Month: November 2013

Article by Investazor.com

This week has started with a shortage of the US dollar. Investors went for riskier currencies (Euro, Cable, Aussie, Kiwi, etc.), from the first hours of trading. The stock indices continued to trade sideways while gold and silver had a pretty interesting jump, but did not keep the gains.

This week can get very interesting starting with tomorrow. In the table below you will find the economic indicators that might have the highest impact on the Forex market and will be published in the economic calendars.

By far one of the most important days is Thursday. Australia will announce its Employment Change and Unemployment Rate, but the main events are the MPC Rate Statement and the Minimum Bid Rate for the ECB, followed by the ECB press conference. And if this it isn’t enough, the United States will release their advanced GDP and Unemployment Claims.As you can see RBA will publish its cash rate and statement, Switzerland will release the CPI, Great Britain will have the Services PMI, United States will publish the ISM Non-Manufacturing PMI and New Zealand will announce it employment change and unemployment rate. Wednesday Australia will publish the Trade Balance, for Great Britain it will be released the Manufacturing Production and for Canada the Ivey PMI and Building Pemits.

Friday the party will continue with the RBA Monetary policy, China’s Trade Balance, the Canadian Unemployment rate and the well-known Non-Farm Employment Change, which Federal Reserve is observing closely, and Unemployment rate. The day will end with a speech from Fed Chairman, Ben Bernanke.

The week will end with the Chinese CPI and Industrial Production on Saturday.

During the publishing of these indicators and events the volatility will rise for the Forex Market, but not only. If there will be surprises from the Central Banks, changes in their Monetary Policy or big differences between the forecast values and the actual values of the indicators, we can expect for interesting moves.

It is recommended for traders to adjust their trading strategy for high volatility and also to reconsider their money management so that losses can be stopped as soon as possible.

The post Prepare for High Volatility in the Forex Market appeared first on investazor.com.

by George Leong, B.Comm.

The easy money will continue to be pumped into the economy by the Federal Reserve, but the difference, I think, will be that the soft tone will have less of an impact on the stock market than in the previous years. As was widely expected and to no one’s surprise, the Federal Reserve sat on its hands and did nothing with its current bond buying. So its status quo again as we move ahead and get ready to welcome in Janet Yellen as the next chairman of the Federal Reserve.

Based on the subsequent reaction by the stock market, the news was clearly discounted. The only thing was what the Federal Reserve would say about the economic renewal.

As I have said on numerous occasions, the Federal Reserve, in spite of adding over $3.0 trillion in debt to its balance sheet, continues to see America in flux and unable to shake its demons. By this I mean the economic renewal, while in place, remains at a tepid pace. Consumer spending is just not where you want to see it, and I think the advance reading for the third-quarter gross domestic product (GDP) growth on Thursday will point to this. Also, the jobs market continues to be caught in a vacuum.

“Available data suggest that household spending and business fixed investment advanced, while the recovery in the housing sector slowed somewhat in recent months,” said the Federal Reserve. Notice the comment on the housing market which I said was heading down.

Of course, for market participants, the cloudy forecast from the Federal Reserve will likely mean the tapering of the monthly bond buying will continue past the December Federal Open Market Committee (FOMC) meeting and into early to mid-2014 before any tapering begins.

As the next head of the central bank, Janet Yellen will likely maintain the quantitative easing as long as she can with her dovish reputation as an economist who supports the backing of loose monetary policy to help economic stalling.

Yet for investors, the direction of the stock market will be less driven by the easy money and the Federal Reserve, and will likely shift more to how the economy and corporate America are faring. The economic renewal will likely be flat throughout 2014, and we know corporate revenue growth continues to be a major issue that helps support the sluggish economy.

Given this, I expect gains will be harder to come by in 2014. And while the stock market could head higher, the easy money made in stocks will have passed. If the upcoming holiday shopping season for the retail sector is as soft as some pundits predict, we could be in for a rough end to the year. As such, a prudent investment strategy would be to take some profits off the table and cut some of your losers prior to the year-end.

