THE MICIK MARKET LETTER
QE Forever & Gold

Alan Micik snippet
Posted Sep 17, 2012

The FED has now launched QE III and it will continue to impact all financial markets, one’s personal investment decisions, our freedoms, our lives, and our kid’s lives for many years in the future. Fiat money “makes the rules” and FED Chairman Ben Bernanke (BB) has announced that the U.S. will now embark on a $40 Billion per month buying program of Mortgage Backed Securities (MBS’s), for an “unlimited” amount of time. With “Operation Twist” and re-investment, the FED will now spend $85 Billion per month into 2012’s year-end. Further, interest rates will stay “exceptionally low” into mid-2015 as the FED continues financial repression. BB and the FED stated that these actions are being undertaken to increase employment in the States and get the economy moving again. Savers should also welcome reduced yields as they see the economy and jobs improve.

How “noble” of the FED to do QE III for the “economy and jobs.” Of course, the fact that certain Republicans had stated that they would not re-appoint BB as Chairman if elected, would call for an audit of the FED, and would establish a Gold commission were most certainly insignificant factors regarding the FED’s decision this Thursday. As BB stated, the FED is “independent” and apolitical regarding such matters and has done a “good job” in that regard as viewed by the public.

Of course, we are comforted in knowing that the FED will be able to reduce the pristine assets on its books at the precise moment that would prevent rampant inflation because they once told us that could be done during QE I and QE II. We missed that commentary in their QE III announcement, but we are quite sure it’s there… somewhere.

Savers are also reassured and welcome the prospect of an improving economy. They insist on getting the lowest possible yield to help the FED shrink their personal $U.S. purchasing power by 4-8% per year for the 5th straight year… ”whatever it takes.” More financial repression please. If the missing Saver’s purchasing power goes to the Banks or to service the government’s debt that’s good because Savers “welcome an improving economy."

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This is QE Forever, not QE III.

The FED’s tripling of its balance sheet in the past few years was heavily comprised of sub-prime and other assets that it absorbed from the U.S. Banks and others, but with no FED audit the public will never know those details. Regardless of one’s political persuasion it is clear that QE Forever benefits the incumbent in the Oval Office, and the incumbent has not recommended an audit of the FED, or anything else that would “inhibit” their independence. Now, the FED will buy more pristine MBS’s assets from the market and/or from the Banks at a $40B rate with no timetable and no cap on their purchases since it may buy more than that amount “as necessary.” The FED’s balance sheet which has already tripled since 2008, will double from here in 2-6 years. Just as Congress has shown no spending restraint, neither has the FED.

Is all of this QE Forever simply for the good of the “economy and jobs,” or are we being too skeptical? Each of us must make our own judgment in that regard.

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The Investor and/or Trader investment implications of QE Forever are many, but let’s first look at gold, as it is the “King” of assets. MML has always recommended a 10-40% physical gold position (each Subscriber elects the percentage that’s appropriate for them), and from time to time we have “hedged” our physical gold or taken bullish trading positions.

QE Forever is incredibly long-term bullish for gold, but there will be corrections, consolidations, and shake-outs along the way to the “end-game” of Fiat currencies. The Central Banks (CB’s) want asset prices to rise (stocks and such) because rising asset prices will ultimately “bail-out” their governments through depreciated currencies and thereby reduce the “real” cost of their respective debts. If assets do not rise, sovereign debts become unmanageable, and each CB’s Fiat Franchise is then at risk because it is sovereign debt that backs Fiat currency. Without the continual issuance of new debt, you can not maintain any Fiat currency for a sustained period.

However, CB’s are well aware that gold’s price is the thermometer of the value of any Fiat currency. While there is ample evidence throughout history that CB’s will periodically attack the thermometer instead of the patient, their long-term record is abysmal since the long-term fundamental and technical trend of any market will ultimately determine the market price.

Gold has now risen about $U.S. 150+ since mid-August as it “sniffed-out” QE Forever. This rise has been far steeper than most other asset classes (such as stocks) which the CB’s want to elevate. A near-term uptrend is in place, and gold is above its upper Bollinger Band which means it can continue to rise. Conversely, it is possible that the “news” of QE Forever might now be priced into the market as evidenced below in our Subscriber’s section on gold and silver.

Our “hedging” since November of 2011 has produced closed “hedging profits” on our physical gold of $135 per ounce for Investors, but more importantly, we retained every physical ounce our Investors own as we will never sell our “core” physical gold position. With Spot gold at $U.S.1,773 on Friday’s close, our physical gold is now worth $U.S. 1,908 (1,773 +135=1,908). MML has also taken some Trader bullish stances during this period which have produced another $70+ profit since November for those that have elected to trade.

If you would like to review our current MML forecasts for gold, silver, the $U.S., $U.S. Stocks, or $U.S. Bonds, consider a subscription (details are listed below). Note that unlike other market reports, we do not have regular “publication” dates as the markets create the dates of action, and thus the communication to our subscribers.

More follows for Subscribers…

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Sep 16, 2012
Al Micik
email: atmmail@sbcglobal.net

The Micik Market Letter (MML) covers opportunities in any market sector when low-risk opportunities are identified for the investor and/or trader. Ongoing coverage is provided for gold and physical gold hedging strategies. Silver & GDX are periodically covered when low-risk opportunities occur. MML uses proprietary indicators combined with technical analysis, and contrary opinion. Unlike other market reports, we do not have regular “publication dates,” as the markets create the dates of action, and thus the communication to our subscribers. Individual shares in any sector are generally not covered, but nor are they excluded. By using baskets of stocks (ETF’s), we seek to decrease our risks and have improved liquidity when it’s time to exit a position. This enables us to use reasonable Stops, and we use them on every single trade in order to limit our own emotions. This is a new 2011 publication, but the editor has 36 years of market experience.

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