Thoughts on Markets

Friday, August 01, 2008

All is not rosy, but we can still rejoice!


Both silver and gold are forming a different graph image from the last two days. It seems there are prospects of upward movement. However, it is early in the day and we have one more new month of Summer Doldrums. It is also, Friday, the day in which traders make moves to cover themselves over the weekend. Much is in doubt at this time! Silver is 17.61 on a down tick, and gold 913.10 on a down tick. At least we are above 900 gold again. Though the prices of mining stocks are very attractive; for example, DROOY @ 6.32; HMY @ 10.62; IAG @ 6.77; SLW @ 13.05, I am not adding to my portfolio at this time. Sometimes, it is best to do nothing. Of course, I have a portfolio full of mining stocks.
The above graph of the Total Credit Market Debt as a % of the GDP (Gross Domestic Product) presents a frightening revelation of excess. This debt is almost 350% of our GDP. That is gigantic. No wonder our economy is suffering. We have this debt hanging over, not only the financial industry, but the entire economy.

Reports from yesterday revealed that the GDP was lower than expected, personal consumption was down, the employment cost index was flat, and initial unemployment claims were up a bit. In spite of rosy rhetoric from the government, the economy does not look very healthy.

Overhanging all is the reserve status of the dollar. Without that, we would be a third world country economically. Foreigners and central banks are reducing holdings of the U. S. Dollar. This is ominous!

The masking of markets by intervention prevents accurate assessment of markets and makes investment decisions extremely difficult. Still, we must do the best that we can. We must try to see through the intervention to the longer term trends. After Nixon removed all ties of the dollar to gold on August 15, 1971, the precious metals have been in a very long term upward trend, particularly after the drop from the 1979-1980 spike. At the same time, the dollar has stayed in a long term downward trend with only brief bounces. Thus, our best bet seems to be in the precious metals and things rather than dollars. The precious metals and things continue to be valued ever more highly against the depreciating dollar. Keep your eyes focused upon the long term trend for security in financial matters.

Rest in the sure knowledge that the Sovereign God in three persons: Father, Son, and Holy Ghost, remains in control. Often the challenges He presents to us are for growth of our faith in Him. Thus, we are to praise Him and give Him thanks in everything whether it seems good or bad at the time. As Paul wrote, "Rejoice, and again I say, 'Rejoice.'" We can always do that, because all true, lasting joy comes from our wonderful King Jesus.

Best to each, Doug

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