Tuesday, February 2, 2010

Hamlet is Us

When the market is down in January, don't expect a good year. In 2008, I noticed that the market was down in January and I went ahead and invested in gold stocks anyway. I was hammered that fall. Marketwatch quotes S&P's Sam Stovall as saying that this "barometer's track record is dicey, as it often fails to identify the start of new bull markets, such as the market-turnaround years of 1982 and 2003."

At 11:01 The Street noted that gold broke 1100 (I like that kind of symmetry, 11:00, 1101, it goes with my coin flipping method of investing). I'm not convinced that gold will remain firm in the short term just yet, although I've been wrong plenty of times before. Kitco today indicates that the 30 day change in the gold price has been slightly positive.

Jon Nadler of Kitco concludes his report today with this remark:

"If you are in the short-term end of the spectrum of players, excitement will not be lacking, on an hourly basis, even. The bigger picture remains unconvincing on several levels for medium-term speculators."

Also on Kitco, Roger Wiegand has a summary of the derivatives blow up over the past ten years.

Here are some of Wiegand's points:

"USA and other nations’ central bankers pumped currencies and bonds to the moon...TARP money was stolen from taxpayers and funneled through conduit AIG to crooked, failed bankers to reliquify their balance sheets with free money. They are supposed to lend some out for growth but are holding it tight earning free interest from the government; taking no risks...Crooked bankers discovered they are “Too Big To Fail” and are doing it all over again with a tacit “no penalty” understanding. Estimated derivative balances today are $204 Trillion Dollars. No one will stop them until everything collapses in one final crashing swoon."

I have a Hamlet problem. I fear the further fall of gold and rise of dollars in light of the likelihood of dollar demand in case of a global issue such as defaults by Greece or Spain (logically that should not happen but the big investors insist on the safety of the dollar). But I also fear the long term prospects for the dollar given the fragility of the banking system and the likelihood of further inflationary movement.

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