America's Business is War

Richard Russell said that America's business is war. All of us hate war, but there is a lot of truth in his statement. For investors, this should mean to investigate defense and aerospace stocks. Richard suggests PPR which covers defense and aerospace. This, to me, seems to be an excellent idea!

The impact of America's historical and current business necessitates government spending. Of course, with the consumers maxed out with debt and rapidly losing value in their homes, their spending should be slowing. America is continuing the on the course of greater spending by the federal government pursuit of it's business. We are in a period in which one should expect ever greater inflation. The impact on the dollar will be an even greater loss of purchasing power.

Therefore, it seems that the damage to the dollar will receive greater recognition by foreigners. While some smaller countries have been bailing out of dollar reserves, there has been little impact on the dollar. When will some of those holding greater amounts of dollars, take the leap to escape an increasing loss of value. It is very likely that there has been some stealth bailing which has gone unnoticed by the media.

The run up of gold last week to 27 year highs is a precursor of a run to at least 800 before next year. We may be treated to an all time high by year's end or at least early next year. Gold is trading at 744.70 at present. An additional demand for gold will come about as the lemmings join in the party and create the third wave of the balloon in gold.

One must be very careful about what he wishes for, because there will be consequences. The consequence of higher prices for gold will be reflected in the price of all energy, food, clothing, and all the other consumables which we consider to be essential. It will mean a lower standard of living in America. Discretionary spending will drop like a rock. Price Inflation will escalate as a result of Inflation of the dollar.

We are already experiencing price inflation as we shop. Gasoline at the pumps has had a small reduction in the last weeks, but crude is above $81 now. That will trickle down to impact us as we fill the tanks. We are also moving into the time of the year when heating will be important and it is very likely to cost more this year than last.

What should one do? Each of us should pay off as much debt as possible and reduce discretionary spending. It is very important to put aside extra dollars to cover necessities and emergencies. After all, we should not concentrate all attention on seeking additional income. The most important part of personal and family finances is foregoing consumption to build up funds left over after all the bills and expenses have been paid. Don't focus on how much you can save by making bargain purchases. Rather focus on how much you can save by avoiding the purchase all together. Bargain shopping for absolute necessities is essential, but we should avoid making unnecessary purchases.

God's word provides great insight into frugality, wise spending, management of debt, and all activities of life. Read, study, and meditate on His word for all answers of life. The most important question for every one to face is as Jesus asked His disciples, "Whom do you say that I am?" The good news of His word is that all who truly seek Him will find Him and become one of His. The greatest discovery of all is that the Holy Spirit does the work within you to bring from the death in the sin nature you inherited from Adam into the eternal life in our Lord and Savior Jesus Christ.

Best to each of you, Doug

Fed Sacrificing the Dollar to Save the Economy

The dollar is in uncharted territory (low that is). It is at a 15-17 year low. From the "Telegraph UK," came the headline "Fear of dollar collapse as Saudis take fright." It reports that the Saudis with a mountain of dollar instruments may be giving up the peg of their currency to dollars and moving away from dollar reserves.

Iran has reported moving away from the dollar. Dubai is using dollars to buy 20% percent of the NASDAQ. This is a proposed purchase of the system and not the index. Thus, the country is moving to use some of their dollars.

Gold closed the week at $731 and remains in a healthy bull market trend. Silver at $13.49. Both were below their highs for the week, still in an upward trend. With silver at 13.49, the silver content of a pre-1965 U.S. dime is worth approximately 13.49 X 0.72 X $0.10 = $0.97128. Wow, it is now worth almost a dollar. One can find these at flea markets from time to time. Perhaps, the seller does not know of the silver value in the coins, so bargain with the seller before purchasing.

The mining stocks were up for the week, but also below their highs. The Dow was well up. The Federal Reserve move lowering interest rates was welcomed by the general market as well as commodities and real money. The Dow is likely to continue upward for the time being. However, caution should be used, because a correction seems overdue at this point in time. We almost never see anything increase in value without some corrections along the way.

I still suggest the use of trailing stops on stocks.

