03/29/10 Baltimore, Maryland – The Dow was up 9 points on Friday…following a week of big news.
Congress passed a bill permitting the US government to take over the health sector…about 17% of US GDP. Let’s see. The feds don’t have any money, right? They’ve got the biggest deficits ever, and will have to borrow $2.4 trillion this year just to keep the lights on.
And now comes news that Social Security has gone into deficit for the first time ever…and 7 years ahead of schedule.
The feds took over the mortgage finance industry last year. Practically every single mortgage written last year was underwritten by the US government.
And they took over the auto business too. They should be able to do for autos what they did for passenger trains. That is, they should turn Detroit into an Amtrak…which is to say, a Zombie City, if it isn’t one already.
Then, there was the bailout of Greece. And not only that…there was a weak auction of federal debt. A few years ago, any one of these bits of news could have walloped the stock market.
But investors didn’t seem to know what to do with the news. The Feds had taken over another big chunk of the economy. But what to make of it? Was that good news or bad news? The stock market seems unable to make up its mind. Finally, it ended the day with less than 10 points of movement.
Gold investors had a better idea what to do. They bid up the price of the yellow metal $11. Even central banks are buyers:
Central Banks Buy Gold, from MoneyNews:
Central banks around the world added 425.4 metric tons of gold to their reserves last year, the biggest increase since 1964, according to the World Gold Council. That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988. Central banks in India, Russia and China were among those boosting their gold reserves last year, as the precious metal jumped 24 percent, hitting a record of $1,226 an ounce in December. Central banks now possess 18 percent of all gold ever mined.
“There’s clearly been a renaissance of gold in central bankers’ minds,” Nick Moore, an analyst at Royal Bank of Scotland, told Bloomberg. “It’s not just been central banks taking on gold, but a general shift for physical gold in the investment sector.” Many are now singing gold’s praises, with the precious metal up about 3 percent so far this year.
“Gold is quietly, at the edge, becoming the world’s second reservable currency, supplanting the euro and rivaling the dollar,” money manager Dennis Gartman wrote in his Gartman Letter, obtained by Bloomberg. “The trend shall continue months, if not years, into the future.”
Regards,
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Starting to see a lot of reputable analysts calling for S&P 1300+ by year’s end based upon better than expected growth. As you know, I wholeheartedly agree. By this time next year, we should be challenging the S&P highs or 2007.
This turnaround has been so well orchestrated that even BB had to change his tune from calling it a Depression, to a milder “Great Correction”.
Dow 11,000 is within a day or two and that will add well deserved optimism to the markets. There’s a lot of upside here and soon that optimism will translate into more business investment, hiring, etc. It’s a good time to be invested in the future of our country.
Is that when the Goverment raise taxes high enough to pay for the borrowing they have done? Oh yea we don’t haved to pay it back we have the world reserve currency. We can just print it up to pay things off.