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Gold/Mining/Energy : Gold Price Monitor -- Ignore unavailable to you. Want to Upgrade?

To: long-gone who wrote (82463)	2/23/2002 10:45:49 PM
From: Secret_Agent_Man	Read Replies (2) \| Respond to of 116753

In a scenario that will send chills up and down Wall Street and Main Street, not to mention the sleek crowd dining out this fine day at Carpaccio, O'Higgins declares "it's not inconceivable" that the Dow and the price of gold could meet around the 6,000 mark, stocks falling from around 9700 and gold appreciating from around US$300 an ounce. The two measures were last even around 850 in 1980, he notes. Since then, the Dow hit a high of 11908 intraday and gold fell as low as US$250, for a stocks-versus-gold outperformance of 50 times. If gold now has the same performance it did from 1968 to 1980 -- rising 24 times to US$850 from US$35 -- it would bring it to roughly US$6,000. Under this "inconceivable" scenario, an ounce of gold prevention would indeed be worth a pound of cure. O'Higgins' ounces of prevention are in five gold stocks: AngloGold Ltd., Gold Fields Ltd., Newmont Mining Corp., Goldcorp Inc. and Placer Dome Inc., which he calls "my dog" among the group. "Gold was so discredited it was looked upon as a joke -- out of the question. You could buy the whole industry for US$50-billion. How many things can you buy today at a 65% discount to what they sold at 22 years ago? We're talking something real." Which brings us back to the reality check that O'Higgins believes the consumer is only now beginning to face. The fall in the stock market, where most baby boomers parked the bulk of their pension investments, will ultimately have an effect on consumption, which in turn will slow the economy. "These people can't retire," he says. "They'll have to save more. How much money are they going to have to save to make up for what they lost in the stock market? Now they can only count on fixed-income returns of 2% to 5%. You've got to save a lot more money to reach your retirement goal. I don't know when it's going to start. But reality is going to set in. The numbers are the numbers. "If the consumer gets back to reality, he's going to have to cut back. That's the only thing that's been holding up the economy." So, O'Higgins concludes that a 40% drop in the stock market would represent fair value while demand for gold is skyrocketing -- "especially investment demand." "Anybody can make money in a bull market," he says, looking around Carpaccio. "Very few people can do it in a bear market." Of course, that's where Mike O'Higgins believes he comes in. He and the clients who have entrusted him with more than US$100-million to manage are 20% in gold stocks, 20% short the stock market and sitting on a 60% pile of cash. Despite returning "only" 5.5% in 2001, the 71% return in 2000 insured a strong start in this bear market. (More information can be had by visiting www.ohiggins.com.) Meanwhile, he is working on his next book, about emerging markets, which he says is "well along." Lunch is well along at Café Carpaccio, too, though the crowd has barely thinned out by 3 p.m. We get the cheque -- reasonable despite the 60% northern peso discount -- and make a mental note to be back next year around the same time to apply a reality check on O'Higgins' big call to see if it is as good as gold. finance.canada.com