Sunday, August 7, 2011

Shysch! Let the spin-doctors work.

As I mentioned during the weekend markets are:

a) Highly volatile
b) Highly manipulated

and so very hard to predict. First thing this morning I checked the news and our bellowed journalists said that “thanks to” ECB´s market interventions (which you´re paying for) markets weren’t going down as much as feared.

I started laughing.

And then I read that it’s a 1 in 3 chance that U.S. will be downgraded again!

And to top it all off I noticed that a couple of papers wrote that “the recession can come back”...

By this time I was rolling around on the floor.

Perfect way of starting the day - with a bit of comedy!

The truth is that U.S. will be downgraded again. It’s not a 1 in 3 chance, it’s a 100% certainty. The second truth is that the recession (in reality a Depression) never went away. They just temporarily papered it over with money printing and borrowing into the extreme. And ECB creating inflation and in-debting us further and so creating worse bubbles is so stupid that I cannot help laughing at the misery. The Greatest Depression started many years ago, I wonder when that will be acknowledged?

Looking around this morning the Asian markets got clobbered. Not freefall or crashing, but going way down. More interesting though is what got traded and what indications there were. For example Gold is up to an all time high. Again. Last week I read another couple pundits pointing out that gold has hit its high. I think that’s the 3497th time I´ve seen that in papers since late 1990´s. They´ve always been wrong before and they were wrong now. Especially measured in dollars the price of gold will, at least, go upwards $3000-4000/ounce, probably double or triple that before settling.

Just remember, gold is not as much an investment as it’s a safe haven. You can earn money on gold sure, but I see too many out there thinking they are earning lots of cash on gold. No you´re not. Not primarily. Gold you should buy to protect your wealth, not to earn more.

Gold is inflationary safe and in general very safe - its where you put your money when currencies and bonds are unsafe. The reason gold price is going up isn´t because gold is worth more, it’s because currencies are worth less.

Many traders know this, governments know this, and many economists know this. A souring gold price is consequently one of the best indicators that the world is going down the crapper.

Secondly in times like these markets are as likely to go up as down. At one moment people are selling to bring in profits, the next moment they are buying because they think they can make a barging. One day government entities and central banks will buy up toxic assets and vacuum the bond market, the next day investments firms reline themselves with securer bonds, the day after that big banks sitting on tons of freshly printed cash buys competitors, the day after that a few traders get panicked. And so on, and so forth.

My best advice, especially if you have a bad heart, is to stay away from market trading (stocks and bonds in particular). You can make a lot of money if you know what you´re doing, but mostly: stay away.

What I want you to pay attention to however is how media (and politicians) will spin it. I want you to take notice how they will take every tiny blip upwards as a sign of goodness and “recovery” and how they will blame downwards moves on temporary sell-offs, evil rating agencies, the Tea Party, Jews, or whatever they feel is appropriate to blame at that particular moment.

Finally I want you to ask yourself these questions:
IF it is necessary for the ECB to promise to spend hundreds of billions of Euros (which you´re paying for) in order to stop markets from going down further: is that a good thing? Is that something positive? Is that a sign that ECB should spend even more money?

If your answer to these questions are “NO!”, well then you´re already smarter than all journalists, politicos and central bankers across the world combined.

And remember; if markets go down, if you manage to misplace a sock or if it starts to rain you can always blame the Tea Party!

For me, today, its buying sugar day. Sugar, coffee and commodities like that will be very expensive very soon.