Gold Bug

One word: Zealot

Mish is a religious fanatic. His beliefs in gold and the Austrian School of eCONomics are something to behold.

I got news for Mish - there ain't no auto-pilot switches in life.

watchtower said...

"Sorry to pick on your baby today"

I have to face it, the gilded biscuit wheels are falling off my silver gravy boat train!

"the horror...the horror"

Stagflationary Mark said...


I have observed that the world has suffered far less from ignorance than from pretensions to knowledge. It is not skeptics or explorers but fanatics and ideologues who menace decency and progress. No agnostic ever burned anyone at the stake or tortured a pagan, a heretic, or an unbeliever. - Daniel Boorstin

Stagflationary Mark said...


It's all about leverage to me.

Gold and silver bugs feel that owning physical gold and silver feels safe because they are the closest thing to a deleveraged investment one can have. I know. I've been there myself. Holding physical coins in one's hand feels safe.

However, gold and silver are not deleveraged investments. Since gold and silver are so rare, they are two of the most easily leveraged metals in the entire periodic table.

BullionVault: Gold futures

For example, suppose you had $5,000 to invest. If you buy gold bullion and settle you can only buy $5,000 worth. But you can probably buy $100,000 of gold futures!

Note the use of the exclamation point.

You can see why futures are dangerous for people who get carried away with their own certainties.

When I bought gold and silver in 2004 (and sold in 2006) I hadn't given that much thought. Here's what I wrote in 2007 though.

Fed Funds Rate vs. Commodities

I bought gold and silver for the first time in my life back in 2004. I know exactly why I did it. It is still fresh in my mind. My gut said that earning 1% in three month treasury bills when inflation was clearly higher than that was not a good thing. I didn't know how long it would go on. The Fed pretty much forced me to own something of substance. Since I'm a saver by nature, I chose rocks. I already had a house. I can understand why renters might choose to buy. It surprised me that the rocks did so well. It surprised homeowners that real estate did so well. I just wanted a hedge against inflation but I got so much more than that. If you can believe in that chart above, you'll see that I actually bought a piece of heavily leveraged inflation. It seems a very small change in the Fed Funds rate can (not always) have a dramatic effect on commodity prices. Why? We live in an overleveraged society. Everything is overleveraged. Just look at how many hedge funds we have. That's my opinion and I'm sticking to it.