Global Income Fund, Inc. (ETF) is an AMEX listed security that has been trading in a range between $3.78 and $4.38 over the past year. With 7,393,570 shares outstanding, a recent price of $4.05 gives a total market capitalization of $30,017,894. While there are certainly larger companies, Global Income Fund, Inc. (ETF) has definitely earned its place in the pack. Last year, Global Income Fund, Inc. (ETF) created $0.33 in earnings for every share outstanding.
Global Income Fund, Inc. (ETF) is currently priced by the market at 12.20 times last year’s earnings. Many trading multiples around the world are quite attractive these days, but don’t be fooled. A Price to Earnings ratio of 0 simply means that the security didn’t make any money last year.
With a share price under $50 a share and earnings per share below $1 a share, Global Income Fund, Inc. (ETF) could be an interesting value proposition.
Showing posts with label ETFs. Show all posts
Showing posts with label ETFs. Show all posts
Sunday, July 15, 2007
Tuesday, June 19, 2007
Investment Opportunities in Precious Metals
The prices of gold, silver, platinum, and palladium have been on a tear for the past few years. The big profits for "gold bugs" have easily out-paced the rest of the market. How do you get in on the excitement without losing your shirt? Consider investing in a precious metals mutual fund or an ETF. While the usual warnings about avoiding hefty expense ratios still apply, the big risk with investing in gold and silver is insufficient diversification.
It makes plenty of sense to diversify your investment exposure across a wide array of positions. You need to understand that gold and other precious metals are almost completely unlikely to beat the broader market over any long period. This is because the long-term price potential that these commodities can rise to are strictly limited.
Gold and silver are famous for their use in ancient coins, but these days most gold and silver goes for industrial purposes. Precious metals are important components in computers and other electronics. These industries are enormously price sensitive. If the price of gold somehow rose to $1800 an ounce, manufacturers would use other materials. This would drive the demand for gold through the floor, making investors who foolishly bought at the peak big losers.
Commodities in general have been hot for several years now, but the long-term trend is actually downward. Improving technologies and increased competition have made it easier to extract more gold more quickly.
The reason gold is so expensive is its tremendous scarcity. All of the gold ever refined anywhere on Earth would form a giant cube just 66 feet on a side. That may seem like a lot, but compare that with millions of tons of other industrial metals like iron that are refined every year.
Production of precious metals and gold in particular is highly localized. Nearly 80% of the world's gold production since 1900 has come from South Africa. Even within a large, diverse country like the United States, almost all production has come from just 3 states.
Mutual funds and ETFs are clearly the way to go if the commodities boom continues to take precious metals higher. Just don't make the mistake of investing too much in gold or silver. These lustrous metals look shiny, but in twenty years their cumulative returns will be anything but stellar.
It makes plenty of sense to diversify your investment exposure across a wide array of positions. You need to understand that gold and other precious metals are almost completely unlikely to beat the broader market over any long period. This is because the long-term price potential that these commodities can rise to are strictly limited.
Gold and silver are famous for their use in ancient coins, but these days most gold and silver goes for industrial purposes. Precious metals are important components in computers and other electronics. These industries are enormously price sensitive. If the price of gold somehow rose to $1800 an ounce, manufacturers would use other materials. This would drive the demand for gold through the floor, making investors who foolishly bought at the peak big losers.
Commodities in general have been hot for several years now, but the long-term trend is actually downward. Improving technologies and increased competition have made it easier to extract more gold more quickly.
The reason gold is so expensive is its tremendous scarcity. All of the gold ever refined anywhere on Earth would form a giant cube just 66 feet on a side. That may seem like a lot, but compare that with millions of tons of other industrial metals like iron that are refined every year.
Production of precious metals and gold in particular is highly localized. Nearly 80% of the world's gold production since 1900 has come from South Africa. Even within a large, diverse country like the United States, almost all production has come from just 3 states.
Mutual funds and ETFs are clearly the way to go if the commodities boom continues to take precious metals higher. Just don't make the mistake of investing too much in gold or silver. These lustrous metals look shiny, but in twenty years their cumulative returns will be anything but stellar.
