Thoughts on Markets

Monday, July 20, 2009

Precious Metals Moving

Gold is trading between 950 & 955 which is above the previous 940 cap. I wonder how long it will take the boyz to sell their paper calls on the precious metals. Then they will desire to move the prices down to cover their shorts. In the meantime, we have opportunity to take some profits on the miners. Gold is 948.50 up 11.20, but is down from an earlier high of 955.

The miners are strong today as the second half of the "W" is forming smoothly. With the price above 40 there is a strong suggestion that it will go higher. It is staying well above both moving averages with the 50 day above the 200 day.
Silver, too, is holding nicely above 13. The boyz may be acting the same way on silver as mentioned above for gold. Silver is 13.62 up 0.21.
Hecla Mining is offering opportunity for profit taking, as well. I have been selling HL @ above 3.10 this morning. It could go higher, but I wanted to lock in some profit and gain some cash for rebuying at lower prices, if we see them. Hecla is trading in the 3.15-3.18 range presently.
In the futures markets, I sold some August US Bond puts for a double and purchased some September 875 puts. I believe that bonds will go lower. The dollar is now faring well, so to make our treasuries sell able, the interest rates will have to go higher. This will send the bonds lower.

Some interesting comments from The Daily Pfennig today: "Chuck is waking up in Vancouver this morning, his favorite city located north of St. Louis. While he spent most of the day yesterday traveling, he was able to send me the following from David Rosenberg, who is usually pretty good with his thoughts....

"It is the second anniversary of the credit crunch and after all of the fiscal and monetary policy initiatives, the best we get are "green shoots" and now that story is getting stale. Go back two years and you will see that the Fed Funds rate was 5.25%, Today it is zero. The fiscal deficit was 2% of GDP two years ago. Today it is 13%. Mortgage rates were 6.5%. Today they are 4.7%. Homeowner affordability with all the government measures is 70% stronger today than it was then too. The Fed's balance sheet then was $850 Billion. Today it is bloated at $2 Trillion. The government has tried just about everything. Or has it? What if we were to tell you that the one policy tool that is unchanged since the summer of 2007 is... The U.S. dollar? It is exactly the save level now, on any trade-weighted measure, as it was back then. The greenback is struggling at the 50-day moving average, and this could well be the next policy shoe to drop... "

David makes an excellent point. In spite of all of the negative numbers with regard to the US economy, the value of the dollar is basically unchanged over the past two years. This is bound to change, as US policy makers will have to let the dollar fall in order in the face of rising inflation and skittish foreign investors. As we have repeatedly pointed out, the administration has three choices with regard to the tremendous debt load which has been built up in recent years. 1) They can increase revenues (yes, they are increasing taxes, but these increased taxes are already spent on the new health care program). 2) They can decrease expenditures (big government is back, expenditures aren't going to fall anytime soon!). 3) They can let the dollar fall in order to pay back the debt with cheaper dollars (the most likely scenario!!)."

As always, we encourage you to protect yourself from the eventual drop in the value of the dollar by diversifying your investments into other currencies and gold or silver."

The DOW is up about 25, but was a bit higher earlier. The excitement has been in the precious metals, today. We will have to wait and see what the boyz do in the metals and what the PPT does in the general market. Always interesting in markets. Remember there are no free markets only intervention.

Keep your eyes and life focused upon our Sovereign King Jesus, the only Messiah, Savior of His people. He gave us the answer to all of life in His written word, the Bible. Study it, read it, meditate upon it, and apply it to all areas of life. Through Him is life and without Him is death.

Best to each, Doug

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