Posted on 01/25/2010 7:52:01 PM PST by Kartographer
Here we go again.
Less than two years after the housing market collapsed, the U.S. economy is threatened by a new bubble in asset prices. This time, four billowing balloons are hovering: two commodities -- gold and oil -- stocks, and government bonds.
Don't be fooled into thinking that last week's 5% drop in the S&P, and the recent sell-off in oil, remotely makes them fairly valued, let alone bargains. Equities and commodities, as well as Treasuries, which actually rallied as stocks dropped, still have a long way to fall. The reason: They've already seen huge run-ups that put their prices far above their historic averages, and far above the levels justified by fundamentals.
(Excerpt) Read more at money.cnn.com ...
ping
bump
Hurry. The S&P EMini just broke below Friday’s close :)
The real bubbles are the U.S. Treasuries bubble and the dollar bubble.
Gold - in dollars - is up in nominal price mainly because the dollar contines to slide in real value as the printing presses roll. The political will is lacking to make real change in fiscal policy, and this ensures that the dollar will, in the years ahead, continue the longer trend of devaluation.
That’s how I used to think. But now I’m starting to think the only way gold wont collapse is if the dollar does. I don’t see the dollar collapsing in the next ten years...just a mild gradual decline...not enough to keep gold up.
Gold and Treasuries did the same thing in the 70’s. It’s recession behavior where those who managed to hold on to their wealth take a flight to safety and don’t come back until it’s safe, which it clearly isn’t.
I’d be careful believing any bubble talk unless there is well reasoned and well supported logic behind it that leaves little doubt irrational exuberance is at work.
I think the PTB are trying to goose sheeple into Treasuries. If they get enough to voluntarily buy them, then they won’t have to work on expropriating 401ks, a la Argentina. After the Brown election, the lefties are realizing folks aren’t taking a shine to their redistributive horse-hockey.
I’ve continued to buy quality shares of good-dividend [3%+] paying companies with clean balance sheets and reasonable PE’s ranging from 8-15x with good PEG #’s. Maybe I’ll fall on my face, but I’d rather own equity than debt.
If rates go up, unless you own the T bill directly and hold for the duration, you’ll get hosed if rates increase. Which will eventually happen.
I’m not an experienced investor, so if I’m off-base, please let me know!
People look at gold the wrong way. It doesn’t “rise” in purchasing power so much as ALL paper, debt-based fiat currencies eventually fall against it. An ounce of gold bought about 300 loaves of bread in ancient Persian times, an an ounce of gold buys about 300 loaves of bread today. Compare what a dollar buys today to what a dollar bought even fifty years ago.
$3.50+ for a loaf of bread? Maybe at Whole Foods, but if you go to the chain grocery it’s usually 10 for $10...that would be over 1000 loaves for an ounce of gold.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.