Thoughts on Markets

Monday, August 16, 2010

DOW Going Much Lower - Strong Demand for Gold & Silver - Buyer Beware!

It appears that the DOW is headed much lower into September and the rest of the fall. I would expect it to break below 10,000 and it is anybodies guess as to how low it will go. However, I have moved out of general stocks and hold only precious metals and miners with emphasis upon silver miners (FVITF & HL). It appears to me that silver will really shine before very long. Here is a look at the sad DOW graph from which I have annotated with technical indicators.


If Deflation Wins, What Will Gold Stocks Do?

The talk of a possible double dip is now common banter on TV investment programs. And indeed, deflationary forces seem to have the stronger grip right now than inflationary ones. So if deflation is the next reality we have to face, what happens to our favorite stock investments?
There’s lots of data about what gold does during periods of high inflation, but less so with deflation, partly because we don’t see a true deflation all that often. But of course we’ve got the biggie we can look at, and the seriousness of the Great Depression can give us a big clue as to how gold stocks behave in a true deflationary environment. This is a fairly accurate forecast of what mining stocks are likely to do in a depression or recession. I have been trying to put this across to all of you. Certainly, the miners are likely to participate in a crash, but they will recover much more rapidly than the general market. Most investors will then rush to precious metals and miners as they do in such disasters. Further, I expect that intervention into the precious metals markets will cease or be much less than at present, so the recovery for miners and metals should be exponentially greater than that of the general market. Remember things are different now, because this situation is world wide and we are anticipating a collapse in unbacked paper currency which central banks across the world are flooding the world in attempt to avoid the financial debacle. They will not succeed, because they are using the same tools that produced the situation. The real hooker in the currency markets is how much longer the world will tolerate the Dollar as the reserve currency. When, not if, it is replaced it will lose most of its purchasing power. Thus, IRAs, 401Ks, and other pension plans will become almost worthless in concert with the dollar. Read it HERE.


Chinese spending on gold sextupled in the noughties

The annual rate of growth of gold spending in China has been 23% this decade and the nation's gold purchases could see an additional 200 tonnes of consumption in the next decade. Read HERE.


Gold is the best investment at this time - West

Midas Letter Editor James West sees gold as being in a long and slow ‘mania' continuing more or less unabated on a macro level. Gold Report Interview. HERE.


Gold and Goldman Sachs

Is Goldman Sachs suggesting $1,300 gold within six months a cue for further growth in price or a contrarian indicator that the top may have been reached?
Interesting when coming from Goldman Sachs. HERE.

Below is a graph of JAG which is a SPECULATION. I emphasize SPECULATION. It seems to me that it has been oversold. BUYER BEWARE! I have taken a small position. It may not be for you, though. Investigate and make your own decision.

Here are the miners from

 Here are the currencies from

Here are some of the current prices: FVITF 2.2599; TLT (30-yr Bond ETF) 104.44; TBT (ultrashort LT Bond ETF) 32.79; SDS (ultrashort S&P 500 ETF) 33.74; Gold up 8.50 to 1223.90; Silver up 0.25 to 18.39; DOW off 11.43 to 10292; SPX 1078.18.

We must always trust the Lord and rest in the fact that He is in control of every thing. There is much confusion in the markets these days as they are not free. In fact, it seems that almost every market has a great deal of intervention. This adds to the confusion and makes forecasting extremely difficult, at best. Thus, we must study God's word and interpret everything in light of the scripture. We must, also, use the brain which God has given us.

On the matter of security and safety in money market funds (MMF), we must always remember the impact of inflation or debasement of unbacked paper "money." We one considers the very low, almost ZERO interest or dividends earned on MMF, he is faced with the fact that he is only parking dollars in what he feels to be a "safe haven." The earning from these funds is as nothing and the dollars in such funds are losing purchasing power in excess of the earnings. Then, Uncle Sam who is always there to "Hep us." comes in and wants income tax paid on the "earnings." I hope you recognize that such "safe investments" actually cost you in taxes and loss of purchasing power. You may get the dollars back as long as the fund in solvent, but you are losing from such parking of dollars. The same is true of Treasuries. 

Best to each, Doug


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