November 16, 2012
Many investors do not remember October 19th 1987.
That was the day the stock market crashed. The Dow fell over 500 points/23% in one day. The crash was a culmination of a decline that had started in August.
It is important to note that gold served as the best source of liquidity during that crisis and increased in price between October and the end of 1987.
We bring this up because there is an important article on Marketwatch that points out distinct parallels between the conditions that existed in 1987 and today:
Current drop echoes 1987 crash prelude
By Jon D. Markman
The Dow Jones Industrials have fallen 450 points over the past two days, and a lot of the blame has been placed on the re-election of the president. But anyone paying attention to the market over the past three months recognizes that the peak was actually made the week that the Federal Reserve announced a third round of quantitative easing. That was expected to be a positive event, but in retrospect, it ushered in a rolling thunder of value-eroding news events.
Soon after began a very underwhelming earnings reporting season, word of a deepening industrial slump in China, a broadening recession in Europe and the martyrdom of Spain. And then this week it suddenly dawned on people that if U.S. lawmakers can’t stop acting like stuck-up brats, then $1.2 trillion worth of ham-handed spending cuts and tax increases are about toplotz on red states and blue states alike in the coming year.
Independent estimates suggest that would shave four percentage points off GDP faster than you can say “sequestration,” or “defenestration” for that matter, and lead to millions of lost jobs. It looks like the president would be OK with that, since he booked a tour of Myanmar for next week.
In short, the election put an exclamation mark on a parade of indignities, but it is far from the only proximate cause. Investors have liquidated U.S. assets for a while; it’s just more noticeable this week.
October 29, 2012
One of Wall Street’s true all-stars, who correctly forecast the subprime mortgage debacle back in 2007-2008 is now forecasting sharply higher gold prices over the next two years.
Peter Schiff, head of Euro Pacific Capital, thinks that the combination of runaway government spending and loose monetary policies will cause the price of an ounce of gold to climb to $5,000 per ounce over the next two years.
Note that Schiff sees this eventuality regardless of who wins the presidential election next week…
Here is a video of Schiff’s statement on CNBC–TV last week:
October 22, 2012
The general consensus for quite some time in the US has been that inflation has not been a factor in the US economy.
But there is a substantial amount of evidence to indicate that inflation DOES exist in the US economy and has existed for some time. However, government agencies and big Wall Street insiders find inflation to be an inconvenient fact–so they cover it up.
The federal government manipulates and fudges the inflation measures to underreport inflation and Wall Street then parrots the government statistics to their own purpose. You see, historically, high inflation has been decidedly unfriendly for the stock market, so Wall Street has a vested interest in low inflation. High inflation is, of course, very positive for gold investments.
What’s the federal government’s angle? There are several. First of all, high inflation doesn’t help incumbents get re-elected. Second of all, high inflation gets in the way of the Federal Reserve‘s scheming…
There is a great deal of evidence that inflation DOES exist and has existed over the past decade. The report linked below provides evidence of rising price levels, despite the government statistics to the contrary…
September 28, 2012
The chickens may already be coming home to roost in Europe.
For some time Europe has had a very loose, inflationary monetary policy, so it should come as no surprise perhaps that inflation rates are already higher than expected.
Europe may very well be the “canary in the mineshaft.” Other regions of the world, including the USA, have adopted very similar monetary policies. Investors should take notice and invest in assets that not only protect them from high inflation, but actually benefit from high inflation.
Gold investments, rare gold coins in particular, are ideally suited for just such a purpose. They have historically outperformed paper investments during periods of high inflation. But the time to buy is now–before inflation shows up in earnest in US inflation gauges.
Note that in the article linked below, several of the European Union nations are in recession at the same time that these inflation numbers have surfaced. The combination of inflation with recession is known as stagflation, an economic affliction that is particularly damaging to paper assets and positive for gold investments.
Inflation in the 17 countries that use the euro rose unexpectedly to a six-month high in September…
No reasons for the increase were provided by Eurostat, as the figure was only a preliminary estimate, though higher energy costs are likely to blame.