Oct 11 2008
Which way will gold go now?
As promised, I wish to discuss a bit of what financial “gurus” are chattering about on their websites. There are a myriad of ideas. First, I read an article on Motley Fool that gave the distinct impression to me that panic was all right, actually quite sensible. The author praised the levelheadedness of Sir John Templeton and Warren Buffet, but didn’t seem to feel that any of the rest of the mortal population could be blamed on bit if we all freaked out. At least that is the impression I got from reading the article.
On a saner note, Larry Edelson and Martin Weiss are disagreeing as to the direction of gold. Edelson believes it will head up, Weiss believes it is heading downward for a while as the dollar gains strength temporarily. Their whole investing group believes that overseas funds will blossom in the next several years.
Stephen Leeb is touting a new mathmatical model coming out of Harvard to help him pick new stocks for his Aggressive Trader newsletter. His webcast was interesting since I had never seen him speak before. He looked as chagrined as the rest of us who are doing any kind of recommendations. How can anyone sell a new stock picking model when all of the stocks are dropping like they have a twenty pound weight tied to them?
The truth is that no one knows which way gold or silver will go now. If the dollar goes up, then gold will sink. And there is some indication that the dollar is headed upward temporarily as people rush to U.S. Treasuries for security. The fact that oil is dropping throws more doubt in the short term climb of gold. It is is why I suggested some time ago to sell about half or more of all gold you are holding, but keep the cash for reentry later.
Howard Ruff is calling for all people to stock up on goods that they will need later to avoid the ravaging effects of inflation. Both he and the people on the Weiss group have been saying that all this extra money that is being printed by the government will lead to inflation beyond anything these past generations of Americans have seen. The thing about Ruff’s recommendations is that there’s only about so much foodstock that you can have on hand before it either goes bad or it’s simply something you don’t care about eating. What good does it do you to stock up on rice and beans for “someday terrible” if you don’t ever eat rice and beans?
What I see Americans doing now is remodeling as much as they can afford. The contractors who are surviving are the ones who are incorporating remodeling into their work. If insulation or energy efficient windows have not been yet installed, they are getting there now. People are frightened about the price of fuel for this next year, and more than one person that I’ve spoken with recently has breathed a sigh of relief at the lower gas prices.
As for the market, I doubt if the bleeding is over. People are frightened. I caught a brief interview on a news program where on trader was saying that for many stocks, there simply are no buyers at any price. The problem, he said, is that people are just standing by and waiting. That has just thrown a pail of cold water on the market altogether.
Since this is my blog, I get to put in my two cents worth. First, I think gold will go down for a while, as well silver. It’s a great time to releverage a good chunk of your holdings. Sell, then hold the cash and rebuy later. Second, buy and store as much storable food as you can. This is for unemployment first. As more small businesses fail because of the credit crunch, more Americans will be out of work. This will happen so fast it will almost zoom past you. Third, if you have cash in your portfolios, get ready to invest it, but not in foreign stocks right now. When America gets a cold, they get the flu! It’s true there’s prosperity over in China, for example. But what will it be like when their best customer from the past stops buying? They may continue to grow, but it won’t be like before.
There’s no doubt about it: this financial situation is unlike anything we have ever seen before, and since we are on new ground, predicting the future will be pretty tough. Hopefully it will all work out to make our nation stronger.
