Monday was an exciting day—especially in the precious metals market where panic set in resulting in an over 9% drop in the sector, including mining stocks. The fear bled over into other markets as well. Crude oil dropped below $90 per barrel and in Asia as well as Europe, stocks lost 0.7%. In the U.S., stocks skidded 2.6% as volume picked up to a moderate level. The VXO fear gauge exploded upward 39% to close at 16.23. Perhaps somewhat inversely from 2008, this precious metals mini-crash caused margin calls that forced “investors” to put up more capital. Some will sell high-flying stocks to generate cash which will place selling pressure on stocks. Of course, some of the stock indices contain mining companies or companies impacted by falling commodity prices, accounting for some of their drop.
As this letter stated May 5, 2011, Gold in the $1200 per ounce range starts looking attractive. Back then, the letter estimated silver attractive in the $22 to $25 per ounce range, so it’s currently arrived. This is not a recommendation to buy—just an opinion. Your investment choices are your own responsibility. Keep in mind that gold and silver and miners could shed another 50% before they reach their prices of the 2008 crash bottom. if they go undervalued. Cash still seems safer at this point.
Tuesday, precious metals rebounded a bit, rising 2.8%. This aided stocks somewhat. Still, in Asia stocks lost 0.5% and in Europe they dropped 0.7%. In the “weird, wild” U.S. market, stocks gained 1.5% on low volume while the VXO plummeted 20% to close at 13.01. Wednesday, in Asia stocks rose 0.6% but in Europe, they fell 1.6%. In the U.S., stocks reversed the previous day’s gains, falling 1.5% on low moderate volume while the VXO shot upward 23% to close at 16.00. Oil continued to slide to drop below 87. Could it be that “investors” are finally ready to admit that this QE charade is not over. QE liquidity does not produce productivity gains. Instead QE stifles productivity by stoking the fires of malinvestment.
Thursday, in Asia stocks followed the lead of the West dropping 1.1%. In Europe, stocks took a breather, closing just about unchanged. While precious metals had about a 0.5% gain for the day, metals mining stocks soared about ten times that amount. Stocks in the U.S. closed down 0.3% on low moderate volume. The VXO fear gauge moved up about 4% to close at 16.70. Friday stocks in Asia gained 0.4% and in Europe gained 0.5%. In the U.S. stocks gained 0.8% on moderate volume as this was an options expiration day. VXO dropped nearly 13% to close the week at 14.27. Overpriced IBM got its due today—dropping over 8% to close at 190 after even accounting tricks and excuses about currency losses failed to sway enough greater-fool “investors.” Surprisingly, the Dow Jones Industrial Average closed in the green despite this big loss in the biggest contributor to the index.
For the week, stocks dropped 2%, precious metals shed another 5%, gold miners lost 10%, and crude oil fell another 1%. With Apple down 44% from it’s peak last year, precious metals down 46% from their peak a year and a half ago, and now IBM losing it’s grip, could it be the asset inflation bubble scheme by the banksters is starting to crumble? Time will tell.