Lear Capital: Gold Has Tamper Tantrum Over Taper Tampering

2010_01_05_17_53_260001It’s now nearly a daily routine – Taper Tampering!  One minute it’s on and the next it’s off… as though the economic data supports it one minute and not the next.  The latest taper fear-inducing data was an unexpected rise in non-farm payrolls.  In the month of October, non-farm payrolls came in over 200,000.  If you listen to the media, this was a blockbuster number and cause for Fed tapering to begin sooner than later.

The news was said to be a major surprise, although numerous reports tell us the holiday selling season is beginning early this year.  Some sales have already begun, Black Friday has become Black Thursday and across the country, Christmas displays are appearing much sooner than usual.  But, I guess that has nothing to do with an accelerated holiday hiring season.  Mix in lower gas prices and the markets seem to be buying into the story that the economy is improving and new-found disposable income, by way of lower energy costs, will rescue retail profits.

Just two months ago, on September 17, it was deemed almost certain the Fed would announce tapering measures.  On September 18, the Fed shocked everyone saying it would not taper.  Then taper talk crept back into the news reports only to be met by Janet Yellen’s assurance that she was prepared to continue the current Bond and MBS buying strategy.

So, while the Fed’s job has always been to tamper with economic liquidity, taper tampering is being brought to a new on-again off-again level.  And the media eats it up.  I mean really!  The last debt crisis hit amid reports that Fannie and Freddie were fine, real estate was not in a bubble, the Dow was headed to 20,000 and home values could continue to rise 15% a year.  No one tampered with that news.  Instead we got the economic weather report after we got 12 inches of rain in 3 hours.  “It’s raining!”

While reports of the day seem to be that economic recovery really is underway, there are still many experts who believe the Fed can never taper without sending the markets and the economy into stimulus withdrawal.  Scott Carter recently interviewed Dr. Marc Faber, editor of the Gloom Boom and Doom report, and asked what he sees ahead for Fed stimulus.  Dr. Faber, in classic style said $85 billion a month of stimulus will soon be $150 billion a month and then don’t be surprised if it grows to $1 trillion a month.  Yup!  No kidding.  I was there when the question was asked and answered.

So, the taper tantrum continues and for the moment the markets are in a mood to believe the economy can recover without tapering.  Meanwhile, gold and silver are having their own tamper tantrum.  They refuse to move higher amid all these conflicting economic forecasts.  They also refuse to move much lower than their accepted all-in costs of production of $1300 an ounce and $21 – $29 an ounce respectively.  Pounding their fists and kicking their feet is all gold and silver can do until the Fed puts an end to its own taper tantrum.

So which forecast is right?  What should you be doing with your savings and retirement accounts?  It seems that with Gold and Silver now at suppressed prices, maybe at prices as low as they can go, now is the time to take no chances and own some.  And, if gold and silver prices go down further own some more.  I would hate to see the tantrum we all would throw if we got blindsided by another debt and economic crisis.

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