This article More Easy Money Signals Tougher Times Ahead for U.S. Economy was originally published at InvestmentContrarians

By Sasha Cekerevac, BA

Another day and another record-high stock market is what it seems like these days. That must mean that the economic recovery in America is close at hand, right?

Not so fast; the data on job creation appears to show that the situation is actually worsening.

Job creation is crucial to this economic recovery. While it is true that job creation is a lagging indicator, we do need to see an increase to verify whether or not the economic recovery is actually accelerating.

While the stock market might be cheering the Federal Reserve’s decision to continue pumping out money, I worry that all of this excess cash is losing its effectiveness. We are not seeing any positive impact of this monetary policy on Main Street, and things are beginning to deteriorate.

The latest monthly release of the ADP National Employment Report, produced by Automatic Data Processing, Inc. (NASDAQ/ADP), showed that job creation from September to October amounted to just 130,000 new positions, worse than the expected 151,000. (Source: Automated Data Processing, Inc. web site, October 30, 2013.)

I know what you’re going to say: this decline in job creation is not a sign of a poor economic recovery, but rather a result of the U.S. government shutdown.

If that’s true, then why has job creation been decelerating for the past few months? Take a look at the job creation table below, and tell me whether our economic recovery is accelerating or decelerating:

While I would agree that the government shutdown did impact the economic recovery, that’s just an excuse. There is no way that business owners began worrying about a two-week government shutdown in July

In reality, it’s quite disappointing, since there was a glimmer of hope last winter that perhaps the economic recovery might take hold and job creation would begin accelerating. Looking at the past few months, I don’t know how anyone believes that our economy is on the verge of booming.

Compare the last few months of private sector job creation to the stock markets, like the S&P 500.

            Chart courtesy of www.StockCharts.com

Clearly, there is a vast difference between the trend over the past few months in our economic recovery and the stock market.

While there were positive signs that perhaps job creation was about to pick up at several points over the past year and a half, clearly since the summer, we have seen very little encouraging news.

If job creation and a strong economic recovery aren’t pushing up stocks, what is?

I believe the vast majority of the move up this year has been primarily generated by the Federal Reserve and its easy monetary policy.

The Federal Reserve’s goal was to improve job creation. However, things appear to be worsening. If the Federal Reserve has its foot on the gas and the economic recovery sputters and fails, what other options are really left?

That’s a real concern for me, since the emergency action taken by the Federal Reserve has been overused. It is now creating bubbles in many markets, and as you see, it’s having little impact on job creation.

Bubbles are fun on the way up, but they’re painful when they pop.

With the stock market at all-time highs and the economic recovery failing to accelerate, something has to give. We can’t continue having an ever-higher stock market on ever-decelerating job creation and companies are having difficulty growing revenue.

As I stated over the past couple of months, trying to time a market top is impossible, but I believe we are getting ever closer to a peak in the market. I would recommend taking profits and raising cash. Yes, I do realize that you don’t want to have funds sitting idle, but impatience and “rushing” to follow the herd is never a good long-term strategy.

This article Why Having Cash Sitting Idle May Be Your Best Investment Strategy Right Now was originally published at InvestmentContrarians

By www.CentralBankNews.info     Uganda’s central bank maintained its Central Bank Rate (CBR) at the neutral level of 12.0 percent given that core inflation is projected to decline to the bank’s 5.0 percent target and that real economic growth is now close to the economy’s long-term potential growth of 6-7 percent.
    The Bank of Uganda (BOU), which raised its rate by 100 basis points in September and warned in October that it would raise rates again if core inflation accelerates, said the balance of upside and downside risks to inflation were now roughly even.
    The BOU forecasts annual core inflation to remain in a range of 6.5-7.5 percent over the next 12 months and then decline towards 5.0 percent in 2015. Last month the BOU forecast 7-8 percent core inflation over the next year but also saw inflation easing towards its target.
    Uganda’s headline inflation rate eased to 8.1 percent in October from 8.4 percent while the core inflation rate declined to 7.2 percent from 7.4 percent as monthly food crop prices declined by 1.0 percent after two months of steep rises.
    The central bank said the inflation outlook was still subject to a degree of uncertainty and while food prices may have peaked, it was too early to be definitive. Buoyant domestic demand may also limit the decline in core inflation over the medium term.

