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| Daily Jurojin - Tuesday, June 9, 2009 |
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Tuesday, June 9, 2009 Perpetual motionIt is of course hard to stay in motion when that object has no legs to speak of. Yet the stock market keeps gyrating as investors try hard to get their collective heads around what constitutes good news and what bad news looks like these days. The current cadaver in vogue remains the employment report, which shocked by showing fewer than anticipated job losses. As investors pore over the rotting corpse of the U.S. economy most are trying to weigh up whether or not the market rebound is not only justified, but whether it has the legs to continue its run.Until Friday investors had become rather worried about the demise of the U.S. dollar, which fell to its weakest for 2009 against the euro and British pound and made eight month lows against the dollars from Canada and Australia. The natural flipside at times such as this - not that we are very accustomed to watching fiscal stimulus equivalent to 12% of the U.S. economy - is to invest in commodities. And king of them all is of course, yup, you've beaten us to it, is gold! The price of an ounce of gold has fallen from $983.20 last week to $952.70 as at Monday's closing price. During the day the contract fell as low as $943.80. What changed? Didn't you hear already? Well, the fact that unemployment rose to 9.4% during May means that all is well, the panic was just someone yelling "fire!" in the movie-theater and you should move along rapidly because there really isn't anything to see. Really? Well, no - not so fast there! The employment report was a little fudged. First, due to a statistical quirk, births and deaths helped reduce the number. How? Who the hell cares - that's what the report said and no amount of bitching is ever going to change it! Second, if you count those poor souls fed up with asking, "can I please have a job?'" only to be told, "sorry, we're not quite finished slashing our payroll, but do think of us again in 2010 when things may have improved, and have a nice day now!" the actual rate of unemployment reads above 16%. So it would seem that the dollar has caught its second wind on account of the fact that the Fed might send interest rates skyrocketing before the end of this year. Couple that with the fact that the Europeans haven't resorted to the printing presses like the Fed has and so they have no recovery prospects. So surely that makes the dollar a better buy than the euro. Now it appears that gold is out of favor - its price is seemingly spinning around and around in perpetual motion and none of the ingredients towards the last eighteen months financial catastrophe matters any more. Do we need to remind gold investors that the budget deficit is likely to remain at four-times that of 2008 and will likely reach around $1.8 trillion? We're unsure what the catalyst will be to help get gold back on track short of another slide in the value of the dollar, but we think that ultimately sense will prevail. The Supreme Council of the Secret Order of Jurojin |
