Thoughts on Markets

Thursday, July 17, 2008

Gold Down Temporarily & General Market Up a Bit

The gold correction came in yesterday's trading. It appeared to be another example of intervention rather than clear market action. Gold is currently on an up tick at 970.20 and silver at 19.07. Both are looking good for the time being. It is early in the NY trading day, but the recovery is moving well.
The DJI gained yesterday after several down days. The gain was not significant, but, nevertheless, a respite from the latest trend. Again, we are early in the day and one day does not necessarily mean a lot. Tomorrow will be the last day before the weekend and will probably reveal much more to us about the direction of the markets.

From the Daily Pfennig today:
I got a big kick out of Senator Jim Bunning, you know the ex-Phillies pitcher (from the 60's!), who sent a hard high one inside to Big Ben Bernanke after Big Ben had asked for more Fed powers the other day... I don't have the space to give you all of Bunning's comments, but here are some of the highlights... Oh, by the way, sure sounds like the good Senator is a Pfennig reader too!

"Thank you, Mr. Chairman. I know we have a lot of ground to cover today, but I want to say a few things on the topic of this hearing and of the next.

First, on monetary policy, I am deeply concerned about what the Fed has done in the last year and in the last decade. Chairman Greenspan's easy money the late nineties and then following the tech bust inflated the housing bubble and created the mess we are in today. Chairman Bernanke's easy money in the last year has undermined the dollar and sent oil to new record highs every few days, and almost doubling since the rate cuts started. Inflation is here and it is hurting average Americans.

Second, the Fed is asking for more power. But the Fed has proven they can not be trusted with the power they have. They get it wrong, do not use it, or stretch it further than it was ever supposed to go. As I said a moment ago, their monetary policy is a leading cause of the mess we are in. As regulators, it took them until yesterday to use power we gave them in 1994 to regulate all mortgage lenders. And they stretched their authority to buy 29 billion dollars of Bear Stearns assets so J.P. Morgan could buy Bear at a steep discount.

Now the Fed wants to be the systemic risk regulator. But the Fed is the systemic risk. Giving the Fed more power is like giving the neighborhood kid who broke your window playing baseball in the street a bigger bat and thinking that will fix the problem. I am not going to go along with that and will use all my powers as a Senator to stop any new powers going to the Fed. Instead, we should give them less to do so they can do it right, either by taking away their monetary policy responsibility or by requiring them to focus only on inflation."
It is really about time that the Federal Reserve was blasted for the record. More power to the Senator. This backs up what Congressman Ron Paul has been saying for decades. We must pray that others in position to act will join in to put the blame where it belongs and to begin to hold the Federal Reserve to some type of oversight. It is virtually autonomous now and has been since inception (Maybe we should say the deception with which it was created).

The dollar is enjoying a bit of power after the rhetoric of Bernanke and Secretary Paulson. The dollar bulls cry is "Ignore the facts, full speed ahead."

Foreign Investment in the U. S. has dropped as has the sale of treasury issuances. We are not getting sufficient foreign investment to cover our currency needs. Several Sovereign Wealth Funds are beginning to shed their dollars. This is a growing trend which will adversely affect our dollar and make everything more expensive in dollar terms for us.

Remember there is no painless way for America to get back on a sound financial footing. Every action of the Federal Reserve and the spending by governments at all levels has compounded our problems and only delayed the inevitable cataclysmic event. Our standard of living is and will continue to decrease. That is why, I continue to say batten down your financial hatches.
Beware of pending bank failures. Keep some cash in hand to cover emergencies.
The general market is still a dangerous place. Be very cautious and carefully consider every decision.

Consistently, read and study your bible with the prayer for the Holy Spirit to give you understanding and wisdom. As James tells us, "You have not, because you ask not."

Best to each, Doug

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