Today's Market
by Dr Invest

This has to be one of the oddest of moments in economic history. There are no words to describe a world economy so close to the bring of disaster, yet seemingly barrelling ahead under full steam.

Money is being dumped into the world economies by the central banks, enhancing bankers portfolios, but having little long-term effect. For the moment, the central banks have held off the realities of government bankruptcy, while politicians reward their citizens with more entitlements that the governments know they cannot pay. The central bankers are caught in this circle, having to print more to keep world-wide governments from faltering. (To big to fail.)

When does the insanity stop? It makes one want to buy gold and go crawl into a hole. CNBC reported:

Global markets rallied on confirmation that the European Central Bank (ECB) had signed off on a highly anticipated, unlimited bond-buying program, however, experts remain skeptical on how long the euphoria will last. The program - called Outright Monetary Transactions (OMT), aimed at lowering borrowing costs for governments struggling with unsustainable debt levels - involves the purchases of sovereign bonds in the secondary market with maturities of up to three years for countries implementing approved fiscal austerity measures.

According to Jim Nelson, Portfolio Manager at Euro Pacific Capital, the recent upside in risk assets is a case of "unjustified optimistic frenzy." In a note titled "European Central Bank's Bond Buying Changes Nothing," Nelson says without significant support from surplus nations like Germany and the Netherlands, the central bank will accomplish little more than "spinning its wheels," adding that there is no certainty such support is forthcoming.

Germany has demonstrated a lot of resistance to expanding the euro zone's bailout fund. In fact, Bundesbank President Jens Weidmann was the only member of the ECB's 23-member Governing Council to vote against the bond-buying proposal. Weidmann on Thursday said the program is "tantamount to financing governments by printing banknotes," adding that it may encourage countries to postpone necessary reforms.

When you read this, it should make your blood run cold. Smoke and mirrors cannot change fundamental problems of governments initiating entitlements without tax revenues to support them. At least for the short-term, central banks can manipulate the market. But where central bank manipulation has occurred, the economy has returned back to the fundamentals that support it. In simple language, a stimulus program cannot cure an ailing and failing economy. With a failing job report for August, September's job reports are likely not much better. Yesterday's elation is today's sadness.

GOOD NEWS

TIP and BND fell dramatically yesterday, but has regained most of the losses here at noon. The bond portfolio had set at 1.76% and now sits at 1.70%. The possibility is that the bond portfolio with re-gain the losses from Thursday.

GOLD MOVING

Gold has begun to move again. As many of you know, I have been reluctant to recommend gold because of the dismal returns for 2012. But in the past thirty-days gold has performed well. Below is the gold price chart.



Gold is still down almost 9% for the year, but holding 10% gold in your portfolio could bring a positive result in the days ahead.

Keep the faith and add wisdom. Careful investing and sticking to your investment method will return the best results. We will think about adding stocks to our portfolio at the end of October if there is an opportunity for an uptrend in stocks. Keep your stop-sell on all your investments. Don't take a loss.

(Note: The above information is for entertainment purposes only and not to be used as investment advice.)