Thoughts on Markets

Wednesday, June 18, 2008

The War on Gold Continues - Cracks in the Power are coming




Both silver and gold are moving upward over the last 24 hours.Silver is at 17.23 and gold 885.90 as this is written. We have had some good buying opportunities in mining stocks with the correction earlier this week.DRD Gold (DROOY) is languishing at 6.60 today, Harmony (HMY) 10.96, and Vista(VGZ) 3.60.These are in a buying range for many of us.

Since March, each time the price of gold has exceeded the 20 and/or 50 day moving average, the cartel fighting the price of precious metals has swung the ax on the price pushing it back down. At some time in the future, they will lose their power. This will occur when more and more of the late lemmings rush to get on the precious metals band wagon.

By the way, please, heed my warning about the time lag between purchases of GLD and SLV shares and the resulting purchase of the metals in concert with the shares. The article by Ted Butler, sent out yesterday, had the facts on this subject. I prefer www.everbank.com Metals Select and www.goldmoney.com gram accounts as safer.

Ever Bank was formally the Mark Twain Bank and offers a number of good services. Investigate and make your own decisions on every type of places for emergency funds, investments, and ready cash.

From The Daily Pfennig:
"OK, some of you might not know what I'm referring to there... But basically, the Fed has opened Pandora's Box of bad bonds for collateral. That's right... All that debt that the lenders banks and brokerages had on their books and causing the write-downs has been given to the Fed as collateral, thus making the Fed a "junk bond" house...

Government watchdog, John Williams of Shadow Stats tells us that... "Illiquid collateralized debt obligations - including mortgage-backed securities now total in excess of 20% of the collateral backing the Federal Reserve Notes.""

From Casey's Resource Plus:

"“Gold,” Phillips wrote, “is reacting to the disappointment of the G-8
conference at the weekend where some sort of agreement was hoped for to ensure a strong $, but none came. Instead more words left the market in the air. Now the $ is slipping, while still in its trading range of $1.53 to $1.59 against the Euro. But with no action impending where to now?” he asks. His answer: “With Joseph Lieberman about to reveal what regulations he proposes this week we are entering an environment where 'stability' is to come from regulation. That shows for sure we have entered crisis days. This can only be positive for gold and silver.” We don’t know if Phillips has nailed it, but for certain we are equally skeptical whenever government proposes to stabilize volatile markets through regulation. That it has never worked well in the past seems a lesson lost on those with their itchy hands on the levers of power. Brien Lundin, editor of Gold Newsletter commented that, “It's true that some of the recent economic data are pointing toward a slowing economy, and some are predicting that the resulting lower consumption will act as a drag on the price of gold and other commodities.” However, he added, “inflation is first and foremost a monetary phenomenon, and the market is now recognizing that the Federal Reserve will be unable to fully launch a tight-money campaign while the economy remains so weak -- and during an election year,” he wrote."

We see the fact that the strong dollar rhetoric is just that: hot air! The recent news on the economy is not encouraging at all; therefore, the Federal Reserve remains firmly nestled on the horns of the same dilemma upon which it has rested since it created the paper money it was designed to produce. While it was begun to bring stability to the dollar, it has consistently devalued the dollar.

Remember un-backed paper currencies have value only through the power of governments to force their use for all debts public and private and the acquiescence of citizens to accept it.

Back to Christian Economics:

What is savings? Most would answer that it is a pass book account at a local bank, cash in a money market account, a checking account, an IRA, or a 401 retirement account. However, in economic terms it is foregone consumption.

What is Christian about this definition? Certainly, it is not explicitly in the Bible, but that does not make it invalid. What in the Bible supports this definition?

Looking back on Genesis, we are told that God created all that we are and see about us. As Creator, He is the owner. Ps. 24:1 re-enforces this, as follows: "The earth is the Lord's and all it contains, the world, and those who dwell in it." Check Ps. 100:3, "Know that the Lord Himself is God. It is He who has made us, and not we ourselves; we are His people and the sheep of His pasture." Then there is Ps. 50:10-12, "For every beast of the forest is Mine, the cattle on a thousand hills. I know every bird of the mountains, and everything that moves in the field is Mine."

Even the earthly makers or creators of things are the owners, thereof. This is true of the owners of businesses who employ workers to produce products for them. Even more so, the ownership of all He created is property of the Sovereign God of all. Every single thing, every animal, every plant, and every person belongs to God.

In Genesis, we are told that man was His highest creation was given a soul and a mission to multiply and subdue the earth (Gen.1:28). Under God, man was to bring godly order to the entire earth, but he was to recognize God as the owner of all, even himself and his offspring.

In Matt. 25:14-30, we find the Parable of the Talents. You will recall that a master (a picture of God, Himself) gave 5 talents to one servant, 2 talents to another servant, and 1 talent to another servant. Each of the servants with the 5 and 2 talents were good stewards and earned a profit for their master which they gave him as he returned home. The servant with the 1 talent was a slothful steward and simply returned the 1 talent which had been entrusted to him. The other two servants were rewarded with "Well done, good and faithful slave." words from the master, but the unprofitable steward was cast out "into the outer darkness; in that place there shall be weeping and gnashing of teeth."

We, as these servants or slaves are to be faithful stewards of what God has entrusted to each of us. He gives us life, ability, and tasks to enable us to care for our families. Ultimately, it is He who owns and we are his stewards.

I hope you fully understand this, every time you drive "your" automobile, thank Him for allowing you to use it as a steward, not the true owner. That will give you a totally different perspective on the vehicle. You are to care for it as His property which He graciously allows you to use. This goes for everything we hold. Each is a stewardship for which we will be required to give an account to the Master. This applies to the dollars He provides for us through our labors.

To be a good steward of earnings, it is wise to live beneath our means. This is particularly critical during the stagflation of today. Remember, 1 Tim. 5:8, "But if any one does not provide for his own, and especially for those of his household, he has denied the faith, and is worse than an unbeliever." Scary words!

Were we to live simply from pay day to pay day with nothing left over, what would be the result if we lost our job? Thus, we must forgo consumption to build a reserve funds to cover contingencies in the unknown future. I believe this to be imperative as good stewards of God!

Best to each, Doug









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