Good Uncle Ben sure hit a vein and unleashed a global bloodbath! Bernanke’s comments caught most of the investing world off-guard. Even the US. US, I believe have some of the smartest, most-savvy analysts in the business. And they all agreed that Quantitative Easing would have to be in place through 2014, and likely through 2015. While they are not fans of QE, but it’s hard to deny that it has been the basis for much of the bull market over the last 18 months or so. It has kept interest rates low, equities high and physical gold in steady demand. Generally speaking, you don’t see Fed policy shift this quickly. Usually, policy changes happen slowly -- hinted about at first, then executed in small steps. Bernanke started hinting last month that he might start tapering. Then yesterday, he said it could very well be over by mid-2014! That’s not a taper, that’s a sudden S-T-O-P! Making changes to Fed policy that fast is akin to engaging the light-speed drive on the Millennium Falcon, for the readers who are “Star Wars” fans. Bernanke’s comments came out of left field. All the experts we spoke with agreed with our assessment that QE was going to continue. By the way, you might not hear it from anyone else, but all us “financial guys” look at the economic landscape, come to a conclusion, then check that conclusion with our peers. Some people might not be willing to share that “behind the curtain” information with you like I do, but we all compare notes. What does this “bloodbath” mean to you? In the long run, ending QE is a good idea. Ending like this is tough, but in the long run we aren’t all dead, like the infamous economist Lord Alfred Keynes said. In the long run we have to retire and leave the world to our children. I’m glad to see QE done; I’d have just liked to see it unwind a bit slower. But we have to play the hand we’re dealt. I’ve been saying gold was close to a bottom, however I also pointed out Monday afternoon: “I will tell everyone that it is very important to pay attention to what Ben Bernanke and the Fed have to say on Wednesday. If the Fed comes out and says that QE-Infinity will end, gold may be in for a slight tumble that we should be ready for.” I know the roughly $80 that gold bullion has given back over the past two days might not seem slight, but remember it’s 5% of the value. That means gold maintained 95%. I’m not being Pollyanna about it; it’s a two-day drop ... rarely do these things go on and on. What’s more likely is a bounce, and then the market will forget about the panic and fundamental valuations will come back in play. To that end, I’ve reached out to a gold expert I know and asked him to do a guest article for us. Our people are perfectly qualified ... more than qualified, but I know it’s nice to see an opinion from someone else, now and again. Also, I don’t mean to give a lecture, but I would be remiss in my responsibility to you if I didn’t point out how this situation is a perfect example of why discipline is so important. If you’re allowing yourself to be swayed with every news story, like many people in the markets do, obviously, you’ll find it hard to make any real returns. I have the discipline I use, the three-bucket method that we’ve been talking about. Friends, family and colleagues have their methods -- as a matter of fact one of my colleagues, Tony Sagami did a video recently about a system he uses ... you may want to learn about his approach, too. To paraphrase an old saying, if you don’t abide by some disciplined investing method, you’ll lose money on every “emergency” the 24-hour news cycle creates. It’s often said that if you don’t stand for something, you’ll fall for anything. I want to make sure you’re standing tall so you can see everything coming your way … and that you’re prepared to react or to not react right away, whichever is more-appropriate for the occasion. Some other news you should keep an eye on today: The International Monetary Fund is threatening to suspend aid payments to Greece because of a 3-billion- to 4-billion-euro gap in the rescue program. The IMF made it clear, however, that most of the problem is the European Central Bank’s refusal to roll over bonds ... the problem isn’t coming from Athens. Ireland, which the IMF sees as doing a solid job of getting back on track fiscally, received its latest payment from the IMF this week. This euro-zone country, the second to apply for funds after Greece, might be on-track to exit its bailout payments as soon as this year, according to the IMF. Oil futures had the largest one-day drop in seven months. China’s slowdown and Uncle Ben’s QE bombshells are likely to blame.
Posted on: Fri, 21 Jun 2013 06:36:23 +0000
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