Ed’s Daily Notes for August 28th   3 comments

Bloomberg: Gold-Price Indicator Fading as ETPs Tumble by $71 Billion

Gold-backed funds that heralded record prices in 2011 and last year’s biggest sell-off in three decades are becoming less useful as market predictors.

After a decade of changing mostly in tandem, gold prices and holdings in exchange-traded products backed by bullion have the most-negative correlation since 2004. Investment in ETPs are headed for a fifth straight week of moving in the opposite direction of New York futures, data compiled by Bloomberg show. That would be the longest stretch since 2012, before investors began dumping gold.

Global ETPs that accumulated more bullion than France’s central bank in 2012 saw their influence wane as equities surged and the Federal Reserve took steps to ease economic stimulus, signaling higher interest rates that erode the appeal of gold as an alternative asset. As investors exited the funds, erasing about $71 billion of value, unrest from Ukraine to Gaza this year revived demand for the precious metal as a haven, boosting prices that Goldman Sachs Group Inc. says aren’t sustainable.

“There is a disconnect” because “a lot of money has left,” said Mark Luschini, the chief investment strategist at Janney Montgomery Scott LLC. in Pittsburgh that oversees $65 billion. “For gold, this year has been all about the Federal Reserve and political tension, and at the moment, the rate-increase worries are overshadowing the safe-haven buying.”

The bloom is off the golden rose. That doesn’t make gold ETP’s a “sell”. It just means the actions of retail investors in equity markets is far less relevant to the price of gold now.

Business Insider (via Yahoo Finance): This Illustration Posted By Eric Schmidt Shows How Google Thinks About Innovation

Google is one of the largest, most influential technology companies in the world. But it didn’t start out that way, and it’s not easy to maintain that status. Google Executive Chairman and former CEO Eric Schmidt has shared some insight as to how Google views innovation and the competition.

Schmidt and Google’s former SVP of Products Jonathan Rosenberg are publishing a book next month called “How Google Works.” The book dives into what Schmidt and Rosenberg learned as they helped build Google into what it is today.

Schmidt has been teasing the book by posting excerpts of illustrations and various tips from the book to his Google+ and Twitter page. His latest post emphasizes that tackling the market with different angles rather than simply trying to be better than your rival is crucial for success.

“It’s important to understand what’s going on around you, but the best way to stay ahead is a laser focus on building great products that people need,” Schmidt posted to Google+ along with the illustration.


Posted August 28, 2014 by edmcgon in News, Precious Metals, Stocks

3 responses to “Ed’s Daily Notes for August 28th

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  1. A question: Most financial advisors recommend removing a maximum of 4% from your investments upon retirement. I believe most say 4% per year plus the annual amount of inflation for each year following year one’s withdrawal. So year 1 — 4%, and year 2 — 4.12%, and year 3 — 4.24%, and year 20 — 7.44% if there is a 3% annual inflation rate.

    The S&P 500 has increased an average of 11%/year during the last 50 years or 7.4%/year when adjusted for inflation.

    This appears to be a very safe (and I don’t want to be eating dog food when I am 100 years old) withdrawal scenario based on the 50 year return for the S&P 500.

    Question: Am I looking at the numbers correctly?

    We are both retired — Nancy retired this past 3/31/14 and I roughly 10 years ago (but have worked part time and full time off and on until about four years ago) I am going to begin drawing down on non-IRA accounts beginning in Oct. or early next year and want to make sure I am not beginning too early on the draw down. Currently we are waiting until my wife is 70 (4 years) and I am 70 (6.5 years) before beginning Social Security. I also am planning on not withdrawing from any IRA or 401K accounts until the account name holder is 70. This means I will withdrawal approximately 5% from non-IRA/401K until we turn 70 and then roughly 4+% from all investment account.

    • Latetom,
      On the surface, that sounds right. I will defer to anyone else’s opinion on this?

    • FYI. Good plan for both of you to wait until age 70 to collect the max. In the meantime, take advantage of file and suspend to collect benefits without affecting your age 70 benefits.

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