The Economy Guy

Everything moved sideways today including stocks which is irrational, but that’s the way of stock.  Stocks are like people, and there is a good reason for that.

Gold hit an all time HIGH today of $1153 interday.

In the news today…..

CPI rose – 0.3% in October.  Sounds like a benign inflation, and it is just right for a healthy economy.  However, we aren’t really health: we are still in a deflationary environment – think of declining housing values.  Also remember that CPI as measured by the government underestimates the true inflation (increased cost of living) out there.

US Housing Starts fell – to their lowest level in the past 6 months in October.  This is great news from my perspective.  New homes only add to the inventory of houses out there that are for sale.  We must reduce the inventory to get prices to stabilize.  That’s the whole story behind reducing foreclosures, and keeping owners in their homes – even if they are upside down on their LTV (Loan to Value).

Goldman Sachs Chairman – apologized for Goldman’s past actions that contributed to the financial crisis.  He also gave out $500M to charity (about 3% of the amount of bonuses Goldman is giving out this year.)  I say Bah Humbug!!!!!  This scumbag who lead his company to actually create the bubbles of the past isn’t trying to repent.  He is just trying to buy off your and everyone’s sympathy.  Ignore his message.

IRS vs. UBS – Here is the deal struck between these two. I have been highlighting this story as it unfolded because I am very interested, and it shows how our government thinks and acts.  The Internal Revenue Service on Tuesday released the terms of its banking secrecy deal with Switzerland. The banks must reveal the names of U.S. depositors who do not file a W-9 form for three years. But the deal only applies to depositors who had more than CHF1M ($992,802) in their accounts at any time from 2001 through 2008, and which generated average annual revenue of more than CHF100,000 ($98,892) over three years. The deal dates from the time UBS (UBS) agreed to pay the U.S. government $780M to avoid prosection on tax evasion charges. The deal was the result of protracted negotiations between the two countries.

Tonight’s Dinner Conversation…..

Gold.  Let’s talk about what’s going on in the gold market.  You know I am excited about the recent rise in gold.  It’s gone as high as $1153 today.  Yikes.

Here are some things I’ve picked up about gold:

1. The reserves (gold in the ground) for gold is declining each year = less supply
2. The Central Banks of the world are buying gold  = more demand
3. The Central Banks of the world are selling Dollars to buy gold = lower Dollar.  We are talking about big bucks here.
4. Four US Banks hold almost all of the futures to SELL gold.  They are front organizations for the US Government.
5. There is a balance of futures to BUY gold and these are from all the other organizations and people of the world.

The US government has never, and never will win this battle of manipulating the gold price.  Right now, those SELL futures are building up a huge negative balance due when they sell the contract, or the contracts become due.  What’s going to happen at that time?  One of two things:

1. There will be an explosion in the price of gold (and silver too – same story).
2. The government will close the exchange and not allow the loss.

Oh by the way, who loses here?  You, the taxpayer!!!!

Here are the last numbers for today:
Dow Jones 30 Industrial – 10,426 (down 11 points)
10 Year Treasury Bond – 3.37% (up 0.05%)
Euro – $1.4947
Gold – $1141 (up $2)
Oil – $79.58 (no change)
Gasoline – $2.00  (no change)