"All political thinking for years past has been vitiated in
the same way. People can visualize the future only when it coincides with
their own wishes, and the most grossly obvious facts can be ignored when they
are unwelcome." -- George Orwell
Let me call your attention to some of the most fascinating analysis being
presented by a battery of Analysts, Media people and Economists with
absolutely NO Intuitive Perspectives on some of the most
pressing issues of our time. We, as individual investors and just plain
citizens concerned about inflation/deflation, QE3 and the size of our
National debt are wondering about the future of both the US and European Bond
and Stock markets and their sovereign debt problems. No one can seem to see
beyond the crisis of the day and all are satisfied with what only amounts to
stop gap measures at best. No one, not the media nor any politician is
demanding any moves toward any kind of permanent solutions. All our leaders
seem to be satisfied to just kick the can down the road a ways without any
mention of any of our longer term pressing problems or even discussing any
potential solutions.
As a normal part of my missives, after a major release of government
statistics, I examine their latest pronouncements and point out the numerous
fudged statistics such as the last month's 150,000 estimated jobs created by
"supposed" new company startups that were guesstimated to have been
created, etc. So what happened this time? WHY were such poor numbers released
without any massaging or spin at all? Has there been a change in the
government's agenda? What could they possibly have up their sleeve?
WHY QE3 of course! Given the current hullabaloo in Washington about COST
CUTTING and BALANCING the BUDGET, there would be no chance of Bernanke
(Obama) getting QE3 through today's Congress without some kind of panic
crisis and cry from the public and business community demanding QE3. Well, if
you do not have a crisis, let's just manufacture one. After all, as far as
the government is concerned, the only crisis worth worrying about is the 2012
elections. And in their minds, the government is going to need a ton of money
to continue stimulating the economy in order to fight the Republicans who
will have a shrinking economy, continuing falling home prices and increasing
unemployment winds at their backs. All Keynesian Socialists are convinced
that the only way to get this economy going is to create more demand by
printing more and more Fiat money. The best and only acceptable way to get
there is? You guessed it, QE3! There is simply NO political chance of getting
any kind of QE1or2 like bailout plan through the Congress.
Given the FED'S current downward manipulation of interest rates, the only
remaining options for private-sector investors, especially seniors looking
for some "safe" source of income on which to retire on is to buy
stocks and high risk bonds. That, in my opinion, is why both markets have
surged since the announcement of QE2 and in no way reflects a growing
economy.
The unanimous agreement by the European Parliament's Committee on Economic
and Monetary Affairs (ECON) to allow central counterparties to accept Gold as
collateral has been a great step if all you are considering is the Gold
market. This is yet another act of recognition of Gold's growing relevance as
a high quality liquid asset (money).
The end of the QEs and the unwinding of government and Fed stimulus will
lead to a massive depression according to former Fed Economist, Richard Koo.
In a report on May 17th by Mr. Koo regarding Federal Reserve Stimulus and
Quantitative Easing programs, "much of the current run in equities, and
commodities has been primarily achieved through money printing and not by
market and economic growth forces.
In commercial real estate, for example, banks-at the request of US
authorities-are engaging in a policy of "pretend and extend"
and offering loans to borrowers whose debt they would never roll over under
ordinary circumstances. That means that current prices do not accurately
reflect true market prices of either private or commercial real estate.
Housing prices, meanwhile, have resumed their downward trek late in 2010.
According to a number of former Fed economists: The end of QE2 will lead
to a double dip recession at best, morphing into a depression at worst. The
cessation of massive monetary easing (the end of QE2) could be the trigger
that sets off the recession turning very quickly into depression should QE3
not be swiftly implemented.
Once an inflationary boom begins, it by necessity and definition, must end
in a bust. Indeed, unless an inflationary boom is fed with more and more
inflationary credit, the economy will quickly morph into a deflationary bust.
With the first signs of an ensuing bust, a massive QE3 effort, courtesy of
anti-deflation hawk extraordinaire Ben Bernanke is sure to follow. In other
words, if the private banks don't inflate first, we will see a deflationary
scare followed by another Federal Reserve orchestrated inflationary cycle. In
the end, we will get QE3 one way or another. The only thing now remaining is
to figure out how to play the unfolding scenario.
