Silver Bars Direct

3 November 2010 107 views No Comment Email This Post

Shayne McGuire is not crazy, nor is he peddling any merchandise. Instead he runs a $330 million gold fund at the Teachers Retirement System of Texas. In his book, Hard Money: Taking Gold to a Higher Investment Level, he lays out the reasons why he expects gold to soar to $10,000 an ounce, as well as the optimal way to construct a gold portfolio using ETFs, gold and stocks to get the best diversification among the 4 precious metals. He also details how to buy physical gold without getting ripped off, and why rare gold coins are an attractive investment option inaccessible to fund managers. Hard Money is not a book about a financial crash, the end of civilization, or storing up food and a mysterious form of wealth for a long, dark financial winter. Rather, it offers an investment strategy to deal with the reality of present financial conditions, conditions that could lead to a dramatic rise in the price of gold.

According the the WSJ:

With gold prices surging this year, his fund is up about 25% since its inception a year ago. For its fiscal year ended in June, the Texas pension fund was up 15.6% overall. The gold fund has half its assets invested in a gold exchange-traded fund, SPDR Gold Trust, and the rest invested in gold stocks.

Gold’s historic run-up was spurred by uncertainty about currencies, fears of inflation and continued monetary easing by the Federal Reserve. Like dot-com stocks in that bubble, which were difficult to value because many companies generated no earnings, gold is hard to value because it produces no earnings or revenue and costs money to store.

“It doesn’t do anything but cost you charges and stare at you,” billionaire investor Warren Buffett said in a recent interview.

There are other gold bulls, of course, including prominent hedge-fund manager John Paulson, who has predicted gold could go to $4,000 an ounce by as early as 2013.

For his part, Mr. McGuire says gold is no longer only for those who think financial Armageddon is near. He expects gold to soar amid rising inflation, among other things. “The world does not need to end for gold to go hyperbolic,” he says.

In his book, Mr. McGuire reasons that $10,000 gold is possible if enough other pension funds and big investors jump-start buying and move as little as 1% of total global stocks and bonds holdings into the metal. Such a migration into gold would equal enough demand to push prices up tenfold from their current level, he calculates.

Of course, the same argument would be true for nearly every other investment class. Mr. McGuire has confidence in his argument, however, because he believes inflation will return, which typically pushes gold prices higher.

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