Surprise Surprise?

"All political thinking for years past has been vitiated in the same way. People can visualize the future only when it coincides with their own wishes, and the most grossly obvious facts can be ignored when they are unwelcome." -- George Orwell

Let me call your attention to some of the most fascinating analysis being presented by a battery of Analysts, Media people and Economists with absolutely NO Intuitive Perspectives on some of the most pressing issues of our time. We, as individual investors and just plain citizens concerned about inflation/deflation, QE3 and the size of our National debt are wondering about the future of both the US and European Bond and Stock markets and their sovereign debt problems. No one can seem to see beyond the crisis of the day and all are satisfied with what only amounts to stop gap measures at best. No one, not the media nor any politician is demanding any moves toward any kind of permanent solutions. All our leaders seem to be satisfied to just kick the can down the road a ways without any mention of any of our longer term pressing problems or even discussing any potential solutions.

As a normal part of my missives, after a major release of government statistics, I examine their latest pronouncements and point out the numerous fudged statistics such as the last month's 150,000 estimated jobs created by "supposed" new company startups that were guesstimated to have been created, etc. So what happened this time? WHY were such poor numbers released without any massaging or spin at all? Has there been a change in the government's agenda? What could they possibly have up their sleeve?

WHY QE3 of course! Given the current hullabaloo in Washington about COST CUTTING and BALANCING the BUDGET, there would be no chance of Bernanke (Obama) getting QE3 through today's Congress without some kind of panic crisis and cry from the public and business community demanding QE3. Well, if you do not have a crisis, let's just manufacture one. After all, as far as the government is concerned, the only crisis worth worrying about is the 2012 elections. And in their minds, the government is going to need a ton of money to continue stimulating the economy in order to fight the Republicans who will have a shrinking economy, continuing falling home prices and increasing unemployment winds at their backs. All Keynesian Socialists are convinced that the only way to get this economy going is to create more demand by printing more and more Fiat money. The best and only acceptable way to get there is? You guessed it, QE3! There is simply NO political chance of getting any kind of QE1or2 like bailout plan through the Congress.

Given the FED'S current downward manipulation of interest rates, the only remaining options for private-sector investors, especially seniors looking for some "safe" source of income on which to retire on is to buy stocks and high risk bonds. That, in my opinion, is why both markets have surged since the announcement of QE2 and in no way reflects a growing economy.

The unanimous agreement by the European Parliament's Committee on Economic and Monetary Affairs (ECON) to allow central counterparties to accept Gold as collateral has been a great step if all you are considering is the Gold market. This is yet another act of recognition of Gold's growing relevance as a high quality liquid asset (money).

The end of the QEs and the unwinding of government and Fed stimulus will lead to a massive depression according to former Fed Economist, Richard Koo. In a report on May 17th by Mr. Koo regarding Federal Reserve Stimulus and Quantitative Easing programs, "much of the current run in equities, and commodities has been primarily achieved through money printing and not by market and economic growth forces.

In commercial real estate, for example, banks-at the request of US authorities-are engaging in a policy of "pretend and extend" and offering loans to borrowers whose debt they would never roll over under ordinary circumstances. That means that current prices do not accurately reflect true market prices of either private or commercial real estate. Housing prices, meanwhile, have resumed their downward trek late in 2010.

According to a number of former Fed economists: The end of QE2 will lead to a double dip recession at best, morphing into a depression at worst. The cessation of massive monetary easing (the end of QE2) could be the trigger that sets off the recession turning very quickly into depression should QE3 not be swiftly implemented.

Once an inflationary boom begins, it by necessity and definition, must end in a bust. Indeed, unless an inflationary boom is fed with more and more inflationary credit, the economy will quickly morph into a deflationary bust. With the first signs of an ensuing bust, a massive QE3 effort, courtesy of anti-deflation hawk extraordinaire Ben Bernanke is sure to follow. In other words, if the private banks don't inflate first, we will see a deflationary scare followed by another Federal Reserve orchestrated inflationary cycle. In the end, we will get QE3 one way or another. The only thing now remaining is to figure out how to play the unfolding scenario.

