The last few days have been a wild ride for investors. With cracks in the Eurozone widening, new Fed promises of ultra low interest rates for the foreseeable future, riots spreading across the UK, and continuing unemployment in the US, there can be little doubt that massive currency debasement is now "baked into the cake".
Markets have reacted by a move to the safety of gold – the only true cash position – and away from the risks of most currencies, stocks and commodities. Major currencies are at all-time lows. Commodities, while down hard, are generally still higher than they were at the bottom of the 2008 credit crisis. Major stock indices, however, are lower than they were at the bottom of the last crisis.
Here is a quick scan of the markets, priced in gold, as of August 10th:
USD: 17.55 mg, a new all-time low
CAD: 17.68 mg, a new all-time low
EUR: 24.98 mg, a new all-time low
JPY: 0.227 mg, a new all-time low
Silver: 0.672 g/oz, has given up all it's YTD gains, but is still 82% above its 2008 lows
Platinum: 30.79 g/oz, is now cheaper than gold for the first time since December 2008
Copper: 155.40 g/tonne, is still 57% above its 2009 low of 99 g/tonne.
Crude Oil: 1.46 g/bbl, is 30.3% higher than its 2009 low
Coffee: 41.22 mg/lb, is down 22.3% for the year so far
Cotton: 17.38 mg/lb, down 63% from its 2011 high, but still 30% higher than its 2009 low
Dow Jones 30 Industrials: 188.16 g, down 26.3% YTD, and 14.6% below its 2009 low
S&P 500: 19.67 g, down 29.1% YTD, and 13.4% below its 2009 low
NASDAQ Composite: 41.79 g, only 2.2% below its 2009 low
AMEX Gold Bugs: 9.69 g, down 23% YTD, but 50% higher than its 2008 low
Short term bonds, as measured by the SHY fund, are at all-time lows. The long term bond fund, TLT, although almost as high in USD as it was at the height of the 2008 credit crisis, is worth less than half as much gold.
Some stocks are doing very well. AAPL, for instance, has given up most of it's gains for the last year, but it is still worth more than twice what it was at the bottom in 2009.
The federal minimum wage is now 127 mg/hr – the lowest it has ever been. When introduced in 1938 at 25 cents/hr, the rate was 222 mg/hr!
My advice is to stick with the safety of gold. This is the time to be in cash, and certainly not the time to be in risky fiat currencies. Platinum may be a decent speculation, however. It is very unusual to be able to buy an ounce of platinum for less than an ounce of gold. While it may get cheaper still if the economy continues to weaken, I think platinum's relative rarity and many important industrial uses make it worth the risk over the long term.
