Empire of Dunces


Some thoughts

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In light of the many questions that I have received on this topic, I thought it advisable to post my thoughts right here.

To get to the point, the last year has been quite good for us, with some major profits in the oil and gold sectors. Our patience in this area is now truly paying off. More detail will be provided in our face to face meetings. As far as the future goes – I continue to be extremely bearish on the Euro. However, since currencies always trade vis-a-vis other currencies, I have to include the warning that I am also extremely bearish on the US Dollar, the Japanese Yen, the British Pound, and pretty much all paper currencies. Notable exceptions are the resource currencies, in particular the Norwegian Krone, the Australian Dollar and the Canadian Dollar. I understand that a lot of the currency experts include the South African Rand, and while technically a resource currency, I simply cannot recommend it. I am intimately familiar with South Africa, and the simple fact is that that country is a basket case. There might be gains here for the short term currency trader. However, since that is not our beat, I can only encourage you to stay away. There are more than enough places to make money in this market
I cannot emphasize it enough – go long on gold. It is not too late. Yes, there is going to be short- to mid-term volatility, but long-term trend is up. Before this entire crisis is over, we are going to see 3000-5000 Dollar per fine ounce. I do not make such predictions lightly. I am not a gold bug, and when it is time to bail, we will bail. But right now, and for the foreseeable future, gold continues to be a clear buy. I started buying this supposedly ‘barbaric relic’ first when the price was at 270 USD, and have continued to buy since. It is definitely not yet time to sell, no matter how many cab drivers and former real estate brokers you hear talking about it. I know, that is normally a sign to sell, but there are larger forces at work here than individual buyers and sellers, or even governments and central banks. These trends are being moved by ECONOMIC FUNDAMENTALS. I always laugh when I hear the politicians talk about re-establishing the primacy of politics over markets. They might as well talk about establishing political primacy over gravity. Some things simply cannot be changed. And the fundamental laws of the market are as immutable as gravity. An oversupply of paper (currency, debt, etc.) must inevitably lead to inflation and a rise in the price gold, silver and other hard assets. And yes, you can nail me down on that. If I am wrong about this, I am in the wrong business, and you should take your business elsewhere.

If there are any more questions, you know how to reach me. Until soon.


Written by gloege

May 17, 2010 at 01:34

Posted in Economics

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