December 22, 2010 – Solid arguments for investing in gold bullion turn up in the strangest places. Writing for the Wall Street Journal Richard Barley brings joyful news of the stock market befitting the holiday season.
“Stock Markets Are Poised to Steal the Show Next Year,” the headline declares. “And what show is that?” you may ask. After a brief mention of “other asset classes” Barley presents his case relative only to bonds, and it is hard to think of any other asset class that wouldn’t steal that show.
More unsettling, however, Barley’s show is one put on for insiders and not the average investor. “Cash-rich corporate balance sheets,” Barley’s first positive sign, indicate only that strong earnings (Barley’s second positive sign) are not finding their way back to investors. However, they are strongly driving up equity buybacks, which Barley also believes is good. And it is a good thing – for insiders. That way corporate wealth can be channeled into private equity and M & A schemes to keep the Wall Street casino running.
Oddly, Barley believes that “global growth [is] looking good.” Wow. Outside of Asia growth is stagnant, and even when the volatile emerging Asian economies are factored in, average growth still falls below baseline. Until western nations at least start to climb out of the hole such optimism cannot be justified.
To be fair, Barley admits that “volatility is likely [and] politics and policy are big risks.” His examples include adding Spain to European bailouts, increasing them to “18% of the euro zone's economy,” “Chinese monetary policy and emerging-market inflation,” and the failure of QE2 “to reduce unemployment or spur growth,” any of which “will likely drive periods of risk aversion.”
Exactly. Enjoy the show, but avert the risk with gold bullion investments.