A reminder, if ever one was needed, is the importance of having a
diversification into Gold and Silver bullion. Dollar cost averaging remains a
sensible strategy for those concerned that there may be further short term
weakness in both Gold and Silver markets.
On the 100th anniversary of the launch of the Titanic, governments the
world over appear to be engaged in an exercise of "rearranging the
deckchairs" prior to the ship sinking. In much the same way that there
was a popular perception that the Titanic was "unsinkable," so too
today is the real risk posed to the Euro, Dollar, Yen, Pound and other Fiat
currencies largely going unacknowledged and/or is being swept under the rug.
GOLD
I have long cautioned everyone regarding the short term, extreme
volatility of both Gold and especially Silver and the danger of attempting to
trade or time the markets. If ever there was a market to "buy and
hold" it is today's Gold and Silver bullion markets. Those who continue
to buy Gold and Silver bullion coins and bars and store them in safe
depositories will be richly rewarded in the coming years. Absolutely nothing
has changed regarding their fundamentals. If anything, they are being greatly
strengthened and this latest sell off was due primarily to manipulative
efforts by the massive concentrated shorts (JPM) aided by a series of
unprecedented margin increases causing margin calls and liquidation notices,
which brought about a cascade of selling. However increasing demand from both
industrials and Central Banks from around the world will quickly stop the
selloffs. This demand is particularly strong in China and Asia and among a
minority but increasingly vocal and influential band of Silver advocates who
believe that Silver is money and will help protect people from developing
problems in the western and global financial and monetary systems.
I've been a staunch GOLD buyer since 2001; I recently bought Gold at
$1,410 and Silver at $31 and I'll be buying and recommend buying more
whenever either or both correct further.
So far, even though it's climbed +500% since 1999, my every re-examination
and re-analysis, that I do on a regular basis, of the fundamentals
surrounding Gold has only reinforced my resolve (even in the face of every
phony news event such as George Soros selling 99% of his Gold in May). That's
because, even though I have been a trader all my life, when it comes to a
genuine Bull Market, I'm an investor, not a trader... and I don't see any
quick fix ideas, let alone any consensus on repairing the global exchange
rate system. But again, it's not because I'm romantic about Gold. It's
because the primary trend is still extremely bullish, even more so than is
the AAPL story and all the increasingly ridiculous government machinations
remain strongly intact and upbeat for Gold and Silver.
In short, I see major Financial Tornados heading towards both America and
Europe. By far, the most compelling reason to own Gold these days is the
explosive eventual price tag of the global credit crisis. "The Piper
must always get Paid." Most analysts and investors fail to appreciate
just how much counterfeit cash governments around the world have been and are
continuing to print. Governments have boxed themselves into a corner with
their zero interest rate policies; so much so that they can see no
alternative solutions of getting their countries out of their quagmire except
to continue, like lemmings, marching to and over the low interest, easy
credit, cliff.
We've all heard about the sovereign debt problems across the pond. While
several European countries - Greece, Portugal, Ireland with Spain and Italy
not far behind - risk defaulting on their sovereign debt. But this list of
possible "sovereign debtors" is not limited to economies in the
Euro zone. It also includes the U.S. (especially the States) and the U.K.
The only way these countries know how to survive the financial crisis is
to print more money and the creation of SDRS does not amount to any real or
meaningful change. But the day of financial reckoning will come when all
these governments are forced to start draining the excess liquidity from
their economies in a last ditch attempt to shore up their currencies. That
day could arrive for the dollar sooner than we think. The Federal Reserve's
second round of Quantitative Easing (QE2) comes to an end in June. When that
happens, I'm convinced we'll get QE3 and suffer the worst inflation since the
1970s thanks to five plus years of unorthodox Federal Reserve monetary
operations. It's going to be pretty interesting to see how the Fed unloads
$2.8+ trillion worth of securities from its balance sheet without triggering
a major bond and stock market crash.
Ongoing monster-sized fiscal imbalances in the U.S. and in other countries
around the world will lead to some sort of currency crisis. That crisis will
make the one in 2008-2009 look like a cocktail party by comparison.
