Thoughts on Markets

Monday, July 21, 2008

SEC Moves to Save Financial Companies

Today, I am a bit later in examining the precious metals. Gold looks to be moving a bit higher than during the last two trading days. Gold is currently$962.50 and silver $18.32. When we remember that this is summer time, as the temperature is reminding me, the time when precious metals are a bit dormant. That is, it is a down or coasting time for real money.

The SEC has moved to "save" the financial industry by disallowing naked shorts of some 17 banks and both Freddie Mac and Fannie Mae. Of course, the hedge funds and many investors had gone short (sold borrowed shares) in this industry. Why, because it was and still remains under pressure from bad loans, rising foreclosures, and escalating credit card debt defaults.

This type of intervention is new and punishes many who had already borrowed the shares which were sold. They had to buy the shares back whether they wanted to or not. The action was similar to retroactive legislation which though forbidden by our Constitution is often done by our Congress (Witness the annual tax and other legislation.)

The media, and, therefore, the public always blames the "speculators." This ignores the work of speculators in the market place. Speculators step in and buy when the majority of the traders in the market want to sell. Conversely, when most of the traders in the market want to buy, the speculators accommodate them by selling. Thus, the speculators perform a great service to the market by providing what the traders and investors want.

DRD Gold (DROOY) remains under $7, but is back up to about $6.83. This, to me, is a good buying range. However, last week I purchased for a low as $6.66. The companion Harmony Gold (HMY) is less than $12 at $11.93. Both look good to me and are a major part of my core holding in the mining stocks.

God in His heaven must be laughing at the folly of man these days. Men are looking for rational decisions to better their investments, save the environment, cure wars, prevent wars, save economies, and solve a vast number of other perceived problems. However, how often does an elected or appointed official remind the people that "Blessed is the nation whose God is the Lord: King Jesus."

That is the root problem. God has greatly blessed These United States of America in our past and we have enjoyed the result of these blessings for decades. However, as we, the people, have left the God of our blessings, the blessings have dwindled and even become curses.

Is this not what happened to the Old Testament nation of Israel? If you will study their history, God would give them great blessings. Then they would forget the God Who blessed them and began to claim that they, themselves, had created the blessings. Then they would fall under the punishment of God and be captured and taken into captivity. This happened over and over again. I would suggest, that we are facing the results of the same depravity of the old nation Israel.

Unless we return to the Sovereign God of all as individuals, families, churches, communities, states, and finally our nation, we are in for greatly increased problems. Beware, God is not mocked. His word does not return void, but accomplishes the purpose for which He sends it.

Best to each, Doug

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