Written by Andrew Hoffman
on May 07 2013
Boston Martial Law
Read the Monday Afternoon Wrap-Up for 5/6/2013 and the Tuesday Morning Commentary for 5/7/2013
Now that several weeks have passed, it’s time to speak up. It’s supposedly a “sensitive subject”; but in REALITY, more so via PROPAGANDA than actual citizen “outrage”…
The Boston Marathon Bombing: If You Don’t Believe P.C. Propaganda Matters…
I’ve spent days proving to MYSELF that 9/11 was a “false flag” event; and as I wrote in “AMMUNITION SOLD OUT”-am reasonably confident of the same regarding Newtown, Connecticut. Why more people aren’t skeptical of these – and other questionable government statements – is beyond me…
…but clearly, we are all susceptible to “THE EVIL WITHIN“; although we’ll never know whether it’s “NATURE VS NURTURE ” that triggers it…
“HUMAN NATURE, PART II (ranting andy)”
Sadly, my first thought when the bombs went off was it was government planned; as it was too convenient that the bombs were placed at the finish line – so they could be captured on tape, and mass marketed to the public as a “terrorist attack.” And sure enough, that was EXACTLY how the MSM initially reported it – be it via leaks, lies, or otherwise…
Report: Authorities Detain Saudi National as Suspect in Boston Bombing
Here we are three weeks later, and the “suspects” are Chechnyans with ties to the CIA; just as Osama bin Laden was a “person of interest” long before 9/11…
Unfortunately, I don’t know enough to make an educated decision regarding what actually happened in Boston; although, as intimated above, you know how I’m leaning. Irrespective, this is where my “conspiracy theory” ends – and my RANT starts; about the MARTIAL LAW undertaken by Boston and Federal police, agents, and swat teams in the ensuing weeks…
Ron Paul Criticizes Boston Lockdown: ‘We Had Martial Law Out There,’ ‘It’s Criminal’
I can recall standing in the Detroit airport and seeing CNN blare headlines like “police tell Bostonians to go indoors, and don’t come out unless police knock”…
Boston Martial Law: ‘They Were Confiscating Guns from residents’
THAT is what terrified me; and why more than ever, I believe TPTB are well aware of the FINANCIAL ARMAGEDDON on the horizon…
Shutdown After Boston Bombings More Frightening Than Attack Itself
There is NO OTHER WAY to explain why the Bush and Obama administrations have so vigilantly pursued the CONFISCATION of our civil rights…
National Defense Authorization Act
Executive Order — National Defense Resources Preparedness
…and worse yet, why tens of millions have apathetically allowed it…
Children of the State – Destruction of the Constitution
Thus, my unwavering PLEA to do everything in your power to get out of harm’s way. Obviously, I cannot be “everything to everyone.” However, in the financial arena, I am crystal clear as how to best PROTECT YOURSELF. Per the “HOLY GRAIL OF THE FINANCIAL WORLD“; only PHYSICAL gold and silver are REAL MONEY – and all else is worthless.
PROTECT YOURSELF, and do it NOW!
Call Miles Franklin at 800-822-8080, and talk to one of our brokers. Through industry-leading customer service and competitive pricing, we aim to EARN your business.
Hand Holding 101
For the sake of simplicity, let’s classify the people who own gold into three groups. There are the true believers, and they are in the minority. I classify myself in this camp. Then there are the people who start to lose faith as the price falls and they look for someone to blame for their (paper) losses. They send me emails proclaiming that Richard Russell and Jim Sinclair don’t know what they are talking about (it’s always Russell and Sinclair). They haven’t thrown in the towel quite yet, but they are getting nervous. The third group has thrown in the towel (so far, they are a very small minority). The market is getting too emotional for them.
The interesting thing is that Richard Russell is the last person to be upset with. Do not equate Russell with an ever-rising gold price. You should pay attention to what he says – and has been saying for as long as I have been following him, and that is a very long time. He says the purpose of a bull market is to throw off as many investors as it can. That’s why they call it a “bull.” The bull wants to take as few people forward as possible.
