Stalling economies around the globe have prompted central bankers to increase their asset purchase or quantitative easing programs. As central banks print money to purchase assets, they increase the amount of paper dollars in the economy, which is often referred to as “inflating the money supply” or “debasing a currency”. We will continue to look for good entry points to add to our gold positions in numerous client accounts. Our current holdings in copper, silver, oil, and gold can help us protect our purchasing power should central banks be successful in their attempts to create positive inflation via currency debasement.

From a Bloomberg story, Fed Action Likely as U.S. Growth Slows:

The Bank of Japan is also increasing asset purchases to spur its economy, creating a 5 trillion yen ($60 billion) fund to buy government bonds and other assets, it announced after its two-day policy meeting today. It also lowered its benchmark interest rate to a range of zero percent to 0.1 percent, from the previous 0.1 percent.

“The additional purchases — although we don’t have precise numbers for how big the effects are — I do think they have the ability to ease financial conditions,” Bernanke said yesterday in response to questions in Providence, Rhode Island, at a forum with college students.

As we stated in Investment Contingency Plans on September 14th, as economies struggle and/or asset prices fall, the odds of additional central bank asset purchases increase. The central banks will continue to purchase the assets with freshly “printed” electronic money. Just as liquidity helped fuel the rally off the March 2009 lows, we believe additional quantitative easing may lead to a rally in risk assets. It is also possible some improvement in economic data may follow gains in the financial markets (just as we saw in late 2009). The problem with the money-printing approach is it does not address the long-term structural problems with global balance sheets (too much debt and fragile demand for assets).

By Chris Ciovacco
Ciovacco Capital Management

Chris Ciovacco is the Chief Investment Officer for Ciovacco Capital Management, LLC. More on the web at www.ciovaccocapital.com

Ciovacco Capital Management, LLC is an independent money management firm based in Atlanta, Georgia. As a registered investment advisor, CCM helps individual investors, large & small; achieve improved investment results via independent research and globally diversified investment portfolios. Since we are a fee-based firm, our only objective is to help you protect and grow your assets. Our long-term, theme-oriented, buy-and-hold approach allows for portfolio rebalancing from time to time to adjust to new opportunities or changing market conditions. When looking at money managers in Atlanta, take a hard look at CCM.

All material presented herein is believed to be reliable but we cannot attest to its accuracy. Investment recommendations may change and readers are urged to check with their investment counselors and tax advisors before making any investment decisions. Opinions expressed in these reports may change without prior notice. This memorandum is based on information available to the public. No representation is made that it is accurate or complete. This memorandum is not an offer to buy or sell or a solicitation of an offer to buy or sell the securities mentioned. The investments discussed or recommended in this report may be unsuitable for investors depending on their specific investment objectives and financial position. Past performance is not necessarily a guide to future performance. The price or value of the investments to which this report relates, either directly or indirectly, may fall or rise against the interest of investors. All prices and yields contained in this report are subject to change without notice. This information is based on hypothetical assumptions and is intended for illustrative purposes only. THERE ARE NO WARRANTIES, EXPRESSED OR IMPLIED, AS TO ACCURACY, COMPLETENESS, OR RESULTS OBTAINED FROM ANY INFORMATION CONTAINED IN THIS ARTICLE. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.

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