Thoughts on Markets

Tuesday, May 03, 2011

Free Market vs Controlled Markets of today - Long Term perspective of gold and silver.

Though many believe that now that the "Wicked Witch is dead," all our problems are solved. That was a short lived jump for the dollar yesterday. Many problems are facing the world. The question of the value of the dollar is really being examined by the world. By the way, it seems that the Fed and USG have added price inflation to the exports of the US. Price inflation is spreading around the world resulting in riots in many places. How long will it be before they are here?

As I have said many times, there is no salvation in men. In fact, there seems to be no problem solution in government. The classical economists have always said as Winston Churchill at the end of WWII, that the government should get out of the way and let the citizens have a free market. Ludwig von Mises, once asked by a student, What should the government due to end price inflation? The reply was the famous, "Less, much sooner."  

Yes, the Austrian School of Economics' Free Market is most closely aligned with Biblical Economics. After all, God wrote the Bible, not simply as a pathway to the only Savior, Jesus Christ, but as a guide for all life and practice in all areas of life. He is the Creator of all and certainly knows what is best for His creation.

Let us all turn back to Him and live lives which follow His way. Then the problems we see will fade away and our nation will be healed.

Mine Web:
Despite protestations to the contrary, US monetary policy does affect commodities
Whether Fed Chairman Ben Bernanke admits it or not, commodity prices have been given a significant leg up by U.S. monetary policies and are likely to continue to benefit. The Fed and USG "doth protest too loudly" to be believed by a growing number of citizens here and throughout the world. Often we find they speak with forked tongues. HERE.

Fed Up with the Fed?
Thomas Sowell:
When people in Washington start creating fancy new phrases, instead of using plain English, you know they are doing something they don't want us to understand. How true! HERE.

Mine Web:
Gold and oil not the solution to China's cash problem
$3 trillion in foreign currency is currently burning a hole in China's pockets but there are no simple solutions for what to do with it - although commodities would have to be a part of the answer.  China is increasingly concerned about the drop in purchasing power of the dollar. She continues to shop around the world for ways to replace the dollars and dollar instruments. She also seems to be slowing her purchases of such. How will our debt be financed without China's buying? HERE.

Mine Web:
Gold price dip a boon for jewellers ahead of Akshaya Tritiya gold rush
As news of bin Laden's death flashed across television channels in India, investors and bullion traders rushed out to lap up the yellow metal on its dip, stocking up for the May 6th gold-buying festival. Gold and silver dips are a boon for those interested in adding the metals to their portfolios. I have been buying Fortuna (FVITF) at from 5.20 to 5.33. Of course, as I bought the price continued to move downward and was available yesterday at 5.15 or a bit less. That is to be expected, but I did not want to miss out on the lower prices. Read the article HERE.

Mine Web:
Gold steadies, silver stabilises in European trade
Precious metals shrugged off the potentially negative impact of a slightly stronger dollar to trade , to trade slightly higher after falling on Monday. Any strength in the dollar will be temporary as far as I can tell. The dollar is still being pushed downward by the Fed and the USG. There is no other way for our national and personal debt to be serviced. Expect the dollar to resume its down trend shortly. HERE.

Mine Web:
Silver extremely vulnerable to a sharp decline, gold overheated - CPM
Precious metals consultants CPM Group warns that silver prices are "extremely vulnerable to a sharp decline" and could fall by $12 or more very quickly. Gold, it says could also fall back. I have very rarely played against the precious metals, but if you would like to jump into that arena, there are two ETFs designed for that right click HERE. This is a game, that is too risky for me. I do not do that and am not recommending this to anyone. Read the original article HERE.

Mine Web:
Sell dollars, buy gold and other currencies as U.S. inflation soars - John Williams
ShadowStats Editor John Williams predicts hyperinflation and double dip recession ahead and advocates selling dollars and buying gold and stronger currencies. Gold Report interview. I am with John on this. We, consumers see inflation all around us as we shop for food, education, and medical. At the very best, we will continue to have a muddle through economy as John Mauldin has said for months. The alternation which I see is stagflation until run away inflation heats up. HERE.

Let's take a longer term view of the precious metals in the current bull market. I believe it has much farther to go, but for the time being it seems that the gold silver ratio favors gold. Below are longer term graphs of both of my metals followed by the gold silver ratio graph:

Miners from Scottrade:

Currencies from KitCo:

Some Prices: DOW up 5.60 to 12812.20; S&P off 1.11 to 1360.11; NASDAQ off 4.30 to 2859.73; Gold off 5.90 to 1539.70; Silver off 0.58 to 43.35. (Fortuna (FVITF) is very inviting for me, as is Hecla (HL) < 8.60; however, I would like to see silver stabilize before jumping in again. By waiting, I have often missed out. If I did not have junk silver and Silver Eagles, I would be shopping for them during this correction.)

Best to each, Doug


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