We are starting to witness that now, and it will intensify if gold starts to head back down toward $1,000. Russell says, “Think Big Picture and think Primary Trend.” That happens to be the best advice anyone can give you. Especially if you understand the role that gold is designed to play in a portfolio. Russell advises that you never sell your core position of gold coins and bars. He points out that gold is money. Now if you want to “invest” in gold, then you buy mining shares or options. But when you buy physical coins, they are keepers. Russell has written volumes on why we all need gold as a balance to the reckless monetary policies of the Federal Reserve. He is very pro-gold and anti-Fed. He does not whine or panic when gold falls. He is still resolute in his belief that at some point in the next few years gold will sell for one or two times the Dow. It’s around 15 to 1 now. Yes, Russell is bullish on gold – even now as it tests our mettle.
What about Jim “Mr. Gold” Sinclair? If there is anyone who breathes air who has more experience in this field I don’t know who it could possibly be. To say that Sinclair is bullish is an understatement. Sinclair is consistent in his view that the paper gold market and the physical gold market are starting to disconnect. He is certain that the paper gold market on the COMEX and London Bullion Market Association (LBMA) will no longer be able to control the price and the margin on gold will rise to 100%. It did in silver in 1980. He tirelessly points out that physical gold is moving from the west to the east. The Chinese, Indians, Russians and Arabs are accumulating the gold that is being foolishly dumped by the western central banks. He promises that the dollar will crash, falling to well below 72 on the USDX. It is currently around 82. Gold, he promises, will trade above $3,500, well above $3,500! He is resolute that the Fed is stuck with a QE to Infinity policy, and there is no exit.
It is easy to have faith in the Russells and the Sinclairs of the world when gold is RISING. But when gold is falling, most people start to lose their conviction.
That’s when I step back and ask myself, what’s changed? Are the fundamentals different today than they were for the last 12 years when gold was rising rapidly? The answer to that is yes, things have changed. They are worse today, more gold friendly that they have ever been since gold turned north in 2001. The Fed is creating a trillion dollars a year of new money. The Fed is printing money to buy US Treasuries. Congress is hopelessly bogged down in a trillion dollar a year deficit stretching as far as the eye can see. Since interest on the debt compounds, the number will get larger in the future, not smaller. The only thing holding up the economy, the stock market and the bond market is the liquidity provided by the Fed. The only thing holding down interest rates is $85,000,000,000 (I printed out all the zeros for effect) a month of newly created Fed money, also known as Funny Money and Banana Republic money.
Yes, things have changed, and gold benefits from all of the above.
So why then is gold falling? Have you noticed that whenever something bad happens to us we ask why me? Why did I get cancer? Why did I lose a child? Why did that car hit mine? Why am I losing money with my gold holdings? The “why,” my friends, is not important. It happened, that’s what’s important. Whether the fall in gold is due to manipulation (and I believe it is) or whether it is just a normal major correction in a long-term primary trend bull market designed to throw off the weak participants is not important. It happened, that’s what’s important. Now we have to deal with it.
We are all being tested. Do we sell? I say no! Do we panic? I say no! Do we buy the pullback? I say yes! This is the hardest thing to do. We have to fight human nature on this. Most of us find it easier to buy on the way up. Being able to buy when there is “blood in the streets” is a rare ability. That’s why so few people are as successful as the Rothschild’s or Jessie Livermore or Sinclair’s father Bert Seligman. Only a few of us will buy gold if it continues to “correct.”
I must confess, I am puzzled that Jim Sinclair’s timing is so off. He has been right as rain for the entirety of this 12-year bull market – until just recently. His first missed call was less than two months ago. We really do want him to be right and if he is misguided in his timing, then who can we trust? He is “Mr. Gold.” But I know that even if gold falls another few hundred dollars, when it does bottom and turns up to and past $3,500, few if any will fault him for being a bit early in his call. He must be as puzzled as I am when all the fundamentals say gold should be going up but it is going down. This is upside down! This is un-natural! This is illogical! And you know what – things that don’t make sense are not true (courtesy of Judge Judy).
