by Ned W. Schmidt, CFA, CEBS
Schmidt Management Company
August 15, 2007
Complete and total intellectual bankruptcy of Federal Reserve was confirmed this past week. Creation and collapse of two financial bubbles in eight years would seem to suggest monetary philosophy of Federal Reserve is fatally flawed. Core rate of inflation as a tool for managing monetary policy should be declared dead, and buried in history books of foolish thinking. The entire time the Federal Reserve was driving interest rates to 1% we were told all was well because core inflation was tame. Worrying about the mortgage and housing bubble was unnecessary, cause core inflation was fine. All was clearly not fine! Bailout Ben Bernanke continues to mumble about core inflation as econometric models are used to guide the Fed's thinking. The now much poorer investors in quantitative hedge funds might explain to Bailout Ben the risks of relying on computer models.
Central banks around world have essentially eased, lowering interest rates below market equilibrium. Such action is inflationary, and will reduce the value of your money. Gold will clearly be a beneficiary of this easing. Gold has already demonstrated that it is a better investment than most quantitative hedge funds, which have been hemorrhaging investor money. Gold stocks, as shown in chart, are over sold, being ignored by investors, and should be bought. Canadian investors, especially, should look at action of CN$ after �default� by COF. Canadian dollar is likely to experience continued selling due to this event. Gold and perhaps Gold stocks at this level are the only havens from financial meltdown.
© 2007 Ned W. Schmidt
Ned W. Schmidt,CFA,CEBS is publisher of THE VALUE VIEW GOLD REPORT. That report now includes a weekly message, TRADING THOUGHTS, to help investors identify timely points for buying Gold and Silver. His monumental report, "$1,265 GOLD", with 255 pages and 98 graphs, is now widely known, and is available at www.amazon.com or from the author by clicking HERE This work has now been read by investors in over twelve countries around the world. Ned welcomes your comments and questions. His mission in life is to rescue investors from the abyss of financial assets and the coming collapse of the U.S. dollar. He can be contacted by Email.
Please remember that no method is perfect nor is the one
running the model.
All estimated returns are for the model portfolio and do not reflect those earned on actual portfolios.