It is now the seventh day of the week, and I look forward to corporate worship tomorrow. This is a joyous occasion for the people of God. We meet together to fellowship in worship of King Jesus as all should do. If you do not, you do not know what you are missing. We live in the peace that passes all understanding on the human level even when things on earth seem to be falling apart. What a wonderful peace comes from knowing and depending upon the Sovereign ruler of all.

Best to each, Doug

Who is Manipulating Currency Now?

The Federal Reserve's lowering of interest rate by 1/2% screamed loudly in investors' ears. The DJI moved up two days in a row. Some 300+ on Tuesday and 60+ on Wednesday on good volume. "Happy days are here again!" (The DJI is off 11.47 now.) The move on Wednesday was quite a bit quieter though. Perhaps, investors are beginning to think about the long term impact on the dollar. If, as expected, more interest rate cuts during this last quarter of 2007 come to fruition, the dollar will drop even further.

By the way, the Consumer Price Index (manipulated by government economists) showed a drop of 1%. Wow, no inflation! How wonderful! But wait, what do you see as you shop? Are not prices rising? The least expensive hair cuts have gone from $4.95 to $10.00 recently here. I, also, noticed that eggs, which were about $0.99 a few weeks ago, are now from $1.25 to $1.59. But I am so happy that there is no inflation in prices I must pay. At least, the government is telling me I should be happy.

The EURO is above $1.40. Gold began a rise over night and is now at $734.40 (26+ year high). Silver has responded and moved to $13.28. Silver still lacks the percentage move of gold, but should begin to follow more closely as gold rises. The base metals are up with copper moving toward a new high.

The housing bubble is still showing signs of the continuing saga of trouble. Realty Trac of Irvine, CA reported August notices of default to home owners was up 50% for July to 108,716 about 2 1/2 times last year's 42,144.

Also, it should be noted that housing starts were off 2.6% in August and building permits were off by 5.9%. These are the lowest since June of 1995.

Our national and personal debt is at all time high. It takes about Billion Dollars a day from foreigners to support our debt and spending binge. How long will they continue to support us with a depreciating currency? Iran just switched out of dollars to other currencies as their reserve. How soon will others follow? They will, we all know. Only the Lord knows when, though.

Keep depending upon the Lord for successful results of all your plans.

Gold is $734.60 now. See, it does retain purchasing power better than any paper currency.

Best to each, Doug

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

Gold Bounces Around

For the last 24 hours, gold has bounced between a low of about 711.25 to a high of about 721.10. Thus, it has again threatened the 2006 high of 728.18. It has had every opportunity to exceed that high, but is yet to accomplish the climb fully. Once it does, we can expect it to go higher. Today, it could be waiting for the decision on interest rates. Meanwhile, let's look at different areas.

October crude was up 1.47 to a new all time high of 80.57 yesterday. Goldman Sachs predicts it will be 85 this year. That should put a further damper on consumer spending. More expense at the pumps and for heating will give less spending dollars in the hands of consumers. Retail sales should suffer as a result, because many consumers are maxed out on credit.

Speaking of consumers, how about the run by consumers (depositors) on London's Northern Rock! It is reported that police were called in to keep peace as the mobs stormed the bank to redraw their sterling cash. This should remind one of the history of the "great depression" here in the 1929-1930 era. Why does this happen?

It's due to the fractional banking system which allows banks to create currency out of thin air. They are required to hold only a small portion of deposited cash to cover the required reserve percentage. The rest can be loaned out. Thus, they have more currency to lend than actually on hand. They succeed at this until there is a run on the bank and depositors discover that there is not enough paper currency to pay off ALL depositors. First come, first serve. To save the banks, more of the currency is pumped in by the central bank, the amount of withdrawal is limited for the depositors, or withdrawals are only allowed over time. Any such "remedy" penalizes those with deposits in the bank. Those early to the bank at the first hint of problems, get their full deposited cash back. The later folks do not. I pray that this does not happen here.

Most Americans depend upon the Federal Deposit Insurance Corporation program to cover their deposits. Believe me, there are many more dollars on in depositors' accounts than can be covered by the FDIC. Last I heard, it was about $0.05 on the $1. It is likely much less now.

Of course, the bank run in London is fall out of the serious housing bubble collapse in Britain. It is apparently worse than here for the time being. Ours in not over either, though!