    Uganda’s economy has improved this year with growth in the second calendar quarter rising by 2.1 percent from the first quarter for annual growth of 5.7 percent, up from 5.4 percent.
    The central bank said data for the first quarter of the current 2013/14 financial year, which began on July 1, “indicates a buoyant level of economic activity which if maintained would be consistent with growth of 6 percent or above for the 2013/14 fiscal year.”
    Last month Uganda’s statistics office revised upwards its estimate for growth in financial 2012/13 to 5.8 percent from an earlier estimate of 5.1 percent and the bank also predicted growth of 6.0 percent for the current financial year.
    The BOU’s rate rise in September was aimed at limiting the pass-through of higher food prices to non-food prices. The rate rise reversed a 100 basis point rate cut in June that was aimed at stimulating demand.

    www.CentralBankNews.info

By George Leong, B.Comm.

There’s some buzz surrounding the video gaming market again with the pending releases of the “PlayStation 4” by Sony Corporation (NYSE/SNE) and the “Xbox One” by Microsoft Corporation (NASDAQ/MSFT).

As I recently discussed, the release of new gaming and entertainment consoles generate excitement and drive up the demand for games. (Read “Why the Gaming Sector Should Be on Your Radar.”) In this column, I wrote about Electronic Arts Inc. (NASDAQ/EA) and Activision Blizzard, Inc. (NASDAQ/ATVI), but a much smaller gaming software maker that I expect could deliver some impressive numbers, based on my stock analysis, is Take-Two Interactive Software, Inc. (NASDAQ/TTWO).

If you are a fan of the infamous “Grand Theft Auto” series, you also probably know that the creator is Take-Two Interactive. The recent launch of its latest version, “Grand Theft Auto V,” is breaking all records for the series, as the company said it has already sold 29 million copies in the first six weeks of sales. That’s impressive and will generate well over $1.5 billion in revenues, which is more than the company’s trailing 12 months of sales, according to my stock analysis.In addition to Grand Theft Auto, Take-Two Interactive publishes games under two labels: Rockstar Games and 2K. The 2K label publishes under three more labels: 2K Games, 2K Sports, and 2K Play.

My stock analysis suggests that the stock should be doing better with the projected sales. Take-Two Interactive is still up 61% over the past 52 weeks, easily beating the 25.5% return of the S&P 500. But in comparison, over the same period, Electronic Arts is up 95%!

On a valuation basis, Take-Two Interactive is comparatively cheaper versus Electronic Arts and Activision Blizzard, as reflected in the table below.

While Take-Two Interactive is cheaper than Electronic Arts and Activision Blizzard on a price-to-sales (P/S) basis, the key variable to note is how low Take-Two Interactive’s price-to-earnings growth (PEG) ratio is at 0.52, according to my stock analysis (a reading of below 1.0 suggests a cheap valuation). This implies the stock is trading at less than its estimated five-year earnings growth, which is cheap, as my stock analysis indicates.

Take-Two Interactive has beaten the Thomson Financial consensus earnings-per-share (EPS) estimates in four straight quarters. However, as my stock analysis indicates, the issue that I see is that while revenues are estimated to grow at 65.8% to $2.03 billion in fiscal 2014 (ending in March), there’s a drop off of 32.6% in fiscal 2015, according to Thomson Financial. This is a real problem that Take-Two Interactive will face, according to my stock analysis.

The chart shows the bullish golden cross and upward trend. Traders could see a pop to above $20.00 for some profits if the company can deliver a strong fiscal third and fourth quarter, based on my stock analysis.

Chart courtesy of www.StockCharts.com

But until Take-Two Interactive can come up with other successful games, the stock will continue to be a target for traders who trade on the success of the Grand Theft Auto series.

