Thoughts on Markets

Friday, July 11, 2008

Iran Tests More Missiles & Precious Metals Respond


Both silver and gold are on an upward sprint. The upward spike is very strong and possibly triggered additional missile testing by Iran and the concern about Freddie Mac (FRE) and Fannie Mae (FNM). Ex St. Louis Federal Bank President William Poole said, "Freddie Mac and Fannie Mae are insolvent."

How will they be bailed out? Will the government take them over (nationalize them)? Or, will the Federal Reserve attempt another big bail out? Both are considered to big for them to be allowed to fail.

This is simply more testimony to the ill health of our finance industry. It seems that, in spite of the glowing comments by Paulson and Bernanke, the mortgage problems are far from over. We should expect much more bad news from this sector of the market.

Nevertheless, gold and silver are responding not only to the fall of the dollar, but to the questionable value of all major currencies. Remember none are backed with gold or silver and are simply pieces of paper called, "notes," and are really IOUs. However, these IOUs are without terms or conditions. They are created by central banks. You know the golden rule: "He who holds the gold makes the rules." The corollary is "He who controls the creation of paper money, exercises control over governments and encourages enslavement of the citizens."

The following graph from Casey Research questions the decoupling of China's major stocks from the U. S. Blue Chip Stocks.
Thus, it appears that China's economy is still tracking very closely with that of America. The Chinese are doing a great job of marketing to the rest of Asia, Russia, and Euroland. They are also courting governments in Central and South America, as well as, Africa. They are desperately attempting to lessen their dependence upon American consumers. Time will tell how expert they are in this matter.

Back to gold and silver, we see that virtually all mining stocks are up substantially today. Gold is currently at 964.10 and silver at 18.78. As mentioned the upward spike is great. Often, after such an upward thrust, there is some correction. Though it is early in the trading day, we have seen some bouncing of the prices, but the upward moves remains strong at this time.

The DJI are off 90+ to 11140 or so. The general market may be somewhat over sold, but it remains a dangerous place to be. There is also more room on the downward side. I would not be a buyer until a bottom has been clearly seen. Stay with precious metals, mining stocks, commodity stocks, and cash ( Keep your "powder dry" and ready for use.)

Rest securely in the firm knowledge that our Sovereign God has all under His control. He tells us, "Be still and know that I am God." We only get into trouble, worry, and deepest concern when we try to be as God knowing the temporal future. We are to take one day at a time, but live all to the glory of God. "Seek first the kingdom of God and His righteousness, and all will be added to us."

Best to each, Doug

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