The mining stocks are slow to catch up with the price of gold. We should also notice that silver is lagging behind the run up in gold, as well. Gold is down to 713.70 as this is written. It seems to be in a consolidation period which is likely to be followed by another upward surge. The question is when? Our patience is once again being tested.

Remember that all is in the hands of THE Lord of all. His are really the good hands protecting and giving peace to His people.

Best to each, Doug

Is Gold Over Bought?

Gold has run up very rapidly. It is up 34.50 (+5.15%) over the last 30 days and up 116.80 (+19.88%) over the last year. The 30 Day Gold graph from www.kitco.com clearly shows that the run up in price was significant. Long term, it confirms the bull market in gold. We may be in for another correction, but I believe that it will be short lived and a small blip on the 10 year chart displayed a few posts ago.

The overnight and early morning trading in gold has moved the price down to 705.40, a drop of $6.00. This has caused the mining stocks to back off some, but they are still well above what they were just two weeks ago.

Over the next few days, the market will reveal to us the short term direction. In the meantime, we must focus on and maintain a long term view. After all, we are in for the long haul and plan to sell the mining stocks during the third phase of this bull market. Then, we will have funds to pay off any remaining debt and to purchase assets at bargain prices when the bubble bursts.

The dollar lost more ground against the EURO over night. The EURO sprinted to a new high of $1.3904 and seems to be headed to above $1.45 by year end. Wow, this upstart currency is really kicking its way through a succession of new highs as the dollar loses more purchasing power.

There is more evidence that foreigners are diversifying out of dollars. Very likely some of the dollars have gone into gold, but the banks and large investors are going into other more stable currencies. Remember none are truly stable as they are all unbacked paper and have value only in relation to other currencies.

It is the time of year when the residents of India really get into buying gold. The high price does not seem to deter their buying. This is a yearly event and is just beginning for 2007. That will tend to stabilize the price. Thus, there will be strong buying of gold. The ETF in gold (GLD) has been adding tons of gold to its holding as more investors have climbed aboard.

Crude oil is rushing toward $80/barrel. Rumors of a military strike on Iran abound. Check this

http://www.newsmax.com/insidecover/iran/2007/09/12/32225
.html?s=al&promo_code=39F7-1

I emphasize RUMORS. I pray that it does not happen. But if it does, consider the impact upon the price of crude oil, gold, silver, and other commodities. We might even have to sell some of our holdings into that type of run up. This is not good news, but we must be prepared for what ever happens and take advantage when we can.

In closing, remember the concept of trailing stops. I use them on much of my portfolio and believe they are a great way to lock in profit and prevent substantial loses.

The news of the day may not all be good, but it is out there and I try to present it to you. It is not intended to be a gloom and doom report, but an honest presentation of the days events. I rest securely in the Lord. This is a privilege which His people have. He has said, "Be still and know that I am God." He is the one and only God of all.

Gold has moved back up to 708, down 3.40 for the day.

Best to each, Doug

Gold Bouncing Around, But still above $700

As this first paragraph is written gold is down a bit to 708.80 and silver to 12.57.

Silver is lagging gold by a substantial percentage. Silver is a critical metal for virtually all electronics manufacturing and is being consumed at a rate which is producing an ever increasing shortage for the metal. The easily found and mined silver has been consumed. Now good silver is harder to find and much more costly to mine. The demand from India and China has made a quantum leap over the last few years. Both countries have and continue to consume a substantial amount of silver. At some point in time, this will have a significant impact upon the price of silver which goes well beyond the depreciation of the dollar. Silver may, due to these considerations, be a better long term investment than gold. However, it will be, primarily, demand driven and not for its use as currency, as is the case for gold.

Thus, I consider silver to be a great investment at the current price levels. Of our two large producers of silver, Pan American Silver (PAAS) and Silver Standard (SSRI), I am invested in SSRI. I like SSRI, because it has, price-wise, performed better than PAAS. In fact, several months to a year ago, the market price of the stock of SSRI sped past that of PAAS. Previously, PAAS had lead SSRI for years. Both are down at present; as follows, PAAS -0.41 to 26.31 and SSRI -0.62 at 34.28.

October crude oil reached an all time high of 78.23 yesterday. This will be clear to us at the pump and in heating oil prices. This happened in spite of the OPEC announced increase in the amount of oil produced. Another critical demand driven commodity, copper surged to 3.3994/lb.

