Why Gold Stocks Should Be Owned

“However shortly after the funding began, the Bank for International Settlements (BIS),
the central banks’ bank in Switzerland, issued a paper stating that the problem
stemmed from borrowing by three giant hedge funds, which were engaging in a
leveraged strategy. The leveraged strategy involved buying Treasury bonds, and
selling derivatives against the bonds. To continue to leverage these positions they had
to borrow against their bonds, creating huge demands for loans that the banks were
either unwilling or unable to continue to provide. In effect there were three major hedge
funds with a problem bigger than the Long Term Capital hedge fund problem in the fall
of 1998. ”
“The FRB is also working on revised language that will justify allowing inflation to exceed
their 2% target.”

Why gold stocks?

Below is chart of liquidity in the market: Ratio of LIBOR3 to 3month T bill rates. Clearly chart shows how ratio began its downward move since the operation began in last fall.