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The case for precious metals may 2012
1. The Case for Precious Metals:
What Role Should Gold and Silver Play in Your Portfolio?
By Michael S. Finer and Gary M. Coon
Major League Investments, Inc.
June 7, 2012
As Ralph Waldo Emerson wrote, "The desire of gold is not for gold. It is for the means of freedom
and benefit." Emerson's keen observation that since ancient times people have bought gold not simply
to own gold, but for what gold represents, certainly rings true for today's investment managers.
Historically, gold has served both as a safe harbor during economic downturns and as a valuable
hedge against inflation. Therefore, over the long-term, gold can be an effective tool for wealth
preservation.
And yet, because gold has no earnings and does not pay dividends, an investment in gold is often
categorized as "dead money." This traditional knock has particular merit in today's low interest rate
environment. As Warren Buffett, one of the great investors of our time and a famous critic of gold,
once quipped, "[Gold] gets dug out of the ground in Africa, or someplace. Then we melt it down, dig
another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone
watching from Mars would be scratching their head."
So, after a decade-long run-up in price, no actual earnings, no yield or other way to return cash to
investors, you might wonder whether it's still possible to make money in gold. With respect to gold
positions, our robust technical analysis generally leads us to subscribe to the 13 ½ month cycles that
technician Tom McClellan espouses. This cycle suggested as of the end of May 2012 that gold was
forming a bottoming pattern in the mid $1530 to $1570 range. Complementing technical timing
considerations, factors like currency stability, geostrategic/political context, and demand for precious
metals drive our investment decisions.
Of course, gold is a complicated measure of value because gold also reflects the currency that it is
3. opinion reflect the judgment of the authors as of the date of publication and are subject to change.
Information presented does not involve the rendering of personalized investment advice and should
not be viewed as an offer to buy or sell, or a solicitation of any offer to buy or sell the investments
mentioned herein. Different types of investments involve varying degrees of risk, and there can be no
assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio.
All investment strategies have the potential for profit or loss. Major League Investments, Inc. is
registered as an investment advisor and only transacts business in states where it is properly
registered, or is excluded or exempted from registration requirements. Registration as an investment
advisor does not constitute an endorsement of the firm by securities regulators nor does it indicate that
the advisor has attained a particular level of skill or ability.
Major League Investments, Inc.
530 Loring Ave Suite 302, Salem, MA 01970
Phone: 978-740-1011
michael.finer@majorleagueinvest.com
IRS Circular 230 Disclaimer: To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this
communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the
purpose of avoiding tax penalties that may be imposed non the recipient or any other taxpayer, or (ii) in promoting,
marketing, or recommending to another party a partnership or other entity, investment, arrangement or other transaction
addressed herein.