-- Published: Friday, 31 October 2014 | Print | Disqus
Global:
I was just wondering this morning, what new drama we are about to see, when the Quantitative Easing Program by the US Federal Reserve has ended. Well, The second Act of the drama has begun. The Bank of Japan has stepped in and begun pumping liquidity into the markets by way of asset purchases. And right on cue, the global stock markets (especially the BSE Sensex and Nifty) have bounded to lifetime highs...Underlying fundamentals be damned!!! And mind you, this is all hot money, quick to come and quicker to flee.
Macro:
BTW, I wonder why, the governments of the world won’t leave the markets alone. This has begun to increasingly look like socialism all over the world. The governments and their Central Banks are increasingly trying to intervene in the markets. At this rate, very soon, we are going to be seeing most of the ownership of the world's productive assets in the hands of BIG GOVERNMENTS. And we all know what happens when The Government starts owning all the means of production. Long lines at the ration shops. The war between the Communists And Capitalists just reversed...
Micro:
A Few days back I met a retired person. He had heard somebody predict that the BSE Sensex was going to reach a level of 50000 from the current level of 25000. And he was planning to put his retirement savings into the stock markets. I strongly advised him against it and told him to either put his money into a nice a safe nationalized bank fixed deposit or purchase gold bullion if he was feeling a bit adventurous.
What Next:
After a lot of dabblings with the world's finances, The Bank of Japan will stop its own QE, but then the EU will pitch in, then China, then the US again, after all, money can be created out of electronics bits now-a-days.
How will the crash come:
The crash in the stock, derivatives and bond markets will not come in the near future. That is a certainty. But how?
Here is a speculation:
It will begin as some really small event. Somewhere, someone is not going to be able to pay back his loan. Or maybe some small country is going to default on its obligations. And the domino will begin. And it will be good. A certain amount of deflation has always been good for the progress of humanity. It weeds out the weak and inefficient and strengthens the efficient businesses.
But no. In today’s scenario, The central banks will still try to valiantly avert the said crash, by buying still more assets. In the long term, what will happen is that the central banks and governments and government owned enterprises will end up with owning most of the stocks, bonds and other assets. This is a sure fire way towards Socialism. With all the hardships it entails. And then the Big Government will even confiscate all private gold.
Alternately, the economic exploitation of nature will reach such a great degree, that mother nature will give way. Hmm, that looks like a certain possibility in a sufficiently long term. Keynes said that we are all dead in the long term. But it is our duty to ensure the survival of our children and grandchildren. So, we need to be thinking about ALL the possibilities.
Just Stored cans of food and ammunition are not going to ensure the survival of your grandchildren. It’s going to be financial assets in the coming new world order.
And gold as we know it IS MONEY. Buy it and store it. And it will Just sit there. It won’t corrode. It won’t evaporate. It won’t spoil. Somebody down the line will discover, that some grandpa has saved some money in the locker. And if he / she is wise enough, will know how to use it properly.
And now is the right time to buy. But not as a speculative asset. Neither as a quick bargain. Buy in small quantities. Buy As much each year as you can save, after taking care of all expenses. And the more aggressive folks can certainly buy in monthly SIPs (the financialists say SYSTEMATIC INVESTMENT PLANNING – SIP).
The floor of gold price production currently is about 1200 USD. So, gold at anything lower than 1200USD is definitely attractive. Because, at less than 1200 USD, the miners stop mining gold, or mine it very minimally, to cover their daily expenses.
And remember, GOLD at 1USD an ounce means we are, all of us, wearing golden ornaments and golden crowns (like the GODS) without any risk of it being stolen.
Which means we are, all of us, happy and well fed :).
Manish Thatte
manishjagdishthatte@gmail.com
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-- Published: Friday, 31 October 2014 | E-Mail | Print | Source: GoldSeek.com