We all understand, or should understand that we are right in our bullish views, in spite of the price (at the moment). When we remind ourself what gold is – MONEY and an insurance policy that protects our net worth against blatant Fed money creation and reckless government deficit spending, we should be able to hang firm and those with the greatest conviction will take the discount price and buy as much as we can afford. And if it goes lower, we will buy more. We do it because we understand the end game here and the end game is the winner is the one with the most ounces, and the loser is the one with the most dollars. There is no other way this can play out. Or, as our favorite cowboy Bill Holter likes to point out, it’s a mathematical certainty.
Just remember, the bull is trying to throw you off. Don’t fall for it. Don’t lose faith here. The reality is that we are being offered a once-in-a-lifetime sale on gold and silver. We really are. Let the hedge funds, the traders and the bullion banks fight it out over the paper price of gold and silver. To them, gold and silver are just “things” as my friend Bill Fleckenstein used to tell me. They are trading gold and silver the way they trade copper and orange juice. They are all things to be traded for profit. So, when they knock each other out and lower the price, we get to buy the “things” for fewer dollars. And to us, gold and silver are not “things,” they are wealth. Thank you for making it easier for me to increase my wealth – after this “correction” is over. I still stick to John Williams timetable – hyperinflation in a year and a half. When it hits, you will be thankful for all of the ounces you were able to accumulate at these truly bargain-basement fire sale prices.
PS: Even the most bearish in our industry, those who say gold could drop to $1,100, are long-term bullish. How could any thinking person not be bullish when the fundamentals are so gold friendly and the mathematical certainty of a watered-down dollar is so obvious?
Here are Larry Edelson’s most recent comments:
Yes, gold and silver and related mining shares may bounce a bit more. But mark my words: If you’re buying them now on the basis that they’ve bottomed, you’re going to lose your shirt!
So I repeat my warnings: Gold will NOT bottom until it moves below $1,100 an ounce. Silver will not bottom until it moves below $20. Mining shares, in general, will not bottom until they lose another 30 percent to 40 percent of their value.
But I will also go on record that the devastation in the precious metals sector, though not over, will come to an end over the next few months.
So while I maintain my view that you should continue to steer clear of the sector for now, you should also start preparing to move back in to the precious metals sector in a very big way.
So how do you prepare to do that?
***
In the next bull phase for the precious metals, I see gold ultimately reaching well over $5,000 … silver over $125 … and your typical, unhedged mining share tripling and quadrupling in value.
Continue reading on MoneyandMarkets.com
From Uncommon Wisdom, (Weiss Research) the same organization that brings you Larry Edelson, Sean Brodrick takes a very different view on gold. He says demand from China should put a floor beneath the price of gold. India is catching gold fever too. Sales are booming at the U.S. Mint. Central banks are buying. Gold buyers are forced to go on a waiting list.
Hope for a deeper pullback, but don’t count on it.
I find it interesting that the Chinese, Russians, Indians and Arabs are not sitting on the sidelines waiting for gold to fall to $1,100 before they start buying. They are buying all they can get right now. And they will keep buying should it fall, and will keep buying if it rises. I guess they must be asking themselves, “What would we rather have, dollars or gold at this price?” The answer is obvious! They are buying in record amounts NOW. What you do now is up to you. Ultimately you will win big-time. Either gold will go up from here or from a lower number in the next few months. If you are unsure what to do, split your planned purchases up and buy in thirds, one-third each month for the next three months. This may be the time to income average. If you wait for a deeper bottom that doesn’t arrive, you are losing as surly as if you buy now and it does go lower. If Brodrick and Edelson can’t agree, no one can give you the answer. But it’s getting down to splitting hairs now. Either the technical people will maneuver gold and silver lower or the physical demand will prevent it from happening. Be honest now, isn’t it exciting to watch this all unfold? Boring is not a word to use in the same sentence with precious metals anymore.
