What markets do day to day is interesting to watch. But, if you talk to the trade room at Dillon Gage, looking for them to tell you what will happen tomorrow, they just won’t. They know better and the truth is, if anyone tells you they know, run the other way.
What we do at Dillon Gage is to look at the underlying economies, gold movement,and public sentiment to try to see what we think long term markets are going to do. Walter and others then write commentaries reflecting the markets and our thoughts.
So here are some observations…As I write today (Feb 12th), we are seeing large moves in the market. Stocks are down over 335 points, gold is up over $50 per oz. at around $1250 per oz. Silver is up over $.50 per ounce at around $15.80 per oz. and oil is down $.66 at around $26 per barrel.
Anyway you cut it, this is an active day and the markets do talk about a lot of issues. Let’s see if we can bring it all in.
One of the big issues is the current interest rates market. Currently Japan and Europe have negative rates. In other words, when you buy their debt you do not get any money or interest paid but the bond holder actually pays those governments money just for them to hold their money in their debt instruments. In the US, Janet Yellen, the Chairman of the US Federal Reserve, indicated that the US may be considering going negative as has Japan and Europe. This has huge implications and as other commentators have written, is a basic assault on our economic system. This has been tried by Japan for years and hasn’t worked and this policy won’t work here.
Let me underscore this. It isn’t healthy for our banks nor does it boost confidence within the business community. In short it is incredibly deflationary. Normally when someone such as the government borrows money, it pays people interest for that loan. When the people have to pay the government, it means that although the government has huge debt trouble, the government doesn’t need the money for the debt they are incurring. That means that the government is either printing or has printed so much money or that people are so frightened about things, that they are willing to say that they will buy a government obligation that guarantees that their dollars will be worth less next year. To my knowledge this has never occurred in the US before and may show that the Fed has run out of bullets.
This movement to safety is also reflected in the stock market falling not just today but since the beginning of the year and the rise of precious metals markets.
Top it off by the leading Democratic candidate for the President of the United States is a self described socialist with the policies to match, further unsettles the worlds economic markets.
If you are older, try to protect your principle for sure and know that we will be in for a lot of volatility.
About the Author: Stephen W. Miller founded Dillon Gage in 1976 after a long career in the brokerage industry. Mr. Miller has a breadth of experience from company management to investment banking services, leading NASDAQ small cap market companies through both first and second tier financing, to taking several organizations through the successful completion of their initial public offering. Mr. Miller and Dillon Gage Inc. have been members of the Chicago Board of Trade and the New York Mercantile Exchange. Mr. Miller is also the co-founder and President of HELPS International.
Author Name: Walter Pehowich
Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.