Thoughts on Markets

Monday, August 01, 2011

All wisdom comes from God - Markets are mixed and confusing. - Congressional solutions remain rumors. - Where is the buying opportunity?

With all of the intervention into the markets and central banks games playing games with unbacked, immoral paper currencies, it is no wonder that we are seeing the strangest of markets. Then the centralized socialistic and communistic governments get into our lives and stir the buckets even more. We face in the current environment, one of the most difficult times man has faced when it comes to finances and even life decisions. 

One has no where to turn for wisdom and understanding except the only true infallible word of the Sovereign King Jesus. While many unfortunately look to a messiah state and lose all hope, it is refreshing to look to the God of all and rest in His wonderful care. But that means we are to be His watchmen on towers throughout the world declaring to one and all the wonderful gospel given to us by the Father's only begotten Son, Jesus Christ. Though all have sinned and come short of the glory of God, there is one way to be reconciled with Father God and that is in Jesus Christ. All of the Bible points to this, and those who reject it, are choosing death when life is only in King Jesus. 

Schaeffer Research:
Opening View: Stocks Poised to Rally as Congress Finds a Solution
Stocks are set for a strong open this morning, as futures on all three major indexes are pointing significantly higher. Over the weekend, word broke that Congress had finally reached an agreement on a debt deal that will essentially cut spending and increase the federal debt; ceiling. "There are still some very important votes to be taken by& Congress, but I want to announce the leaders of both parties in both chambers have reached an agreement that will reduce the deficit and& avoid default," President Obama said. This is a 180-degree reversal from Friday, when buyers hit the exits after the all-important House vote over a debt solution had been delayed. The solution is far from a true solution. Once again a temporary band aid has been put in place. Even with all the rhetoric to the contrary, it remains smoke and mirrors. HERE.

Mine Web:
Gold slips on 11th hour US debt deal
The yellow metal fell in early trade as investor concern about a default in the US diminished after U.S. President, Barack Obama's announcement of a last minute deal to raise the country's borrowing limit. This was expected. HERE.

Smaller towns in India to drive growth for branded gold jewellery
Seller of branded gold jewellery are seeing major growth opportunities in the more remote areas of India as rising disposable income in and growing preferences for brands has meant a significant increase in demand. More demand? It is already quite strong except for the temporary set back we are now experiencing. HERE.

U.S. debt ceiling crisis only a minor player in gold and silver prices
The media is abuzz with the U.S. debt ceiling political imbroglio, but its true effect on gold and silver prices is only marginal at best. I believe it could be big, but definitely temporary. So temporary, in fact, that I may not have an opportunity to jump in. The miners, which are my primary interest have yet to respond to the consistently higher prices of the metals. HERE.

Gold cornerstone for wealth preservation - dollar will fail! - Jay Taylor

All fiat currencies fail, says Jay Taylor. That's why he calls gold and silver the only true currencies and key to wealth preservation. Gold Report interview. This tells a lot. The price of gold and silver here in America will depend upon the dollar. A rally of the dollar will increase a aversion to the metals. The long term fall of the dollar will be more positive to metals. The political "solution" to the debt ceiling and debt problems will have a temporary impact pushing the dollar higher in the near term. HERE.

Sell U.S. gold reserves to pay bills: gold to reach $16,000 by 2020 - NIA
Pressure group presents damning indictment of U.S. political system vis-a-vis debt ceiling impasse, advocates selling U.S. gold reserves to mitigate debt - if they exist - and sees gold hitting $16,000 or higher by end of decade. Were the price of gold to go that high, a better solution could be to revalue the currency with a gold backing after paying off the debt with worthless paper. Of course, I believe that would be immoral, but so is paper currency. It is a violation of God's command regarding the terrible sin of unequal weights. HERE.

The next two articles are presenting suppositions, which if come to fruition, would wreck the South African miners. I would like to move out of these investments like DROOY and HMY though they have been some of my core holdings for years. They would be about wiped out if nationalized by such a socialist governmental move

South Africa's mines do face risk of ‘some form of nationalisation'
A report commissioned by mining execs from country risk consultants Eunomix warns that South African mines do indeed face a risk of nationalisation in ANC policy shift. HERE.

Striking SA Gold, coal miners to meet with Chamber of Mines Monday
In a bid to end the strikes that have cost the South African economy significantly in terms of lost output, union leaders will meet with the Chamber of Mines on Monday. Is this to settle or to prolong the strike with greater demands? HERE.

Seeking Alpha:

6 Very Cheap Stocks in a Very Expensive Market
DRD Gold Limited is South Africa’s fourth largest gold mining company which is engaged in the exploration, extraction, processing, and the smelting of gold. Drd Gold reported revenues of $285 million in the year 2010. The 52-week trading range for its shares is $3.92 to $6.2.
The company‘s reserves are situated in places like Blyvoor, Crown and Ergo. DRDGold's gold production decreased by 17.8% in 2010 (which is about 106,452 ounces), the company’s realization prices increased by 19% in 2010 . DRDGold expects its production to increase by around 10 %( 265,200 ounces) and its capex by 70% in 2011. I wonder about this in view of the potential for nationalization. Nationalization would be a disaster for the mining companies and the nation. HERE.
Gold: Deflation, Stagflation, High Inflation, It Doesn't Matter!
Recently I received a copy of a study titled “The impact of inflation and deflation on the case for gold” from the World Gold Council, and the study is available at the organization's website (pdf - registration required) or this link. The work was conducted by Oxford Economics and commissioned by the WGC, which in my mind is the equivalent of tobacco producers sponsoring a study about the benefits of cigarettes. Nevertheless, the report includes a baseline economic scenario and is summarized as follows.

Steady economic recovery in major economies supported by strong emerging market growth.
Easing of financial stress and repair of banking systems.
Modest inflation, gradual normalization of monetary policy, slight dollar appreciation.
This is an interesting report which is worth a read. HERE.

Will China Dump U.S. Debt?
With the political clash over the U.S. debt ceiling in full swing this week, I’ve been inundated with people asking variants of the same question: with the U.S. in (temporary) danger of defaulting, will China, which holds at least $1.2 trillion worth of U.S. Treasuries, finally get fed up and dump its share of the U.S. national debt? It certainly sounded that way, with the official People’s Daily condemning Congress’s handling of the debt crisis as “irresponsible” and “immoral,” while Chinese diplomats urgently pressed their American counterparts for reassurance.
In fact, as I pointed out in a National Public Radio Click HERE interview on Thursday, China may well be unhappy with the situation, but unless it dramatically changes its approach to its own economy, it’s pretty much “along for the ride.” I  believe that China is already dumping U. S. dollars and buying fewer of our debt instruments. Read the article HERE.

I had expected the SPY to jump today, but that has not happened, yet. I had also expected CEF to correct, but the same is true. Perhaps, the "solution" being offered by Congress and the White House is seem by many as just more kicking the can down the street to be handled in the future some distant time from now.  Certainly, we knew that it would be smoke and mirrors. Is the public really beginning to catch on to the deceit and subterfuge? I would hope so, but I wonder. "How long O' Lord?" I continue to ask as did King David. Look at these graphs:

Miners by Scottrade:

Currencies from Kit Co:

Some Prices: DOW off 85.37 to 12066.38; S&P off9.91 to 1282.37; NASDAQ off 20.34 to 2736.15; Gold up 3.00 to 1630.20; Silver, still lagging behind, off 0.16 to 39.74.

Best to each, Doug


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