Real Wealth #278 10/07/2010
Charles Evans, president of the Federal Reserve Bank of Chicago Calls for Fed to Let Inflation Rise Over the Informal 2% TargetDear Subscribers,
an extremely important Wall Street Journal interview of Charles Evans, president of the Federal Reserve Bank of
Evans is calling for strong action by the Fed to charge up the economy, including a new program of U.S. Treasury bond purchases and possibly an audacious public declaration by the central bank that it wants inflation to rise for a time beyond its informal 2% target.
While the entire interview is worth reading allow me to share with you one question and answer in the interview that I find eye opening for precious investors.
Gold prices and commodity prices have risen quite a lot. Does that register?
Evans: I don't put a lot of weight on those indicators. Gold moves up and moves down. Commodity prices are often driven by stronger demand around the world and with emerging markets doing better at this point in the cycle that is part of it. Does it worry me about inflationary expectations? I just don't see that at the moment. When I talk to people in the business community there is not a lot of pricing power.
Evan’s is clearly expressing the majority opinion among presidents of the Federal Reserve banks around the country and not only the Federal Reserve Chairman and Governors but also the opinions of most central banks around the world. Few are seeing the risk of inflation, rather the risk of deflation.
This creating an environment in which most of the World’s Central Banks are keeping interest rates at or near zero and at the same time using quantitative easing in an attempt to spur economic growth. In short, hundreds of billions of dollars, pounds, yen etc...are being created out of thin air. The fact that gold, silver, platinum and other commodities are rising in terms of the vast majority of currencies doesn’t seem to concern the world’s central bankers because they are STILL focused on heading off deflation.
This is why precious metals and commodities have been steadily climbing in price and why they will continue to rise. There’s a commercial for Forex trading that’s been running that shows what is designed to represent three central banks just spitting out wads of cash over and over again. It’s a fair representation of what’s going on.
We’re getting a pull back today in both stock prices and commodities. One of the best market timers in the world Tom McClellan who publishes the McClellan Market Report is looking for “hard” pull back in the market going into October 11th. I and my staff are hoping to see a pull back in stocks that would also give us a pullback in oil shares so we can add to the Gold & Energy Advisor model portfolio.
I recommend reading the McClellan Market Report and encourage you to become a member of the ButtonWoodClub which includes the two monthly issues of Tom’s famous letter which cost $295 a year to subscribe to but as a member of the ButtonWood Club is just one of several fantastic advisory letters and stock market valuation tools you will receive as a member of the ButtonWoodClub member for just $1 for the first 30 days and then just $395 a year or $39.95 a month.
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Editor and Publisher
month’s issue of the Gold & Energy Advisor newsletter features a wind energy company. Allow
me to emphasize this is an extremely speculative company that is NOT included
in our model portfolio. I decided to feature the company as a way of exploring
what kinds of wind energy companies are out there. If you’re a conservative investor, can’t risk
your capital I suggest not taking a position. Stick with our model portfolio
recommendations and buying physical gold, silver and or platinum.
Please see risk disclosure link below.
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