Gold fever spreads to mutual funds
Some investors are quick to invest in gold. Others would never touch the stuff. But whether or not you are a gold bug, you should check on your mutual fund holdings. You might find yourself wading more than bunion-deep in bullion without even realizing it.
With gold cracking $1,200 an ounce and up by more than a third this year, more fund managers are entering the market. Some believe it has more potential to appreciate, while others see it as better than leaving money in the cash drawer.
Morningstar analyst Bridget Hughes said diversified-stock mutual funds are buying gold, both in the form of bullion or in exchange-traded funds such as SPDR Gold Shares (GLD). She cited Queens Road Value (QRVLX), First Eagle of America (FEAFX) and Presidio (PRSDX).
A somewhat extreme case is Appleseed (APPLX), with 10 percent in gold. Hughes wrote, "Not only is the management team concerned about inflation and the dollar, it is also having a tough time finding attractive valuations among stocks after taking profits in stocks as the market has run this year. For Appleseed, with already more than 20 percent of assets in cash, gold seems the best option."
There's more evidence of a "gold rush" on Wall Street. Goldman Sachs raised its 12-month forecast for gold to $1,350 an ounce, up from an estimate of $960. Also, the chief executive of Newmont Mining (NEM), a major producer, said gold might hit $1,500 in two years because of the declining dollar and more acute demand.
Meanwhile, investor interest has spread to other metals. Another Goldman report said copper and zinc should hit new highs by mid-2010. It predicted that copper, now at about $7,100 a metric ton, will reach $8,100 and that zinc, at about $2,400 a ton, will rise to $2,600.
WHAT RECOVERY? This doesn't look good when we're being told the economy is on the mend. The luxury home builder Toll Brothers (TOL) lost $111.4 million in its fourth quarter, about 68 cents a share, and the stock sank. The loss was blamed on one-time costs to reduce the value of land holdings and to account for staff cuts; TOL argued that its daily business is nearly break-even.
But it still doesn't bode well for an industry that has benefitted from lavish attention from Uncle Sam in the form of a tax credit for first-time home buyers. The credit was due to expire Nov. 30 but was extended and expanded to include a $6,500 credit for existing-home buyers.
VIX VAPOR: Macro Risk Advisors said stock market volatility is headed down. So it advised people to buy puts in the Chicago Board Options Exchange's volatility index, the renowned VIX. It said the VIX, which closed Friday at 21.25, may fall below 20 for the first time since August 2008. Macro said the puts for December and January expirations are a deal.
OH, GREAT: The debt checker, Fitch Ratings, estimated that advertising will enjoy only a mild rebound in 2010, with some media sectors doing better than others. A report from analyst Mike Simonton and Jamie Rizzo argues that newspapers and most consumer magazines will see continued ad declines because business that has gone to new platforms isn't coming back.
Fitch believes radio revenue will be down while TV stations, both broadcast and cable, will improve. Overall, it expects audience fragmentation to continue being the rule.
In addition, Fitch offered the prediction that one of the four broadcast networks will ditch the airwaves and become a cable station as early as 2011. The most likely candidates for that are NBC, now under the control of Comcast (CMCSA), or Walt Disney's (DIS) ABC.
BUFFETT'S BUYS: The Web site tickerspy.com, which does an excellent job chronicling the investment moves of Warren Buffett, reports that the Omaha sage made several moves during the third quarter besides acquiring Burlington Northern Santa Fe (BNI). Buffett's Berkshire Hathaway (BRK-A) added to stakes in waste manager Republic Services (RSG), Nestle (NSRGY), Travelers (TRV), Exxon Mobil (XOM), Wells Fargo (WFC) and Wal-Mart Stores (WMT), tickerspy said.
It said Buffett trimmed shares of Moody's (MCO), health insurer WellPoint (WLP), power wholesaler NRG Energy (NRG), SunTrust Banks (STI) and ConocoPhillips (COP) while selling out of hydraulics manufacturer Eaton (ETN) and vehicle control systems maker Wabco Holdings (WBC).
CLOSING QUOTE: "All of the savants on commercial real estate, with depth of experience like Wilbur Ross and others, have found it appropriate to comment on the demise of commercial real estate. You'll find their comments are almost directly inversely related to their knowledge of our industry." -- Sam Zell, chairman, Equity Group Investments LLC and chairman of Tribune, who perhaps has a newfound appreciation for sticking with what he knows.