Wednesday, March 28, 2007

Arrested For Driving While Blind

It's official. Straight from the horse's mouth comes "news" that the Planet's leading economy is essentially rudderless, directionless, and in a bit of a quandary as to what to do next to stave off the inevitable...Self Destruction.

Testifying on Capitol Hill infront of the U.S. Senate [quite possibly the largest collection of adults incapable of balancing a checkbook], Captain Ben Bernanke of the USS Sinking Ship [aka Chairmen of the Fed.] had much to say about the "direction" of the nation's economy, and the Fed's policy as it pertains to steering it through the thick financial fog that is now begining to envelope it.

Bernanke said the Federal Reserve last week changed its policy statement -- which investors look to for clues about future rate moves -- to gain "a bit more flexibility, given the uncertainties that we are facing and the risks that are occurring on both sides of our outlook."

There's an increased threat of higher inflation on the one hand and weaker-than-expected economic growth on the other, he said. Those economic crosscurrents can complicate the Fed's job.

The Fed's job? Just what the hell is the "Fed's job? Let's hop, skip and jump over to the Fed's web site and find out.

The Federal Reserve sets the nation’s monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates. The challenge for policy makers is that tensions among the goals can arise in the short run and that information about the economy becomes available only with a lag and may be imperfect.

Hmmmm...Based on this definition of the Fed's "job", it wouldn't be too big of a stretch to say that our bearded skipper is caught between a rock and a hard place, with the mother of all financial "perfect storms" much closer than the horizon he can no longer see through the fog.

Captain Ben and his crew appear to now be sailing the angering seas of financial chaos by the seat of their pants. No compass in hand, and no idea which way to turn next. Moderate long-term interest rates? Not very likely. Maximum employment? If Captain Ben raises interest rates to fight inflation, he'll be greeted with "maximum UNEMPLOYMENT". Stable prices? If Captain Ben cuts interest rates, he'll be greeted with INFLATION and soaring prices. Jumping ship is not an option, Captain Ben. But nobody would blame you if you did. The ONLY thing we can be certain of right here and now, is that our Skipper is uncertain.

Financial markets are intolerant of uncertainty...the seas are about to get mighty rough.

I stop and wonder what Gilligan would do. He'd buy Silver and Gold with all of Mr Howell's money. And you should do the same with yours.

Silver and Gold are a bit range bound of late, as the forces of good and evil duke it out in the trading pits...and the springs on our Rat Traps wind ever tighter.

Silver Resistance: 13.38 / 13.54 / 13.67

Silver Support: 13.25 / 13.16 / 13.03

Gold Resistance: 668.50 / 670.30 / 674.50

Gold Support: 662.10 / 658.30 / 655.50

Too many are thinking that another opportunity to buy Gold, Silver, and the Gold stocks will be created in the future, or that paper equities will survive, With that type of thinking, some do not see need to bother with adding Gold to portfolios at the present. That short sighted thinking is going to cause many investors to find themselves seriously left behind financially. Given the fundamentals for the U.S. dollar and the potential for instability of a historic proportion in the Middle East, Gold is essential for any portfolio. 1400 is a good target price for both U.S. dollar Gold and the NASDAQ Composite Index. And remember, the Gold bugs were the ones that first warned about the collapsing U.S. housing market. And again we were scorned by the cable business media!

By Ned W Schimdt

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