Financial Sense Blog

The natural resource sector has been performing extremely well of late and we are of the opinion that we are still in the early stages of an explosion in share prices. Gains of 100’s of percent will be common but not without some risk.

Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value.

The U.S. dollar is attempting to complete step three of a trend change, which would increase the odds of a correction in stocks, gold, oil, silver, and risk assets in general. Step one (see labels in chart) was a break of the downward-sloping trendline; step two was making a higher low; step three would be to make a higher high. The dollar bull ETF (UUP) is shown below a proxy for the U.S. Dollar Index.

Since Obama's election the American people have gotten a better look at what an economy can look like under socialism, and they don't like what they've seen. The economy is ready for the certainty that comes from political gridlock, which will likely result from next week's elections.

The chart below provides an update to our last, and includes an additional third panel illustrating the value of the US fiat currency unit, or "MONEY" as it were. After trading in its normal range from April through August, the bulls won a key battle for Dow 10k, and the VIX submerged into QE-3 territory (readings beneath 20) amid the roaring rally of September 2010. The VIX has remained beneath the 20 level ever since, closing out the week ending October 22 with a complacent, overly optimistic reading of 18.53.

One week from now we are likely know the final outcome of the Fed’s next round of quantitative easing (QE 2) when the Federal Open Market Committee (FOMC) meets on November 3rd, the day after the mid-term elections. The Fed appears convinced that throwing more money at the financial system through the purchase of US Treasuries (UST) will help to revive economic growth and bring down employment.

Orders of durable goods increased 3.3% in September after a 1.0% drop in the prior month. The September gain is entirely from a 105% jump in bookings of civilian aircraft. Excluding transportation, orders of durable goods fell 0.8% in September vs. a 1.9% increase in August. In September, excluding aircraft and electrical equipment (+0.4%), orders of all other major components such as primary metals, machinery, autos, computers and electronics declined. Overall, orders of durable goods have slowed in the third quarter (see chart 1), after an impressive turnaround during the first two quarters of the year.

The mortgage & foreclosure scandal runs so deep that ordinary observers can conclude the US financial foundation is laced with a cancer detectable by ordinary people. The metastasis is visible from the distribution of mortgage bonds into...

We once had an ongoing series in BIG GOLD called, "1001 Reasons to Own Gold." The idea was that there were so many valid reasons to own the metal that I wanted to track and report on them. If you've been invested in the precious metals arena, you know there have been a myriad of bullish indicators for silver this year as well.

In the world of stock, commodities, and real estate investing, it is common knowledge that capital flows to where inflation exceeds the cost of borrowing. Clearly, if you can borrow at 4% and inflation is 6% it pays to borrow money and speculate in the appreciating stocks, commodities, and real estate. This is the situation in many developing nations today, especially in China, India, and some other countries in Southeast Asia and Latin America; borrowing costs are less than the commonly accepted “true” rate of inflation. Additionally, companies and industries are growing, and this makes stocks in those countries doubly attractive.