This article Small Game Developer Set to Generate Short-Term Gains is originally published at Profitconfidential

London Gold Market Report
from Adrian Ash
BullionVault
Mon 4 Nov 07:40 EST

WHOLESALE trade in London left the price of gold sitting at last week’s finish of $1317 per ounce Monday morning, as European shares rose with government bond prices but commodities slipped.

 Silver also held flat, trading near $21.90 per ounce – more than 5% below last Wednesday’s 5-week high.

 The Euro ticked higher from a 6-week low to the Dollar.

 “Gold could claw back some gains,” says the weekly note from Japanese conglomerate Mitsubishi, “as bargain-hunters re-enter the market and if the Dollar weakens on poorer than expected US economic data.”

 This week brings October’s official Non-Farm Payrolls data on Friday.

 Consensus forecasts are for the smallest net addition since January at 130,000.

 If weak US data mean quantitative easing “continues at the current rate for longer than expected,” says Robin Bhar at French investment and bullion bank Societe Generale, “then…further declines in the gold price may be delayed.”

 But SocGen’s commodity team “still expect gold to fall towards $1100 next year” however.

 Shorter term, “a batch of gold selling – likely from the [mining] community – scared all the small bidders [last week],” says one London trading desk.

 “Gold miners are clearly looking at securing some of their future bullion sales.”

 Output from No.1 gold mining nation China will hit a record of 430 tonnes in 2013, according to China Gold Group Corp.

 Consumers will meantime buy some 1,000 tonnes, reckons vice-general manager Du Haiqing, speaking at an industry conference in Tianjin.

 Likely to overtake India as the world’s No.1 buyers, China’s “consumption will gradually cool down” starting 2014, says Du, “as consumers become more rational.”

 Meantime in India, and “despite the festival season of Dhanteras and Diwali,” says the weekly note from German-based refining giant Heraeus, “support from this was missing” for gold in October.

 “Demand was being met by recycled metal as well as via illegal channels.”

 “Physical demand continues to be lackluster,” says Swiss refiner MKS in a note quoted by Bloomberg today.

 “[Indian] jewelry stockists and retail investors [only] made token purchases of gold,” MoneyControl says of the Diwali festival “to mark the beginning of the new Hindu Samvat year 2070.”

 Gold over the last 12 months “offered negative returns [to Indian buyers] for the first time in fifteen Samvat years,” notes the Business Standard.

 Western investment demand meantime saw net outflows of 6 tonnes last week from the giant SPDR Gold Trust (ticker: GLD), taking the quantity of gold needed to back the world’s one-time largest exchange traded fund to a new 57-month low of 866 tonnes.

 But whilst big-money mandates and institutional investors remain shy, total gold coin sales by the US Mint so far in 2013 have already overtaken full-year 2012, according to data on its website.

 Sales of American Eagle and Buffalo gold coins stood at 993,500 ounces by end-Oct., says the Mint. That contrasts with total 2012 sales of 885,000 ounces.

 Silver coin sales from the US Mint meantime stand “near a new annual record” notes one retail dealer, after strong October sales to distributors took 2013’s running total to 39.175 million ounces, just shy of 2011’s record 39.869 million.

 “We remain bullish gold,” says a Singapore dealing desk today. But gold “might be further tested before investors regain faith in the yellow precious metal,” it adds, putting nearby support at $1300 per ounce.

 Rising Spanish bond prices meantime pushed Madrid’s borrowing costs down to the lowest level in more than 3 years.

 The US Dollar edged back from multi-week highs to the Euro and Sterling after new data showed the Eurozone’s manufacturing sector expanding as forecast and the UK’s construction sector surging at the fastest pace since spring 2007.

The Pound rallied from a 2-week low of $1.5900 on the news, edging gold for UK investors down to £822 per ounce.

Adrian Ash

BullionVault

Gold price chart, no delay | Buy gold online

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can fully allocated bullion already vaulted in your choice of London, New York, Singapore, Toronto or Zurich for just 0.5% commission.

