My flight landed late Friday afternoon in San Diego. I was there to hook up with my best friend Rick Brown, to spend time with him and attend his father’s funeral. Not much could get me to leave my wife on a long holiday weekend, but this was an exception.
I brought along my Sony Vaio lap top in case I was able to find a couple of quiet hours so I could knock out a newsletter for Monday and Tuesday.
Since the markets are closed for Memorial Day, I decided to skip the usual format and write about an amazing weekend that I shared with Rick, his family and friends.
Ricky is a 57 year-old, retired and very successful African American. Rick and I bonded the first time we met, in 1983. He responded to an ad that I placed in the Minneapolis Star Tribune, for a pair of British-made Quad Electrostatic loudspeakers. That was right around the time that I went to work in the gold industry. Our bond was cemented by our shared fanatical passion for high end audio – a passion that we share to this very day. Music and great sound is my “escape” from a world gone mad!
Two years ago, Rick moved back to Southern California, where he grew up, so sadly, we don’t get to spend much time together anymore. Last August my son Andy and I flew to Carlsbad to meet with Rick Rule, the founder of Global Resources and his staff. They recommend Miles Franklin to their clients who want to buy physical gold and silver and we recommend Global Resources to our clients who want to work with a broker who specializes in mining shares. Both are sure that we have picked the best possible firm to assist our valued clients . After our hour-long meeting, Andy rented a car and drove to Las Vegas where he was speaking at a financial seminar and I spent two nights with Rick Brown, who also lives in Carlsbad. The day I returned home to Minneapolis, Rick Brown drove up to LA to move his 84-year old father into a nursing home.
And now here it is, nine months later, and I am back again, but this time to pay my respects to Rick’s father, George Harold Brown at his funeral
It was the first time I ever attended a service at a Negro church and I assure you, it was a moving experience. Rick’s oldest cousin Sharonne, sang Amazing Grace. Sharonne was backed by Eddie Kendricks, a legendary keyboards man who has worked for decades in the LA area. Sharrone toured with Barbara Streisand on one of her world tours and this “sister” could sing! I dearly love great Gospel music but had never experienced it “live.” The service was both uplifting and emotional and an experience I will always never forget.
It’s a special thing to be around so many people who have absolutely unwavering faith. There was no doubt in anyone’s mind that George Brown was going to the Promised Land and that helped turn a sad event into a celebration. George didn’t die, he moved on to a better place. Very impressive!
You are probably asking yourself what any of this has to do with my usual comments on gold and silver. Well, let me continue and you’ll find out.
After the internment and reception/luncheon which was held at a great restaurant, the family and close friends drown back to Rick’s mother’s home to eat, drink, laugh, and exchange stories – and eat some more. I made it a point to spend a lot of time talking to Rick’s two sons, Robert and Justin. Both are in their 20s and very successful young men. Might I add that both are the product of an excellent “gene pool” and they are very smart – and very well educated.
Robert travels all over the world teaching companies how to use his company’s customized software for the commercial real estate market. Justin graduated with honors with a BA in Business from University of Wisconsin and was hired by Prudential to work in their REIT Department assessing the value of commercial properties. He just quit his job, in San Francisco and next week he, and three friends, will spend six weeks traveling throughout South America. This fall, Justin will enroll at NYU – on a scholarship, in pursuit of a Masters Degree in Business.
I spent over an hour talking with each of Rick’s boys. I have known Justin since he was two year old. Unlike many of the “older” people who I talk with, these educated young men were open-minded and fascinated with the information that I shared with them on the dollar, the economy, the stock market and gold. In fact, They really were more open-minded than most of the older and more established people that I converse with. I found it interesting that most of what I had to say was totally foreign to them. They had NO understanding of gold, or of the insidious inflation that has hollowed out our currency in their lifetimes. In spite of their education and business experiences, they had no understanding of where the economy is surely heading. But they were very than interested to find out. Young fertile minds are a wonderful thing to cultivate.
