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Three New Reasons to Buy Gold

By Jeff Clark
Thursday, September 25, 2008

Sometimes there just isn't anything to do.
The stock market is on hold, waiting for a conclusion to the mortgage/broker/banker bailout plan. The bond market is waiting for the same thing. Ditto for the gold market.
Most stock charts are a muddled mess with no distinguishable patterns. And it's going to take a few days before anything develops.
Since there isn't a clear edge one way or another, I've been sitting on the sidelines the past couple of days. I've had nothing to do but watch CNBC and listen to the "experts" talk about the bailout plan.
Some version of the plan is going to go through. It has to. Too much is at stake and too much political capital is on the line.
So we might as well get used to the idea of the United States Treasury propping up the securities markets.
But three things bother me...
1. Why do they keep saying the U.S. taxpayer might make money on this deal? This is absurd. Taxpayers have absolutely no chance to see a profit off this. The Treasury is going to go into the market and buy distressed assets at discount prices. Perhaps, by some stretch of the imagination, the bond market's Fairy Godmother might come along, sprinkle a little pixie dust, and watch the bonds rise in price. But none of those gains are going to come back to the taxpayer.
Politicians will use the money to increase the size of other programs or to fund new entitlements. We'll never see a dime of it. The bailout plan increases the size of government. If the plan is profitable, then it increases government even more.
2. What's with the "this has to be done today" attitude? Just knowing there's some sort of plan on the table has stabilized the financial markets. We're not seeing runs on banks. And we're not seeing massive redemptions in money market funds. So why the constant call for urgency? It reminds me of when I was 18 years old and buying my first car. The salesman gave me a price and insisted, "This is only good for right now. If you get up and leave, then the deal leaves, too."
Unless you're getting out of the way of a hurricane, or running out of a burning building, few important decisions have to be made right away. Something doesn't smell right about this.
3. How come no one talks about Section 8 of the plan? Section 8 reads as follows...
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Does it bother anyone else that the Treasury is asking for complete and total discretion to do whatever it wants with the U.S. economy?
Let's face it. The government will approve some form of bailout plan. Lawmakers will rush it through on the fear that we have to do something NOW. It's going to result in bigger government. And it's going to put more power in the hands of fewer people.
Seems to me those are three excuses for the government to crank up the printing presses and flood the world with dollars. In other words, those are three pretty good reasons to buy gold. So maybe there is something to do in this market after all.
Best regards and good trading,
Jeff Clark

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Market Watch
Symbol Price
S&P 500 1221.53 +1.3% +10.1%
Oil 37.77 +1.5% -2.8%
Gold 135.20 -0.1% +13.4%
Silver 27.93 +0.4% +47.9%
US-Dollar 80.67 -0.8% +8.1%
Euro 1.32 +0.6% -12.1%
Volatility 19.39 -9.2% -8.2%
Gold Stocks 564.53 +1.3% +10.6%
10-Year Yield 3.00 +1.4% -9.6%

World ETFs
Symbol Price
USA 122.56 +1.3% +10.2%
Canada 30.44 +1.3% +13.8%
Russia 21.63 +2.3% +16.7%
India 37.73 +1.9% +20.0%
Israel 16.47 +0.9% +9.7%
Japan 10.58 +1.0% +7.4%
Singapore 13.88 +1.0% +19.2%
Taiwan 14.72 +1.6% +17.8%
S. Korea 56.56 +1.7% +22.8%
S. Africa 70.85 +3.9% +22.9%
China 45.06 +1.4% +0.1%
Lat.America 52.82 +1.4% +6.7%

Sector ETFs
Symbol Price
Oil Service 136.18 +1.5% +14.8%
Big Pharma 64.13 +0.6% -3.3%
Internet 72.13 +0.7% +22.3%
Semis 16.03 +2.1% +28.9%
Utilities 31.21 +0.3% +1.6%
Defense 18.51 +1.3% +10.1%
Nanotech 9.99 +1.3% +0.0%
Alt. Energy 9.95 +1.4% -4.4%
Water 18.31 +1.1% +12.2%
Insurance 16.07 +1.2% +18.3%
Biotech 20.58 +1.1% +27.1%
Retail 19.65 +0.1% +28.4%
Software 24.59 +0.9% +24.1%
Big Tech 53.73 +1.0% +21.9%
Construction 12.99 +2.1% +13.3%
Media 13.57 +1.1% +25.0%
Consumer Svcs 67.26 +0.8% +23.3%
Financials 54.87 +2.4% +5.2%
Health Care 64.22 +0.7% +1.3%
Industrials 63.25 +1.6% +19.7%
Basic Mat 73.57 +1.6% +21.6%
Real Estate 55.24 +1.4% +23.8%
Transportation 91.17 +1.4% +25.6%
Telecom 22.48 +1.1% +17.1%