The Stock Markets Have Their Say

November 5, 2007 | By | Reply More

Oil closing in on $100 a barrel and gold briefly breaking the $800 an ounce barrier.

It doesn’t take a genius to realize that there is trouble ahead for the financial markets as the US stays under pressure to keep interest rates down as inflation increases its deathly hold in order that the pretence of a buoyant economy can be sustained for a little longer.

Lies, damn lies, and statistics tell an increasingly unbelievable tale that all is well, inflation within acceptable limits, growth moving forward, stock market sustainable and the sub prime debacle past its worst.

Well, Joe and Jill Public are at last beginning to realize that they are being conned and can’t carry on burying their heads in the sand.

The mantra of consumerism is beginning to look jaded as easy credit dries up. Lest we forget this is a main driver of the US economy.

If our European readers are feeling smug and relieved that they are well out of it then they are also due a rude shock, particularly the Brits who have been fed a similar diet of lies to keep an incompetent government drawing its own self imposed and ever increasing pay, pensions and expense awards at levels in keeping with the true level of inflation and not the massaged figures that are published to keep state pensions down and the public and private pay awards under control.

Lest we forget the US has mighty reserves of natural resources, a substantial manufacturing and farming base, and above all entrepreneurs that haven’t yet had the spirit knocked out of them by over the top restrictive practices instigated by jobsworths.

The UK has a highest level of personal debt in the world, even higher than the US, a virtually non-existent manufacturing base and a farming community on its knees burdened by over control and reliance on very tight supermarket prices.

The ability to easily top up mortgages is diminishing and that is beginning to adversely affect retail spending with only the world leading London financial center to keep things afloat. Stay away from the pound.

The other common market countries are in better shape on the whole but only marginally, so what are the conclusions we should take on board?

Get out of the dollar but do not switch to the pound sterling, Euro denominated holdings may hold up better, Canada and Australia have enormous natural reserves of commodities that are likely to stay in demand and probably increase in value over the long term as the BRIC economies catch up with the decadent West so assets denominated in these two currencies should be OK.

But our tip of the week is to remember two old investment adages and act on them

  • “The trend is your friend”
  • “Buy the dips and sell the peaks”.

With gold heading inexorably towards $1000 an ounce, perhaps even before the end of the year and onward to $2000 by the end of the decade there will be plenty of opportunities to buy gold when bouts of profit taking occur. Just keep an eye on the charts. If you want to speculate and take profits in the short term this advice will also stand you in good stead.

The same will apply to silver, platinum etc. as they are dragged along with gold.

To see how to play the precious metal markets without buying the physical metal trawl through this site, the info and help is here.

A final thought, nuclear energy is back in the news, if it ever really went away, and the move towards building new nuclear power stations is becoming an urgent priority with some nations.

The potential demand for the yellow cake is growing and although it is unlikely that many new facilities will come on stream before 2015, stock piling to meet a future demand is a reality. Bear in mind that new mines, whether it be for uranium, gold etc. can take five or more years to begin production while at present demand exceeds supply.

At the end of the day market forces always win through.

Rant over, so until next week, good investing, and keep the faith in gold.

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