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Buffett Buys, Oil to Double, Gold to Fly, Bernanke Twists

Wealth Daily's Weekend Edition

Written by Christian DeHaemer
Posted June 23, 2012

We had a busy week on Wall Street.

The great Ben Bernanke told us things were bad — and getting worse.

Chinese manufacturing is slowing... Home sales dipped in May... The people of Greece voted for the austerity/pro-euro party... The debt crisis then moved on to Spain, who is now paying more than 5% for 18-month paper (this despite the fact that Spanish banks recently got a $100 billion euro bailout).

But the news isn't all bad.

The Fed chief told us he would continue the “Twist” for the rest of the year.

This is a card trick in which Ben sells short-term debt and uses the proceeds to buy long-term debt in an effort to push down mortgage rates.

It's working. Mortgage rates are at 3.63%, surely as cheap as I've ever seen them...

Though I do remember my grandfather once telling me they were 2% during the Great Depression — only no one could get a loan then.

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Buffett Bullish

We wrote on Thursday that Warren Buffett is buying up housing on value. And because Bernanke did not invoke QE3, the market has sold dollar-denominated assets like gold and oil... which in turn, as Brian Hicks tells, has China buying up all the cheap oil it can gets its hands on.

Your humble editor detailed (in full below) how, if we used the money supply/gold price as an indicator, gold would be at $8,500/ounce today.

You should be looking for entry points on this dip.

Here is your dollar/gold chart:

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When the greenback goes up, gold (and oil) go down.

Will the dollar continue to rise as the euro falls... or will we get QE3 in August, which will drive the dollar down?

It's too soon to tell — but I'm betting on the latter.

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Petro-Dollar

I've been doing some interesting research on the idea of the U.S. dollar as the world's reserve currency.

The reason the Fed gets to pay 0.25% on its debt while Spain pays more than 5% is because the dollar is used to trade between countries — and to buy oil.

The Chinese have been working hard to end this special relationship. I'll tell you more about it next week.

In the meantime, go outside and ride your bike or something...

It's the weekend.

Happy Saturday,

Christian DeHaemer Signature

Christian DeHaemer
Editor, Wealth Daily

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