Thoughts on Markets

Tuesday, August 12, 2008

World Wide Recession??

The economies of the world are not in the best of shape these days. It is likely that we are moving into a world wide recession.

As I wrote earlier today, there are many signs of a recession here. Additionally, unemployment numbers are on the increase, hours are being reduced, companies are dumping jobs, and retail sales are showing signs of slowing. The same is being repeated in many countries of the world.

By the way, Russia has backed off a bit on its attack on Georgia. It may have ended, but we will have to wait and see how this cools, if it does. Russia has clearly shown that it will not tolerate surrounding nations to act totally independently. What's good for Russia is good for them or else is the word for the day.

I believe we are in a recession now. If that is so, it a a natural consequence for commodities and precious metals to languish. In addition to the substantial intervention, this will have an impact upon prices of our precious metals.

We are approaching the time of year when Indians buy gold very heavily. It will be good to see if we can detect whether this will be the case this year. If so, then the prices of gold should once again rise into the fall and early winter. If there is a lack of such buying, who will take up the slack and move the prices upward. We have seen more Chinese buying this year.

The distraction by the election sound bites and the Olympics have somewhat dried up a substantial portion of the news. Our election has a lack of real interest this year. It boils down to whether you will vote for or against Obama. That is, if you plan to vote at all. Often, it seems useless to vote, because there is no change regardless of the party in the White House or Congress. Both are pro big government, big spending, and less freedom. Both ignore the Constitution.

Recessions and depressions are negative for gold and silver, as well as for other commodities. A gauge of the health of the economy is the movement of the price of copper. It is currently mostly down.

I suggest, in spite of the wonderful low prices of the mining stocks and precious metals that it is likely wise to wait and see the direction of commodities before jumping in with both feet.

The Lord will reveal the direction through the movement of the markets. The DJI was down triple digits moments ago, but is now down 81+. Gold is 814.50 and silve 14.61. Mining stocks are mixed but mostly up a bit today.

Best to each, Doug

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