bowman711

Will the Loonie Join the Party?

With the blind intent to force a new election in November, I'd say it is the Canadian Liberal Party that is putting a damper on the Canadian dollar. Even if the Liberals don't win the election, just the uncertainty that they MIGHT win is enough to scare anybody who remembers what they did to the Canadian dollar when they were last in powr.

Gold ETFs: What Went Wrong With Conventional Wisdom?

I think one other element can be added to the discussion about gold. The PRICE of gold does not necessarily reflect the VALUE of gold. Historically, gold has been considered to be a store of value. That means that no matter whether there is inflation or deflation, gold will eventually find its same level in relation to the rest of the economy. Therefore, if 500 ounces will buy a$400,000 house at a gold price of $800/oz it will still buy that same house (now a $200,000 house) with with 500 ounces of gold at $400/oz.. This is what is meant by saying that gold will hold its value.

Conventional wisdom would say that the massive 'bailouts' by the U.S. and most of the rest of the world would be highly inflationary. I think the reason that gold isn't responding to this is because of two reasons; first, it takes time, many months, before newly 'printed money' is reflected in the economy. Second, it looks to me like no matter how much governments introduce 'liquidity' into the economy, it is done through the banks, and they aren't lending it. Therefore, there is none (or very little) of these new dollars that is making it into the larger economy. Until that money makes it way into the larger economy, is won't create inflation.

Actually, we are right now in an historic fight between inflation and deflation, and so far it seems deflation is winning. Look at how much the stock market has deflated in the past few months. Consider how the real estate segment of the economy is being deflated. One could say that energy is also in an historic time of deflation from its highs.

If the economy is being deflated, gold will go down in price. However, once everything washes out, gold should find it historic value in relation to the rest of the economy. So, don't be too dejected if your hold holdings go down in price. If you hold them until the economy stabilized, you will probably own relatively the same portion of the economy, the same value, as you did when gold was much higher in price.

Options Trader: It's Deal or No Deal Friday

The Balance Sheet for Oilsands Quest (BQI) shows that they have 646,000,000 in assets to only $154,000,000 in liabilities. It has gone from about $7.00/share down to $2.78/share in the past few months. I've ridden it all the way down because they look sound enough to me to ride out whatever happens to the rest of the economy. I figured that if they could get only 1/4 of their oil reserves out of their holdings, at $100/barrel there would be some $25-28 of oil per share.

Even if deflation goes down 90%, and oil goes down to $10/barrel the oil would still be worth the same proportion - $2.50-2.80 a share. At any rate, I think this company is sound enough, and its value is in oil in place should retain its value, so hopefully after all the fallout to come, BQI shares should have about the same relative value in relation to the rest of the economy as it did before all this financial mess started. At least, that's what I am 'banking on.' Once the world economy starts operating on all cylinders again, I expect oil demand will eventually pick up to the levels now seen.

On the other hand, if central banks around the world manage to inflate the economy out of trouble for the time being, oil will increase in price to reflect whatever inflation there is - $150, $200 or whatever a barrel - and then the oil BQI has in place in the ground will also increase in value. [The huge drop in price in the last two or three months is reflecting the expected slowing economy, not the relative value of the oil in the ground.]

Therefore, I'd say that investing is SOUND companies, where most of their value is in their commodities in the ground, should come out of all this uncertainty in relatively good shape. It may take some years for the world's economies to rise up to past levels, but it eventually will.

Don't get me wrong - I have significant positions in DGP, CEF, and SLV, gold and silver ETFs. But, I think holding companies with ore or oil reserves should supplement gold. You might not like BQI as much as some other company. Fine. Take your pick of any number of sound companies that have almost nil chance of going bankrupt.

A Tale of Three Markets

Correction: 'For months, a pipeline in Nigeria is bombed by terrorists and the price of oil just $4-5 a barrel.'

should read: 'For months, a pipeline in Nigeria is bombed by terrorists and the price of oil increases $4-5 a barrel.'

A Tale of Three Markets

For months, a pipeline in Nigeria is bombed by terrorists and the price of oil just $4-5 a barrel.

Russia invades a West-oriented country, takes control of a pipeline that supplies something like 20% of Europe's oil, threatens to cut off that oil (and that of their own pipeline that supplies another substantial portion of Europe's oil), threatens any British or American naval ships that enter the Black sea and the price of oil drops some $7+.

Also, saying that the dollar is getting stronger makes about as much sense as saying that the value of your house is going higher because your neighbor's house is falling into more and more disrepair. The dollar isn't going up; it just isn't 'falling into disrepair' as fast as the Euro and some other currencies are.

Something doesn't compute here.

The Dollar Rally Ends

Does CLH stand for 'Curmudgeon & Lunatic Here'?

Contrarian Trading Tips: Gold, the Dollar, Energy and Financials

Wow, gold is now down another $5 to $830.50 - I'd say hold off a while longer in buying gold - the wild ride - er, slide - continues.

Contrarian Trading Tips: Gold, the Dollar, Energy and Financials

As I write this, it isn't on the Kitco chart yet, but gold had just taken another Yosemite Falls drop of nearly $20, breaking through the $835 level. (it is now at $836.60) My guess is that the bullion banks won't quit driving gold down until gold is at least down to $780. I'd hold off on buy gold yet.