Gold Staying Above $700
While several gurus are saying that gold is overbought, the price remains above $700. As long as the dollar is under as much pressure as currently, the price of gold should hold fairly firm.
The sub-prime fall out is still evident. Countrywide Lending is apparently laying off another 10,000 to 12,000 employees. The other shoe is dropping in the associated industries of construction and real estate sales, as well as the mortgage companies. How long it will continue is anyone's guess. However, it is not over yet and is likely to continue into at least the next year.
The question of what caused the housing fiasco is answered in spades: The Federal Reserve System here and the other central banks of the world. The low interest rates and abundance of paper currency were the primary causes. Of course, the desire for homes on the part of individuals and the greed of house investors certainly welcomed the liquidity and all dived in. Most jumped on board the train while there was much paper profit to be made without a thought of the longer term consequences of high debt and high cost of servicing the debt. As usual, all looked very rosy for a time. Then realities came to the light and the pressure was on from lower income reducing the funds available to service the debt followed by foreclosures.
This is always the result of the mis-alignment of investments due to the paper liquidity expansion. This can be seen historically by examination of the business cycles of booms and busts caused by excess financial liquidity. The government shouts that "happy days are here again." Businesses see the increase in sales which are there only because of the liquidity pumped into the economies by the central banks. The increase in sales in terms of the various currencies are primarily price inflation due to the increased supply of the currency, not real growth in the economy. The booms always encourage, however falsely, over expansion of manufacturing, storage, and retail facilities. This has always been followed by a contraction of liquidity and the bust.
Of course, the wise business men would not be expanding during the boom, but rather would be cutting costs and saving funds to pick up the bargains during the bust. By this strategy, these would be able to expand at lower cost and be ready to take advantage of the next boom. How many are wise enough to use this practice? Too many are taken in by the perceived "growth" of the economy.
The mining stocks are showing signs of new life. and the general market continues its rise. The DJI is up over 141 to 13270+ and the S&P is up 14+ to 1466+ at present. Gold is 704.40 and seems to be creeping upward. Silver is 12.55 which is higher than recent past, but lags behind the rise in gold. The precious metals will go higher, but there are likely to be many bumps along the way. The Agora Group is calling gold, and to a lessor extent silver, to be the investment of the decade. I look at both metals as means of preserving wealth against a depreciation of the paper currencies of the world.
Gold is up against the Dollar, Pound Sterling, Chinese Yuan, Indian Rupee, Japanese Yen, and the Swiss Franc. By the way, the EURO is worth 1.3830 of our Dollars today. That is a high for some time. It could be a new high, but I am not sure.
Keep your eyes on the Lord and study His word to solve all of life's challenges. His is the ONLY way.
Best to each, Doug
The sub-prime fall out is still evident. Countrywide Lending is apparently laying off another 10,000 to 12,000 employees. The other shoe is dropping in the associated industries of construction and real estate sales, as well as the mortgage companies. How long it will continue is anyone's guess. However, it is not over yet and is likely to continue into at least the next year.
The question of what caused the housing fiasco is answered in spades: The Federal Reserve System here and the other central banks of the world. The low interest rates and abundance of paper currency were the primary causes. Of course, the desire for homes on the part of individuals and the greed of house investors certainly welcomed the liquidity and all dived in. Most jumped on board the train while there was much paper profit to be made without a thought of the longer term consequences of high debt and high cost of servicing the debt. As usual, all looked very rosy for a time. Then realities came to the light and the pressure was on from lower income reducing the funds available to service the debt followed by foreclosures.
This is always the result of the mis-alignment of investments due to the paper liquidity expansion. This can be seen historically by examination of the business cycles of booms and busts caused by excess financial liquidity. The government shouts that "happy days are here again." Businesses see the increase in sales which are there only because of the liquidity pumped into the economies by the central banks. The increase in sales in terms of the various currencies are primarily price inflation due to the increased supply of the currency, not real growth in the economy. The booms always encourage, however falsely, over expansion of manufacturing, storage, and retail facilities. This has always been followed by a contraction of liquidity and the bust.
Of course, the wise business men would not be expanding during the boom, but rather would be cutting costs and saving funds to pick up the bargains during the bust. By this strategy, these would be able to expand at lower cost and be ready to take advantage of the next boom. How many are wise enough to use this practice? Too many are taken in by the perceived "growth" of the economy.
The mining stocks are showing signs of new life. and the general market continues its rise. The DJI is up over 141 to 13270+ and the S&P is up 14+ to 1466+ at present. Gold is 704.40 and seems to be creeping upward. Silver is 12.55 which is higher than recent past, but lags behind the rise in gold. The precious metals will go higher, but there are likely to be many bumps along the way. The Agora Group is calling gold, and to a lessor extent silver, to be the investment of the decade. I look at both metals as means of preserving wealth against a depreciation of the paper currencies of the world.
Gold is up against the Dollar, Pound Sterling, Chinese Yuan, Indian Rupee, Japanese Yen, and the Swiss Franc. By the way, the EURO is worth 1.3830 of our Dollars today. That is a high for some time. It could be a new high, but I am not sure.
Keep your eyes on the Lord and study His word to solve all of life's challenges. His is the ONLY way.
Best to each, Doug
posted by Doug @ 9:18 AM
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