Supply and demand dictates the most important reasons for owning or
avoiding any commodity, including Gold. If you don't understand a commodity's
supply and demand situation, then the odds are you'll lose on that
investment, unless of course you are a subscriber to UNCOMMON COMMON SENSE.
What you need to know about Gold and perhaps Silver is that they are not
only a commodity. They are also very quickly becoming a currency. All of the
world's currencies - including the Swiss Franc - have declined versus Gold
and Silver since 2005. They're all losing their purchasing power against Gold
and Silver. That's why they are in such high demand.
As I have explained numerous times, Gold is not only a currency; it is a
Superior Good in economic terms, whose demand increases the higher prices go.
Despite record high and rising prices, Gold demand rose 11% to 981.3 metric
tons. In what is becoming a familiar refrain, China was a major reason for
the increase in demand. The country's purchasing rose 47% in the 1st quarter
and the W.G.C. believes it may easily double by 2020.
The demand for jewelry as an investment by (Asian) people, who normally do
not have bank accounts, is another one of the main reasons for the strong
rise in demand for Gold. Jewelry purchases in both India and China account
for 40% of total global Gold demand. They regard the purchase of Gold products
as an investment with strong growth potential along with their cultural
affinity towards Gold and Silver.
ANOTHER WILDCARD FOR GOLD:
Central Banks are also jumping on the bandwagon. After
more than two decades, central banks have once again become net buyers of
Gold. A driving force behind this is the central banks of emerging markets
wanting to diversify away from their rapidly increasing but depreciating
foreign currency reserves. Another reason is that European central banks have
seen the error of their ways and are now more interested in rebuilding their
Gold reserves. They all remember well the Weimar Republic.
For those worried about the current price pullback and volatility in
commodities, Gold is able to more easily absorb price shocks not only
compared to other commodities, but to the stock market as well. This means
that on average, Gold's volatility remains significantly below that of the
Goldman Sachs Commodity Index as well as the VIX.
THE NEXT MOVE TO $2,500 GOLD AND BEYOND
The point here is that Gold still has a long way to rally. My projections
call for $2,500 an ounce over the next 12 months or sooner and $6,250 by
2017.
Gold has entered the 'summer doldrums' and traditionally seasonal factors
result in weakness in the precious metal markets, particularly in June and
July. This is a good time to accumulate your favorites stocks as well as
bullion on the seasonal dip. This has been the case in recent years and was
seen again last year when Gold rose in June, fell sharply in July (leading to
the usual "bubble has burst" nonsense), and then rose strongly from
late July until May. Gold's traditional period of strength is from August
into the autumn and early winter. However, this year the doldrum period will,
in my opinion, be greatly shortened.
Buying Gold during the so-called summer doldrums has been a winning
strategy for most of the last 34 years and especially in the last eight
years, averaging a gain of nearly 14% in just six months. New buyers should,
as always, avoid attempting to "time the market" and consider
dollar cost averaging their purchases to ensure that they do not miss the
Gold and Silver Rocket Ships to the Moon and beyond. Whatever you do, don't
get too cute.
SPECIFIC STOCK SELECTIONS, MARKET DIRECTION AND TRADING STRATEGIES ARE
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GOOD LUCK AND GOD BLESS
If you need cogent analysis and clear reasoning; if your
time matters as much as your investments, then UNCOMMON COMMON SENSE is the
service for you. My job is to find you the best of the best, making sure your
radar is pointed at the critical issues and weeding out all the noise so that
you can make an informed decision.
We are coming into the most trying times in our nation's history.
Is now the time you want to be going it alone?
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UNCOMMON COMMON SENSE
Aubie Baltin CFA, CTA, CFP, PhD.
2078 Bonisle Circle
Palm Beach Gardens FL. 33418
aubiebat@yahoo.com
561-840-9767
Please Note: This article is for education purposes only
and is designed to help you make up your own mind, not for me to make it up
for you. Only you know your own personal circumstances so only you can decide
the best places to invest your money and the degree of risk that you are
prepared to take. All Information and data included here has been gleaned
from sources deemed to be reliable, but is not guaranteed by me. Nothing
stated in here should be taken as a recommendation for you to buy or sell
securities. I am not a registered investment advisor.