A reminder, if ever one was needed, is the importance of having a diversification into Gold and Silver bullion. Dollar cost averaging remains a sensible strategy for those concerned that there may be further short term weakness in both Gold and Silver markets.

On the 100th anniversary of the launch of the Titanic, governments the world over appear to be engaged in an exercise of "rearranging the deckchairs" prior to the ship sinking. In much the same way that there was a popular perception that the Titanic was "unsinkable," so too today is the real risk posed to the Euro, Dollar, Yen, Pound and other Fiat currencies largely going unacknowledged and/or is being swept under the rug.


I have long cautioned everyone regarding the short term, extreme volatility of both Gold and especially Silver and the danger of attempting to trade or time the markets. If ever there was a market to "buy and hold" it is today's Gold and Silver bullion markets. Those who continue to buy Gold and Silver bullion coins and bars and store them in safe depositories will be richly rewarded in the coming years. Absolutely nothing has changed regarding their fundamentals. If anything, they are being greatly strengthened and this latest sell off was due primarily to manipulative efforts by the massive concentrated shorts (JPM) aided by a series of unprecedented margin increases causing margin calls and liquidation notices, which brought about a cascade of selling. However increasing demand from both industrials and Central Banks from around the world will quickly stop the selloffs. This demand is particularly strong in China and Asia and among a minority but increasingly vocal and influential band of Silver advocates who believe that Silver is money and will help protect people from developing problems in the western and global financial and monetary systems.

I've been a staunch GOLD buyer since 2001; I recently bought Gold at $1,410 and Silver at $31 and I'll be buying and recommend buying more whenever either or both correct further.

So far, even though it's climbed +500% since 1999, my every re-examination and re-analysis, that I do on a regular basis, of the fundamentals surrounding Gold has only reinforced my resolve (even in the face of every phony news event such as George Soros selling 99% of his Gold in May). That's because, even though I have been a trader all my life, when it comes to a genuine Bull Market, I'm an investor, not a trader... and I don't see any quick fix ideas, let alone any consensus on repairing the global exchange rate system. But again, it's not because I'm romantic about Gold. It's because the primary trend is still extremely bullish, even more so than is the AAPL story and all the increasingly ridiculous government machinations remain strongly intact and upbeat for Gold and Silver.

In short, I see major Financial Tornados heading towards both America and Europe. By far, the most compelling reason to own Gold these days is the explosive eventual price tag of the global credit crisis. "The Piper must always get Paid." Most analysts and investors fail to appreciate just how much counterfeit cash governments around the world have been and are continuing to print. Governments have boxed themselves into a corner with their zero interest rate policies; so much so that they can see no alternative solutions of getting their countries out of their quagmire except to continue, like lemmings, marching to and over the low interest, easy credit, cliff.

We've all heard about the sovereign debt problems across the pond. While several European countries - Greece, Portugal, Ireland with Spain and Italy not far behind - risk defaulting on their sovereign debt. But this list of possible "sovereign debtors" is not limited to economies in the Euro zone. It also includes the U.S. (especially the States) and the U.K.

The only way these countries know how to survive the financial crisis is to print more money and the creation of SDRS does not amount to any real or meaningful change. But the day of financial reckoning will come when all these governments are forced to start draining the excess liquidity from their economies in a last ditch attempt to shore up their currencies. That day could arrive for the dollar sooner than we think. The Federal Reserve's second round of Quantitative Easing (QE2) comes to an end in June. When that happens, I'm convinced we'll get QE3 and suffer the worst inflation since the 1970s thanks to five plus years of unorthodox Federal Reserve monetary operations. It's going to be pretty interesting to see how the Fed unloads $2.8+ trillion worth of securities from its balance sheet without triggering a major bond and stock market crash.