The Illusion Is Slowly Shattering
The economy is horrible and getting more horrible by the day. The Fed said they’ll keep buying $85 billion in bonds per month unless they need to buy more or if they need to buy less. The odds are that they’ll be buying more not less. Bernanke keeps spewing Fed gobbledygook and no one seems to notice. However, the break between the paper and physical precious metals markets continues to widen, so someone, somewhere gets it. But certainly no one in a policy making position in the Western World could care less. So keep stacking!
Ranting Andy Hoffman – The Illusion Is Slowly Shattering
Destruction of the Machines
Read the Friday Afternoon Wrap-Up for 5/3/2013 and the Monday Morning Commentary for 5/6/2013
On May 6th, 2010 – three years ago, today – the Dow “flash crashed” by 1,000 points; much of it occurring in less than 30 minutes – before recovering to lose just 345 points…
While not close to the percentage losses of the 1987 crash; it, too was blamed on advanced COMPUTER programs that simultaneously “kicked in”; DESTROYING all semblance of market liquidity…
In 1987, such programs – euphemistically termed “portfolio insurance” – were not utilized to MANIPULATE markets; but instead, to PROTECT portfolios from falling prices. In other words, the major mutual funds held similarly derived “stop loss” contingencies; so when they were all “turned on” simultaneously, the market became a selling VACCUUM.
Conversely, 2010’s crash was precipitated by MANIPULATIVE HFT algorithms; simultaneously seeking the same trading “catalysts.” And like 1987, they all “kicked in” at the same time, yielding MASSIVE losses for the suckers involved…
Stock Market Crash 5/6/10 (Live Panic!) Incredible!!
I have written exhaustively of the dangers of HFT trading, which currently constitutes 75% of ALL NYSE activity – particularly as Goldman Sachs has a 20% market share. And remember, the (then) largest HFT trader – Knight Trading – nearly bankrupted itself with them last year…
…while numerous ETFs have DESTROYED investors in like manner…
…as recently as last week…
Artistic Algo paints Smiley Face while Crashing Stock from $10 to $0 in Milliseconds
As relates to PMs; I not only write daily of the destruction wrought by PAPER PM naked shorting, but of how you WILL lose money owning mining shares…
“D-DAY”
…and as of late, closed-end bullion funds…
“PM BULLION CLOSED-END FUNDS – HELPING OR HARMING?”
However, NOTHING depicts how BROKEN U.S. markets have become better than what occurred last week, when a “hacked Twitter account” of the Associated Press news service caused a three-minute market PANIC…
Hacked AP Twitter Account reports of Two Explosions at White House, Obama Injured
In which “more than 260,000 front-month e-Mini contracts traded between 1:09 and 1:12 PM EST, and more than 180,000 front-month 10-Year U.S. Treasury contracts”; creating the same selling VACUUM that as in October 1987 and May 2010…
From a Twitter Hack to the Complete Evaporation of all Market Liquidity in One Chart
Throw in the carnage wrought a week prior in the PAPER PM pits; when HFT computers were allowed to NAKED SHORT tens of billions of gold and silver “contracts”; and you can see why I have long SHOUTED that “PHYSICAL=LIFE, but PAPER = DEATH”…
Hopefully, last week’s “WHITE HOUSE TWITTER CRASH” will serve as the straw that broke the camel’s back for anyone naive enough to believe “markets” are anything but banker-operated slot machines hungry for your life’s savings. If not, I don’t know what else will.
PROTECT YOURSELF, and do it NOW!
Call Miles Franklin at 800-822-8080, and talk to one of our brokers. Through industry-leading customer service and competitive pricing, we aim to EARN your business.
The Illusion Orchestrated by the Fed
This guy’s video on YouTube has been so popular that Obama called him personally. He said he was very disturbed with the video and invited him to the White House. Obama also said he wanted the White House to handle the Press and not to talk about the video or the White House visit. That’s very interesting. Watch it now before it’s pulled from YouTube. This may be the best six minutes invested in your future.