(c) BullionVault 2013

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

By HY Markets Forex Blog

Asian stocks  were seen trading lower on Monday, trimming gains seen in the previous session from the upbeat China data and ahead of the highly anticipated Chinese Community Party meeting scheduled later during the week.

Shares in the Asia-Pacific region began the trading session in green, driven by the sign of rapid growth in China. The official Non-Manufacturing Purchasing Managers Index (PMI) came in at 56.3 in October, advancing to a 14-month high.

The upbeat data had a positive effect on the equities, as stocks in the region dropped later in the session and investors focus on the upcoming key meeting of China’s Communist Party, where members of the party is expected to discuss China’s economic agenda. China’s Communist Party’s upcoming meeting is scheduled from November 9-12, in Beijing.

Meanwhile, the US Federal Reserve’s (Fed) tapering is still in the spotlight, despite the forecasted outcome of the Open Market Committee (FOMC) meeting last week.

Asian Stocks – China

Hong Kong’s benchmark Hang Seng was seen flat, edging 0.12% lower to 23,220.00, while the mainland benchmark in Shanghai declined 0.05% lower to 2,147.75 points.

Down from the gains seen from the string of upbeat data’s released on Friday, including the above-forecasted gross domestic product (GDP) growth published in October. The second largest economy grew an annual 7.8% in the third quarter, after China’s growth dropped 7.5% lower in the June quarter.

“China’s Steel PMI in October contracted for two consecutive months, down to 47.5 from 49.2 in September. This does not necessarily contradict with China’s overall PMI expansion in October. In fact, if you look at the detailed breakdown, China’s October overall PMI expansion was fueled by output PMI only, other sub indexes mostly pointed to slowed pace in tapering, especially, new order PMI slowed in October to 52.5 from 52.8 in September,” Helen Lau, senior analyst for UOB Kay Hian, stated in a note.

Kunlun Energy was the session’s main movers, climbing 3.6 higher, while Tingyi Cayman Islands Holding dropped 3%.

HSBC holdings are expected to announce its earnings report for the third-quarter after the market closes later today.

Interested in trading Asian Stocks Online?

Visit www.hymarkets.com and start trading today with only $50.

The post Asian Stocks Clears Previous Gains On China PMI appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By HY Markets Forex Blog

Eurozone PMI climbed to 51.3 points in October, rising from last month’s record of 51.1, Markit Economics confirmed.

“The eurozone manufacturing economy is undergoing its strongest growth period for two-and-a-half years, since the mounting uncertainty caused by the escalating sovereign debt crisis hit businesses hard in 2011.” Chris Williamson, chief economist at Markit Economics said.

“While it is in some respects disappointing that the PMI has failed to show a steeper pick-up over the last two months, the recent growth revealed by the survey indicates a marked turnaround in the health of the manufacturing economy. While the survey was signaling a 2-3% annual rate of decline in industrial production earlier in the year, a 2-3% rate of expansion is now being indicated.” Williamson said.

“However, while the recovery goes on, it is by all measures frustratingly slow. In particular, the modest gains in output and new orders remain insufficient to encourage firms to take on more staff. More encouraging indications about the recovery can be gained by looking at the increasingly broad-based nature of the upturn, and especially the fact that increasingly robust gains in production are now being seen in countries such as Spain, Italy and Ireland, to suggest that structural reforms to boost competitiveness are starting to pay off”, Williamson also commented.

Eurozone PMI – Germany & Spain PMI Climbs

The Final PMI for Germany’s manufacturing sector saw a climb to 51.7 in October, exceeding forecasts of 51.5 in a flash reading and up from 51.1 points seen in the previous month.

Meanwhile the industrial sector for Spain saw a jump in October, while the manufacturing PMI was seen above the 50-threshold for the third month in a row, advancing to 50.9 points, up from 50.7 seen in the previous month.

Eurozone PMI – France & Italy declines

Italy’s manufacturing sector declined in the month of October, as the country’s PMI dropped down to 50.7 points from 50.8 points  recorded in September.

In France, the manufacturing activity dropped lower in October as the PMI in the country’s manufacturing sector edged lower to 49.1 in October, down from 49.8 seen in the previous month.

Interested in trading In the European Market?

Visit www.hymarkets.com and find out how you can start trading today with only $50.

The post Eurozone PMI Climbs in October appeared first on | HY Markets Official blog.

Article provided by HY Markets Forex Blog

By Mitchell Clark, B.Comm.

American Express Company (AXP) just hit a new record high on the equity market. By most accounts, the company had a good third quarter. The stock’s been upgraded by the Street with rising earnings estimates and share price targets.

Management said that its credit quality and top-line growth were the reasons for a substantial 15% gain in 2013 third-quarter earnings per share. Revenues grew six percent to $8.3 billion.

The stock appreciated another 10% since management reported its third-quarter earnings. The company’s forward price-to-earnings (P/E) ratio is approximately 15.5 and its trailing P/E is around 20.

In spite of coming in below Wall Street’s earnings consensus, Discover Financial Services (DFS) has been holding up well. The position is only two points from its all-time record high.

The most recent quarter saw the company increase its potential loan loss provision to $333 million, up from $136 million last year, due to lower recoveries on older unpaid accounts. The Street saw this as an aberration, and 2013 and 2014 earnings estimates were increased along with higher share price targets.

MasterCard Incorporated (MA) has been a stunning wealth creator over the last five years. Even since the beginning of this year, the stock has appreciated close to 50%, which is a superb achievement. The company’s market value is now close to $90.0 billion.

Visa Inc. (V) is a bit larger than MasterCard in terms of stock market capitalization. It’s doubled in value since the beginning of 2012. Visa, MasterCard, and American Express are institutional favorites.

Visa’s third-quarter earnings stumbled in its latest quarter—the first sign of a crack in what has been a top wealth creator over the last few years.

Visa’s total revenues for the three months ended September 30, 2013 were $2.97 billion, up nine percent from $2.73 billion in the same quarter last year.

Diluted earnings per share dropped to $1.85 per share from $2.47 in the comparable quarter, mostly due to a large tax provision.

To assuage the marketplace, Visa announced a new $5.0-billion share buyback program for fiscal 2014. This goes a long way to help pay for its recently increased quarterly dividend.

Like the other credit card companies, Visa is still a great business and brand. But the company’s current valuation is questionable, given the stock’s recent run. This position is definitely due for a break. (See “My Six Favorite Growing Dividend Payers.”)

The one thing the company still offers is the expectation for double-digit growth. It’s a tough thing to come by these days, so the stock market is paying for it.

Visa’s fiscal 2014 class A earnings-per-share growth is forecast to be in the mid- to high teens. Annual revenues are expected to be in the low double digits for the fiscal year.

After a major correction, Visa’s share would be worthy of consideration, but not currently. According to Thomson/First Call, the stock is trading approximately 10% below Wall Street’s median price target.

This article My Top Four Wealth-Creating Credit Card Stocks is originally published at Profitconfidential

By Michael Lombardi, MBA

Can it be true?

The U.S. Department of the Treasury has reported that for the federal government’s fiscal 2013 year, which ended on September 30, 2013, the U.S. government budget deficit was $680 billion—the smallest budget deficit in five years. (Source: Bureau of the Fiscal Service, October 30, 2013.)

Should this be taken as great news? No, it’s “smoke and mirrors,” as I will explain below. But the mainstream certainly thinks this year’s budge deficit, which came in below $1.0 trillion, is good news. They forget that no matter how you look at it, any budget deficit, no matter how small or large, is adding to a bigger problem at hand—our massive national debt.

Let’s face it: a budget deficit at the end of the day means the government spent more money than it received. Where does this extra money that the government spends come from? The answer is simple: it borrows. And as a result, the national debt rises.

Our national debt has increased significantly over the past few years. At the beginning of 2008, the U.S. national debt stood at $9.2 trillion. Today, it stands above $17.0 trillion. (Source: Treasury Direct web site, last accessed October 31, 2013.) This represents an increase of almost 85% in the national debt in the matter of a few years.

I believe the national debt will double from here…from $17.0 trillion to $34.0 trillion.

