Central bankers believe in gold

In a stunning reversal from previous polls, central bankers and sovereign wealth fund managers believe gold will be the best performing asset for the rest of 2010.

http://www.bloomberg.com/news/2010-06-22/gold-to-be-best-performing-asset-for-the-rest-of-the-year-ubs-poll-finds.html

Middle East is snapping up gold

Not only are Asian central banks and citizens buying gold as the financial crisis continues to develop, but so are middle eastern sovereign wealth funds and clients.

http://www.business24-7.ae/banking-finance/banking/commercial-banks-buy-gold-to-meet-demands-2010-05-05-1.240551

Abu Dhabi sovereign fund manager missing after plane crash

http://edition.cnn.com/2010/WORLD/meast/03/27/investment.fund.missing/index.html?eref=edition

The Abu Dhabi Investment Fund is believed to be among the largest in the world, if not THE largest. Having said that, the fund lost billions in the aftermath of the banking and financial crisis. Comments?

My Facebook post on deficit spending

Kathleen, not to single you out, as I do agree with you on the benefits of hope, but when the hopes are built on a false foundation, the house will crumble. Ask Shawna, as I'm sure she is aware of my thoughts--and investment theses. It's built on mistrust of government fiscal and monetary policies. It's got nothing to do with Dems vs. GOP, or conservative vs. liberal, etc. Obama and Pelosi just happen to take it to unprecedented extremes, as our nation's currency--and hence, our sovereignty are now at risk of being irrelevant.

Long story short, you could quite possibly be holding confetti, built on false promises from the Fed and US Treasury, with the complicity of our banking industry, who Congress conveniently bailed out, while they appropriate all this deficit spending. The US is running a massive Ponzi scheme, taking in taxes on social security and other unfunded entitlement programs--knowing full well payers will never see a dime back.

I'm in the business of risk management, not in the business of forming ideaological judgments, and unfortunately, the average American is an unwilling participant in the huge casino of the world's financial system. It includes citizens who pay taxes, have home mortgages, credit cards, retirement savings, or merely hold the USDollar. In other words, every single American.

The financial implications go well beyond whether Congress enacts healthcare reform, cap and trade, or any other bill. The crux of it comes down to you can't keep spending money you don't have. Because in our case, the foreign creditors who have been lending us this money, will eventually say "Enough!", and then the music will stop.

The US government has been bailing out failing industries, and foreign sovereign funds have been buying Treasury bills to fund our debts, but when they realize the US government itself is already bankrupt, they won't be bailing us out.

Sorry to take the punchbowl away, but the G-20 countries have already pissed in it.

Precious metals manipulation

In surprising actions and admissions of guilt, the CFTC gave an update on their ongoing investigation of silver manipulation at the COMEX, and the Fed admitted to gold swaps with foreign central banks. These gold bug conspiracy theorists aren't so nutty after all.

http://news.silverseek.com/SilverSeek/1253632847.php

http://www.gata.org/node/7819


Folks, the cat is out of the bag that the Federal Reserve Bank, US Treasury Department, commercial bullion banks (foreign and domestic), and the recent Administrations have all been culprits in a long-running price suppression scheme for gold and silver. The cracks are being slowly exposed.

Profligate spending has its unintended but predictable consequences--the debasing of a currency, in this case, the USDollar. This, in turn, saps confidence in the world's reserve currency. Rising prices in gold and silver are open indicators of that phenomenon, so it stands to reason central bankers are motivated to suppress precious metals prices.

Sovereign funds are no longer willing to be held hostage to the US Treasury's printing presses. Neither are hedges funds or individuals looking to preserve their wealth. And neither should you.

Bailout or No Bailout?

I'm from the school of let 'em die. If you and I make poor investment decisions, we have to suffer the consequences. These executives applied far too much leverage, took on way too much risk, and after plundering their firms, they get golden parachutes. Where's the accountability factor?

I'm all for the founders of Google earnings billions because they have created a lot of value for consumers, business, shareholders, and employees. But when executives run their firms to the ground, they should not profit from said disasters, whether their firms get bailed out or not. A meritocracy rewards those who add value, not those who detract from it.

As much as I hate that the taxpayers bear the brunt of rescuing an AIG, I reluctantly agree they should probably be bailed out, because if they implode, the cascading illiquidity would essentially freeze up markets worldwide, as the sovereign funds, hedge funds, pension funds, mutual funds, private equity firms, and every financial institution would suffer a loss of confidence in the US financial markets, which would bring about a dark age analogous to the Great Depression. No one wins in that scenario, save the few bottom fishers with cash and balls to step up and play in the deep end of the pool.

But make no mistake: the intended recipients of these bail outs are the big institutions--not necessarily the common man, altho we all are in the same boat.

Having said that, there is a downside to this massive injection of liquidty--re-inflation. Interest rates should be favorable short-term, but when oil approaches $150 a barrel, when gold flirts with $1500/oz, the Fed will have no choice but to raise rates. Again, the lesser of two evils, but still an evil...Eventually, the economic shocks worldwide and the domestic slowdown will eventually dampen demand and cost of living increases, but until then, gold seems more stable than the US Dollar.

You know the world is turned upside down when there is more concern about the USD than the Brazilian currency, Russia has a flat tax, and the US has the 2nd highest tax brackets in the western world. Our leaders have forgotten what has made this country (and California) great.