We the People Stimulus Package
The scorecard for last week:
Gold $1470.70 up $3.30
Silver $24.13 up $0.30
Dollar 82.09 down 0.14
Just last month, 660,000 Americans left the workforce. In one month! There are now 90 million able-bodied, working-age Americans no longer working. That’s almost one-third of the country’s population. The workforce participation rate is the lowest since 1979. For men, it’s the lowest since 1948.
Does this sound like a recovery to you? The robust stock market is not reflecting a strong economy. It is a dumping ground for the trillion dollar a year QE money creation machine (along with the bond market where half the funds are used to hold down interest rates). Look up close and you will see that the foundation supporting the economy and stock market is very unstable. And that, my friends, is why the Fed, with the help of Wall Street (GS and JPM) keeps attacking gold and silver. No, the messengers cannot be allowed to call attention to the illusion that is being circulated to the masses. The truth is that the dollar is at risk. Inflation is nothing more than a debasement of the currency and QE is a debasement of the currency. A year from now, no one will argue that inflation is not an issue and gold and silver will be worth a whole lot more than they are today. So, if you can find product, join the line and place your orders now. This feels like a bottom, but even if it isn’t, it’s close and the move up will arrive in a hurry. Let just one black swan pop up, like the Israelis attacking Iran’s nuclear facilities or Syria’s chemical depots. The world as we know it can change in a split second, so be prepared now, before the event(s).
Shortly after writing the above, the below article hit the newswire.
Be sure to read it.
Syria: Israeli attack equals declaration of war. Iron Domes at Haifa and Safed
Can they Put this one Back into the Box?
We are now 3 weeks out from the paper massacre of the gold and silver prices. We immediately saw (as in THE first day) massive physical demand from all over the world explode as shortages and premiums in gold (and particularly silver) came about. The stretching of delivery (if even available) times and increases in premiums over “spot” prices came about from day one and so far show no signs of easing. “Is this the one?” Do the paper and physical markets separate from here further or do they converge again?
I obviously don’t know the answer to this and personally didn’t think that we could have time wise even lasted to this point but what is happening now shows just how fragile the supply chain really is. You can look at this from front to back or back to front to see the supply chain. The mines mine ore and then pour dore, the refiners refine the dore and then mint coins and bars, then the coin dealers get product and it’s sold. The problem is this; the mines only (in gold’s case) produce 2,500 tons per year. There are no recent “big finds” and have not been for at least 10 years or more. There are no big projects (especially now that Barrick’s Pascua Lama project is tied up) coming on stream to sufficiently increase supply. Demand was 4,000 tons per year, now it is much greater because of the infinite wisdom of the paper market/makers smashing the price and unleashing global demand. The refiners are working overtime and weekends to mint product to supply the dealers. The dealers are now seeing demand unlike ever before; the question is now whether the demand abates, continues or even increases from here.
My point is this, the “paper smash” that was surely designed to SCARE investors away from the metals has done exactly the opposite. It was in retrospect a mistake, big, HUGE! Previous to take down 3 weeks ago we believed that the physical market was “fragile” at best, now we have proof that we were correct in this analysis. Now the question becomes, “Can they put this back into the box?” Can they calm the physical precious metals markets? My guess is that they cannot unless… one of two or both of two things happens. Some way, somehow “sufficient supply” must show up in the cash markets OR the price must rise (and by rise I mean dramatically) in order to ration out the existing supply. I don’t see exactly “where” new supply will come from, as for price I don’t know at what levels buyers will turn back if they continue to see shortages. What I mean is that nothing causes a buying panic greater than a shortage. In other markets a shortage may be just an inconvenience, in gold and silver (because they are money) a shortage will in itself actually create higher demand because of the “emotions” involved.
Don’t get me wrong, we have seen “smack downs” in price many times over the last 13 years and only once (late 2008) did it lead to a buying frenzy and shortages. For the most part these price assassinations have worked and made people think twice about their purchases. I guess you could say that “it worked until it didn’t” and right now it’s clearly not working. We seem to have crossed some type of barrier or line in the sand and the crowd mentality has changed. Maybe it is simply the fact that there is so much more central bank created money sloshing around? Maybe it is simply because enough people understand (and believe) the central banks when they say that they’ll pump another $2++ trillion into the system over the next 12 months? Maybe it is because enough people who used to “believe” the far-fetched promises have finally tired and know that something “just ain’t right?” Maybe enough people who used to think that something wasn’t right have finally decided to do something about it? Maybe the zero percent or even negative interest rates are finally taking their toll? What it is exactly we will probably never ever know for sure.
