Thoughts on Markets

Friday, November 21, 2008

Gold Springs Forward to 787 Pushing toward 790

Here is an example of what can happen as the spring under the price of gold is released. Gold is pushing through 780. Where will it be capped now? That is the next plateau that is likely to be established by those who intervene. Who is it? Well, those with the greatest vested interest are the central banks (Federal Reserve) and governments. Neither would like to reveal to the general public the fraud of FIAT unbacked paper currency. The hedge funds might have an interest is profiting by selling options and manipulating the price to have them expire worthless.

Regardless of who, the fact is that gold is only held back by intervention. The strong upward move today reveals that the price of gold should be much higher NOW. As this is written gold is at 782.60, so it has broken through 780. Were it to hold for a time at this level, the market price of the mining stocks would bounce upward. Most investors would prefer gold and mining stocks above the "safety" of Treasury Bills and Bonds which are paying a negative interest rate when the inflation and taxation is considered.

My two trading stocks are responding nicely: DROOY is now up 0.35 to 3.30 and VGZ is up only 0.03 to 0.87. I would expect a much greater move with the price of gold at this level.
On the other hand, the DJI and the Transportations have dropped precipitously for the last two days and have; therefore, twice reaffirmed the bear market. I believe were are not at the bottom and that the debacle has much farther to go. Presently, the DJI is up 100+, but it is early in the trading day. Normally, one would expect a rebound after the last two terrible down days. That should be expected. By the way, I would consider this an opportunity to unload a few more of the tax losses in your portfolio.

A recap of the bad economic reports from Casey's Daily Resource Plus today:

"The bad news yesterday? Here's a list of headlines...

1) U.S. weekly jobless claims surge to 16-year high (Reuters)
2) Philadelphia Federal Reserve Bank says business activity hit a new 18-year low (Reuters)
3) U.S. Conference Board's index of leading economic indicators falls 0.8% in October (Reuters)
4) Loan Investors accuse Goldman Sachs of naked shorting (Bloomberg)
5) Federal Reserve blows out balance sheet again. . . . . . .
6) Citigroup Weighs Its Options, Including Firm's Sale (WSJ) - (They forgot bankruptcy! - Ed)
7) Fed to Cut Rates to Zero on Deflation Risk, JPMorgan Predicts (Bloomberg)
8) Switzerland slashes interest rates a full percentage point to 1% - (telegraph.co.uk)
9) Alt-A Losses Outstripping Expectations, Moody's Says (housingwire.com)
10) JPMorgan May Fire 10% of Investment Bank Staff (Bloomberg)
11) GMAC Applies for Status as Bank, Begins Debt Swap (Bloomberg)
12) (Corporate) Bond Risk Soars to Record as Markets Return to 'Crisis Mode' (Bloomberg)
13) Buffett's Berkshire Falls Most in at Least 23 Years (Bloomberg)
14) American Express had highest monthly increase in credit card delinquencies on record in October (Bloomberg)
15) CMBS (Commercial Mortgage Backed Securities) Market Begins to Show Fissures (WSJ)
16) Junk Bond Yields Reach Record 20% as Economy Declines (Bloomberg)"

One would expect nothing but bad news during our recession/depression. This one is turning into a real doozy - it will be very deep and very long.

From Reuters on November 14th, 2008:

Quantitative easing has begun

By: John Kemp

<span class=– John Kemp is a Reuters columnist. The views expressed are his own –

Quietly, without fanfare, the Federal Reserve has turned on the printing presses. The central bank is flooding the market with enough excess liquidity to refloat the banking system — and hopes to generate an upturn in both economic activity and inflation in the next 12-18 months to prevent the economy falling into a prolonged slump.

Read the article HERE.

Markets are never very dull. They are always exciting. We must hang tough during the bad times and take profits often. We must be very cautious and slow to buy during these times.

Keep yourself informed on the way of God and the Economics of His way. The Austrian School of Economics is most closely aligned with His way. It is definitely not the Keynesian School which is followed closely by governments and central banks which are seeking control of citizens through control of the fraudulent currencies.

God continues to laugh at the folly of man and his ways. We must seek Him and follow His way for an abundant life here and now and the eternal life which follows.

Best to each, Doug


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