Unchecked aggression and Goooooooold (Solid Gold!)

First of all Mike, this unchecked aggression against Cleveland will not stand. In case you forgot, here is the Interview Ocho Cinco tried to give after getting rocked in the last meeting. Just remember the pain train is coming baby (whoooo!! whoooooo!!).

On to gold.

I like gold for a lot of reasons (bling!) but as an investment there are really only two reasons I have some in my portfolio. One, a booming global economy, led by the BRIC countries (Brazil, Russia, India, and China), increases demand for gold through both industrial uses and jewelry. The second reason is that gold acts as a hedge against inflation. Since gold is a dollar-denominated commodity, any weakness in the dollar (which is bad for us as consumers) is good for gold and should increase its value. Again, like the oil play mentioned last week, its an investment that makes money when conditions are undesireable for us as a consumers (high oil/inflation).

Two ways to play, GLD and AUY

Back in the day it was really difficult to buy gold bullion as a small investor. It's expensive to transport because it's heavy and storage costs are high. The other way you could "own" gold is by buying futures contracts, but that has its own set of undesirables and risks. Lucky for small investors today, there's an ETF that basically tracks the price of gold (symbol GLD). By pooling together many investors they've lowered the costs of buying, storing, and selling gold for small investors. If you invest in GLD, you're basically buying gold bullion and your investment moves with the whims and supply and demand of the gold market. For example, some people have said that gold rose to $700 an oz last spring because of increased investor demand due in large part to the existance of the GLD ETF.

Gold miners -- AUY

The way I've added exposure to gold in my portfoio is by buying a gold miner, Yamana Gold (symbol AUY). Gold miners by nature are tied to price of gold since the produce gold. The nice thing about AUY, is that it's one of the few gold miners that is ramping up gold production. Most of the others are "increasing" gold production, revenues, and profits by aquiring other miners since they're mines are nearing the end of their productive lives. Now should make a decent entry point into AUY as well since it was up to $11.5 recently after a good quarter and has come back to $10.6. Cramer has liked it since it was $8 a share; I've bought at around $8.5 and $10.5. Keep in mind a dime in share price is around 1% so be picky and try to get it on a down day. Also, buying in increments helps as well (buy it in halves, at least, to average to a better price).

I'll be adding GLD and AUY in equal amounts to my virtual portfolio tomorrow just to track my picks. 2/3 from last week are up slightly. I may be early on the bottom for oil services so I may add to that position on weakness. Also, HAL is a buy in that sector long term since they should make good money on spinning off KBR, but again, i dont see a rush to buy it. There should be plenty of time to build a position there.

Enjoy Turkey Day
MC