Thoughts on Markets

Wednesday, September 17, 2008

DJI Crashing - Precious Metals Booming Upward


Metals are on the move as the dollar is under greater pressure.
GLD is performing very well today. If it goes a bit higher, there will be a very positive showing. Contrasting to the move in precious metals is the 326+ drop in the DJI today. Are we headed for another 500+ down day? The general market seems to be in crash mode with brief dead cat bounces from time to time. We will have to check on the volume of the down days to see if there is massive selling. Thus, there seems to be a decoupling of the general market from the precious metals. This is to be expected as the the dollar is hit hard.

I wonder when the Plunge Protection Team will jump in to save the general market. Have they given up? I doubt it!

The Fed left the rates the same this week. The committee was reluctant to cut rates to once again attempt to bolster the market or raise rates to curb inflation. Lower gas prices at the pumps is helping the consumer to some extent. However, we should look for the consumer to slow discretionary spending as prices in virtually every necessary area are rising. Employment is showing dismal figures, as well.

From Casey's Daily Resource Plus this morning:

"If Monday was incredible...Tuesday was astounding. On Monday morning Paulson said that there would be no help for AIG, but less than 36 hours later, the Fed became 80% owner. I would suspect that former CEO "Moe" (Hank) Greenberg had a say in that. From now on, every trade by AIG is a trade by the government. I see that Reserve Primary Fund, the oldest money fund in the US, became the first money market fund in 14 years to expose investors to losses after writing off $785 million of debt issued by bankrupt Lehman Brothers. The decision hasn't yet been made if the fund will be wound up or not. Russia stock exchanges halted trading yesterday after a 17% share price fall. Pakistan's military has ordered its forces to open fire if U.S. troops launch another air or ground raid across the Afghan border, an army spokesman said Tuesday. And LIBOR (the London inter-bank offered rate) that financial institutions charge each other to borrow, soared 3.33 percent points to 6.44 on Monday!

Here's another story from The Twilight Zone...via Bloomberg this time. "Lehman Brothers, the securities firm that filed the biggest bankruptcy in history on Monday, was advanced $138 billion this week shortly after the pre-dawn filing by JPMorgan to settle Lehman trades and keep financial markets stable, according to a court filing. The first advance was repaid by the Federal Reserve Bank of New York, Lehman said. The bank didn't say if the second amount was repaid. Both advances were ``guaranteed by Lehman through collateral of the firm's holding company, the filing said. The advances were made at the request of Lehman and the Federal Reserve, according to the filing." Unbelievable!"

I have highlighted two sections of the above report. There is a true joke about politicians which is too often true. "How can you tell if a politician is lying? His lips are moving." This also seems to be true about Bernanke and Paulson. We are being lied to daily by this twosome.

We are on the path a inflation of the currency which is beyond belief. Such creation of dollars, if continued, is bound to discredit the dollar completely. How long will it be before there is a mass exodus from the dollar by international central banks? The leak has already started and there seems to be no one to put his finger in the dike this time.

Precious metals have rebounded as the should in the face of such debasing of the dollar. As this is written gold is up to 830.60 and silver to 11.21. We did well to hold on to the mining stocks, as all are very strongly up today. The trend may continue as the bullion banks and the rest of the boyz seem to be on the positive side of the futures markets.

By the way, I am buying puts on the financial industry and selected banks. Many banks and other financial institutions are in deep trouble and we should see many more failures. All can not be bailed out!

Folks, we are facing one of the most dangerous elections in our history. Neither of the major candidates will be good for America. Both are for more spending and likely more taxes upon currently overtaxed citizens. Either one will freely violate the Constitution after being sworn into office. They differ only to some extent on certain issues and the type of spending. There will be change for the worse when either one assumes the office of President of These United States.

We must pray that the Sovereign Ruler of all will raise up statesmen as magistrates for our nation before it is too late. We must work to bring our families in submission to King Jesus, then do the same for our churches, then work in our local communities, then the states, and finally to the federal level. It will take time without a miraculous intervention by the Lord. In the end, He will balance the books, but there will be struggles and challenges on the way. Rest securely in the knowledge that He is in control.

Best to each, Doug

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