The softening of #gold and #silver prices is the result of investors’ willingness to embrace risk in the stock market again. The strengthening of #platinum prices is also a result of investor belief that economies are growing again. (The idea being that growing #economies mean more vehicle sales. Interestingly, Americans today are driving their vehicles FAR longer than they ever have in history!) The NY Fed today said they expect the bull market in stocks will continue for five more years! Woo hoo! This should give you an idea of how long the Fed intends to keep feeding the financial bubbles with funny money. There is really very little evidence of any robust economic growth going on anywhere, except for certain niches and financial-related pockets (the same old banks and banker-buddy businesses). But people want to believe, and they want their 401(k)s to go up, so they follow the trend – which is what they SHOULD do (the trend is your friend!). But P/Es are rising a lot faster than earnings, so investors are paying a higher and higher price for ever-diminishing returns in general. Will this condition continue for five years? Let’s hope so! It gives us more time to stock up on bargain-priced silver, even as our #401(k)s are rocketing higher. Most of us should now be significantly more “wealthy” than we were before the Great #Recession began. We just need to take steps to prepare ourselves for the next, inevitable bubble bursting.
The key now is to just be aware that eventually (maybe in five years, maybe later this month), there will be a good correction (or two or three) in stock prices to return to market sanity (not that it’s particularly insane right now, just somewhat overpriced). The triggering event could be a surprise in the financial markets, a geopolitical event, the emergence of irrefutable (un-disguisable by the Fed) inflation, or simply the continuing collapse of the global economy. But markets could certainly zoom a lot higher before we reach the state of “irrational exuberance”. The #Eurozone is now in the longest recession since the euro was introduced and things are NOT looking good there, despite the hopeful political proclamations. Japan has gone off the deep end with a money-printing program to DOUBLE the global yen money supply! (Yen down 25% vs. US dollar already! Yikes!) This program will further distort markets and inflate bubbles and encourage the US Fed toward another round of Quantitative Easing (QE), also known as funny money printing. But it will help provide nominal support for commodity prices which, without all the money-printing worldwide, would be falling like a rock. (“Helicopter” Ben #Bernanke is demonstrating his theory of how to manage a depression. He claims he learned from his study of the Great Depression how to solve such massive financial collapses. Clearly, his “solution” is to spread the pain far and wide and extend the duration of it so that everyone in the world is impoverished. Slowly. Methodically. But absolutely.)
The US deficit has actually improved somewhat lately as the two huge tax hikes (the 2% FICA increase and the massive wealth income tax rise) bring more money into Washington’s coffers. This will inevitably result in the #Obama administration proposing more new ways to spend this “windfall”. And, the US economy is actually growing, though anemically. #China is growing at a moderate pace (the official rate is exaggerated, perhaps by as much as double, by “hot money” flowing into the strengthening yuan. China’s challenge will be to develop internal markets faster than the strengthening yuan decimates their external (export) markets. A small handful of countries have fairly robust economies, Canada for example. But the overall global economic condition is very weak. Despite what the #IMF and World Bank claim, when all the bogus political hype is removed, I would be surprised if the global economy is growing at all, in reality.
Everybody WANTS the global economy to grow, but no government anywhere seems to be willing to let anything go under so the marketplace can perform the healthy function of destruction and re-birth, marking to market those failed businesses so new ones can rise up more efficiently from the pieces. It’s the hopelessness of the socialist idea that “we’re all in this together, sink or swim!” that drains more and more productive capital out of the system to prop up useless, failed behemoths that suck the life out of society and yield very little, if any, benefit. Combine that with the popular (though totally erroneous) claim that government creates jobs and grows the economy, and you have a prescription for a growing parasitic government that confiscates and squanders what capital remains in productive hands. This, sadly, is the natural “death cycle” of democracy. When people discover they can vote themselves more and more free stuff, eventually all the working, productive people run out of it. (And, by the way, the government cannot create one job without confiscating the money for it from productive citizens and businesses via taxes. And when it does so, the job typically costs taxpayers about TEN TIMES what it would as a privately-created job, and probably represents only a busywork position that contributes no real value to society in the first place.)
So, follow the market trend, but watch your candlestick charts closely. Have a plan. When the stock market tanked in 2007-08, stocks went down 50-60%. Gold only declined about half as much. Keep that in mind as you continue to diversify into precious metals. High-dividend-paying stocks fared relatively well, too. Treasuries (the last refuge for “safety”) have been in a 20-year bull market that is currently so overpriced you don’t even get your money back (in terms of buying power) after holding them for any length of time because they don’t even earn as much as real inflation.
Eventually (five years? ten?), the global (or more correctly, the West, plus Japan) experiment with Dr. Gono’s Zimbabwe money-printing program will end badly for the US dollar, the euro, and the yen (and many other currencies). The hyper-inflation of that terrible day will make holders of gold and silver seem like Masters of the Universe (not to mention TARGETS!). The New York Fed in its prediction of five more years of bull markets in stocks was probably looking at the Dow Jones/gold price ratio. When that ratio gets above 25, start looking for the exits. If it goes over 30, bail out of stocks with extreme prejudice!
