The streets are paved with GOLD!

It’s been an interesting week on the markets. The jobless recovery is continuing as companies have learnt to manage without having to hire more staff. This could escalate and it’s very negative for the morale of organisations. I know it will take time for many of the government sponsored aid packages to stimulate the global economy but a jobless recovery is very damaging to the confidence of the youth of a country.
If young people, especially young males think that developing a career will be difficult and unattainable the long term affects could be a wasted generation and long term dependency on social welfare for these people.
The major markets finished the week on a high. Even the fact that US unemployment went over 10% failed to trigger a sell off in the markets. As the markets have risen a certain amount of money will have been reinvested as confidence returns and companies start to meet their earnings forecasts. This has led to a build up of money that is slowly been invested. Even hedge funds are able to raise money for investment.
The purchase by India during the week of a large proportion of gold production was a significant factor in the gold price appreciation. Is gold the new bubble! Gold has seen a significant increase in the last few years. It is a store of safety against inflation and against a declining dollar. Was the purchase by India a declaration that they were going to continue to build gold reserves because they see a declining dollar over the next few years and the rise of inflation because of the sell off in the dollar?
The oil price and the S&P 500 now seem to be correlated. As the S&P rises on a stabilising economy so does the oil price. How long will this correlation last? Is the correlation a reflection of the decline in the importance of the dollar as the reserve global currency?
The decision by the management of GM to cancel the sale of its European division Opel questions the corporate ethics of GM. GM received billions of dollars in US government aid and was fast tracked through chapter 11. It disposed of divisions and engaged in a lengthy sale process of Opel. It had negotiated with unions; the German government had come forward and supported an aid package.
The decision not to sell in my opinion is negative. GM would be forced out of business if it had not received the state aid from the US government. It should have committed to selling Opel.
One could argue, that when private equity took over Chrysler it failed to turn the fortunes of the organisation around and that these big heavy industries need to be linked to organisations which will drip feed them government money as the working capital cost of running these organisations is too expensive for private organisations to fund?
Then again Ford is doing a good job of managing their way back to profitability