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What Can You Say About A Week Like This One?
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(September 22, 2001) As bombers and warships head to the Middle East, President Bush talked war before Congress, America, and the world. This week, U. S. stocks lost 13% of their value as markets suffered through five of the heaviest trading days in history. And the question is no longer ‘are we in a recession?’ but rather ‘how long will this recession last?’ A sigh of relief as this week finally ends…
Let’s start with stocks. Most of us have some exposure directly or indirectly to the stock market. This week the Dow was down 14.2%, the S&P 500 down 12%, and no sector of the market was spared. Around the world, equities in Britain, Germany, Switzerland and Germany also fell to lows not seen since 1997.

As to the economy, capital spending in many areas has come screeching to a halt. “The business world is simply covered in a blanket of hesitation,” reported storage giant EMC, while announcing a probable 3rd quarter loss and the layoff of 2,000 employees.

Paul Krugman was more optimistically quoted in the New York Times on September 14th, “The nation’s productive base has not been seriously damaged. Our economy is so huge that the scenes of destruction, awesome as they are, are only a pinprick…The wild card here is confidence."

Unfortunately, consumer confidence has been waning for a few months now. Furthermore, this week the Conference Board reported that 47% of Americans believe that the events of September 11th will trigger a recession. And, of course, consumers expecting a recession usually curtail their spending, which makes their expectation of recession a self-fulfilling prophecy.

Joseph Philips writes in Morgan Stanley’s ABS Strategy Report: “The horrific events of September 11th will probably go down in economic history as the straw that broke the camel’s back.”

So what does any of this have to do with gold? In a nutshell, Gold bullion sales over the past few days have taken off. Here at Onlygold, the average number of daily visitors to this website has tripled. Sales of gold bullion here have roughly quadrupled the pace we set in August, mostly from people who are buying gold for the first time. And it’s no wonder, with war in the air and equities values vanishing at a rapid rate.

David Bogoslaw of Dow Jones Newswire reported on September 21st that “physical demand for bullion coins has skyrocketed in recent days.” In that Dow Jones report, he describes financial planners making large bullion purchases for their wealthier clients. Bogoslaw writes:

“Many investment managers agree that by holding between 5 and 10 percent of their portfolio in the form of precious metals, individual investors can reduce the overall risk to their portfolios.”

And certainly during a week in which 13% of the value of U.S. stocks and mutual funds simply disappeared, a return to the old fashion value of gold seems entirely appropriate.

 

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