Overseas stock markets took a breather from their bull run and the dollar retrenched against foreign currencies sending commodities prices lower in early trading.
In early trading gold was off $1.94 to $1,606.68 and silver was down $0.08 to $27.93, leaving the silver/gold ratio at 57.5.
Commodities were all down in early morning trading, but not by much and largely in line with currency adjustments. Platinum, palladium, crude oil and copper all meandered lower in largely sideways trading.
If you want to know why your 401(k) never seems to get any traction, take a look at this excellent article in Wired about high speed trading. On any given day quants and engineers are trying to figure out how to skim another few pennies when your retirement fund buys stock buy using high speed trading. It’s a process that robs wealth without adding any value, a stealth tax on market trades.
Some of you might remember the grainy 16mm black and white films they used to show us in school about how the stock market worked. Stockholders invest in the company by buying stock, the company invests in new factories, and the company sells more widgets. Seems almost quaint now, doesn’t it?
Today companies are awash in free cash and don’t really need your money. Instead of selling stock to raise money to build factories, corporations are more likely to use junk bonds to buy a competitor’s factory, lay off the workers, dump the pension obligations on the taxpayers and ship the machine tools overseas. Then they hide some of those obscene profits buying back the goods at a higher price from their foreign subsidiary. In any other context we would call that money laundering.
Wall Street has become a ripoff for the average investor and that’s one of my primary reasons for keeping part of my wealth in gold and silver.
High speed traders can fiddle with commodities prices to a certain degree, but they can’t skim off the hard assets in your physical possession, though I’m sure they’re working on it. Over time and despite the best efforts of futures traders, gold and silver prices will equalize to currency values. That doesn’t necessarily mean the price of gold will go up, but that it will continue to hold some relative value in relation to the buying power of the script in your bank account.
While you may be a fool to keep all your money in gold, it’s the bigger fool that trusts all their money to the harpies on Wall Street.