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Last Chance to Buy Gold and Silver At a Discount

Commodities / Gold and Silver 2011 Nov 01, 2011 - 05:17 AM GMT

By: George_Maniere


Last Thursday, October 20th, all was right in the world. We had rallied past every key technical indicator; Europe had announced that they had come to an agreement to save the default of Greece and Spain, and Italy and Portugal. Peace and prosperity would once aging reign in the land of Leonardo da Vinci, and the home of the greatest art ever created. The food is not too bad either.

Last Friday I think everyone took the day off as there was such relief from the news out of Europe that no one wanted to jinks it by showing up. Anyway it was Friday, Europe would be saved and we had a one month closing higher in the markets than we had in 40 years. We deserved a rest and Friday was the day.

Well what a difference a day makes. Last week’s passage of the Eurozone financial rescue plan impacted the markets as traders continue to evaluate its worth. The markets are also whispering and watching the Fed for any news about a QE3 initiative but the Feds steadfastly deny any such plan.

Initial relief over Europe's latest attempt to end its debt crisis faded fast yesterday (Monday) as investors fretted about the plan's lack of detail and grew more skeptical about Italy's turnaround effort.

One day after European leaders announced a series of measures aimed in part at enticing investors back to the region's debt markets, bond buyers demanded higher yields on Italian and Spanish debt. An auction of new Italian bonds was met with weak demand, forcing the nation to pay higher interest rates than in previous sales.

The response from bond markets underscores how challenging it will be for European leaders to convince financial markets that last Thursday's broad agreement is sweeping enough to enable troubled countries such as Italy and Spain to work their way out from mountains of debt. The plan calls for beefing up the region's bailout fund, recapitalizing banks and reducing Greece's debt burden.

At this point, it’s pretty obvious that this recovery is fake.

Since 2009, this recovery has been manufactured, bought and paid for by governments from here to U.K.

Last week, the latest EU bailout plan was just another example of a government throwing money at their problems - and really putting off the real issues until next month or next year.

Today, I want to show you two questions you need to answer so you can navigate these perilous economic waters this year.

Ask yourself; is the Economy Growing or Shrinking?

As a trader, I’m always watching to see if an economy is expanding or contracting? What is the trend of the market? Are the people in this country confident and assured or are they afraid that today may be their last day at work?

To determine this, I found this chart of the U.S. GDP.

A Government-Spending Induced Expansion Has Come!

Click here to view larger image

The GDP figures show how the U.S. economy is faring. A negative number shows that there is an economic contraction. A positive number shows economic expansion.

Right now, we’re showing a positive number. But there’s just one problem with that. It’s not consumers who are promoting this growth - it’s the government. The politicians are stepping in to keep the economy afloat.

In other words, it’s not a healthy expansion. So I don’t expect it to last long.

The good news: even if these numbers show a false start to the economy, they still give me some insight on what traders are seeing. Long-term, I’m still cautious. I know the enormous sums of money that the government spent to get these economic results. They can’t keep that up forever.

Sooner or later, the economy will fall onto the backs of the consumer once again (as we saw in early August). When this happens, we’ll likely go back into an economic contraction.

This tells me that I can be bullish in the financial markets for short spurts here and there. But long-term, it also tells me to be cautious and to make sure I trade accordingly.

To prepare for this in my trading, I can always cut down my lot sizes for each trade. That will decrease my risk just in case the markets turn on me.

Also, if my trades are comfortably above their breakeven point, I’ll quickly move my stop-losses so I can assure myself of some gains just as soon as I feasibly can.

Finally, Should I Be On Offense or Defense?

By George Maniere

In 2004, after retiring from a very successful building career, I became determined to learn all I could about the stock market. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please post all comments and questions. Please feel free to email me at I will respond.

© 2011 Copyright George Maniere - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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