Paulson Didn't Listen...
Just as I ended yesterday's blog post asking Ben, Hank and the boys to get heck out of the way, they just couldn't leave well enough alone. I should have known better... it is an election year, and they have to throw some bread to lower and middle-class Americans, while the circuses of reality TV and pop culture entertain them.
My suspicion is that it'll help financial firms like Merrill Lynch and Bear Stearns with the valuation of these bundled and sold mortgage 'investments' (and I use that term very loosely), and improve how they look on their books - maybe for another quarter or so. But it's only a short-term Band-Aid that may prop up the public's confidence in the mortgage market.
And confidence is the only real 'collateral' that investors have with financial paper assets. History shows that once the public loses confidence in a paper asset, it takes a long time to get that confidence back. One example is the Dow Jones Index, which basically broke even in nominal terms from 1929 to 1954, and actually lost ground against inflation.
Other paper assets, such as Enron stock, will have a loss of confidence and never get it back again. That's why I'm very bullish on precious metals and commodities over the next few years to a decade. Gold is a good buy, but silver is still a GREAT buy - even at $17/ounce. Gold and silver-mining shares (and the physical metals) are the best places for your money. Metals markets can be very volatile, but don't let that scare you.
All markets - whether they're stocks, bonds, or commodities - will be pretty volatile in the next few years. Tangible assets will NEVER go down to zero, like a share of a dot.com stock can. And the Fed will keep increasing the money supply, with a larger number of dollars chasing the same number of commodities. That's the biggest reason I'm bullish about investing in these markets, and you should be too.
My suspicion is that it'll help financial firms like Merrill Lynch and Bear Stearns with the valuation of these bundled and sold mortgage 'investments' (and I use that term very loosely), and improve how they look on their books - maybe for another quarter or so. But it's only a short-term Band-Aid that may prop up the public's confidence in the mortgage market.
And confidence is the only real 'collateral' that investors have with financial paper assets. History shows that once the public loses confidence in a paper asset, it takes a long time to get that confidence back. One example is the Dow Jones Index, which basically broke even in nominal terms from 1929 to 1954, and actually lost ground against inflation.
Other paper assets, such as Enron stock, will have a loss of confidence and never get it back again. That's why I'm very bullish on precious metals and commodities over the next few years to a decade. Gold is a good buy, but silver is still a GREAT buy - even at $17/ounce. Gold and silver-mining shares (and the physical metals) are the best places for your money. Metals markets can be very volatile, but don't let that scare you.
All markets - whether they're stocks, bonds, or commodities - will be pretty volatile in the next few years. Tangible assets will NEVER go down to zero, like a share of a dot.com stock can. And the Fed will keep increasing the money supply, with a larger number of dollars chasing the same number of commodities. That's the biggest reason I'm bullish about investing in these markets, and you should be too.
Labels: foreclosures, gold, Hank Paulson, silver, sub-prime mortgage
posted by Brian Ochsner | 1:11 PM
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