The average American saves/ invests much lesser than his Chinese or Indian counterpart. Why does this happen? Simply because the American is sure of his ‘Social Security’ – and that his ‘rich’ country will take care of him. Whereas the average Indian or Chinese provides for his own retirement.

A good environment, stability, growing income etc. are sure signs of a successful organisation (company, country or a human being) – this allows him/ the organisation to borrow ASSUMING that the success of his past will continue. Similarly the USA now continues to borrow continuously. This could be harmful. Allowing the market to solve the problem is a far better solution than the US government print notes and bail out the ‘toxic’ banks.

The fact that the government is ‘trying’ to solve the problem is a big hassle – the market does not understand what to buy and what to sell! If Warren Buffet’s cost of funds is higher than Citibank (TARP) – this is a big noise in the market. It sends out a poor signal about Buffet and makes Citi look healthy. Some of this mess will be sorted out easily – but the more jumbled signals remain.

So be careful. In such times gold is a good asset. However, gold may be in the midst / end of a great 3+ years of a bull run.