Investment Risks, More on Gold

Investment Risks, More on Gold

Investment Risks

Yesterday two readers were good enough torespond to my query with respect to additional near-term investment risks I failed to identify in yesterday's e-mail:

·           the first believes a significant near-term investment risk centers around the possibility of "Major holders of US Debt deciding to liquidate their positions in a disorderly and/or uncooperative manner"; and

·           the second commented that as an 'independent' in political terms he believes "both US parties are different sides of the same coin - and often the same side. As this particularly ideological administration continues to fail it will redouble its efforts to impose its socialist agenda and the country will increasingly push back in a variety of ways. That push back will engender the same in DC and things will become increasingly precarious. Something will blow. Internal confrontations will escalate and how it will play out is a total mystery but play out it will and the consequences to "normal life" will be extreme. This does not strike me as an immediate threat but does seem to have a reasonable likelihood of occurring before the next presidential election".

Thank you to both respondents for taking the time to provide thoughtful insights into what I think as a volatile, difficult, and potentially very dangerous economic environment.  While personally I think it unlikely large U.S. debt holders are likely to liquidate the U.S. debt they hold in a disorderly manner in the near term, if ever, that it could happen is a risk worth thinking about.  As to the 'second risk', I believe U.S. policymakers may, by exercise of continuing partisan politics, take the U.S. 'to the brink' of real economic disaster.  However, I have to believe they would never intentionally take the U.S. 'over the cliff'.  That said, momentum may take the U.S. there (i.e. 'over the cliff') if its politicians and others in positions of serious administrative power fail to come to grips sooner than later with what I see as the U.S. weakening in economically with each passing month.  Unfortunately, I can only see U.S. Federal budget 'balancing', etc. only if the collective group of U.S. politicians act in a bi-partisan and efficient way.  How naive is that:  politicians of any stripe being politicians, I would not assign much possibility - let alone probability - to near-term bipartisanship, let alone efficiency.

More on Gold

An article this morning titled 'Seven Reasons Gold Price Will Push Higher - Much Higher!' quotes Peter Krauth of moneymorning.com as saying, aside from inflation which Krauth says is 'hard to deny' its coming, that (this is in part somewhat repetitive with content of some of my prior e-mails):

·           gold mine production is decreasing;

·           gold is getting harder to find;

·           investment demand for gold is increasing;

·           Central Banks are buying gold;

·           there are signs of a push for gold-backed currencies;

·           asian demand for gold is exploding; and,

·           gold is in a secular Bull Market.

I seriously doubt there will be return to 'gold-backed currencies' and I think a 'secular Bull Market' is a 'result' and not a 'cause' - and don't have an opinion on whether gold is 'in one'.  That said, there seems to be broad consensus that there are varying degrees of substance to the other five points.  Based on the study of physical gold and its behavior I did over a year ago (see 'Gold as an Investment' - a series of 11 Blog Posts archived under 'Categories' on StockResearchPortalBlog.com) I continue to think of physical gold as a 'purchasing power' safe haven in both inflationary and deflationary times.  Hence, I don't pay particular attention to the day/day price of physical gold in the context of physical gold itself.  However, I do pay attention to the price of gold in the context of my gold explorer/producer investments.