Friday Wasn’t Quite Black, But It Did Lose A Bit Of Its Shine

“Fight Against Stupidity And Bureaucracy”

You couldn’t exactly call yesterday “Black Friday” the way financial pundits like to do, but that traditional “safe haven”, gold, certainly lost a lot of its shine.

In fact the price of gold went into freefall, plunging the best part of $100 an ounce in a massive selling spree and ending up below the magic $1500 mark for the first time in a while.

I don’t think anyone is sure yet just what triggered the almost panic sell off on the Comex, but my gut feeling is that, once started, the computer generated trading gizmos used by the big hedge funds etc., kicked in big time and made matters go from bad to worse.

These automatic trading monsters trigger sales when a pre-chosen stop loss figure is reached, one stop loss sell off triggers the next and so on until there is a massive market plunge, as happened yesterday. The same could just as easily happen on the stock market.   

What most ordinary folks don’t realize is that the majority of traders in the financial markets are idiots. They just hang around looking at their screens and then follow whatever they see happening. It’s the herd mentality syndrome. When the big boys start to sell then the little boys follow suit and the whole thing goes from bad to worse, often without anyone really knowing who started it or why it is happening.

That seems to have been the case yesterday as there were no catastrophic economic indicators, like major inflation fears, currency collapses, etc., to trigger a significant movement one way or the other.

Whatever caused it, it is a warning to investors to be cautious. It could be a blip or the harbinger of turbulent times ahead.

Although there are many doom-and-gloom merchants with their “the end is nigh” web sites urging their followers to dump paper money, fiat currencies they call them, and stock up on gold, the truth is that gold has not been a good investment in recent months and years.

By definition the very worst a good investment should do is hold its value in line with inflation – if it doesn’t you are losing value.

For almost two years now gold has been steadily falling in value. Anyone who bought, for example, in August or September 2011 has seen their investment fall significantly in value – down by more than twenty percent in fact. You put $10,000 in, you get less than $7,900 out, and the dealers take their cut both ways.

So will the bear market for gold continue or was Friday just a glitch? Well, if you could answer that one for certain you would be able to make a lot of money.

My feeling, for what it’s worth is that the price will probably fall further. Maybe not so dramatically as yesterday, but it could easily trickle downwards to the $1200 region.

That assumes no dramatic sell offs by bankrupt governments and banks, because that is definitely a last resort measure that they would be most reluctant to take. If or when it does happen it means BIG financial trouble for everyone.

So will gold ever be a good investment again?

Warren Buffet never thought so, but it could be. Possibly a very good investment. But probably not a long term hold. Many western economies are just hanging together at the moment. The amount of debt and insolvency has to mean that at some stage the normal investment vehicles like currencies, stocks, bonds etc., will start to suffer and people will turn back to “safe havens” like gold.

IF you buy at the right time, and remember that you need to get rid of it and fast when the cycle turns again, you could do very well. But I wouldn’t jump in and buy it just yet.

Take it away Shirley….

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Gosh, It’s A Two Post Sunday!

“Fight Against Stupidity And Bureaucracy”

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I haven’t had a rant for a while, so one is long overdue. Here it is.

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I’m sure hardly anybody noticed, but last week the bureaucrats in Washington effectively shut down the web site Intrade for US citizens. Intrade was the popular web site that any adult, including Americans, could use to wager on the future price of certain commodities, like gold or oil.

Effectively the bureaucrats have now made it illegal to solicit Americans to buy and sell commodity options contracts unless they are listed on an exchange registered with them or on one designated as legally exempt by them, and they have taken upon themselves the power to regulate nearly any commodity-related activity unless Congress provides a specific exemption.

Of course the politically well connected investment banks and hedge funds into which the great and the wealthy put their money can carry on as before speculating on the price of everything from pork bellies to platinum and manipulating gold, currency, oil and other markets. The recent MF Global scandal really puts that beyond reasonable doubt.

Intrade is just the latest move by the bureaucrats and the thought police to restrict the freedom of American citizens. Not so long ago it was the online gambling websites, then New Zealand based Megaupload was targeted, then banking in any offshore jurisdiction, now the Ireland based Intrade, and tomorrow, well, who knows.

Maybe the ever sensitive morons in the thought police will try to stop you reading blogs critical of their asinine bureaucracy? Oh, oh, gulp!

The way they are acting is nothing short of a complete perversion of the concept of a government with limited powers. But are the liberals, who should be in the forefront of upholding such principles, falling over themselves to defend the ordinary people?

Not likely.

If and when this type of interference happens in China or North Korea or somewhere similar, they are rushing to get on to their high horses to condemn and ridicule.

But back in Washington they are busy trying to create an inefficient and bureaucracy-ridden nanny state that they know will necessitate clamping down on individual choice and freedom, if it is to even stand a chance of making it look as if it is working.

To add insult to injury the bureaucrats make their usual claim that they are taking these steps for “your own protection”.

Why is it that the steps the bureaucrats take in the ”public interest” never seem to turn out to be in my interest or in the interest of anyone I know?

By the way, in case you are wondering, I have never used Intrade, it’s not my kind of thing and I don’t know enough about that field to speculate with any consistent degree of success.

But I would appreciate the freedom to make up my own mind on the subject, instead of having the faceless and less intelligent bureaucratic thought police dictate the decision for me.

We all know how successful the Volstead Act was at the beginning of the last century, but the bureaucrats learn nothing from their mistakes. And they never will, because their desire is not to do what is right or just or even sensible, their desire is to create an ever growing bureaucracy which they control.

Home of the brave? No doubt about that when you see the young people who are willingly putting themselves in harm’s way to help to defend the nation.

But land of the free? No siree, not no mo!

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