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The U.S. election results are in. The
people have chosen. Subscribers are well aware of the changing rules of the
game will conform to the latest economic developments. There may well be a
period of negativity relating to the general markets due to the U.S.
election, Fiscal Cliff and Year End Tax Loss Selling. We may see both parties
come to some sort of conciliatory agreement to save the holiday season. This
is known after the election as the Honeymoon Phase, when previously
antagonistic parties feel the need to think “Can’t We All Just
Get Along!”
What should investors in the precious
metals market do next on this wave of Obama’s win? The way we see it is
to wait for any initial reaction of pessimism to subside. Precious metal
devotees are a special breed that still must operate within basic rules of
the game. What is the market signaling to us?
Immediately after Obama’s victory,
there has been a selloff in the general market. Note carefully that gold and
silver has held up well despite a significant decline in the Dow Jones
Industrial Average and S&P 500. The market will do whatever it can to
confuse, misdirect and obfuscate. The recent decline in the S&P500 not
only was unmatched by the action in gold, but we note silver is outperforming
as well.
What could the recent market response
tell us as to what our next move in the gold market might be? Possibly,
reverting to one of our favorite mantras: “Patience and
Fortitude”.
We may well be witnessing negativity as
being the abdication of disgruntled Romney supporters. This is generally the
standard reaction of depressed players quitting the scene at the wrong time.
But, hey, this is a psychologically skewed, emotional reaction to leaving the
battlefield.
Napolean was famous
for having said, “One engages then one waits.” Similarly, as
precious metal players we have taken our positions and hopefully buy and hold
along the secular upward charts may turn out to be the prudent course.
Miners and precious metals have
outperformed over the past decade and may do so for a considerable while
longer as we are nowhere near bubble territory.
At this point it is important to address
the implications to our subscribers of the “fiscal cliff”.
Remember that our representatives have been revealed as active shareholders
in the purchase of stocks that drive our economy. When Jamie Dimon was being questioned by the committees, it was
instructive to learn that the very inquisitors owned many of the stocks under
surveillance. Speak of conflicts of interest!
Seemingly forgotten has been the
activities of Governor Jon Corzine and MF Global with the missing hundreds of
millions of dollars, which apparently have gone up in cigarette smoke. The
elites are not about to rock and sink the boat.
It might be a pleasant surprise to see
them finally get down to the business of the nation in addition to their own
interests. How refreshing it would be for both parties to join in reducing
the budget deficits before the possibility of a Holiday catastrophe?
The pressure is on for our reelected
President and the Lame Duck Congress to avert the Black Swan. Any move short
of reconciliation might not only risk another recession, but also question
the viability of the American Economic System.
The question arises, in the long term,
will these conciliatory measures work or are they destined to be short term bandaids? Our national debt is at least 16 trillion.
Could it be this increasing shift to soft money may be too little and too
late?
After all there is only so much you can
blow up a balloon before it bursts. Close to 23 million people are unemployed
in this country and close to two-thirds of our citizens don’t
pay income taxes. If we are believers in hard currency such as gold and
silver then the printing presses will be turned on even higher to attempt to
satisfy our soaring debts and artificially boost the economy.
However, there may be another side to
this story. Could it be that the proponents of entitlement have voiced their
feelings in this recent election? The majority of the American People may
well be in favor of priming the pump to satisfy their lifestyles.
We have become a nation of debtors.
Between mortgage, student loan and credit card debts the average citizen owes
over $50,000. To a certain proportion of our nation free and easy fiat money
may well be the way to go in the short term.
Eventually, the piper must be paid. We
may have to face one day that the party is over. Our large creditors such as
the Chinese are already looking to diversify away from U.S. debt and the
dollar.
Our critics have felt that our patience
with precious metals positions are not buy and hold,
but buy and hope. So far our long range charts signal that gold and silver
are in a continuing bull market, which are sometimes obfuscated by a
concentration on the short term tactical decisions. The technical
picture reveals the
opposite.
Gold is outperforming and may continue to
decouple from the equity markets. Remember inflation and uncertainty is
bullish for precious metals and bearish for the general equity market. Are we
beginning to witness this phenomenon?
The lame duck may well throw a life
preserver to the black swan to keep it afloat temporarily. However, the
golden eagle and the silver loony are hovering overhead. Gold and silver are
making cup and handle patterns which is historically indicative of major
breakouts.
Check out our research by going to
http://goldstocktrades.com/blog
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