Wanted: Better Data, Not QE3
Stocks are up today, so far. Speculation that the Fed will not be able to resist more quantitative easing is putting a floor under stock prices. And the news that Qaddafi is just about defeated in Libya is helping the good vibes.
But clearly, this market will need more than speculation about the Fed and the easing of some geopolitical tension.
We need some economic data to show a little growth, and ease the worries that the U.S. economy is slipping back into recession.
Should We Blame Speculators for Higher Commodity Prices? (GS)
My belief as a researcher and an analyst is that undue speculation in not just the copper market - but nearly every market, including the stock market, currency markets, the bond market, etc. - my belief is that this speculation is being fueled predominately if not completely by the actions of the Federal Reserve.
The Fed has a mandate, for better or worse, constitutionally or unconstitutionally, to maximize employment and keep GDP growth slow and steady. And now we're seeing the breadth of their power to implement those two goals - they can simply transfer "dollars" from out of thin air into the bond market, into the financial system, into the mortgage market. Those dollars have to go somewhere. Goldman Sachs (NYSE: GS) isn't likely to sit on billions of dollars - they'll put it to work speculating. The same is true of all of the Fed's member banks.
As we saw with the oil markets between 2008 and 2010, when the bets turn against the speculators, the price tends to drop to ridiculous lows. Looking at a copper chart, the same thing happened there too.
An investment axiom 9 out of 10 investors don’t understand
If you haven't already, I advise pouring yourself a strong cup of coffee to make it through today's letter.
That's because I'm going to, as briefly as possible, discuss a concept that's somewhat boring.
But it's vital to understand this concept if you hope to have any success with your investments. Understanding this concept will lead you down the road to asking the right questions about where, when and how you invest. It will give you a crystal clear understanding of the difference between investing and speculation.
It won't guarantee success by any mean, but it will put you on the right path.
How to buy gold and silver
While I've been answering many of these questions in a piecemeal fashion throughout issues of the Resource Prospector, I thought I'd once and for all cobble the information together in one place.
Like anything, if you're just getting started in buying gold and silver it can be a somewhat daunting process.
That's because there are about as many different precious metal vendors as there are types of coins, and it can be a bit of a minefield if you don't know EXACTLY what you're looking for, how much you should be paying, and perhaps most importantly, why you're buying precious metals in the first place.
I recently received a question from reader David W. which seems to encapsulate just about every possible angle of this topic:
