“Big Banks Will Not Be Allowed To Fail”

March 10, 2009 Company Profiles, Physical Gold, Politics No Comments

The markets run up on Asian and Citi news, but the bigger story is the quote, “Big banks will not be allowed to fail.” A combination of the government action and Bernanke’s statement, “Big banks will not be allowed to fail”, are an indication of more serious problems ahead for the banking sector.

So far it has been a big up day for the DOW based on some dubious news. We will get into that in moment, but first let’s check the numbers. The DOW is up 246 at 6,793, the NAS up 59 at 1,327, the dollar is slipping of it’s lofty perch, down 1.06 (1.17%) at 88.10 and gold is following in lockstep with the dollar, down $23.10 at $898.40. Gold has had a $100 swing in one week. Who says that there is not uncertainty in the markets these days?

Apparently the need for security and the move to the side lines has ended for the DOW, based on a memo from Mr. Pandit at Citi, and a rebound in financial markets in Asia. Mr. Pandit’s memo indicates that the bank has been making a profit for the last two months. With the amount of dollars that the government has pumped into Citi in three different bailout injections, I would think that a “pet rock” should be able to show some sort of profit, if only by cooking the books. I am not suggesting that that is what has been done, but it would not surprise me, if further down the road, this were to come out. Miracle on Park Avenue! Citi is currently trading at $1.o5 (How can they show a profit if they have lost the opportunity to be sold at the Dollar Store?). Oh well, the Citi news, such as it is, and the resurgence in the Asian markets are the catalysts for this latest move.

The news that is not getting much attention came from the U.S. government which is evaluating ways in which it might help the banking giant should “things” get worse. After three government capital injections, “big brother” is developing contingency plans for when “things” get worse. Do you think that possibly the government is aware of “things” that they are not telling us. You had better bet on it. You would have to be really crazy to buy Citi right now.

Big Ben Moves In To Save The Banker’s Day

The government is working on contingency plans to save Citi while simultaneously the Fed (which is a privately owned organization which has nothing to do with the Federal Government) trots out “Helicopter Ben” Bernanke to opine on the Citi situation with a definitive statement today. It is probably the clearest statement that he has made in a long time. “Big banks will not be allowed to fail.” God has spoken and all is right with the world! These two events are what should be determining the markets actions, not the Asian markets and the Citi memo. This market is so desperate it will grab at any crumbs thrown it’s way.

gold pour “Big Banks Will Not Be Allowed To Fail”

Lower Price Offers Great Opportunity!

Gold is now going to test the support in the $885 – $890 area and I believe that renewed buying will come in at these levels. I think now is the time to buy gold and buy gold stocks. Physical gold should find renewed interest at these price levels. This should also bring renewed interest in gold purchases in India which fell off totally as gold approached $1,000 per ounce. These levels won’t last long, so it is time to take advantage of the situation while you still can.

The Premier Gold Royalty Stock

On the gold stock side, I am beginning to buy the stocks that I like, starting with Royal Gold, RGLD. I bought RGLD yesterday at $38.10 and I am looking at more considering the drop of $1.61 to $36.59 that it has so far put in today. These are good levels for this stock and I will accumulate as long as the price of gold holds the $885 line. If it breeches that mark I will re evaluate at that time, but I am not concerned with any purchases of RGLD at these levels. This stock will perform well in the next up leg for gold. No one can pick the bottom of any stock, but you can determine a range of comfort-ability where you want to get in. As I have stated in the past, I am not a professional trader and I am offering my opinions on gold and gold stocks and nothing more. Before you buy or sell any stock you should do your own do diligence because it is your money. Unlike the “experts”, I like to include the stocks I like because then we can look back and see what works and what does not. This is a learning experience for all of us, because we are entering uncharted waters for investing. If nothing else, the future will be exciting.

Till next time, good luck and good trading!