Gold
The relentless advertisements from companies eager to sell precious metals do a great job creating interest in the market for gold, but there are many considerations before any commodity should be purchased. Investors need to consider their objectives and willingness to take on risk.
Gold and other commodities are quite distinct from many of the stocks and bonds that should make up the lion's share of most portfolios. While stocks can lose all their value if the underlying company goes bankrupt and bonds go into default every day, gold will never be worth nothing. At the same time, price run-ups in excess of 300-400% simply will not happen in the lifetime of someone purchasing today. This is wildly different from stocks which can consistently rise 10% a year with no appreciable harm to its inexhaustible long-term potential. If gold is trading at historically high levels, it may certainly rise to a new plateau, but it will not turn a pauper into a prince.
Gold is primarily valuable as a hedge against inflation. Unfortunately, just as gold is sure not to lose as much value as other investments might, gold will probably not create substantial wealth over the long term.
Many investors worry that the stock market does not always rise. There have been ten year periods in recent American history when the stock market did not rise at all. But gold isn't immune to this sort of risk. In 1980, at its all-time high, gold sold for $850 an ounce. Nineteen years later, gold traded for under $253 an ounce. Luckily for recent investors, gold has since rebounded back up into the vicinity of $700 an ounce. It's generally not fair to use data from market highs to demonstrate that if you have exceptionally bad timing, you can lose money in any market, but the general point with gold is that it will not make you rich.
If all that glittering gold still holds your interest, consider investing in the companies that mine for gold. Many of these companies use derivatives to reduce their exposure to losses caused by a decline in the value of gold, so they don't serve the same function as gold itself. Rather, these companies benefit from rising worldwide demand for gold in electronics and jewelry. Given gold's unique physical properties, even just the use of gold for electronics is likely to ensure the success of these companies. And the rise of a substantial middle class in India and China will spur tremendous demand for jewelry made of this precious metal.
Just be careful to disregard price to earnings ratios when evaluating mining stocks. Mining companies should be valued on the basis of how much gold is in the ground. Right before the deposit runs out, most mines are running at peak profitability. Make sure exploration continues or you could end up with an empty mine that made a great deal of money last year for someone else.
Gold and other commodities are quite distinct from many of the stocks and bonds that should make up the lion's share of most portfolios. While stocks can lose all their value if the underlying company goes bankrupt and bonds go into default every day, gold will never be worth nothing. At the same time, price run-ups in excess of 300-400% simply will not happen in the lifetime of someone purchasing today. This is wildly different from stocks which can consistently rise 10% a year with no appreciable harm to its inexhaustible long-term potential. If gold is trading at historically high levels, it may certainly rise to a new plateau, but it will not turn a pauper into a prince.
Gold is primarily valuable as a hedge against inflation. Unfortunately, just as gold is sure not to lose as much value as other investments might, gold will probably not create substantial wealth over the long term.
Many investors worry that the stock market does not always rise. There have been ten year periods in recent American history when the stock market did not rise at all. But gold isn't immune to this sort of risk. In 1980, at its all-time high, gold sold for $850 an ounce. Nineteen years later, gold traded for under $253 an ounce. Luckily for recent investors, gold has since rebounded back up into the vicinity of $700 an ounce. It's generally not fair to use data from market highs to demonstrate that if you have exceptionally bad timing, you can lose money in any market, but the general point with gold is that it will not make you rich.
If all that glittering gold still holds your interest, consider investing in the companies that mine for gold. Many of these companies use derivatives to reduce their exposure to losses caused by a decline in the value of gold, so they don't serve the same function as gold itself. Rather, these companies benefit from rising worldwide demand for gold in electronics and jewelry. Given gold's unique physical properties, even just the use of gold for electronics is likely to ensure the success of these companies. And the rise of a substantial middle class in India and China will spur tremendous demand for jewelry made of this precious metal.
Just be careful to disregard price to earnings ratios when evaluating mining stocks. Mining companies should be valued on the basis of how much gold is in the ground. Right before the deposit runs out, most mines are running at peak profitability. Make sure exploration continues or you could end up with an empty mine that made a great deal of money last year for someone else.
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