The Board's decision to drop the CEO for the so-called purpose of raising the share price is absolutely moronic. But anyone familiar with Barrick Gold's Board knows this is simply par for the course. They are nitwits of the highest order. I seriously doubt there is some hidden meaning behind the boot that will be disclosed at a later date that will have any bearing on the direction of the stock.
One must also comprehend the dynamics that will move gold significantly higher and thus ABX remain firmly in place. Europe's only possible solution to their crisis is the ECB printing press. The amount of bad debt they will need to monetize is truly staggering. When the inevitable takes place gold will shoot to the moon.
And the United States is not far behind, given a choice between falling back into recession or creating larger deficits, printing more Greenbacks...Well we all know the answer to that question.
If this was a game of chess, the proclamation of "Checkmate" would be in order. Even Barricks dysfunctional Board can't screw this up, ABX to 65 in the next 12 months.
You subscribe to popular theory that says the printing press magnifies the quantity of money and so the purchasing power of money is debased because more dollars (M) will chase the same quantity of goods and services (GDP). It has yet to be borne out by data. No inflation, rather a whiff of deflation is in the air. Witness housing prices, commodities, etc. Of course, M has been increased through our QE's, but all that does is ending up as reserves sitting idle in banks, not out there chasing stuffs. When it does, we will see if the Fed will keep its promise to mop up the excess liquidity. Yes, it bears watching, but that is later. They may or may not succeed. Until then, gold bugs are jumping the gun. They are not aware of the holes in their argument. Slowly, it is dawning on them. They have been shouting fire, but there is still no fire.
Yes it is true, an increase in the reserves held at our banks via fed monetize policy alone does not create inflation. Without an uptick in the velocity of money, those reserves being lent out into the real economy, creating growth, jobs, higher wages et cetera one would not normally see too much demand chasing too few goods...
But what you fail to recognize is the powerful force of expectations. Not only is the tinder in place for a large fire in the forms of huge reserves...Risk taking based on negative real interest rates, unprecedented fed policy, expansion of their balance sheet, backstopping of all forms of debt has been creating bubbles for quite some time, not only in the developed economies but the emerging markets as well.
My point is banks are not the only source of lending nor inflation. Govts, stock markets, individuals, companies are already acting on expectations...
What has happened is we now have a world economy addicted and more importantly relies on money printing to resolve all that ails us. The answer to our debt problems has been clearly more debt, this travesty has been taking place for nearly 3 decades now and the many maladies associated with this madness are making themselves known across the globe.
Bottom line, money in theory should be a storage of value, Bernanke has destroyed that premise, has lost our credibility as a reserve currency. We will soon find out as the European crisis unravels how devastating that sin will be...
One buys gold not only for the fear of inflation, but the credible trepidation our system is broken. My view is we either collapse or suffer some form of severe stagflation. No in between, goldilocks ending, hence my ABX position.