The Realtors announced that existing home sales will decrease by some 8.2%. Recently, in San Antonio there has been an increase in the inventory of homes for sale. One can drive around and see more signs than in recent months. This is happening even though there is the new Toyota plant and Wachovia banking system. These and the supporting businesses kept the housing market alive here beyond the time the housing burst was first being felt.

Gold has lost a bit more to 707.30 and silver to 12.53. Some correction is to be expected as the run up has been significant and very rapid.

We must always trust in the Sovereign God of all to have the peace that surpasses all comprehension. His people enjoy the security that God-given faith provides even in what we see as the worst of times. We know that He is in control and loves us with a love from which nothing can separate us.

Best to each, Doug

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

Spot Gold at 705.80

Here is the 60 Day Gold Graph from Kitco.com from yesterday. The technical indication was that gold was going above 700. Note also, yesterday December gold went to 700. Now gold is at 706.30. Just seconds ago it was at the price indicated in the Title, above.

Those with a long term perspective are currently being rewarded. However, the rhetoric and gold sales may be on the horizon. Governments and central banks don't give up easily. They enjoy the monopoly of paper currencies and fear gold in the hands of their citizens.

Gold must continue above 700 for this move to maintain positive action. Perhaps, we are reaching a higher plateau in the price of gold. Could those who war against gold be letting it stay around 700? Possibly!

Mining stocks are responding nicely to the 700 figure. CDY 1.3799; CEF (not mining, but bullion) 9.51; DROOY 7.09; EGO 5.47; GFI 16.38; GSS 3.55; HMY 10.18; IAG 7.89; KGC 13.32; Kry 3.049; MRB 4.10; NEM 43.79; NTO 5.70; PAAS 26; RNO 5.225; SSRI 34.26; XRA 2.62. They all look promising. I am very pleased that I bought DROOY and HMY on the last dips. Hopefully, you did, too.

Remember the trailing stops. I am currently using 15% trailing stops on much of my portfolio. Suggest that you do the same.

Gold has backed off to 702.80, but the last move was up.

Well, it is a busy day for me, so I'll close. Remember, the Lord's Day is coming. It is important that each of us join in corporate worship our Sovereign King Jesus. Each of us needs to be confronted by the Word of God and to participate in the sacraments.

Best to each, Doug

Gold Striving for $700

Both silver and gold are looking good for the time being. Both seem headed much higher. However, we have seen gold head for $700 only to be pushed back by reported gold sales by central banks or other anti-precious metal rhetoric. Central banks and governments hate gold in the hands of citizens. It simply provides more freedom from the paper currencies of the world which provides governmental monopoly on the circulating thing we commonly call, "money."

Gold is at 689 and silver at 12.88 now. Both are up a good bit from the past few weeks. One must wonder why the prices fail to reflect the loss of purchasing power of the dollar. We would expect gold to be above 875 and silver at least 18. Time will tell.

By the way, I suspect the precious metals are in stronger (longer term investors) hands at this time after the wash out of the last few weeks. We, with a longer term view on precious metals, can wait out most of the corrections and see them as buying opportunities. I am glad to have picked up more DROOY on the last dip. It is now well above my cost over the last two weeks. We must hang tough.

I have learned not to trade in and out on my total portfolio. At times, I will use a smaller batch of volatile stock shares for trading, but never my entire portfolio. Also, I am a believer in trailing stops and am currently using 15% trailing stops. Every time I place one, I ask the Lord to keep it from selling for a long, long time.

The general markets are highly volatile at the present time. They are seemingly bullish, but are having little overall change. As Richard Russell points out, there are buyers who are very bullish and sellers who are equally bearish. Thus, little action to suggest little but up and down in a trading range for the time being.

Sales of existing homes fell sharply. In spite of the assurances from the Federal Reserve and Washington, it seems that more of the housing fiasco is being revealed over time. The dollar has taken serious hits from competing currencies around the world. This has been positive for the precious metals and commodities.

Keep looking to the Lord for wisdom, His wisdom, which is vastly above that of men. Seek His word and follow it. Read the Bible daily. Meditate upon it and follow it for success here and hereafter.

Best to each, Doug