Archive for February, 2009
24 February, 2009
At the beginning of October, 2008, I remember reading a number of articles covering US stock markets that heavily pushed the message “it’s time to buy US stocks!” However, since the beginning of October, 2008, the major US stock indexes have sunk like a stone, shedding roughly 23% of their value. Since these analysts were severely wrong in October, they decided to push the same message again in early January, 2009. Surely, if US markets had moved 23% lower from the previous supposed “bottom” of US markets, then these same analysts were certain the start of this new year most definitely offered a low-risk, high-reward setup to make very quick profits in US markets. In fact, in January, 2009, I recall a headline that blared, “THREE SCREAMING BUY SIGNALS!” (emphasis mine). Again, these bold declarations of US markets hitting bottom turned out to be premature as the US S&P 500 (NYSE: SPY) has plummeted another 17% in value. See a pattern developing here? It’s the PT Barnum approach of finding the sucker in all these articles. You see, investment companies are looking for suckers everyday because everyday they know they’ll find several, or perhaps even many. After all, Albert Einstein (1879-1955) once stated: “Only two things are infinite, the universe and human stupidity, and I’m not sure about the former.”
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February 24th, 2009
18 February, 2009
If we look at the below graph of the USO (US Oil Fund), at first glance, it appears that the deflationists have been correct about their assumptions of a worldwide slowdown causing demand for oil to plummet. However, if we recognize deflation for what it is, an appreciation of the currency, given the most recent 12% figures of US monetary supply growth (as determined by www.shadowstats.com ), the conclusion of US dollar heading for sustainable appreciation seems downright foolish. Thus if deflation has little or nothing to do with oil prices being so low at less than $35 a barrel right now, what is the real reason for the oil price collapse? Investigating the battle behind the scenes of this growing monetary crisis will yield the answers.
At the end of last year, Bloomberg reported that “Gulf Arab leaders approved an agreement to create a central bank and single currency for the region to boost trade and strengthen monetary policy. Read more …
February 19th, 2009
18 February, 2009
In an extremely difficult investment environment, it is often difficult to know who to believe. Deflation or inflation? Have financial stocks bottomed or do they have much more to fall? When gold corrects sharply, is the gold bull over or still alive? Is oil heading to $20 a barrel or $80 a barrel? For every analyst arguing one side of the above arguments, you have another analyst strongly arguing the opposite. And often you have the majority of analysts taking one position in the above arguments and then flip-flopping like a politician to the opposite position just two months later if things move the opposite way from their predictions.
For example, when we look at oil prices, oil has plunged from $147 a barrel to less than $35 a barrel in 7 months! During this time, the deflationists have been out en masse in the mainstream media, claiming that plunging oil prices were directly attributable to plunging demand worldwide from economies that were stagnant. For example, here’s a link to a story that seems to infer that plunging oil prices are caused primarily by plunging US demand and growing US inventories. Though it would be ignorant to ignore the affect of a slowing global economy on demand for crude oil and its affect on lower crude oil prices in the futures markets, it would be equally ignorant to attribute the majority of crude oil’s plunge to a shrinking global economy as well. Read more …
February 18th, 2009
February 4, 2009
Recently a handful of US based financial analysts have made a big fuss over the many secondary equity offerings of many major mining companies, stating that is a sure sign that prices of gold and silver stocks have peaked and will soon come crashing down. The reason for these dire predictions? These analysts claim that the executives of these companies are taking advantage of an opportunity to raise capital when their stocks, in their words, have absolutely peaked. Furthermore, they state that recent stories of gold jewelry sales in Abu Dhabi sliding 70% and gold imports dropping in India from 18 tonnes in January 2008 to just 1.2 tonnes in January 2009 are further proof of gold’s imminent demise. In the past couple months alone, some of the big names in the mining industry that announced plans for a secondary offering included Newmont Mining (NYSE: NEM; $1.2 billion in stock and convertible debt), Silver Wheaton (NYSE: SLW; $250 million), and Redback Mining TO: RBI – $150 million). There’s only one problem with these tunnel-visioned analysts – they’re wrong. Read more …
February 4th, 2009
February 3, 2009
A recent story reported about counterfeit £1 coins out of London made me reflect upon the enormous irony of the story given that our current economic woes have been caused by an unsound global fiat currency system in which all currency is backed by nothing. It made me think, “Is there really any difference between “real” and “fake” money?” Though mass production of counterfeit £1 coins in the UK has been a problem for years now, apparently the counterfeiters have stepped up their game in recent months. At the end of September, 2008, the Royal Mint reported that random samples of £1 coins in the UK determined that 1 out of every 50 £1 coins was fake, an astonishingly large percent. However, the most recent assay conducted by the Royal Mint at 31 locations in the UK has determined that 1 out of every 40 £1 coins is fake, with the total amount of estimated fake £1 coins in circulation in the UK now at 37.5 million pieces.
Currently, all major Central Banks have massively increased their monetary base by hundreds of billions of dollars in relatively short periods of time, with some increases in the trillions of dollars. In order to be able to do so, it is obvious that there are no limiting inputs in the “production” of money other than printing presses, paper, ink and manpower. Read more …
February 3rd, 2009
