Thoughts on Markets

Thursday, September 18, 2008

DJI Up A Measly 10-15 - Gold Up to 898.40 +33 for the day

With gold at 891.70 and silver at 12.67, the GLD proxy for gold is looking strong. Now lets look at the miners.

GDX, the miners market vectors is beginning to look stronger, too. The mining stocks have not responding as rapidly as the price of gold, but they are on the move with virtually all of them strongly in the green today.

There was selling pressure on the precious metals last night in the thin trading volume of the Hong Kong Asian market. It looks like a bit of either profit taking or the boyz weakly putting a cap on the boom.

This graph of the AMEX Gold Bugs Index reveals that the smaller miners have not enjoyed the rise in the price of gold as much as was expected. However, they seem to be on the road playing catch up.

The global credit system is suffering from the US crash mode of the general market. Investor confidence has turned more toward fear. Even the AIG bailout does not calm the fears. The fears are forcing many to avoid risk and move from paper currencies to the precious metals.

The Federal Reserve is now with the $85 Billion bail out (probably buy out) of AIG is now in the insurance business big time. Of course, they have bought a bankrupt company with created dollars. By the way, the US Government purchase of Fannie and Freddie gave it some $5.1 Trillion in additional debt. I wonder how much debt the Federal Reserve assumed in the AIG deal.

The world has plenty of liquidity, but still faces a severe solvency problem. There is a great deal of mistrust among banks. Therefore, each is hesitant to lend to another member of the banking community. Loans are drying up between banks.

There is also some more movement out of dollars by foreigners, as well as, American investors.

Another side of the picture is that nationalization of the financial industry has taken several steps forward. That is a strong move further toward socialism. Think of the entire financial world owned by the central banks and governments. That would put too much unlimited power in the hands of those which must be controlled by constitutions enforced by demand of the people. Welcome to more totalitarianism.

Some highlights from yesterday: Russian stock market suspends trading, Goldman Sacks may have to divest assets or merge, housing starts here lowest in 17+ years, and our financial debacle may still be ahead. Nothing has really been solved, yet. We have only applied more band aids. We need solutions.

We should bite the bullet now and let the chips fall where they may. The market can correct even major disasters. However, it never happens without pain. Our band aids simply postpone the inevitable and made the final balancing of the books ever more painful.

The God of all in Heaven looks down at the folly of man in derision. He is in control, and often gives us our wishes. Just as in Romans Chapter One, He lets us have our own desires and then reap the consequences thereof. Woe to him who does not follow the will of the Sovereign of all. Each of us is required to be obedient to Him even if we do not acknoledge His existance. His law word is for all.

Best to each, Doug

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