Thoughts on Markets

Thursday, June 05, 2008

Summer Doldrums - More on Debt



The graph of silver shows that silver is gaining a good bit of interest. The supply is low and the demand is high. Without the manipulation by the big money and derivatives, we would see much higher prices. I believe that in the longer range, silver may percentage wise out perform gold. Gold is at 873.60 with the last tick down, and silver is at 17.02 on an up tick. We are, without a doubt, bogged down in the summer doldrums. We should expect both to be in a trading range for 3-5 months.

Here is the graph on GDX (Gold Miners). It is up from the lows of late April and early May. The price has moved below both the 50 and 200 day moving averages. This is typical of summer months. We will have to see it push near 47 to have any real change. Patience is the name of the game, as difficult as that is for most of us.

The mining stocks are mixed today. About 50% of the ones I follow are up. Particularly, DRD Gold (DROOY) @ 7.67 and Harmony (HMY) @ 11.53 are attractive. However, most will remain in a narrow trading range until the fall. Use great caution in making any purchases.

Daily Pfennig reported that recent surveys of U. S. consumers indicated that 9/10 are lowing life style and 2/10 are considering moving closer to work. These results certainly track with what I know that each of us sees as we shop. With gasoline nearing $4, consumers have reduced their driving and moving closer to work may be one solution.

In San Antonio, we have seen recent improvements in apartments and condominiums near heavy business areas; such as, medical centers and central city. Makes sense if the price is right and one can leave the rural and other housing areas. However, I see the lack of a yard a draw back from such locations. Another draw back is the closeness of neighbors, many of whom one could do without very easily.

I believe we are all beginning to see the inflation and recognizing that it does have an impact on our life style. Shopping and paying utility bills is particularly challenging. Oil prices have backed off a bit which is a help, but it is still a shock to feed my Dodge Durango at the pumps.

More on the biblical view of debt:

Yesterday, we looked at the Sabbath of debt demanded by scripture. It seems to be mandatory for lenders and implicitly obligatory for borrowers. Regardless, this is a conservative and important concept. We are to give up normal business and other activities to observe the weekly Sabbath, now the Lord's Day. Therefore, a Sabbath from debt is a great idea, as well.

Another important principle is found in De. 24:10-13, as follows: "When you make your neighbor (brother in the faith) a loan of any sort, you shall not enter his house to take his pledge, you shall remain outside, and the man to whom you make the loan shall bring the pledge out to you. And if he is a poor man, you shall not sleep with his pledge. When the sun goes down you shall surely return the pledge to him, that he may sleep in his cloak and bless you; and it will be righteousness for you before the Lord your God."

The pledge of the cloak is a given by the poor brother as a surety or collateral to guarantee the re-payment of the loan. This has implications for both the lender and the recipient of the loan.

The one who has borrowed the amount of the loan is seen as a poor brother to the lender. Since he is poor, he likely has only one cloak. It should be recognized that he has only one pledge to give as surety for a loan. Therefore, wisdom would tell us that he could borrow from only one source. That is a great rule for us to follow!

Multiple loans require multiple payments and as payments are missed, it leads to multiple demands for payment. Many times, I have attempted to help families who are deep in debt. Upon looking over their finances, I found that they had mortgage for a home, loans for a vehicle (often two), loans for furniture, and multiple credit card debts. The demands for payment come from many sources and the family is faced with ever increasing debt and engages in the process of robbing Peter to pay Paul, in an attempt to satisfy the loudest demands for payment. This is the plight of too many people in an inflationary environment and is simply the result of attempting to live beyond their means. Believe me, it is a long row to hoe to rectify this situation. The rule, "Borrow from only one source!"

On the lender's side, he is cautioned, once again in concert with the prior post, not to profit from the loan to a brother in the faith. He is not to profit from interest or, in this case, from use of the surety. He is not to deprive his brother of essential use of the cloak he has taken as surety. Were he to keep it over night for his own use, he would be profiting from his loan to the brother. This is forbidden.

Further, there is the manner of dealing with his poor brother. He is not to burst into his brother's house to demand the cloak. Rather, he is to wait outside for his brother to bring the cloak out to him. He must respect his brother in the faith, because he is within the covenant and deserves to be treated as a child of God. Of course, his brother could invite him in while he gets the cloak. That would be both parties to the transaction showing respect for one another which is appropriate.

The lack of respect is very often displayed today in the manner in which cars are forcibly removed from delinquent borrowers. This is often done without the borrowers knowledge. What kind of God honoring respect is being shown through such actions? God will balance the books in the end, and we must always be aware of His coming judgment. That will be totally, absolute righteous judgment, as is always the case with our God.

More on the next posting.

Best to each, Doug

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