Energy prices are expected to move up this year. Diesel prices will increase on an expected demand increase of 6.2% this year. Light, sweet crude oil prices exceed $100 in some areas. Consumer confidence continues to go negative. The consumer portion of the economy won’t stand on its own. Four additional banks were closed yesterday which brings the total to 7 for the year.
China is dealing with food inflation, overheated housing, and greater energy demand. Domestically, municipal bonds are now in the spotlight. Municipalities will either raise taxes or go bankrupt. The voter is not interested in tax hikes. It has been reported in Vallejo, California, the city defaulted on their bonds and bondholders received about 5 cents on the dollar. The local judge protected local pension funds which left the investors holding the bag.
Investing is probably more challenging this year than anytime in recent history. Short term traders are dumping gold and silver yet the U.S. Mint is reporting unprecedented demand for 1 ounce silver coins. Has money printing ended? Not that I know of. Has Europe resolved its fiscal problems? No. The U.S. will be refinancing during the mid-year timeframe in the $3 Trillion arena. This year appears to be paralleling 2008. QE3 (Quantitative Easing or printing more money) may happen in the 3rd quarter.
Ireland may be the first domino to fall in Europe. In March, the Irish may elect a new party who promises to default on its debt. If that occurs, the other countries in trouble may follow suit. Will this be a St. Patrick’s Day massacre?
A 20% correction in gold & silver would be healthy. $1,150 gold would produce a notable correction to the related stocks. I will be buying with what money I can scrape up to add to my stock positions. Remember, gold and silver mining companies are making a lot of money at these price levels thus improving their cash positions. One silver producer I invest in has a negative per ounce of silver mining cost. Other metals mined pay for the mining expense. $27 silver is all profit. What company has a better cash flow and income model?
On the subject of Iraqi Dinars
Several people have asked my opinion about this investment. My advice? Ask Our Heavenly Father whether you should invest and how much. Never invest in anything like this where you can’t afford to lose 100%. If you do invest and the major revaluation occurs, then you have a new issue: How do you manage the windfall? Money produces power and a sense of entitlement. Only the strongest believers will be good stewards of the additional funds. Others will lose the money and be back to their previous life, possibly with less. Step 1: Pay your tax liability immediately. Step 2: Pay off your debt immediately. Step 3: Wait on THE LORD to hear what or who you should invest in. Don’t be in a hurry! HE’LL talk to you if you will listen.