Submitted by
SK
Options Trading
as part of our
contributors program
.
"Cassius suggests that the people get the government they
deserve"
.
This can be a good thing, if (and it's a big "if") the people do
their homework and vote based on facts, not on rumor or innuendo -
Shakespeare
in Julius Caesar
Many of our leaders, writers and philosophers have said similar
things down the years and it would appear to be apt today. It's
time for us to admit that we vote for those who offer us the most
regardless of how it will be paid for. As voters we are all for
getting the economy sorted so long as it doesn't involve our
entitlements being diminished in any way at all. After all we have
become accustomed to these benefits and our expectations have been
raised by the political elite of all ideologies to ever increasing
heights that are actually way beyond our pay station. To win an
election the politicians need to be popular and they do that by
promising the voter a better future without the voter having to
exert himself too much. Alas we continue to fall for this three
card trick in the vain hope that it will be alright on the night.
Fat chance!
In the United Kingdom the Brits were intoxicated by the
Blair/Brown ticket and thirteen years later the chickens came home
to roost with a new coalition government implementing a program of
austerity bringing with it the misery we have seen all across the
southern nations of the European Union. France has elected François
Gérard Georges Nicolas Hollande on a promise of a better future and
already his popularity has fallen dramatically as the French
electorate realizes that he just cannot deliver, further more
France now appears to be heading towards its own fiscal cliff.
On the subject of fiscal cliffs the United States has its very
own cliff looming with an ETA of 01 January 2013. One gets the
feeling that this won't be the best start that we have had to a new
year. The reelection of President Obama means we will be in for
more of the same with the only difference being that the president
will not be standing for office again, so being mister popular
carries less weight than it did prior to the election. So his
policies of tax, borrow, print and spend will remain intact as that
is what he does. More and more people will become dependent in one
form or another on the government benefits and less dependent on
their ability to stand on their own two feet and grasp the problem
by its throat and wring the life out it. Benefits for the needy
were a good thing many years ago, but today they have grown
massively into a life style choice that is bleeding the very life
out any economic recovery. Until government spending is cut and cut
hard we can only expect the economy to stagger from one crisis to
another begging for the next stimulus package which it is now
addicted to.
It really is a very sad to see the United States, Europe and
Britain in this mess with the only solution on the table being an
increase in liquidity. This is not the remedy for insolvency and it
does not improve the health of the economy.
We also have the sword of Damocles being lifted from Ben
Bernanke's head so he now has a free reign to run those printing
presses as he wishes.
These two events will conspire to drive the dollar into the end
zone; its demise along with a number of other fiat currencies is
now almost a sure thing. In our opinion the main beneficiaries from
the loss of the dollars buying power will be hard assets such as
gold and silver.
As the penny drops and more and more people realize that the
folding stuff is not holding its value and they will seek refuge
elsewhere and when they do it will be an almighty stampede, as they
will move in tandem to enter the precious metals market. As you
probably already know, there are very few people who can tell you
the price of gold and/or silver these days, as they are fairly
oblivious to what is going on. However, as jobs disappear and the
need for food stamps accelerates they will get the message that all
is not well.
Gold and silver will make the headlines for record breaking
reasons which in turn will induce a demand for them bordering on
the irrational. This will be the first sign that precious metals
are entering the parabolic phase where an unquenched desire morphs
into a maniacal action thus driving prices to unimaginable new
highs.
There is not a lot we can do about this other than to try and
protect ourselves and those around us by taking action in the form
of insurance against the ill wind that is coming our way. In our
minds the best insurance is the acquisition of gold and silver as
it cannot be diluted by any government and therefore will hold its
purchasing power as it has done for five thousand years or so.
As for the dollar we could see it improve over the near term as
money comes out of the stock market due to a number of
uncertainties and returns to the sidelines. This should not be seen
as a bullish sign for the dollar as that money will not remain idle
for long. Once things start to settle down investors will be keen
to put their funds back to work. The interest payment derived from
holding this currency is so low that it is a negative return in
real terms so it will be re-deployed promptly.
Finally, if you can curtail some of your frivolous spending and
live a more Spartan life style in order to generate the cash to
invest in hard assets right now, this could be your saving grace.
Please give it some consideration as there isn't a lot of time left
for us all to get into position and be able to ride this one
out.
Have a good one.
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