"Problem is simple. Keep making money in stocks until the money printing system is dry, inflation is rampant, and [we have] another financial crisis and economic collapse. That’s the play."
— Richard Michael Abraham, Wall Street Journal comment section
I found the above comment after reading a trite article about how the world was going to hell in a hand basket.
(Remember when the WSJ was good? I do. I miss it.)
Mr. Abraham’s comment was spot-on. That is the play.
Money has to go somewhere, and there is more of it every day. It will go into stocks and hard assets like gold.
The point of investing is to make money. A smart investor can’t ignore what’s happening now and wait for an eventuality...
For example, I found this headline in the paper this morning:
Gold climbs to record high of Rs 29,690 on seasonal buying
Gold is hitting record highs in India.
It’s wedding season again, that traditional time when the Subcontinent buys up gold to unload their daughters in style.
This coincides with Akshaya Tritiya, a Hindu and Jain holy festival and one of the two most auspicious days of the year to buy gold in India, as people believe they can gain lasting prosperity by buying the yellow metal on this particular day.
According to the Times of India:
Gold prices set yet another record high of Rs 29,690 per 10 gm in the national capital on Tuesday on rising wedding season demand amid a firming global trend. Gold which had gained Rs 700 in last nine days rose further by Rs 100 to Rs 29,690 per 10 gm, a level never seen before.
Gold in Dollars (GLD ETF)
Here is your gold chart in U.S. dollars:
I use the GLD ETF, which tracks the physical metal.
You will see our long pennant formation going back to the highs of last August.
We are holding at $1,662 per ounce and trying to cross the 100-day moving average (gold line) to the upside. The MACD shows it is slightly undervalued in the short term (bottom of the chart below the 0 line).
It’s that top trend line we need to break. If gold goes above $1,700 an ounce, it’s going to make another assault at $2,000 and consolidate around $2,250.
When it happens, it will happen fast. According to this chart, it looks like it will happen in the next four weeks.
The impetus to this launch is likely to be the French election and the end of the European/German austerity model — which will mean more money printing, of course.
Another catalyst would be bad news from U.S. employment this week, which would point to QE3 by the Fed and more money printing...
I’m a buyer of gold here.
A Rupee Squishy
This is part of the reason gold has hit all-time highs in India.
Last year a U.S. dollar would buy you 44 rupees.
This year it will buy you 53.
Another reason gold is flying in rupee terms is that last month the Indian government proposed to double taxes on imported gold and tax most gold jewelry.
Indian jewelers went on strike and citizens started buying up gold before the taxes could go into effect.
The strike ended a few weeks ago, as Finance Minister Pranab Mukherjee has said he will consider rejecting the new tax proposals.
India is suffering decelerating GDP growth after a multi-year run above 7%. It is expected to be between 4% and 5% in 2012.
Furthermore, inflation is climbing from 7% to 9%, with food prices leading the way... Government debt is growing... The trade deficient is up... Tax revenues are shrinking... Foreign currency reserves are evaporating as the fast money heads for greener pastures...
And if all that weren't enough, India is saddled with a paralyzed government smarting from a corruption scandal (which comes as no surprise, as all levels of government in India are corrupt to their roots).
That said there will be a time to buy India.
The India Infrastructure Fund (INXX) has been dropping since its inception two years ago: It has fallen from $22 a share to below $14.
Put it on your radar. If India goes with more bailouts, or if growth returns, this fund will benefit...
I’m not a buyer — yet.
Nat Gas Freight Train
Here is the four-year weekly chart for the U.S. Natural Gas Fund (UNG). It tracks the price of natural gas traded on the NYMEX.
It has been a brutal four years for NG longs:
They did get a respite recently, however, as the price of natural gas has climbed about 20% over the past two weeks.
There are those who would say that now is the time to buy, that the bottom is in.
Heck, they may even be right. But there is no way I’m stepping in front of this freight train.
The trend is clear...
Happy Akshaya Tritiya,
Since 1995, Christian DeHaemer has specialized in frontier market opportunities. He has traveled extensively and invested in places as varied as Cuba, Mongolia, and Kenya. Chris believes the best way to make money is to get there first with the most. Christian is the founder of Crisis & Opportunity and Managing Director of Wealth Daily. He is also a contributor for Energy & Capital. For more on Christian, see his editor's page.