Thursday, December 29, 2011

Are Stocks Good? Precious Metals Bad?

If one has been paying attention to both equity and commodity markets the past few days, one would note a dramatic divergence between precious metals commodities - particularly gold and silver - and stocks. Yesterday, all asset classes were attacked to the downside, but today, the precious metals took it on the chin while the stock markets melted up nicely on horrific, dull, low volume. Silver actually finished a bit higher, but was ground down today as low as $26.20, before rocketing up on short covering.

Once again, there was nothing triggering either the rally in stocks nor the sell-off in gold and silver. Sure enough, oil was relatively flat, meaning that what the overlords of finance would like one to believe is that gold and silver are risky and not valued investments, while paper assets such as stocks and crude oil futures are good for one's portfolio.

This is while the Fed is printing money like it actually was backed by something other than the "full faith and credit of the US government" and the nations of Europe cannot continue to carry on the socialist policies that have bankrupted many a nation much longer.

In normal times, selling off gold or silver to buy stocks would be pure speculative folly, and even in these unusual days of collapsing currencies, indecision and wild market swings, it still qualifies as a bad idea, even moreso.

The reason for the disparity between the precious metals is that the big banks, along with central bankers, actually wish to hoard gold and silver, but, as is their normal practice, don't want to pay market rates. Thus, they manipulate the price of the two metals down through the various ETFs, particularly, GLD and SLV. Such manipulation has continued for some time. In the case of gold, there is documentation that the downward manipulation has been in place for 30 or 40 years. It's only in the past decade that demand for gold has outstripped the banking cartel's ability to suppress it, but they're certainly back at it with gusto over the past few months, having the CME (post-MF Global) in their back pocket.

The truth is somewhere in between. Taken from the long-standing perspective that this blog has maintained over the past four years running, the breakdown of asset classes goes something like this: gold, silver, tools of trades, working transportation devices (cars, trucks, bikes), raw land and paid-in-full residences: GOOD. Any paper asset, excepting actual currency to meet regular expenses: NOT SO GOOD.

Tomorrow, being the last trading day of the year, we'll look at how our predictions for 2011 fared and offer a glimpse into the financial future with some quick takes on 2012.

Dow 12,287.04, +135.63 (1.12%)
NASDAQ 2,613.74, +23.76 (0.92%)
S&P 500 1,263.01, +13.37 (1.07%)
NYSE Composite 7,482.42, +85.43 (1.15%)
NASDAQ Volume 995,351,250
NYSE Volume 2,229,853,250
Combined NYSE & NASDAQ Advance - Decline: 4292-1394
Combined NYSE & NASDAQ New highs - New lows: 143-111
WTI crude oil: 99.65, +0.29
Gold: 1,540.90, -23.20
Silver: 27.32, +0.08

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