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NEWS WITH VIEWS

Picking through the rubble of last week’s news headlines, there was one particular newsy piece that, while I’ve seen it before, it struck me in a particularly odd manner this past week.

The piece in question was a reference drawn by a much celebrated and well known pundit who repeatedly attempts to label “gold bugs,” or as I prefer – advocates of sound money, as haters of government.

While this well known writer shall remain nameless, so as not to personalize, I would like everyone to stop for just one moment and consider this: is the pursuit of sound money; or for that matter the advocacy of a gold standard – synonymous with hating government? Speaking for myself, I would like to be on the record that I am an advocate of sound money and I am also proud of being identified as a “gold bug.”

As to the assertion that gold bugs hate government – on a personal note, I would like to offer this: I am wary of absolute power since history has shown its propensity to corrupt and I tend to differentiate between unbridled and responsible government.

In that vein, I am of the belief that perhaps the most essential and solemn task that responsible government is charged with - is the carrying out of the minting and preservation of sound money.

The Forgotten Golden Rules

Empirically, we are living in a period where all vestiges of sound money have been abandoned – globally. History has shown and is a constant reminder that such actions always produce, shall we say, less than desirable outcomes – like social upheaval or war. For the record, I’m no big fan of the former or the latter either!

I also find it noteworthy that the same pundit referenced above, while making disparaging remarks about gold bugs out of one side of his mouth, likes to revel in self adulation regarding his gold trading prowess – all the while being ‘loathsome’ of the resulting profits [derived from a rising price of gold] out of the other side of his mouth. Now that’s a perplexing yet profitable conundrum, no?

What strikes me as being odder yet, said profits would never have been possible without irresponsible profligacy [reckless money and or debt creation] on the part of government or monetary authorities. Does this mean that said pundit favors irresponsible spend thrift government or does it mean he only ascribes to such governance when financial benefits accrue to himself personally?

You see, what bothers me more than anything is when someone intuitively knows that something is wrong, but either applauds or encourages the action so as to personally benefit from it – all the while wrapping themselves in the flag or attempting to lay claim to the moral high ground.

Hurricane Haste?

Is it just me, or has anyone else noticed that since Hurricane Katrina ravaged the Gulf Coast the U.S. Dollar has strengthened and stock markets have rallied – all in the face of the most costly natural disaster to ever afflict the U.S. of A? Current guesstimates on the rebuilding costs are pegged in the 200 billion dollar range with USA Today estimating that daily rescue/recovery/rebuilding efforts in the range of 2 billion per day.

Given that the U.S. – as a country – has no savings of her own and pre Katrina deficit spending already required the importation of approximately 2 billion in foreign capital [representing about 80% of the world’s savings] – these are numbers that are widely reported, which basically no one refutes. So, lest I be accused of ill thought toward government once again - can anyone tell me where this additional 2 billion per day in new disaster relief money now being spent is truly coming from?

So many questions and so few straight answers!

Today's Market

Japan’s Nikkei Index was closed Monday for a holiday. Meanwhile, North American equity markets began the week on a sour note with the DOW giving up 84.31 points to close at 10,557.63, the NASDAQ dropped 15.09 to 2,145.26, and the S & P lost 6.89 to close at 1,231. With tropical storm Rita expected to soon be upgraded to hurricane status as it enters the Gulf of Mexico, crude oil futures gained 4.35 to finish the day at 67.40 per barrel.

In the foreign exchange arena, the U.S. Dollar Index gained .41 to close at 88.22. The Dollar picked up most of its ground against the EURO with the eventual outcome of German national elections somewhat in doubt. The EURO finished at .8229, the YEN at 111.47, the GBP at .5541, the CAD at 1.1686, the YUAN at 8.0871 and the RUBLE at 28.43.

In the interest rate complex, in front of tomorrow’s FED - FOMC decision on interest rates, the benchmark 10-year. bond finished the day at 4.25% while the 5-year bond closed at 4.02%.

Precious metals prices had a powerful advance with COMEX gold futures tacking on 7.20 to close at 466.70 per ounce. COMEX silver ended the day up .12 at 7.35. Amazingly and perplexingly [as true a conundrum as you will ever see] the XAU gold bug index finished the day at 110.27 – down .27, while the HUI lost 1.12 to end the day at 238.42. Who would have figured?

On tap for tomorrow, at 8:30 a.m., the Census Bureau is slated to release August housing data. Building permits are expected to be 2,100k vs. prior 2,167k. Housing starts are expected at 2,050k vs. a prior 2,042k. At 2:15 p.m. the FED’s FOMC is due to release their decision on short term interest rates. Expectations are for a 25 basis point increase in the FED FUNDS OVERNIGHT RATE to 3.75%.

That’s it for today. Wishing everyone a pleasant evening and a prosperous tomorrow!

Rob Kirby

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