The Decade of Complacency & GoldEmanuel Balarie Economic historians will look back at this decade, as the decade of complacency. Consider for a second, the definition of complacency from Dictionary.com: Complacency is..."A feeling of quiet pleasure or security, often while unaware of some potential danger, defect, or the like; self-satisfaction or smug satisfaction with an existing situation, condition, etc." In a nutshell, this clearly describes what has occurred throughout this decade. Consumers have continued spending in the midst of declining savings. Housing prices have escalated even as incomes and job growth have failed to appreciate. Manufacturing has left the country, inflation has soared, and our budget and trade deficits have increased at an unbelievable rate. Yet in the midst of all of this the "goldilocks" phrase has been tossed around, consumers have lived outside of their means, and individuals have had a false sense of economic security. What has transpired in the last several months should serve as a wake-up call. The housing slowdown, sub-prime debacle, and equity decline should not have taken anyone by surprise. Yet it did. The escalating tensions with Iran should not surprise anyone. Yet it has. Last night, oil prices jumped to $68/barrel as rumors about an attack by Iran on a US vessel sent prices higher by $5 in a short period of time. While this ended up being a rumor, it is not a rumor that Iran took hostage 15 British sailors. Oil prices should have jumped higher on that news alone. Yet it didn't. This again shows you the complacency that is still in the market. Any way you look at it, taking 15 British soldiers hostage is a big deal. In any case, whether it is complacency over geopolitical tensions ((not only with Iran, but also with North Korea and Venezuela) or complacency about the US economy and the housing market, investors should be aware that this lack of regard will get them nowhere. At best, having this outlook in the midst of convincing economic data and news is hopelessly optimistic. At worst, it may lead to financial ruin. Gold Breaks Away From Equities About a week ago (March 16th) I emailed my newsletter to subscribers and stated that gold has been tracking the stock market. In the newsletter, I stated:
This week we saw gold break through the 660 level and also saw the market head sharply lower as gold has remained strong. Even as I write this, gold is up about 5-6 dollars and the S&P is down about 12 points. [Update: gold is selling off and the stock market is rallying]. While there will likely still be moments where gold will track equities, gold is now clearly trading by its own merits. Oil is up, tensions with Iran are escalating, and the recent sell-off and consolidation that occurred in the gold market is setting up for a relatively quick move above the $700 level. In addition to the fact that gold is decoupling from the equities market, there are several other key reasons why I believe we will see this quick move up to $700. 1) Gold has broken out of the 635-660 Range 2) Middle East tensions heating up 3) Sharp rise in oil prices 4) Dollar weakness continues I will be discussing these issues in my free newsletter later this week. If you are interested in receiving my free newsletter you can sign up here. At Wisdom Financial we offer a number of different alternative investments/absolute return strategies that may help in diversifying your portfolio. If you are interested in any of our managers who offer investments that are not correlated to your typical stock and bond portfolio, you can request information here: Futures and options trading involve substantial risk and is not suitable fore everyone. Emanuel Balarie email: ebalarie@commoditynewscenter.com Emanuel Balarie is President and CEO of Jabez Capital Management. In addition, he is also editor of www.commoditynewscenter.com and the author of Commodities For Every Portfolio: How To Profit From The Long-Term Commodity Boom. Mr. Balarie's industry experience ranges from commodity stocks to futures to alternative investments. He is a highly regarded advisor to clients and institutions on the commodity markets, and has had his research published all over the world. In addition to being a regular guest on CNBC, Balarie is frequently quoted in financial publications such as, The Wall Street Journal, Reuters, Marketwatch from Dow Jones, and Barrons. Mr. Balarie is a graduate of UC Berkeley. For more information on Emanuel Balarie you can visit www.commoditynewscenter.com or email him at ebalarie@commoditynewscenter.com |