Dear Reader,

The consequences of misallocated capital is an encore subject here at the Daily Dispatch. It's a topic that often centers on resources wrongly dedicated to a project of dubious merit, like the cement used to build a bridge to nowhere. However, the resources involved – squandered, really – also include such things as time lost at building a career with limited or obsolete prospects. More than a few times we have poked fun at those who pursue history or art degrees, just two of the many cogs in the diploma-manufacturing departments of the "soft" or social sciences.

To be fair, though, we give equal time to lauding the "hard" or natural sciences, such as physics and chemistry, and by necessity, mathematics. At first blush that may seem a bit biased, as a large chunk of our company is focused on researching and analyzing the mining, energy, and technology sectors – all of which are rather light on social-science majors.

But biased it is not. As is the case with all our conclusions, we objectively assess the data and follow it to its logical conclusion. And if history gives relevant evidence that can be drawn upon, all the better. That is the story when judging the allocation of capital to higher education. Like a game of "rock, paper, scissors," the careers built on a foundation of hard sciences crush those wobbling on the sand of the soft sciences in terms of employment security and earnings.

To bring this point home, let's look at a feature from the Wall Street Journal that compares the earnings, rate of unemployment, and popularity of 173 major fields of study. I have excerpted the top and bottom 15 majors/careers from each category and compiled them into the following two tables:

Top 15

Hmmm… it's pretty obvious what departments students should be entering if they want a well-paying, secure job. And with the rare exception or two, popular fields of study will not accomplish that goal.

Bottom 15

Looks like college students about to graduate with a psychology degree will likely need some counseling, to deal with having a hard time finding a low-wage job. Hey, who needs therapy when there is a pill to cure all ills, right?

Two things stand out in these tables: It seems that the word is out on library science, art, student counseling, psychology, and education administration as bad choices. However, there is far too little overlap between popularity and high-wage, high-demand degrees; engineering, science, and technology comprise all of the top 15 high wage fields of study, and yet they are among the least popular degrees sought.

Until this misallocation of human capital is corrected, it will mean ongoing struggles for millions of college-educated workers seeking wage growth and employment with a future – or simply finding a job. Although the table does not show the unemployment rates for the top 15 paying degrees, they are well below the national average, being in the low single-digits. The adjustment will likely take years. In the meantime, the struggles of millions in the American middle class to keep their status will continue.

'Tis the Season for Gold?

By Jeff Clark, BIG GOLD

Most gold followers know the metal has a seasonal tendency to perform better in the fall and winter than in the spring and summer. Indeed, since 2001, the annual high for the gold price has occurred after Labor Day every year except two (2006 and 2008). Further, that peak was hit in November or December in seven of the last ten years.

So, are we destined for new highs in the gold price between now and New Year's Eve? And what about gold stocks?

Perhaps one way to answer the first question is to determine if gold has been following its seasonal price trends so far this year. If it has, we might have a reasonable expectation of higher prices ahead. Let's take a look…

The following chart shows the average monthly performance of the gold price from 2000 to present, along with its returns so far this year.

(Click on image to enlarge)

As you can see, this year's gold price has followed the typical seasonal pattern in every month but three. This is actually a strong correlation, because seasonal patterns are adhered to only about two-thirds of the time. (The performance appears more volatile than normal, but it's not; the averages are a composite of eleven years' worth of data.) You'll also notice that gold has had only three losing months this year.

If this trend were to continue, it suggests that gold's 2011 high may yet be ahead, meaning the September 5 price of $1,895 (London PM Fix) would be eclipsed.

Here's the picture for gold stocks (as measured by the AMEX Gold Bugs Index).

(Click on image to enlarge)

As a group, gold stocks have performed in the opposite direction of the seasonal pattern in six of ten months so far this year. This might speak to some of the frustration we gold stock investors have had, particularly after they bucked the trend in May and August with big sell-offs.

This doesn't mean, of course, that gold stocks won't rise over the next two months. In fact, the average cumulative gain of gold stocks during this 60-day period is 11.8%. You'll also see that November is typically the second strongest month of the year.

Perhaps another way to determine if a new high for gold is just ahead is to look at its average return from the summer low to the fall high. (We detailed this measurement previously.) To summarize, since the bull market began in 2001, the average gain in the gold price from the summer low (June, July, or August) to the autumn high (September through December) is 20.7%. Our summer low this year was $1,483 on July 1, so $1,790 would match the average… a price we've already exceeded.

Of course, this ignores the effect of another country in Europe blowing, up or the Fed instituting another QE program, or Israel attacking Iran, or…

The largest autumn gain has been 33.5% (2009); if this year's climb mimicked it, the price would hit $1,979 before year-end. That's a 10.7% jump from $1,787, a relatively big climb in a short period of time, but I wouldn't dismiss it given the precarious state of the world's economies and finances.

In the big picture, though, all this talk about where gold might go in the short term is just for fun. It's clear that sooner or later we'll be looking in the rear-view mirror at a $2,000 gold price. And even that level is well short of any inflation-adjusted price.

The ocean barge of inflation hasn't hit our beach yet – but it's been spotted offshore. Buy gold and silver – along with their stocks – because higher prices are ahead, regardless of what they do in any given month.

And because if you don't own enough gold, it is definitely your season.

[Check out the newest issue of BIG GOLD, where we list Shopping Season Specials for our stock recommendations and reveal a discount on a gold coin that you won't find anywhere in the industry. Hurry because coin supplies are limited. Start your risk-free trial subscription today.]

Additional Links & Reads

The Immorality of Democratic Voting (Ludwig von Mises Institute)

Wealth redistribution is theft. It is the taking by force from one group in order to give to another. Force is involved because anyone who fails to pay will be put in prison. In this article, Kel Kelly explains the sad fact that this is what democracy is really all about.

Marc Faber: They Can Postpone the Endgame for Five or Ten Years (LewRockwell.com)

Legendary investor and global analyst Marc Faber says that while hyperinflation is an inevitable outcome of the Fed's accounting games, the end game of this crisis can be delayed for months or years to come and will be postponed until the sovereigns go bankrupt.

US Stocks Slump as Italy Bond Yields Soar to Euro-Era Record (Bloomberg Businessweek)

US stocks are down today, as a surge in Italian bond yields bolstered concern that Europe's sovereign debt crisis is worsening. Expect volatility to continue to be the theme du jour in the months ahead.

That's it for today, folks. Thank you for reading and subscribing to Casey Daily Dispatch.

Kevin Brekke
Casey Research, LLC