By David Nichols

Last week has to be one of the most stunning in the history of financial markets. It started with the weekend sale of venerable Bear Stearns (BSC) to JP Morgan (JPM) for the laughably low price of $2 a share, setting the tone for what will be remembered as a prophetic event for the week that followed, and ultimately, for the months that will follow...

So what has happened, is the Fed is exercising its right to print money with renewed abandon, comforted by the short term validation of its strategy afforded by the Dow's responsive surge. Casual observers might be forgiven for interpreting the bear market rally, representative more of short covers and delusional optimists than of relative strength, for signs that the crisis is over, the market has bottomed, and business as usual is imminent.

But hold the phone. Is this the bottom of the well, or merely a ledge hit on the plummet to resume shortly?

Bet on number 2. Though both gold and oil have taken a near 10% hit during the last few sessions, and sure the Dow has piled on 400+ points in two sessions in the last two weeks, there is much, much more to come...

Next up on the Price is Wrong is commercial mortgages and their asset backed derivatives...

The major difference between commercial mortgage backed securities versus those backed by residential mortgages is exposure. Whereas most residential mortgage backed securities are represented by hundreds of individual mortgages slices, it's not uncommon for a single commercial mortgage to comprise up to 10% of any individual security. That means the quality of the entire issue can crash if just one mortgage defaults.

This is what Ben Bernanke is facing next, and the only real weapon left in the arsenal is more cash, which is okay for the short term, but the dollar is becoming more and more worthless with every billion dollar bailout...

All this means is that gold is going to grow in stature as a perceived store of value as long as the carnage continues...

The $95 price drop in gold this past week is therefore nothing short of a gift. An unparalleled buying opportunity that will quickly be acted on, and one of a likely good number, as the volatility in the commodities, debt, and equities markets is going to stay high for the foreseeable future.

Next stop: $2,000 gold.

Courtesy: www.seekingalpha.com

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