Thoughts on Markets

Thursday, September 15, 2011

Misallocation of Resources - Gold Creamed Over Night - King Jesus calls us to repentance as a nation which has turned its back on Him. - Possible buying time ahead.

We must recognize that all is under the control of King Jesus. The precious metals are taking it on the chin now. The correction due to Greek problems, selling to go long on general market, weak hands selling, or bullion banks intervention. The results are the same for such as we who are holding gold and miners. God is in control and calling this nation to repentance. Maybe He is calling to each of us and we are failing to respond. Nevertheless, we rest in His hands. We must recognize that we are completely in His hands and should rest in the faith that reveals this fact to each of us. 

Going a step forward, I am selling most of my BYD Company stock @ about 1.85, and I see this correction in the metals as an opportunity to do some selective buying in small bites. I am not doing any yet, because I am satisfied with my portfolios, but the prices are very tempting at the current level. I am not selling, either. Prayerfully consider your positions and evaluate your financial and risk tolerance to see what you should be doing, if anything, Remember, I am revealing my thoughts and what I am doing which may not be correct for everyone. Make your own decisions. Commit them to the Lord, act on them, and depend upon Him for results.

Walter E. Williams
Too Much Higher Education
Too much of anything is just as much a misallocation of resources as it is too little, and that applies to higher education just as it applies to everything else. A recent study from The Center for College Affordability and Productivity titled "From Wall Street to Wal-Mart," by Richard Vedder, Christopher Denhart, Matthew Denhart, Christopher Matgouranis and Jonathan Robe, explains that college education for many is a waste of time and money. More than one-third of currently working college graduates are in jobs that do not require a degree. An essay by Vedder that complements the CCAP study reports that there are "one-third of a million waiters and waitresses with college degrees." The study says Vedder -- distinguished professor of economics at Ohio University, an adjunct scholar at the American Enterprise Institute and director of CCAP -- "was startled a year ago when the person he hired to cut down a tree had a master's degree in history, the fellow who fixed his furnace was a mathematics graduate, and, more recently, a TSA airport inspector (whose job it was to ensure that we took our shoes off while going through security) was a recent college graduate."  HERE.

Thomas Sowell
Thomas Sowell 
Back to the Future: Part III
Ninety years ago -- in 1921 -- federal income tax policies reached an absurdity that many people today seem to want to repeat. Those who believe in high taxes on "the rich" got their way. The tax rate on people in the top income bracket was 73 percent in 1921. On the other hand, the rich also got their way: They didn't actually pay those taxes.
The number of people with taxable incomes of $300,000 a year and up -- equivalent to far more than a million dollars in today's money -- declined from more than a thousand people in 1916 to less than three hundred in 1921. Were the rich all going broke? If you missed the first two articles, there are links in the article. HERE.


China’s BYD suffers mounting troubles
Chinese car maker’s engine sputters amid slow sales, job woes
BEIJING ( Caixin Online ) — What Chinese call “white terror” is gripping sales teams at BYD Auto dealerships around the country, as the once-rising star of the domestic car industry struggles with a slowdown.
“White” refers to silence: Employees have been clamming up when asked about the business climate and an alleged staff shake-up that may lead to thousands of layoffs or dealer shop-to-factory job transfers by the end of September.This is bad news for one of my core holdings. I have traded in and out of this stock for some time now. However, I will now dump it for the time being. HERE.

The Motley Fool:

Is Gold Being Suppressed?
The topic of gold price suppression has been an intensely controversial idea, but because it carries sufficient ramifications for the financial world, investors need to consider the matter without jumping to a rash conclusion.
As gold's trailing price performance has been strong, it may seem counter intuitive to consider that an unhindered market could have already hit substantially higher prices. But I want Fools to understand that a large and growing number of economists, analysts, and investors are reaching those very conclusions. In my opinion, there is no doubt. When JP Morgan folks admitted it, that cinched it for me. However, there still may be some doubt among others. HERE.

King World News:

Embry - Institutional Gold Holdings Will Increase 12 Fold
With gold trading above $1,825, today King World News interviewed John Embry, Chief Investment Strategist of the $10 billion strong Sprott Asset Management.  When asked about the action in gold Embry stated, “Following a $400 rise in less than two months, I think a consolidation in this area is extremely healthy.  It shakes out all of the people which probably shouldn’t be in gold that were using levered positions.”
John Embry continues:
“So I have no problem with a decent consolidation.  Now having said that, there still is so much counter-intuitive price action that you know the central banks are in there (manipulating gold).  There is no question that at the time of the Swiss franc devaluation, when gold dropped on either side of the devaluation by over $100, that was totally orchestrated because in a rational world the gold price, as the other safe haven, should have rocketed higher. Gold and silver are very long term holdings requiring steady, strong hands ruled by well informed minds. It is not for the weak and get rich quick folks. They most often get burned.  HERE.

Mine Web: 

Gold ownership about wealth not flying out of the window
The "gut-level case for gold" is the blunt, elemental fact that gold cannot go broke (unlike a company, bank or government), nor be created (unlike a share, derivative or currency). The fundamental reason for owning gold is clearly presented HERE.

Gold slips as stock markets rise
Gold prices fell on Thursday as stock markets rose, with assurances from Germany and France about keeping Greece in the euro bloc boosting appetite for assets seen as higher risk at its expense. HERE

Are gold stocks really beginning to boom again?
Gold mining stocks have performed poorly against the gold price itself for most of the past six months, but this is beginning to change and we could be set for a major boom in valuations as profits begin to surge. They seem to be trying each time the metals rise in price, but have been coupled with the general market stocks. This coupling would have to disconnect for any real increases in the prices of the miners. I have not seem this clearly enough lately, and have not been buying when many have become very attractive. HERE.

Gold eases but remains supported by mounting euro zone fears
Gold priced in euros was restricted by a pick-up in the single European currency on Tuesday but remained within less than 2% of record highs hit on Monday. There are dire reports about the Euro situation and threat of bankruptcy in Greece and several other fringe members. Nevertheless, the Euro nations are holding together fairly well. Could this situation be blown out of proportion? It is serious, but could be handled by kicking the can farther down the street and using band aid temporary treatment. Of course, the temp fix always involves more paper currencies thrown at the problem. HERE.

DRDGold union declares wage dispute
South Africa's National Union of Mineworkers in South Africa has declared a wage dispute with DRDGold, the fourth largest gold producer in the country, seeking an annual wage increase of 14%. More bad news for DROOY. Will it ever end? HERE.


Resort to SDRs for next bailouts will spur rush to gold, Rickards says
Geopolitical analyst James G. Rickards, who spoke at GATA's Gold Rush 2011 conference in London last month, tonight tells King World News that the major Western industrial powers are likely to start resorting to the "Special Drawing Rights" of the International Monetary Fund for the cash needed for the next round of bailouts. And when that happens, Rickards says, "the game really is over. It will be very transparent that we're just replacing one kind of paper money with another kind of paper money and that is going to accelerate the rush to gold." HERE.

MIners from Scottrade:

Currencies from KitCo:
Some Prices: Dow up 127.57 to 11371.21; S&P up 12.76 to 1201.44; NASDAQ up 22.84 to 2595.23; Gold down 37.90 to 1783.20, and Silver off 0.72 to 40.04. I do not like seeing gold < 1800.

Best to each, Doug



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