A golden opportunity for investors?

Economic activity continues to be fitful. But Jim Grant (in a recent issue of Grant's Interest Rate Observer; subscription required) makes the case, based on his own reasoning and research from the Economic Cycle Research Institute, that whatever bounce the economy is experiencing or will experience in the short term might be bigger than people think.

That's not to say that any economic bounce will evolve into a "normal" job-creating, self-reinforcing recovery. I don't believe it will. But at this point, it's not important to have an opinion about that.

The important thing is to know that for the time being, economic activity is not slowing down.

However, given the mind-set of central bankers and finance ministers the world over, whatever the rate of improvement is, it won't be fast enough (especially given high rates of unemployment), and they will continue to create extra stimuli -- ergo my desire to try to capitalize on this money printing in any way I can.

As I have noted repeatedly, the United States' money printing will lead to a weaker dollar and, ultimately, plenty of inflation. For me, protection against that outcome is provided by gold, silver and specific precious-metal-related stocks, which is why I have discussed this subject so often.

Jim shares a great quote from English economist A.C. Pigou: "The error of optimism dies in the crisis, but in dying it gives birth to an error of pessimism. This new error is born, not an infant, but a giant."

And therein lies the psychological mind-set that creates opportunities. (Which is why that is a quote to save for all time.)

For deflation-minded bond lovers, this is a warning. Let's face it: Someday interest rates will have to rise, which means bonds must sink in value. Though that day is still a ways off, at some point shorting fixed income with both hands will be very profitable.

Putting Barrick's move into perspective

Meanwhile, I continue to be comfortable owning gold. In a related story to its recent upside move, Barrick Gold (ABX) announced Tuesday night that it was going to close out its remaining hedges and take a $5 billion-plus charge, selling about $3.5 billion in stock to be able to do so.

For those who don't know, Barrick hedged against any drop in gold prices by selling its future production in the futures market. This worked well when prices were stable to falling, but the rise in the price of gold made the hedges a multibillion-dollar (and growing) liability that it has chosen to eliminate.