Tuesday, March 31, 2009

Price of Gold. Investment for the future? Gold Bubble?

It seems to be the popular opinion that gold will increase dramatically above the $1000 mark, but I believe gold is in a fear bubble and will go down.

Most people are buying into "the gov will devalue the dollar with their printing presses." I say the gov has already devalued the dollar to a great extent through the fractional banking system creating money into our economy out of thin air.

We don't notice the devalue so much because we compare it to other currencies who have had the same practices as us.

But you can see the true devaluation of currencies by comparing them to the price of gold. Back in the great depression gold was about 40 dollars an ounce. Todays prices of $600 to $1000 for gold shows how a huge

devaluation of the dollar has already taken place.

The current depressionary, deflationary, like environment is the dollar, the stock market, as well as the entire economy seeking to be healthy again from its bloated, sickly, and toxic state.

The roaring 20's was economic sickness from over spending, etc, just like our recent past. The Great Depression and the 30's was the economy trying to heal itself and find equalibrium.

The economy gets sick when we overspend do to money being to easy to aquire. But just like a child eating a big bag of candy too fast, his body will reject the over consumption, his body will get sick and throw up to find health again. A depression is an economy throwing up and seeking to find health.

What results is a dollar being healthier, which means it takes less of them to purchase an ounce of gold, which means gold goes down in price compared to the dollar.

Other things would also go down in price. Hence the saying "The Dollar is King", hence the term "deflation" (..of assets / commodities).

I know many of you think I am wrong about this. Because you believe the gov's printing presses will win this battle. But the gov is in over it's head. This ponzi/pyramid economy has blown up via fractional banking, exponentially creating money out of thin air, which we have gladly spent, spent, spent into our economy.

The ponzi has reached critical mass. And the govs little trillion here and trillion there and other parlor tricks are minimal campared to the title wave crashing upon us.

Gold sustaining any prices above $1000 is like the child aready sick on the bag of candy, but we make him eat more anyway, and we convince ourselves he can eat more and more without getting even more sick.

On top of that, to say gold is a great hedge on inflation (as our history has been mostly inflationary), Then to say gold will also be a great hedge on deflation, logic would dictate that you cannot have both.

I submit that current rise in gold prices has been due to fear and misunderstanding (with help from articles written by gold sellers). But when people realize that you cannot by bread and diapers with gold, they will sell their gold, for less than the current bloated prices, for the current currency, which is cash. Then gold will head downward to catch up with other commodities.

Good luck to all.

Is bank lending really increasing?

If you have adjusted a previous loan of $300k to a new loan of $250k - through these loan modification programs - I would imagine that would show up as "a new loan".

And if the example above is a large percentage of these "new loans" that are supposedly coming from the banks, then, in real terms, are they really new loans?

Instead, these "new loans" are like banks saying "Instead of you not giving us anything, we will lower the amount you owe, so you give us something."

So what looks like a $250k "new loan" is in reality a $50k giveaway by a bank in hopes that the home owner will continue to send some money to the bank instead of nothing.

Labeling these kind of modifications as new loans would be the equivalent of saying trading a more expensive car for a less expensive car shows that car sales are increasing.

Smoke and mirrors?

Banks inability to lend is not the problem

Banks inability to lend is not the problem. People have already borrowed up to there earballs. Life happens in cycles. We are moving from a cycle of hyper-borrowing into a savings and debt reduction cycle. In the previous cycle everyone felt wealthy because their house would rise enough in one year to cover the debt they ran up. But as soon as the housing bubble popped and reversed folks got a very sick feeling in there stomach. Because now debt was really debt. No more magic fairy A.T.M. to cover the truth every year. On top of that, people are seeing neighbors, family, and friends loosing jobs left and right. They are not feeling wealthy anymore. Instead they are feeling a desperate need to get out of (not into) debt, and to save for troubled times ahead.

This is the reality. Please folks, the banks ability to lend will not reverse the current situation.

Sunday, March 22, 2009

Great Depression vs Today or Fall of Dow, Finding Bottom

Click on chart for better view.
Keep in mind the "Now" above is March 16, '09, which is when I made this chart, not actually today (when you may be looking at it).

This chart overlays the highest point of the Dow before the Great Depression (Sept 3, 1929) with the highest point of the Dow current day (Oct 11, 2007).

This chart has been adjusted to match percentage decrease and increase.

Interesting to note that if we continue to match the decline that occurred during the great depression, we will hit 4000 before the end of 2009 (which has been my prediction for some time now).

Helluva way to start a blog, huh?

Here is a more up to date chart than mine above
(courtesy of bearmarketcomparison.com)