Ongoing monster-sized fiscal imbalances in the U.S. and in other countries around the world will lead to some sort of currency crisis. That crisis will make the one in 2008-2009 look like a cocktail party by comparison.

Supply and demand dictates the most important reasons for owning or avoiding any commodity, including Gold. If you don't understand a commodity's supply and demand situation, then the odds are you'll lose on that investment, unless of course you are a subscriber to UNCOMMON COMMON SENSE.

What you need to know about Gold and perhaps Silver is that they are not only a commodity. They are also very quickly becoming a currency. All of the world's currencies - including the Swiss Franc - have declined versus Gold and Silver since 2005. They're all losing their purchasing power against Gold and Silver. That's why they are in such high demand.

As I have explained numerous times, Gold is not only a currency; it is a Superior Good in economic terms, whose demand increases the higher prices go. Despite record high and rising prices, Gold demand rose 11% to 981.3 metric tons. In what is becoming a familiar refrain, China was a major reason for the increase in demand. The country's purchasing rose 47% in the 1st quarter and the W.G.C. believes it may easily double by 2020.

The demand for jewelry as an investment by (Asian) people, who normally do not have bank accounts, is another one of the main reasons for the strong rise in demand for Gold. Jewelry purchases in both India and China account for 40% of total global Gold demand. They regard the purchase of Gold products as an investment with strong growth potential along with their cultural affinity towards Gold and Silver.


Central Banks are also jumping on the bandwagon. After more than two decades, central banks have once again become net buyers of Gold. A driving force behind this is the central banks of emerging markets wanting to diversify away from their rapidly increasing but depreciating foreign currency reserves. Another reason is that European central banks have seen the error of their ways and are now more interested in rebuilding their Gold reserves. They all remember well the Weimar Republic.

For those worried about the current price pullback and volatility in commodities, Gold is able to more easily absorb price shocks not only compared to other commodities, but to the stock market as well. This means that on average, Gold's volatility remains significantly below that of the Goldman Sachs Commodity Index as well as the VIX.


The point here is that Gold still has a long way to rally. My projections call for $2,500 an ounce over the next 12 months or sooner and $6,250 by 2017.

Gold has entered the 'summer doldrums' and traditionally seasonal factors result in weakness in the precious metal markets, particularly in June and July. This is a good time to accumulate your favorites stocks as well as bullion on the seasonal dip. This has been the case in recent years and was seen again last year when Gold rose in June, fell sharply in July (leading to the usual "bubble has burst" nonsense), and then rose strongly from late July until May. Gold's traditional period of strength is from August into the autumn and early winter. However, this year the doldrum period will, in my opinion, be greatly shortened.

Buying Gold during the so-called summer doldrums has been a winning strategy for most of the last 34 years and especially in the last eight years, averaging a gain of nearly 14% in just six months. New buyers should, as always, avoid attempting to "time the market" and consider dollar cost averaging their purchases to ensure that they do not miss the Gold and Silver Rocket Ships to the Moon and beyond. Whatever you do, don't get too cute.




If you need cogent analysis and clear reasoning; if your time matters as much as your investments, then UNCOMMON COMMON SENSE is the service for you. My job is to find you the best of the best, making sure your radar is pointed at the critical issues and weeding out all the noise so that you can make an informed decision.

We are coming into the most trying times in our nation's history. Is now the time you want to be going it alone?

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Aubie Baltin CFA, CTA, CFP, PhD.

2078 Bonisle Circle

Palm Beach Gardens FL. 33418

[email protected]


Please Note: This article is for education purposes only and is designed to help you make up your own mind, not for me to make it up for you. Only you know your own personal circumstances so only you can decide the best places to invest your money and the degree of risk that you are prepared to take. All Information and data included here has been gleaned from sources deemed to be reliable, but is not guaranteed by me. Nothing stated in here should be taken as a recommendation for you to buy or sell securities. I am not a registered investment advisor.

India and the U.S. trump Italy as top gold jewelry exporters.

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