Thoughts on Markets

Thursday, July 28, 2011

All is in the hands of the Sovereign King Jesus - Supreme Court Makes a Good Decision for a change - Gold & Silver in Minor Correction - Beware of buying into a seductive trap -

We could well be looking at a trap in the small temporary correction in the metals this week. It is strange how markets seem to have a life of their own and want to play tricks on investors. Of course, we all know that only King Jesus moves all things for the long term good of His people. That certainly concerns markets. Remember, it is He not we who elect and move men into political offices. We should pray that He will provide Godly statesmen, and I do mean "men" for all elected governmental positions. That would straighten out a lot of our earthly problems as these men based all of their actions on the written word of God and they submitted to King Jesus as all elected magistrates are called to do. 

US Supreme Court Shocks Nation by Upholding the Constitution
In 2007, the state of Arizona passed the Legal Arizona Workers Act (LAWA).  The law penalizes businesses who knowingly hire illegal aliens.  Penalties can range from fines up to and including the revocation of the firm’s business license. We must sincerely hope and pray that this is a foretaste of more action by states. HERE.

The Heritage Foundation:
Podcast: Heritage Action CEO Mike Needham on Debt Limit Negotiations, Heritage in Focus
Listen HERE

The Daily Pfennig:"We had another round of disappointing economic data for the US yesterday, with Durable Goods Orders for June declining a surprising -2.1% compared with an expected increase of .3%. May's numbers, which were left unchanged at +1.9%, had generated a lot of hype 30 days ago as manufacturing was touted as the one sector which would pull the US out of our slump. The Fed's beige book which was released yesterday afternoon stated that Manufacturing was the one bright spot in the US economy; so that bright spot isn't looking so shiny now! The beige book, which is a survey of the economic climate in the Fed's 12 regions, stated "that while economic activity continued to grow the pace has moderated in many districts". The statement that economic activity is growing is a bit of a stretch, as the survey showed growth slowed in 8 of the 12 regions. It is not a big surprise that the beige book conclusions followed the same script which has been laid out by Fed Chairman Ben Bernanke. The report underscored the Chairman's message to congress earlier this month that monetary stimulus will need to continue to be necessary in order to bolster the economy. It sure bolsters Chuck's call that we will see QE III sometime later this year." Though the Fed and USG would like to convince us otherwise, the economy is not booming. In fact, it seems to be slowing.

The U.S. Dollar is making a very poor showing in the face of deadlock over the debt ceiling. I am against raising the debt ceiling, but realize that Congress will raise it at the last possible moment. The political posturing and rhetoric flows in abundance, but that is all smoke and mirror arrangement. Long term the Dollar will fail to maintain the coveted reserve status with a concurrent substantial drop in purchasing power. This could happen as early as 2012, but only the Lord knows when He plans to dump the unrepentant America which was founded as a result of His providential will. Here is a look at the dollar index.

Gold on the other hand has been a real strong performer showing that more investors and retail customers are beginning to climb aboard the gold train as it seems to be winding up to spring forward. However, what we are presently seeing is a tempting call to climb aboard for what could be a trap looking for a reason to correct (Debt Ceiling Raised). I will not be falling into that trap now, but am patiently (nervously) waiting to jump on a large correction. 
Here is my favorite stock market vehicle for holding gold and silver: Canadian Trust (CEF). It has performed very well for some months now and I expect it to do better as gold recovers from the overdue correction. I have this in all of my portfolios, and plan to add more during any major correction in the precious metals.

Both gold and silver are undergoing a correction; however, this could be a trap to entice us to buy before a larger correction unfolds. We could see silver as low as 30 or so, and gold below 1550. I am speculating about the lows, but I am waiting for a larger correction before jumping in again with both feet and cash firmly gripped in my paws. 

South Africa's gold miners start strike today as 'strike season' hits other sectors too
South African gold miners are commencing a 48-hour strike over wages today, but coal, platinum and diamond sectors may also be heading in same direction. Here we go again. This may allow some added enticement for us to buy into South African miners. Will have to keep our eyes peeled on you "Old Buttermilk Sky", rather the miner market. HERE.

When Nixon cut the gold link what didn't change?
The monetary system that dates back to August 1971 when Nixon closed the gold window shares one vital trait with its predecessor. The dollar remained as the world's reserve currency. Privilege or curse? It was a privilege back then and was about the time we got out of the Ark: Not quite. It was August 15, 1971, "Ah, I remember it well." We did not consider it a curse then, but how about now  with the current financial fiasco? HERE.

Inflows into precious metals ETFs roaring back
While analysis of ETF inflows suggests that in the first half of 2011 currency ETFs generated more than commodities ones, precious metals ETFs have ‘roared back' in the past month. What do you think these folks will do if the metals drop much lower upon the signing of the new debt limit, as I expect? I would suggest that they will sell, making the prices drop even lower. That is a trap which I wish to avoid. HERE.
Miners from Scottrade:

Currencies from KitCo:

Some Prices: DOW up 78 to 12380.1; S&P up 10.90 to 1315.79; NASDAQ up 33.22 to 2798.21; Gold down 7.00 to 1607.10, and Silver off 0.76 to 39.50. The general markets are stronger today after being hit very hard earlier this week. It is about time for a rebound. The miners are not following the general market, but seem to be predicting lower prices of the metals independently of the general market.

Best to each, Doug


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