Financial Sense Blog

Gold Stocks, SP500 & the Dollar – What’s Next?

Stocks & commodities about to turn

As we all know the market has a way of making sure the majority of traders miss major turning points. The saying is, “If the market doesn’t shake you out, it will wear you out” and it seems we are getting the later…

Gold Bubble?... Not By This Fiat Measuring Stick

Proclaiming a gold bubble has been the mainstream financial media's Pavlovian response to every incremental increase made by the yellow metal since it emerged from a two decade low in 2001. Appreciating an astounding 400%+ in USD's from its bottom, gold has handily outperformed all major asset classes over the past 10 years.

Let Me Put In A Word For Greed

The case for five figure gold

This article aims to counter claims that gold is overvalued by summarizing the views of those who believe gold is going much higher. By looking at history, supply, and demand, this article points out why the gold market is unique, and why it will- someday- become the ultimate, or "last," bubble. This article also seeks to remind people about one of the more understudied lessons in investing: that of learning to hang on tighter and tighter as price moves higher and higher. Because as the cliche goes, "there ain't no fever like gold fever."

The Bernanke Bond Put

As always, we must look to economic fundamentals to handicap the markets next technical moves. This last week we had a minor drop in the ISM manufacturing index and the leveling off of the ECR I Weekly Leading Index. Meanwhile, consumer sentiment offered a similarly uncertain picture. Based on what we continue to see from the economic data, this is a "watch and wait" period in which short-term traders can try to take advantage of the upward trend an buy-and-hold investors should remain mostly in cash on the sidelines.

Irish Financial Crisis Worsens

Peter Sutherland and Ireland’s Sovereign Wealth Fund

Last week, on “black Thursday” the Irish government in essence finally nationalized Allied Irish Bank. In response to the horrific national financial picture painted by Mr. Brian Lenihan, Ireland’s finance minister, Peter Sutherland, former Irish attorney general, hit the media road. Mr. Sutherland’s mantra was similar to that previously presented by his acolyte Mr. Honohan (head of the Irish Central Bank). This mantra stated that though the figures were lamentable they were “manageable.”

Risk Tolerance Still Down

According to the Investment Company Institute Annual Mutual Fund Shareholder Tracking Survey, shareholders' willingness to take "substantial or above average risk" has not recovered since the beginning of the financial crisis started in 2008. (Click here to read the entire article.) The chart below shows that there has been marginal recovery in two age groups, but overall risk tolerance is unchanged from last year, which was down from 2008.

ISM Points to Slowing Conditions in Q3

The composite ISM manufacturing index edged down to 54.4 in September from 56.3 in the prior month. Indexes tracking production (56.5 vs. 59.9 in August), new orders (51.1 vs. 53.1 in August), employment (56.5 vs. 60.4 in August), and vendor deliveries (53.3 vs. 56.6 in August) declined, while the inventories index rose to 55.6 from 51.4 in August. Readings above 50.0 denote an expansion in activity. Although the levels of each of the sub-components of the composite index continue to hold above 50, the declines registered in September, excluding the gain in the inventories index, imply that factory activity advanced at a slower pace in September compared with August.

Prediction: Things May Unravel Faster Than You Think

By my analysis, we are not yet on the final path to recovery, and there are one or more financial 'breaks' coming in the future. Underlying structural weaknesses have not been resolved, and the kick-the-can-down-the-road plan is going to encounter a hard wall in the not-too-distant future. When the next moment of discontinuity finally arrives, events will unfold much more rapidly than most people expect.

Where the Constitution Still Means Something

Today, Oct. 1, 2010, brings to a close a story of grand presumption appropriately dubbed “This is just the beginning” by the tax-dependent American congregation, and its ideological brethren abroad, that worships at the altar of transfer-payments. We have followed this saga from the beginning, and our readers will recall that it started with the Union Bank of Switzerland (UBS) scandal.

Major Investing Opportunity

Liquidity flowing into Asia and Western Latin America

Last week, the Merrill Lynch economics team wrote a good paper about liquidity flowing into Asia. Here is a summary of their conclusions: Liquidity will flow into the Asian region raising consumer spending, stock prices and currency values. We agree with their conclusions, and here are a few of our own.

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