Why Gold Is Going Higher

Posted on May 27, 2011 by MN Gordon

Several weeks ago the gold market took it on the chin…falling from $1,540 per ounce on May 4 to about $1,480 per ounce on May 17.  Since then gold has quietly been making its way back up the charts. Yesterday it hit sold for around $1,520.

Gold has been in a bull market since early 2001 when it traded for under $275 an ounce.  Back then no one would have thought it anyway possible for gold to rise 560 percent over the next decade.  Remember, that was back when gold was still a barbarous relic from an earlier, less sophisticated time.  Paper money, and a central banker’s power to manage it, was going to bring about the great paradise.

Now, scarcely a decade into the new millennium, it is paper money that’s on the run.  The value of paper, along with the elites who control it, have been debauched by an abundance of monetary shams…namely over issuances in the name of economic stimulus.

The other big trend over the millennium’s first decade has been the massive transfer of wealth from west to east.  This big trend is most obviously evident in the rise of China…now the world’s second largest economy, and rapidly closing on the United States as the planet’s top dog. Continue reading →

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When the U.S. Treasury Bond Bubble Finally Explodes

Posted on May 24, 2011 by MN Gordon

The U.S. government borrows more than $40,000 per second.  You’d think running up the credit cards at such a rate would be great fun.  Yet, as far as we’ve made out, there’s nothing much fun about it.

Who knows?  Perhaps within the beltway, where the mountebanks in Washington go about bankrupting the nation by doling out free drugs to the populace, it’s one heck-of-a good time.

For those of us who aren’t loaded on prescription meds, however, a stench emanates from D.C. like wafting odor from freshly laid horse puckey.  Somehow, Congressmen believe if they borrow just a little bit more, and saddle us up with more debt and more idiotic laws, everything will be hunky-dory.

According to Treasury Secretary Timothy Geithner, the United States borrows $125 billion per month.  “With that amount,” notes Reuters, “the United States could buy each of its more than 300 million residents an Apple Inc. iPad.”

Depending on your idea of a good time, a free iPad courtesy of the government may help win over your vote.  But for those who stop to think, and consider their kids will be paying for it – plus interest, the thought of a government sponsored iPad is an insult not a benefit.  Likewise, free drugs should be an insult too. Continue reading →

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The Magic World of Guaranteed Retirement Accounts

Posted on May 20, 2011 by MN Gordon

The pursuit of ignominy is nondiscriminatory.  For it’s with equal opportunity that each individual’s granted the occasion to act a buffoon.  Most rare is the man who heeds the calling, ascends to the highest ranks of public office, and preserves his dignity.  More often, he takes his cue, steps center stage, and behaves like an utter jackass.

For example, here in the land of fruits and nuts confessions of the former Governator’s secret love child with the family maid were plastered across the Los Angeles Times this week.  No kidding…it’s been quite a hoot.

But even more hilarious were front page pictures of the unshaven Dominique Strauss-Kahn, head of the International Monetary Fund, and who was to be the next President of France, doing the perp walk in a New York courthouse for alleged sex crimes against a hotel maid.  What a week… Could a Hollywood screen writer have come up with better cheap entertainment than this?

We don’t doubt it…but no comedic fiction could’ve caused a pother in Paris quite like the images of France’s favorite son handcuffed and jailed.  For this alone, the cheap entertainment’s been priceless. Continue reading →

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When Return Of Your Money Beats Return On Your Money

Posted on May 17, 2011 by MN Gordon

Wild absurdities are taking place in the debt markets these days.  Near impossibilities like negative real interest rates are going on at this very moment.  We blink our eyes with disbelief…but sure enough, the price for money banks are paying depositors is less than zero.  In other words, savers are loaning their money to banks at a loss.  What gives?

To review, negative real interest rates are when the inflation rate is greater than the interest rate.  It takes heavy handed government meddling with markets – like quantitative easing – to pull off such a feat.  During a period of negative real interest rates, savings accounts are penalized.  In the Fed’s best laid plans, negative real interest rates are designed to get people to spend money, to boost economic growth.

We are currently living in a period of negative real interest rates.  But what you should do about it, at least in the short term, may come as a surprise.

When we signed off last Friday morning we noted that Bank of America Certificates of Deposit are currently paying an annual percentage yield of 0.35 percent.  Several hours later the Labor Department reported that the Consumer Price Index rose 0.4 percent in April – or 4.8 percent on an annualized basis.

What this means is that in less than one month’s time, inflation will wipe out the CDs total annual real return.  What’s more, over 12 months the CD will yield a real return of minus 4.45 percent. Continue reading →

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