Thoughts on Markets

Monday, April 11, 2011

Gold & Silver Still High - Dollar up a bit - Budget Crisis Postponed - Inflation

Today, I want to continue to discus the fragility of the paper currency financial system of the world. I sincerely hope that each of you have been frugally investing or protecting whatever wealth we have in gold, silver, and mining stocks. If so, you have had reason to rejoice as your investments have substantially grown over the last month and again this month. However, you must consider what this means in dollar terms here in the U.S. 

As we look at the metal prices, we see that it takes more dollars to buy them. To a great extent, this is not actually an increase in metal prices, but a decrease in the value of the dollar. Thus, as this progresses, we will without a doubt see that it takes more of the depreciating dollars to make virtually any daily purchase. While the USG publishes misleading reports on the limited inflation here in America, we daily see prices of the things for which we shop costing more dollars. 

Currently, we are being forced to shell out more peach backs (Once greenbacks) at the gas pumps to fill our vehicle. This is not totally due to the lesser value of the dollar, but shares in the troubles of the Mid-East. Libya is still not settled completely and there are riots around that area of the world which could threaten oil supplies. Then, too, there is a much greater demand for oil from the Asian tigers of India and China. We should look for even higher prices in the future. 

What all this means, is that it is time to think about the meaning of inflation. John Pugsley wrote a book in the early to mid 1970s entitled The Alpha Strategy. I was reminded, again, of the book, because John or Jack as many of his friend knew him died last week. He will be missed in the investing world. The premise of his book was that during inflationary times, wise people will begin to stock up on non-perishable consumables for two reasons: (1) It will take more dollars to buy them in the future, and (2) It provides a means of lowering income taxes, because you do not have to pay taxes on the increased value of your stored goods. You profit without taxable capital gains. 

For both of his reasons, it really is sound economical theory. I really should not call it theory, but fact. As we move into an inflationary environment, it will become very important to follow John's advise. I will give you a third reason: There will be shortages of supplies in many areas. 

God calls upon us to put our faith and trust in Him. He wants us to use the brains He has given us and to work in accordance with His Law-Word. Jesus told us to occupy or do business until He returns. We are told in Genesis to "take dominion" over God's creation, as under stewards of all He entrust to us. We are to prepare our children to continue the dominion work. We must prepare them as far as we can spiritually and provide capital for their task.

Always, we depend upon God for the results of our work. Proverbs 21:31 tells us, "The horse is prepared for the day of battle, but victory is of the Lord." Thus, we are to diligently prepare, but are to trust in Him for the results. I am so please, that I can trust in Him to fulfill every one of my plans which is in concert with the law of King Jesus. There will be more tomorrow as I have time.

Daily Pfennig (Pfennig@EverBank.com): "Well. as I said above, the Gov't did avert a shutdown late Friday night. I'm going to tick a few people off with this statement, but, Oh well. On Friday, the Gov't agencies had to make up lists of "essential workers" and "non-essential workers". Wanna reduce the Gov't debt? If those people are "non-essential" then. Well, why are taxpayers paying for "non-essential" workers?" They should have been laid off like many in the private sector have. AMEN!

Mine Web;
China commodity imports rebound in March
Imports of goods like copper, iron ore and soy all rebounded strongly month-on-month after a holiday-shortened February but fell or held steady year-on-year. In fact, China ran a export import deficit for the first time in about seven years. The economy still is running strong, but slowing slightly for the Chinese. HERE.


Mine Web:
Commodities surge across the board; gold, tin at new records
Gold, corn and tin hit record highs on Monday, while silver touched its highest in 31 years as investors looked for wealth protection in the face of inflation worries. What a week was last week! Our precious metals upward trend continued even though the momentum seemed a bit weak. The search for wealth protection led more into precious metals. we must always follow the trend, because it is our friend. HERE.

Mine Web:
2011 5-oz U.S. silver bullion coins go on sale April 25th
Orders for 2011 five-ounce silver bullion coins will commence on April 25, the U.S. Mint has announced. When I read something like this, I begin to wonder if the reason there was a shortage of silver for Silver Eagles due to the coming of these larger coins. HERE.

Mine Web:
Can silver be money again just like gold?
In the past silver was an important constituent of coinage worldwide and thus had a similar monetary status to gold. Could this be the case again? It certainly can be. Historical use of gold and silver as the preferred unit of exchange was from almost the beginning of time for earth and mankind. HERE.

Mine Web:
Speculators raise gold, silver futures net long positions

Speculative net long silver and gold futures positions rose in the week ended April 5, on the back of a strong rally to new highs, while bullish bets on the copper market were cut back. The monetary value of gold and silver benefited from the speculators while some other commodities suffered. HERE.

The Street:
Silver Prices Surge as Gold Falls
Gold prices were selling off Monday as investors traded in their gold for cash at record high prices and as the U.S. dollar rallied.
Gold for June delivery was down $4.60 to $1,469.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,478 and as low as $1,465.60 while the spot gold price was shedding more than $7, according to Kitco's gold index. This is news from early this am. However, the prices of both metals are down lower now. HERE.
Miners from Scottrade:

Currencies from KitCo:

Some Prices: FVITF 6.60; OLVRF 1.7286; BYDDF 3.77; DOW up 49+ to 12430; SPX up almost 3.52 to 1331.77; Gold off 4.40 to 1471, Silver up 0.29 to 41.19. Precious metals are holding well though off a bit from the opening while miners are suffering some. I have placed some trailing stops on some miners. Thus, the stops will move up as the price increases, but will produce sells with a 7-8% drop in price of the miners.

Best to each, Doug

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