YEN - The only interesting thing that occurred over the weekend is that the Japanese Prime Minister and the Finance Minister are not on the same page. One says to buy foreign, the says Japan should not buy foreign bonds. That will usually hammer a currency, and the YEN did drop.
EU -- It is not going to breakup any time soon, and so all of you that are sure it is going to break up -- get over it. Do they have troubles? There is no doubt. However, for now there is every indication the EU has stabilized. However, be careful about investing in the EU, as the economic indicators still show that they are in a recession, and only the governments political leaders have NOT admitted it.
Gold - Silver -- The commercials are reducing their short positions. Their short positions are about 1/2 of what they were in October 2012. Look for Gold to begin to bottom here, but as I stated in my newsletter, funds are going short. The bottom, however, does not usually come until Commercials have reduced their shorts to around 100,000 contracts. So, now is the time to watch -- not invest just yet.
- As long as the world remains fairly stable, the wrestling match between commercials and funds is at a stalemate (more or less).
- How much do you relate gold to the devaluation of the currency? If you do relate the two (ignore what currency vs gold as they all are devaluing, except the Renminbi, Norway and Sweden) then why is gold going down? Imports from India in January surged 23% from a year ago. Central banks around the world are buying gold, even though they all (except Russia and China) agree that gold is an archaic form of value and does not represent money.
- Did you ever contemplate Democracy and what its weaknesses are? Democracy is about the "crowd" rule. In a crowd, however, people rarely act rational or do the correct things. "The Crowd" by Gustav Lebon reveals that groups of people can be moved to action that they would never consider taking alone. When people get lost in the crowd they can become convinced of the truth of the message.
- This same behavioral observation is true of investors as well. In our times, the mass media (radio, newspapers, television, Internet news) are able to exploit the crowd without ever having politicians rent a huge stadium to sway the populace. The gold crowd (me included) fall into this trap, and we must be especially careful to weight why precious metals are going down. To break from the gold crowd (if one is in it) becomes heresy, but it is necessary if wealth appreciation is your goal.
- What may be correct to point out is that the price (in US $$$) of gold can turn any moment, and in a few days skyrocket due to wars, terrorist attacks, US politics, inflation out of control and any number of other situations.
In my newsletter and portfolio allocation, I've recommended having only a small part of your investment portfolio in gold. Buy some gold coins for a rainy day. One never knows. When buying coins, don't worry about the price of gold unless you are investing in gold for appreciation as you would any other asset. Remember, Gold like currencies can be very volatile, and the price can be driven by no more than political lip-flapping.
Allocate your assets wisely, and use compounding to your advantage.
Have a wonderful Tuesday.
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