Sal's Corner

Isn't it Ironic

The past few weeks have been brutal to global markets and global economies in general.  The world markets have lost trillions of dollars in paper wealth and currencies have gotten hammered along the way.  The funny thing is that the currency i consider to be one of the most feeble ones is the one benefiting from the whole mess.  The almighty dollar has surged like a balloon out of the water.  Everybody has rushed in to dollars for a lack of a better asset.  Gold has held its own as well, the problem with gold is that is part commodity, part currency, gold has been acting amazingly well compared to some other commodities.  Some people think gold is expensive, but if you ask me, gold is still cheap.  My prediction still stands that in 3 - 5 years, gold will be trading in the $2000-3000 range, the dollar cannot survive with the amount of debt the US has and the exorbitant interest payments.  The reason you see the dollar going up is because people bet against the dollar and now that is rising all those people are being forced to cover their bets strengthening further the dollar.  In addition investors are scared as hell and since the US government is still able to print as many dollars as they wish, therefore, the dollar is still considered safe with a very slim chance of defaulting. 

As an aside comment, a couple of weeks ago I had the pleasure of visiting Chicago to watch my 2 brother run the marathon, they both made it through the finish line, and that is considered a big feat given the weather conditions that persisted that day.  The heat was brutal and we saw plenty of runners that did not fare as well.  I had the fortune of running the last 10 kms or so with my younger brother, as he passed by the place I was standing along with the rest of my family, he looked tired, so I decided to keep him company for the last leg, make sure he was OK and keep his spirits up.  The whole trip was worth all the while, but if I was forced to pick the moment I liked the most, it would probably be that, finishing the marathon with my brother, it really made my day.  I could see the whole trip lending itself to one of those mastercard commercials (although I used american express throuout the trip), running with him was priceless. 

This evening I carved 2 pumpinks with my kids and I took pictures of them, I was going to upload a couple of pictures today, but i cannot find my cammera, I will do so this weekend.  Happy Halloween.

Never Try to Catch a Falling Knife

The past couple weeks we have seen the stock market behave like very few times.  I may not even have been born the last time the markets were behaving this erratic.  The Dow has lost more then 4000 point since its high of approximately 14000.  So where does this end?  I have no idea, in a market like this is better to stay out of the way, this is like an stampede and standing in the way will just get you harmed (in a financial way of course).  I have been writing my blog for several years now, and I remember telling in one of my blogs a couple years ago to never doubt human stupidity, my theory is that bull markets never start from the high P/E ratios we had back in 2003, and that is still the case, we will not have a bull market until P/E ratios decline to the single digit range, and let me tell you that we are still long ways from that point. 

On the other hand, the dollar is also in a very fragile position right now, and if history serves us right, the dollar should be on its way out as global reserve currency and it will be replaced by some other currency (euro, yuan, a mixed basket??).  The current financial situation is putting significant pressure on the dollar, and if I was to guess, I would say the Fed will cut rates next time they meet or may be even before then.  In the meanwhile gold continues to be one of the safest positions that you could take right now.  Let me repeat it once more, gold is in a bull market and it will not stop until it gets to the $2000/Oz range.

This week I'm in Edmonton Canada visiting a refinery, the first thing I noticed is that it is already cold, at least for my standards, and from what I hear there is a slight chance of snow tonight, so bundle up!!