Financial Sense Blog

I am at a loss for words (something that rarely happens to me) as to why so many in the Precious Metals Sector have become so negative at this juncture in this Historic Precious Metals Bull Market. No doubt, many have “2008-itis”, thinking that the Dow is going to crash. Of course, that has been the daily mantra since the top in 2000, hasn’t it?

It has become a media tradition for moves in the gold price to be related to some political event or a civil war or a major tragedy such as the earthquake in Japan, when the events have a negligible effect on those markets. We find it unfortunate that this happens because it is misleading. For instance, this morning we were informed that the gold price had risen in the dollar, because of Japan’s earthquake and tsunami. In fact it was almost entirely accounted for by the fall in the dollar against the euro. The gold price shows its market movements most clearly in the euro, not in the U.S. dollar. A glance across the euro gold price of the last week reinforces that statement, whereas the gold price in the dollar clearly shows the movements in the euro plus the moves of the U.S. dollar against the euro. This piece looks at some of the worst of the misleading statements that may confuse or misdirect gold and silver investors, should they add credence to these statements. It also looks at what pieces of news will move gold and silver prices.

Banking crises unleash powerful deflationary forces of deleveraging and falling monetary velocity. In this environment, people, corporations, and eventually governments are unable to pay their debts and default. Government defaults typically lead foreigners to sell the local currency, and you get a currency devaluation. A devaluation makes prices for imported goods more expensive and leads to inflation. At the same time, governments and central banks fight the downturn with more expansive monetary policies, which leads to higher inflation.

Japanese earthquake, a flawed economic recovery, the S&P showing a classic reversal pattern, the dollar, housing and more.

Public sector employees, the workforce ‘elite’ led by state and municipal workers, are now storming legislative chambers to preserve their special status. Wisconsin is the current case study in what happens when the government, a monopoly service provider, confronts the fact that the taxpayer is tapped out and can’t take it anymore – when there simply isn’t enough money.

After focusing on the energy sector the last few months we return to another long term bullish story – agriculture.

It seems that most everyone is again focused on commodities and I continue to hear talk of $5.00 per gallon gasoline. I obviously can’t deny the fact that commodities have been in an uptrend. In fact, there is a longer-term cycle that averages some 3-years in the CRB Index.

The title above is a phrase coined by John Mauldin to describe Japan's financial condition, a subject upon which he expands further in his new book, written with Jonathan Tepper, Endgame: The End of the Debt SuperCycle and How It Changes Everything.

This 240 page beast has something for everyone to hate. More than 100 recommendations on ways that expenses could be cut, or revenues increased.

Financial markets are not immune to Newton’s First Law. The short-term “motion” in stocks is to the downside.