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« Who's Winning and Who's Losing from Facebook's Botched IPO | Main | What Is Volume Telling Us about Gold Stocks? »
Thursday
May242012

Where can an investor go in this period of turmoil?

We start with this quote from David Cameron, the British Prime Minister made at the conclusion of the latest in European Summit Meetings.

Well, it was a good meeting in that there was complete agreement that dealing with deficits and getting growth are not alternatives, they go together, you need to do one in order to get the other.

We are stunned. Its taken 22 of these high level meetings to agree that they need growth! The mental anguish is unbearable, we just cannot take these people seriously.

As we see it to get growth the eurozone needs to be competitive. To be competitive they need to get the costs of production down otherwise no-one will purchase their products.

May we suggest the following for their consideration:

  1. Slash unemployment pay

  2. Cancel the minimum wage

  3. Cancel paid Maternity leave

  4. Cancel paid Paternity leave

  5. Introduce a flat tax system and free up all those tax officers

  6. Cancel security of tenure in the public sector

  7. Fix public sector spending as a % of GDP, say 30%

  8. Drop the idea of a financial transaction tax

  9. Reduce the pay of all EU politicians by 30%

  10. Raise the tax rate on all EU politicians to the same rate as their citizens.

You can see where we are going with this and its probably why a career in politics it not open to us.

Anyway, all this dithering generates uncertainty and that has led to the euro being sold off as the investment community does not like uncertainty. The markets in general are also heading south so just where can an investor go in this period of turmoil. As we can see from the above chart they are apparently going into US Dollars. Yip, the very same dead cat dollar! It appears to be a case of picking the best from a bad bunch. The dollar with its 'no spending ceiling for me' president is also in a real mess and before long it too will be dropped like a hot potato.

Now, should the negativity surrounding the euro dissipate then the dollar would come under pressure once again. When everyone is negative about the euro we need to tread carefully as the herd is usually wrong and a bounce could surprise us all.

Taking a quick look at the above chart we can see that the STO and the RSI are both well and truly in the overbought zone which suggests a pullback from here. There also appears to be the formation of a double top, which, if it eventuates doesn't bode well for the dollar.

Going forward we see this current lack of stability leading to a eurozone bailout in some form which will involve the creation of more euros, in the miss-placed belief that liquidity is the cure for insolvency, which its not. On the other side of the pond it is election year and so QE3 is only a matter of when and not if. As if the world wasn't awash with enough paper money we are about to be flooded with more of it. We expect QE3, maybe in drag, to make an appearance by the end of June, thus continuing with the debasement of the US dollar. 

At this point gold will embark on a serious rally as the buying power of these currencies sink and investors look for a safe store for their wealth and the preservation of their capital. Gold is well under $1600.00/oz and by the end of the year we expect to see it at the $2000.00/oz. So, in terms of what you can action today, buy gold. We are slightly different in that we are looking for leverage in the this rally and although the gold producers are starting to move we do not wish to increase our exposure to the mining sector just yet. Our preferred vehicle is via the options trading route where we believe that if we remain patient enough and get the timing right the profits generated will be truly astounding.

As always go gently and remember that its your money and your call.

And now Europe in pictures:

I'll reduce the retirement age in France and the Germans can pay!

You stupid French peasant.......

The IMF want how much?

I will only say this once, David!

Regarding www.skoptionstrading.com. Our annual performance figures are as follows:

2009 We made a profit of 23.89%

2010 We made a profit of 158.66%

2011 We made a profit of 40.95%

In 2011 we outperformed:

S&P by 42%

HUI by 53%

Gold by 31%

Silver by 41%

Our trading success rate is 90.81%

89 profitable trades out of 98.

Our model portfolio is up 447.55% since inception

Also many thanks to those of you who have already joined us and for the very kind words that you sent us regarding the service so far, we hope that we can continue to put a smile on your faces.

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Reader Comments (2)

I think you guys forgot to mention that those items that you have proposed in this article are nearly the same as what is being thrown at congress and they are of the same weak minded do nothing blobs who get paid just as much as those phonies in Europe. all of them are always playing Kick the can but the can is wearing out.
The way I see it Its just a matter of time before the Ultra Central Bankers will step in because they want the whole world to come into their submission. they will dictate their fascist policies and then beginning of the end will come and then a World Dictator will arise whom will promise great change and prosperity but the cost will be high and he will decide who will sacrifice their lives for this New World Order. The horrific and evil of this World Ruler will be nothing compared to history and you can thank the Untied States and Europeans for homiginizing all societies into this outcome.

May 25, 2012 | Unregistered CommenterDoug

We have to remain positive and do what we can, but its going to worse before it gets better thats for sure.

May 25, 2012 | Registered CommenterGold Prices

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