Liquidation Returns to the Stock Market

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate … It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up from less competent people.”

That statement was reportedly attributed to Andrew W. Mellon, Secretary of the Treasury under Herbert Hoover. October has historically been a horrible month for stocks, but it seems that this November is moving stocks even lower. Today, the Dow and S&P both closed at five-year lows. I was lucky to actually not lose much at all; Barrick Gold (ticker symbol=ABX) closed up .33%. Big relief for me, actually. For the last couple of months, it seemed Barrick has been performing at multiples of the stock market: the market would move one way 5%, and Barrick would move the same way 10%. Today, the Dow closed down 5.1%, but Barrick finished up. I find that very encouraging. To me, it seems like gold and gold miners are starting to divorce themselves from the larger market.

Gold has traditionally been a safe haven in troubled times, and any step back in that direction makes the market seem more sane to me. The month of October saw a lot of good stocks and assets being liquidated with the bad as hedge funds had to meet margin calls. Rumor also has it that banks flooded the COMEX with paper gold sales in an effort to raise money, in the hopes that they wouldn’t have to make physical delivery. Today, the COMEX spot price of gold itself was essentially unchanged on a day of rather pronounced liquidation. Citigroup, by comparison example, declined 23%.

It also makes sense that on a day when stocks are seeing a huge sell-off, just after the Fed hints that it’s about to lower interest rates again to less than 1%, that gold would start to rally. And I’m all for returning to a market that actually makes sense to me as opposed to the month of October, where everything fell but the dollar during a time when the dollar was being printed at the largest quantity in history. If this turns out to be a bottom for COMEX paper gold and Barrick stock, then it will make for a very happy holiday season for me.

The above reasons to rally in gold are not even counting the amount of new Socialist policies that have the potential to be introduced in the next two years under the Obama administration. And speaking of Socialist policies — whatever happened to the TARP bailout? You remember — that bailout Bush, Bernanke, and Paulson were telling us were necessary to buy up all the troubled assets on bank balance sheets? Except, it turns out that none of the money apportioned to do so actually went to buying up troubled assets. Which was … y’know … the whole justification for the program to begin with.

Why, I remember way back in the far-off days of last month when the whole justification for the bailout was that the taxpayers would show a profit by buying these troubled assets. Oh, well. You can’t trust the government to actually use the money they raised for the program on which they claimed the money was to be spent.

You heard it here first folks.

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