How to invest in the government-based economy
The Dow was up 9 points on Friday鈥ollowing a week of big news.
Congress passed a bill permitting the US government to take over the health sector鈥bout 17% of US GDP. Let鈥檚 see. The feds don鈥檛 have any money, right? They鈥檝e got the biggest deficits ever, and will have to borrow $2.4 trillion this year just to keep the lights on.
And now comes news that Social Security has gone into deficit for the first time ever鈥nd 7 years ahead of schedule.
The feds took over the mortgage finance industry last year. Practically every single mortgage written last year was underwritten by the US government.
And they took over the auto business too. They should be able to do for autos what they did for passenger trains. That is, they should turn Detroit into an Amtrak鈥hich is to say, a Zombie City, if it isn鈥檛 one already.
Then, there was the bailout of Greece. And not only that鈥here was a weak auction of federal debt. A few years ago, any one of these bits of news could have walloped the stock market.
But investors didn鈥檛 seem to know what to do with the news. The Feds had taken over another big chunk of the economy. But what to make of it? Was that good news or bad news? The stock market seems unable to make up its mind. Finally, it ended the day with less than 10 points of movement.
Gold investors had a better idea what to do. They bid up the price of the yellow metal $11. Even central banks are buyers:
Central Banks Buy Gold, from MoneyNews:
Central banks around the world added 425.4 metric tons of gold to their reserves last year, the biggest increase since 1964, according to the World Gold Council. That represents a 1.4 percent gain to put their holdings at 30,116.9 tons in total. The increase was the first since 1988. Central banks in India, Russia and China were among those boosting their gold reserves last year, as the precious metal jumped 24 percent, hitting a record of $1,226 an ounce in December. Central banks now possess 18 percent of all gold ever mined.
鈥淭here鈥檚 clearly been a renaissance of gold in central bankers鈥� minds,鈥� Nick Moore, an analyst at Royal Bank of Scotland, told Bloomberg. 鈥淚t鈥檚 not just been central banks taking on gold, but a general shift for physical gold in the investment sector.鈥� Many are now singing gold鈥檚 praises, with the precious metal up about 3 percent so far this year.
鈥淕old is quietly, at the edge, becoming the world鈥檚 second reservable currency, supplanting the euro and rivaling the dollar,鈥� money manager Dennis Gartman wrote in his Gartman Letter, obtained by Bloomberg. 鈥淭he trend shall continue months, if not years, into the future.鈥�
------------------------------
海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. To add or view a comment on a guest blog, please go to the blogger's own site by clicking on the link above.
