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When the Going Gets Tough, the Tough Buy Gold
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How was your Canadian Thanksgiving and for those who live in the U.S., how was your Columbus Day? Given the fact that the Dow Jones Industrial Average increased in value by the largest one-day amount in history, I’ll bet that all of you began to breath a whole lot easier.
Even though as I write this column on Wednesday, October 15, 2008 the Dow is down again, people continue to hope that the financial worst is behind us. Time will tell if that is the case.
Did you learn anything from the recent past? If the financial condition worsens are you “going to go outside and wail and grind your teeth” or are you going to be a proactive winner?
I, for one, will continue to be a proactive winner and let me tell you what that means to me.
It is clear that one of two things is going to happen in the months ahead.
With the recent actions spearheaded by our global leaders, confidence could come back into the financial community. Credit could ease and economies could again begin to operate somewhat efficiently.
Considering that Japan’s Nikkei fell a historic 10% on Friday and then soared 14.2% on Monday and that the Dow, after plummeting last week, increased in value by the largest amount during the past seventy-five years (11%) on Monday, this could be the case.
The other and certainly more negative side of the coin is that financial institutions could remain frozen and people could very well experience what their parents went through during the 1930’s.
Here is what Forbes had to say on that score when they quoted Kristine Li, a Tokyo-based analyst for KBC Securities Japan, who thinks the pain us is far from over in the Western financial sector. “What we’re seeing now is very similar to the situation in Japan in 1998” …”the government set aside trillions of yen to recapitalize banks, sending shares rallying for a year, doubling from their lows. The banks took the money and took another five years to hit bottom, while companies deleveraged…We haven’t gone through that stage in the U.S. or Europe or globally”.
Let’s hope that Ms. Li is incorrect. But, my actions will be the same regardless of which side of the coin comes up.
I learned some valuable lessons as a result of economic hard times for the Korelin family brought about by the challenges of staring and running a small business some twenty five years ago.
To repeat what I said earlier, sitting on the sidelines and pontificating about what could happen doesn’t do anyone any good. Positive action is the only action worth taking.
Positive action today does not initially depend on which of the above scenarios plays out in the short term.
During this period people need to protect themselves.
Obviously, the best way to do this is to buy gold and silver. As I write this article gold and silver are both down a bit from their recent highs. At the risk of sounding trite, what a great buying opportunity this could be. Doug Casey, Bob Moriarty, David Morgan and the rest of the regular guests on The Korelin Economics Report sure think it is. James Turk and I discussed this action recently on the Weekend Special of the Korelin Economics Report. Go to our website and see what he had to say.
Some of our guests are also suggesting that with gold and silver stocks currently trading at ridiculously low levels they too represent good opportunities.
I say gold and silver for safety and appreciation and the stocks of companies in the precious metals industry for their significant upside potential.
A.B. Korelin
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Al Korelin is the host of the internationally syndicated Korelin Economics Report radio program and the President of A.B. Korelin and Associates, Inc. – a regulatory consulting firm that has been providing services to mining companies for the past 27 years.
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