The Shadow Cavalry Arrives With Bugle Blowing!
How can our politicians accuse China of manipulation of currency? Bernanke came in yesterday with bugle blowing leading the cavalry charge to lower interest rates by 1/2% (50 points). Wow! Of course, when we manipulate the dollar, that is OK.
The action was taken, because there is great fear that our economy is not as sound as those in power would like us to believe. With foreclosures accelerating and adjustable rate mortgages putting pressure on consumers, they felt that something had to be done to increase the liquidity. That is, to hopefully save the present day by putting more dollars into circulation. Rather than bite the bullet and let the misplaced investments adjust under the free market with the associated pain, the Federal Reserve has simply postponed the inevitable. The adjustment will come, but it will be worse when it arrives.
More liquidity or more dollars in circulation is the classic definition of inflation. As the supply of unbacked paper dollars increases, prices of virtually everything we buy will increase. Last night precious metals, base metals, oil, and most other commodities jumped up in price. Gold is now at 723.20 up 8.20; silver is 12.99; crude oil burst to above 82 overnight (another new high), and the DJI streaked upward yesterday. Virtually everything rose in terms of the dollar. Thus, the increase in the supply of dollars has greatly lowered the purchasing power of the dollar.
The EURO pushed toward $2 and is now at $1.39+. What will be the action of the central banks around the world as they see their dollar reserves drop in value? What would, or rather will you do in view of the loss of purchasing power of your dollars? They and we must seek a safe store of value to retain wealth. The banks are likely to begin or continue to diversify away from dollars to other currencies. Hopefully, they will do so slowly over time.
Historically, gold and silver (real money) has been one of the major choices of investors in the know. These are a much more stable form of money than the I.O.U.s represented in the paper currencies. Perhaps, we should increase holding in the precious metals on corrections along the way to higher prices.
For the time being, we are likely to see the DJI move up as it did yesterday. However, with such a rapid run-up as yesterday, a correction is on the horizon. The DJI is up 66.82 after about 15 minutes since the markets opened. The substantial increase in volume in the market yesterday certainly indicates strength. Perhaps, as Richard Russell suggests, those with a tolerance for risk could consider call options on the Dow (the DAWs or Diamonds) on substantial dips in the general market.
The mining stocks are really moving in concert with the price of gold. Here are some present prices: AGXM 1.15; CDY 1.32; DROOY 8.17; EGO 53.79; GFI 17.53; GSS 3.57; HMY 11.82; IAG 8.46; KGC 14.68; KRY 2.78; MRB 4.40; NEM 46.82; NTO 5.94; PAAS 27.36; RNO 5.40; SSRI 35.40; XRA 2.96. The Canadian (CEF) which is into gold and silver bullion is at 9.50 now. Remember to keep trailing stops on these, as well as other stocks.
It is wonderful to rest in the power of the living God of all. His remains in control and laughs at the folly of man and governments who forget this fact. His people learn to accept what they cannot change, to be proactive in declaring His word to others, and in making the changes which they can in accordance with His word.
Best to each, Doug
The action was taken, because there is great fear that our economy is not as sound as those in power would like us to believe. With foreclosures accelerating and adjustable rate mortgages putting pressure on consumers, they felt that something had to be done to increase the liquidity. That is, to hopefully save the present day by putting more dollars into circulation. Rather than bite the bullet and let the misplaced investments adjust under the free market with the associated pain, the Federal Reserve has simply postponed the inevitable. The adjustment will come, but it will be worse when it arrives.
More liquidity or more dollars in circulation is the classic definition of inflation. As the supply of unbacked paper dollars increases, prices of virtually everything we buy will increase. Last night precious metals, base metals, oil, and most other commodities jumped up in price. Gold is now at 723.20 up 8.20; silver is 12.99; crude oil burst to above 82 overnight (another new high), and the DJI streaked upward yesterday. Virtually everything rose in terms of the dollar. Thus, the increase in the supply of dollars has greatly lowered the purchasing power of the dollar.
The EURO pushed toward $2 and is now at $1.39+. What will be the action of the central banks around the world as they see their dollar reserves drop in value? What would, or rather will you do in view of the loss of purchasing power of your dollars? They and we must seek a safe store of value to retain wealth. The banks are likely to begin or continue to diversify away from dollars to other currencies. Hopefully, they will do so slowly over time.
Historically, gold and silver (real money) has been one of the major choices of investors in the know. These are a much more stable form of money than the I.O.U.s represented in the paper currencies. Perhaps, we should increase holding in the precious metals on corrections along the way to higher prices.
For the time being, we are likely to see the DJI move up as it did yesterday. However, with such a rapid run-up as yesterday, a correction is on the horizon. The DJI is up 66.82 after about 15 minutes since the markets opened. The substantial increase in volume in the market yesterday certainly indicates strength. Perhaps, as Richard Russell suggests, those with a tolerance for risk could consider call options on the Dow (the DAWs or Diamonds) on substantial dips in the general market.
The mining stocks are really moving in concert with the price of gold. Here are some present prices: AGXM 1.15; CDY 1.32; DROOY 8.17; EGO 53.79; GFI 17.53; GSS 3.57; HMY 11.82; IAG 8.46; KGC 14.68; KRY 2.78; MRB 4.40; NEM 46.82; NTO 5.94; PAAS 27.36; RNO 5.40; SSRI 35.40; XRA 2.96. The Canadian (CEF) which is into gold and silver bullion is at 9.50 now. Remember to keep trailing stops on these, as well as other stocks.
It is wonderful to rest in the power of the living God of all. His remains in control and laughs at the folly of man and governments who forget this fact. His people learn to accept what they cannot change, to be proactive in declaring His word to others, and in making the changes which they can in accordance with His word.
Best to each, Doug
posted by Doug @ 8:16 AM
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