Thoughts on Markets

Tuesday, June 03, 2008

A View of the Economy Through Clear Glasses

Look at the significant drop in the prices of silver and gold as the NY trading began. Isn't that interesting. Certainly, there is no collusion or manipulation in these markets, is there? Simply the simple market forces at work. Perhaps, even a few deep pocket investors are using derivatives to crush the prices. Whatever/whoever is at work is doing a job on the precious metals and this may well continue through the summer.

Fall and winter are the times when the demand for precious metals really begins to push prices upward. We are facing the difficult months immediately ahead. The mining stocks are being hit quite hard this morning. Though it is early to determine how the day will play out, we should look for the potential opportunity to pick up a few more shares very cautiously today. We should be patient, but look for the best opportunities.

DRD Gold is experiencing a strike at a major mine, and the price may get close to $7 which I would consider a time to add to my holding. You must evaluate your portfolios to see what you should do. DRD (DROOY) last trade was at 7.96. That is a bit high for me, because I have a substantial stake in DROOY already and would be looking for lower price before adding to it.

Silver is down to 16.71 and gold to 883.50. The last tick was down, so we could see lower prices today.

Here is the 10 year gold graph. The recent corrections are not significant in the long term. We must maintain the long term perspective.

The DJI were down triple digits yesterday and are off 13 at this time. The DJI are at about 12490 which is not good. Using the Dow Theory, we have yet to see a confirmation by the Transportations which are setting an upward example for the market. They remain strong! I would suggest, that much transportation of goods these days has switched from trucks to rail in face of the high cost of diesel fuel. Certainly, the long hauls are handled more efficiently by rail.

Looking at the thriving economy without the rose colored glasses, we see the airlines taking the high fuel prices on the chin. American Airlines is to take a cut of 12% in capacity and reduce the workforce accordingly. The bankrupt Delta and Northwest are to merge and cut costs. Turning to the banking industry, we see more of the same.

Wachovia's CEO was asked to resign and Washinton Mutual made a change at the top. There is a rumor that Lehman Brothers is about to report a loss, the first since going public.

The housing bubble is still losing air as prices continue downward. Consumers are in a double bind with prices at the pumps still rushing toward $4 and above, and with food prices escalating very rapidly.

By the way, I have been getting extra large eggs for $1.09 at the Commissary. About four or five weeks ago they were 1.69, then they dropped to 1.24, and last Saturday were still $1.09. If anyone knows why, I would like to know. My thoughts are that the producers are using White Leghorns which lay almost every day. Is there a way to "milk" more eggs from chickens these days?

God's Way of Debt:

Last time, I discussed some of the aspects of debt from the view of the borrower. Today, let's examine some of the laws and concepts for the lenders.

In Exodus 22:25-27 we find a passage that is almost identical to the following found in Leviticus 25:35-38: "Now in case a brother (countryman) of yours becomes poor and his means with regard to you falter, then you are to sustain him, like a stranger or a sojourner, that he may live with you. Do not take interest from him, but revere your God, that your brother may live with you. You shall not give him your silver at interest, nor your food for gain. 'I am the Lord your God, who brought you out of the land of Egypt to give you the land of Canaan and to be your God.'"

Thus, help for or loans to members of the Covenant are to be special. We are not to profit from such. We should willingly supply the necessities for a brother or sister in the faith. The early church, in the Book of Acts, did this as an example for us.

Acts 4:32-37: "And the congregation of those who believed were of one heart and soul; and not one of them claimed that anything belonging to him was his own; but all things were common property to them. And with great power the apostles were giving witness to the resurrection of the Lord Jesus, and abundant grace was upon them all. For there was not a needy person among them, for all who were owners of land or houses would sell them and bring the proceeds of the sales, and lay them at the apostles' feet as any had need. And Joseph, a Levite of Cyprian birth, who was also called Barnabas by the apostles (which translated means, Son of Encouragement), and who owned a tract of land, sold it and brought the money and laid it at the apostles' feet."

This passage has often been interpreted to mean that all property was commonly owned by all, but that is far from the truth. The wonderful fellowship and love that the church members had for each other was such that as a propertied individual saw an unfulfilled need of another, he would willingly provide available funds to meet the need. If he did not have the funds, he would sell property to meet the need. This was a totally voluntary, gracious act which many members sought opportunity to come to the aid of others.

Were this to be true in the churches of today, there would be no need for any believer to eat at the tough of the governmental welfare system. Welfare for members of the churches would be handled by the household of faith.

This was God's way of caring for the pour among us. More on this in the next posting.

Best to each, Doug


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