Wednesday, July 25, 2012 at 6:24pm
The market was like a roller coaster Wednesday, as it started off low, the S&P 500 was a negative 2.33 points with the equities up barely 30 points. The VIX (which measures volatility) was above 20.47, showing bearishness; however, suddenly everything turned around and the DOW went up over 111 points, the S&P 500 gained double digits, but the VIX held at 19.34 (still in bearish territory) even though the down closed up ONLY 58.73, the S&P 500 down 0.42 points.
Treasury Secretary Geithner sounded an alarm to Congress announcing that the debt crisis in Europe and the overshadowing budget crisis in DC could weaken an “already fragile U.S. economy.” (Reuters) Unable to adequately defend himself or his department of charges from the EU Banks of withholding the LIBOR rate fixing scandal for almost a year, Texas Rep. Jeb Hensarling (R) had the attributes of a pitt bull with the fact that the US Fed itself CONTINUED to use LIBOR as benchmark rates (knowing they were being fixed) and was used most egregiously with the AIG Bail-out.
Bond markets are in an upheaval currently which is taking its toll, not only in the thousands of jobs that are being eliminated, but more importantly, the billions of dollars lost in the bond markets over the last several years. The culprit is tighter regulatory activity and electronic trading equipment, much like the electronic trading that decimated the exchange floors decade earlier. Safe haven yields have plummeted to new lows in the US, UK, and Japan, and Germany has been put on notice that it could be next. Barclay’s Michael Gavin protested that other stocks have yet to sell off deeply enough in order to correspond with hand-in-hand increases in safe haven bond prices.
With the horrific weather conditions across the globe, along with the Fukushima nuclear accident, the world’s food supply has suddenly been threatened as never before. There is now rain forecast in the near term for the Midwest, but sadly, not soon enough to save the burning corn crops, hence the increase in the commodities price of corn. Many other of the traded commodities have their own sad stories: the flooding that hit the wheat crop in USA (and took away much of the topsoil) to the drought in Russia which burned the wheat sheaves. Soybeans have suffered from lack of rain as well, and there are many others that will begin to show in the prices at the supermarkets. Though they’ve already begun, it is not the top price to which they will rise. The world food supply is in a most precarious situation, and there seems to be no fix for it, especially with Monsanto genetically modifying most of our foods with substances that are proven to be poisonous to humans upon ingestion.
Four bullion banks have indictments against them by the CFTC (Commodities Futures Trading Commision) but so far have not been served. Several of the major banks did have federal suits filed against them alleging “predatory lending practices” by the same government officials who decreed by law that the loans be made to those who would otherwise not qualify, commonly called NINJA loans. (No Income No Job No Assets) These loans were charged a higher rate of interest than prime borrowers who were more than likely to repay their loans. Due to the Community Reinvestment Act, neither banks nor lenders were allowed to decline home loans. This in itself was what led to the eventual 2008 economic crisis.
As for the precious metals markets, I have been advocating and buying gold since $940/ounce and silver since $9.60/ounce and neither have been anywhere nearly that cheap since. Astute investors who have followed boom/bust cycles know that the only investments left with any value are tangibles—hard net assets such as silver, gold, platinum, etc., and real estate.
One of the strange occurrences with this last downturn has been the sudden inverse of gold/platinum. Platinum is 30 times more rare than gold and has always traded at a price of $200-$300 higher than gold; however, it is now trading around $200 lower than gold and has been even larger range. As long as this diversity exists, there is more downside for equities and more upside for precious metals. Silver breaks all the rules, as it is manipulated by both the paper silver prices and the mining stocks. Once one purchases silver dollars and takes delivery personally, one should not watch the markets anymore until one wishes to add to the position. Deal only with a reputable coin dealer. NEVER INVEST IN ETFs, no matter how strongly one’s broker may try to persuade. There is only one ETF that cannot force its holders to take the profits in U.S. dollars rather than in the physical metal itself. BUYER BEWARE!
©2012 Off the Grid News