Why am I so negative on the national debt? I’m skeptical because I don’t believe this year’s numbers present the real story on government spending. Let me explain…

In the fiscal 2013 year, the U.S. government paid interest of $415.7 billion on the national debt. In the fiscal year 2012, the interest payments were $359.2 billion. This means the interest payment on the national debt has increased almost 16%. The more the national debt increases, obviously, the higher the interest rate payments.

But here is the real kicker: interest rates are being artificially kept low. The Federal Reserve is buying government T-bills with the new money it prints. The process is a scam, a Ponzi scheme at best. If the government was paying the interest rate it has historically paid on its debt over the past 30 years, then the annual interest expense on the national debt itself would be over $1.0 trillion!

But that’s not all…

We have cities across the U.S. economy struggling to balance their budget deficit and failing. Cities like Detroit and others in California have already filed for bankruptcy; I expect this trend to continue. And I potentially see the U.S. government jumping in and bailing them out.

Then there is the student debt problem that has surpassed $1.0 trillion. Increasing delinquency rates for student loans, the majority of them backed by the government, are a big risk.

Then there is Obamacare. I have read so many different reports on the “true” cost of Obamacare, I can’t pinpoint a number. But if Obamacare is the stepping stone to socialized healthcare, as some have suggested, the cost to run the program could be well above the estimates I’ve seen. Throw in an aging population that is more dependent on Social Security than ever and more poor people being dependent on government handouts than ever, and we are looking at real budget deficit problems going forward.

If what I’m saying above materializes even a bit, foreign creditors could say “give us our money back,” at which point the Federal Reserve would have to buy all new U.S. debt. The national debt is something to be very worried about.

Michael’s Personal Notes:

The Federal Open Market Committee (FOMC) decided this week to keep quantitative easing and easy monetary policy going. The statement by the Federal Reserve said, “To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens.” (Source: Federal Reserve, October 30, 2013.)

I’m one of those economists who believes the longer this goes on, the more troubles we are going to see. Is the Federal Reserve playing with fire?

It’s been almost five years since the Federal Reserve introduced the idea of quantitative easing to the U.S. economy. The goal was to help spur the economy and to help the average Joe, who, at the end of the day, lost his job and his house.

Has that happened?

It’s very clear: quantitative easing and the easy monetary policy that the Federal Reserve has been implementing for some time haven’t really filtered down to the average American. But it is helping the big banks; we have seen their profits grow significantly since 2009, while the average consumer has seen his/her real wages decline. Those who are closing in on retirement are forced to stay longer in their career or rethink their options because their savings have either been depleted or haven’t grown enough.

And we are seeing consumer confidence slide lower. This is the exact opposite of what the quantitative easing was supposed to do. For the week ended October 27, the Bloomberg Consumer Comfort Index declined to the lowest level in more than a year. The index tracking consumer confidence stood at negative 37.6, plunging from negative 29.4 a month ago. (Source: Bloomberg, October 31, 2013.)

Economics 101 suggests that when you have an abundance of money supply, you have inflation. The Federal Reserve has been doing exactly that through the help of quantitative easing and keeping interest rates lower. Take this as an example: in just the last few years, the Federal Reserve has printed more than $3.0 trillion of new money out of thin air, and it continues to print another $85.0 billion a month.

And we are starting to see inflation creep up into the U.S. economy. Mind you, the official numbers don’t show this, but if you ask the person who shops, they will tell you how goods and services are getting more expensive.

With all this, I hear the mainstream talking heads speaking against gold. They say the yellow metal doesn’t hold any value any more and it’s not useful. It may be a hedge against inflation, but we currently don’t have any, say the “official” figures. Unfortunately, the mainstream forgets money continues to be printed by the Federal Reserve and the taper talks have diminished.

The Federal Reserve is playing with fire, hoping it will not get burnt. All of this keeps me bullish on gold bullion and negative on the U.S. dollar.

This article National Debt to Double from $17.0 trillion to $34.0 Trillion? is originally pushed at Profitconfidential