I mentioned that the “Maestro,” Alan Greenspan said that he couldn’t identify a bubble in advance (the real estate bubble), and Justin said “we all knew it was a bubble and laughed that it had gone on as long as it did. The collapse was no surprise to us.” Which leads to an interesting question – either our Fed Head and our politicians were stupid fools or they were aware of what was happening and allowed it. Bob Chapman writes that they are anything but fools and that the collapse of our Dollar and economy are planned events and necessary in order for them to establish a One World Government and a New World Order. Take your pick but neither answer should please you.
You are way ahead of the crowd because you have taken the time to search out a few good sources of information and you are aware of the magnitude of the problems that we are facing. That positions you to make a great deal of money – or at the very least, save what you have already accumulated? You really do know more than our best educated and brightest college graduates, and more than most of the people who you voted into Washington. Scary, isn’t it! Try discussing the topics you read in my newsletter with your friends and family and see how far it gets you.
Being in Carlsbad, just a half an hour from La Jolla, I probably should have called up Richard Russell and had lunch with him. We both see things the same way and he has been such a strong influence on me for nearly 30 years. Here are a few of his latest comments.
Richard Russell — I have to wonder how the European authorities are going to force austerity on Greece, Spain. Portugal and Italy. Get ready for strikes across Europe.
And it’s starting to rub off on the US. Support for the latest stimulus bill is fading in the US. Even the wild-spending Dems are afraid of anti-deficit voters, and, of course, what they are most afraid of is the stability of their jobs. Nervous House leaders further pared the stimulus legislation. The bill would boost taxes on big Corporation while extending jobless benefits. Medicare doctors payment would be lowered. Russell comment – GBA, God Bless America. The way things are going, we’re going to need all the blessings God can bestow on America.
Recently I wrote that due to the bear market, by the end of the year we won’t recognize America. I’m not sure I can recognize America now!
From my standpoint, the most difficult concept to get across to subscribers is that the stock market is not reacting to, or reflecting, current news. “News known is news discounted.” As far as the stock market is concerned, all news is history. There are exceptions such as rare acts of God: hurricanes, earthquakes, huge fires. But in general, everything you see on TV or read in the newspaper has already been discounted by the market.
The stock market is interested in only one thing — the FUTURE, what business and the economy will look like three months, six months or a year away. Thus if the market is acting bearishly (as it now is), commentators search the current news for something to blame the rotten action of the market on — Greece, North Korea, the oil spill, higher taxes.
It’s human nature to deny the “message” of a bear market. Nobody wants to accept the thesis that the stock market is forecasting hard times ahead. Wednesday (5/26) the Dow closed down 70 points. “Gosh, maybe North Korea is going to start a war. Yesterday (5/27) as I begin to think about what to write, the Dow is up over 200 points. “Golly, maybe the optimists are going to be right.” “I hear housing prices are up in Southern California.” “I’ve heard that Europe is finally getting its act together.”
Forget it, that’s not the way to interpret the stock market. A top in the 14-month bear market advance has been put in. The big rally since March 2009 is breaking up, it’s over. If the top is in, the stock market has nowhere to go but DOWN. But first the bear must have his cruel fun. To go straight down would be to advertise that we’re in a bear market. But to make the decline circuitous, to punctuate the decline with rallies — that works to keep investors hopeful. And hopeful investors hang on to their positions in a bear market, praying that every rally means that the turn to the upside has arrived. Yes, the bear is a pitiless creature. His fondest dream is to take the market down while keeping the greatest number of investors in his grip.
By the same token the gold bull market thrives by keeping the so-called “gold-bugs” wringing their hands. Gold rises in steps, each step followed by a correction, large or small. The gold bull market detests a mass following. The gold bull market is satisfied to advance carrying only its “true believers,” but it knows that its true believers are few and far between.
The fiscal year 2010′s deficit is supposed to approach $1.6 trillion. Under the Obama budget the deficit won’t go lower than $700 billion during the next ten years. What to do? Ah yes , President Obama has established a debt commission. The solution to the debt horror is to — raise taxes. One of the taxes the cats in D.C. are thinking about is a VAT tax, This would be a hidden tax on everything, basically a tax on consumption. The VAT would tax everything from the raw goods to the manufacture to the sales. At present, when you buy something they slap a sales tax on it, so you know what the tax is. But a VAT tax is hidden, it means a general rise in the cost of everything, just what is not needed as the bear market moves on.
