The terrorist acts at the Boston Marathon were reprehensible, performed by a coward, or group of cowards and aimed at doing damage to so-called “soft targets”. Let’s ditch the political correctness and call it what it is: innocent, civilian men, women and children. Yep, folks, it sure is a new era upon us.
Throughout the day yesterday, Gold was selling off in a hard way, as were other commodities. stocks were in a steep descent, only deepended by the bombs at the Boston Marathon in the last hour of trading. It was a brutal reminder just how fragile this economic recovery has been.
For those fortunate enough to have solid 401(k) and investment balances, the past few years have been quite good as the U.S. and other countries (most notably and recently Japan) have pumped trillions of printed dollars into the economies of the world, which has been driving the stock market to pre-crash highs once again. The big question is whether those dollars have been chasing solid fundamentals in the underlying companies, or just fleeing low-return bonds and treasuries, and selling out of traditional safe-havens like gold.
There are two components to consider in the record sell-off in commodities: First, in a world of hyper-inlfation that many think will eventually arise from all the monetary stimulous, commodities can help protect against the loss of purchasing power since they too will rise to meteoric levels if, in fact, inflation kicks in hard. The second is in severe financial duress, commodities such as silver and gold are viewed as safe-havens against collapsing currencies, which can (and did in post WWI Germany) become literally worthless.
The only rational explanation for the recent sell off in gold is that despite slow growth and many fundamental problems in virtually every major economy world wide, the market thinks the net result of all the currency printing is still going to be slow growth. With China, the world’s second largest economy logging a decrease in growth for the first quarter, yesterday’s steep sell-off in both the stock markets and commodities, aggravated (although not caused) by the bombings in Boston show an incredible amount of uncertainty… the beneficiary? U.S. Treasuries. The good news for the U.S. is that with demand for treasuries comes more cheap money to further over-stimulate the economy. The only rational conclusion I can draw is that the opium of trillions of stimulous being pumped into the economies world over will continue and the market will recover, until the next “trigger event” causes a decline of such epic proportions that we wont be able to recover.
Yes, the world as we knew it is gone for good. We were reminded yesterday just how vulnerable we are to attack. I believe that our financial world has changed as well as we are well beyond the point of no return with the reckless “print and spend” strategy of the federal government. And I believe our day of financial reckoning is right around the corner, just when all of us were starting to feel some comfort again. Shedding debt and acquiring safe-haven assets is now more important than ever to protect your family’s financial future.