A VAT tax would allow the administration to spend more, the absolute worst medicine for the nation as we move further and further into recession. What’s the next trend? I think it’s going to be a trend toward “cleaning house in Washington.” The voters are not all stupid and many are patriots. They see the nation as being on the wrong path and degenerating. “Clean house in D.C.” will be the cry. I said all along that Obama would be a one-term president. Many at the times said I was nuts. I don’t hear anyone calling me nuts now.
In the meantime, the stock market spells out its warning. Sad that Washington can’t read the dire message that the stock market is sending. The little black shadow that grew out of the stock market in April is growing — growing into a huge, thunderous black cloud.
Last fall, my wife and soul-mate, Susan and I were in Seattle and we had a lovely dinner with Bill Fleckenstein and his wife. Bill founded and ran the most successful “shorting fund” from the mid- ’90s until he closed it down in 2009. He appears with regularity on CNBC and writes a daily “Rap” column. He also wrote a must-read scathing book on Alan Greenspan. He has thrived in a “main stream industry but his views and opinions are hardly main stream. Bill is a wine connoisseur and he brought several bottles from his wine cellar to the restaurant. He is an interesting man, very bright and very successful. And very charming. Bill sends us referrals and is a Miles Franklin client. He is on the board of Pan American Silver and owns their stock, but he also understands the importance of owning physical gold too. When talking about gold to Bill, it is like preaching to the choir – but he does not agree with GATA or Ted Butler and does not accept any form of “conspiracy” explanations. He is friends with many of the gold and silver traders who work for the bullion banks and flatly states that the whole manipulation thesis is nonsense. He and I agree to disagree. He may be right. I may be right, but in the end it matters not because there are many strong fundamental reasons why gold and silver will outperform virtually all other asset classes. Here is an interesting piece by Bill Fleckenstein, long-term gold-phile.
On the subject of gold, I would like to make a few points. It’s really interesting to me that there is so much angst concerning gold, given that it has been the longest-surviving monetary asset by a factor of almost 100, versus the short lifespan of the average paper-currency regime.
It is also interesting that the lexicon is riddled with references to gold as being a very desirable asset to possess. People talk about such-and-such being “as good as gold” (never “as good as colored paper”); or they’ll describe some great business as “a gold mine”; or, they’ll talk about “the golden rule” as though it’s an ironclad law. Yet, most people continue to treat gold like dirt, or worse.
Gold has been an asset that’s helped protect and deliver gains vs. paper money for the last 10 years running, yet the popular press heaps nothing but scorn on it. Even people who own gold seem to suffer angst regularly, based on the questions I continually receive in Ask Fleck. Meanwhile, Bubblevision and other media outlets persist in telling you how great stocks are, although this asset class has cost people money for a decade.
The current level of skepticism is nicely illustrated by the recent short-interest surge in the GLD exchange-traded fund. It’s now doubled, standing at about 30 million shares (around 3 million ounces). Meanwhile, when the gold market recently fell out of bed, ETF holders at the margin liquidated no ounces; and in the last couple days, they added a whopping 50 tons (a phenomenon occurring in other places around the planet as well). Thus, as a wise commodity-trading friend said many years ago, you can be with the trend and still contrary.
While I don’t believe that gold is a totally contrary concept, it is contrary from the standpoint of there being so few avid believers though the list of high-quality investors who now hold gold has become quite impressive.
I keep waiting for the day when folks realize that if you invest in the shares of a gold mining company, you basically own a piece of “the money-creation machine.” It’s sort of like owning a central bank that isn’t staffed by losers. In any case, at some point I expect to see the masses rabidly bullish about gold and gold mining companies, though obviously we’re a long ways from there. Bill Fleckenstein
I hope all of you had a wonderful Memorial weekend. I certainly did. Our best, from Miles Franklin, to all of you – God Bless America.
- None Found