The very real danger now is that what has been started begins to snowball. Human emotions are a very difficult thing to gauge and as I’ve written many times before, fear is the greatest emotion of all. “Fear” can make people do both rational and irrational things and do them quickly and in a herd mentality. The entire financial system when looked at with clear, historical and logical “glasses” on is just plain BROKE in every imaginable fashion. We arrived 5 years ago at a point in history where almost anyone previously would have said “that can never happen” …and then we went 5 more years in the defiance of logic, common sense and Mother Nature.
A complete and total RUN on physical metal supplies and inventories has never ever been riper than it is now. “Is this it? Or can they put it back into the box until a later date?” As I said before, I don’t know. In reality it does not matter one way or the other because a complete wipeout of supply WILL mathematically happen either now or later. Zeroing out interest rates and creating unlimited cash will assure this. I will leave you with these questions. Does it make sense to play “chicken” with you and your family’s financial life and bet that “now” is not the time? Do you ETF, allocated and unallocated metals “owners” really believe that you are “special” and that your institution will make good and send you your metal when others cannot? Do you not understand that just “requesting” delivery is in itself a form of current demand that was put off (until now) when your institution took your money but didn’t buy the metal? Do you really believe that the biggest, most all-encompassing Ponzi scheme of all time will end any differently than all of the previous ones? Maybe “now” isn’t “it,” betting against “it” in my opinion is foolish, reckless and will be something that if not prepared for… can never be recovered from.
By the way, we will know for sure when this is “it,” when industrial end users begin a mad scramble to secure product. There will be no turning back once this final line in the sand is crossed!
Government Criminality in all its Glory
Read the Thursday Afternoon Wrap-Up for 5/2/2013 and the Friday Morning Commentary for 5/3/2013
Less than 18 months ago, 60 Minutes exposed perhaps the vilest aspect of Washington’s considerably vile underbelly; that is, its exemption from trading stocks, real estate, and other investments based on material, non-public “inside information”…
Congress: Trading stock on inside information? – November 13, 2011
Fearing ELECTION YEAR blowback, Congress acted in a rare, bipartisan manner to pass a bill banning such actions; as if a separate law needs to be written to ban manipulative, exploitative acts by our nation’s LEADERS…
Obama signs STOCK Act to ban “congressional insider trading” – April 4, 2012
Heck, Obama even gave a speech attesting to the virtue of Washington “playing by the same set of rules” and bridging the current “deficit of trust” the nation is undergoing; replete with blood-sucking Congressman clapping and cheering…
President Obama signs STOCK act
Here we are just five months after ELECTION DAY; and in perhaps Congress’ most gross, blatant act of CRIMINALITY, the “STOCK Act” – or Stop Trading On Congressional Knowledge; has been gutted, introducing a “loophole” that no longer requires Congressmen to disclose their trades. In other words, they can go right back to insider trading to their hearts’ content – that is, if they had any hearts…
Insider House Rules – April 23, 2012
Insider House Rules – C**t Punters Go to Washington – April 23, 2013
If you don’t yet see why I SCREAM for you to PROTECT yourself ahead of future actions they will take to DESTROY you – and past actions that have already DOOMED our futures; I’m not sure what will make you do so.
PROTECT YOURSELF, and do it NOW!
Call Miles Franklin at 800-822-8080, and talk to one of our brokers. Through industry-leading customer service and competitive pricing, we aim to EARN your business.
A Different Way to Look at Inflation Over the Last 45 Years
Starting this year, an appalling 21 new taxes go into effect to pay for Obamacare. For starters, you’ll pay more in capital gains taxes. And taxes on dividends are going up, too.
Most Americans are already struggling to save for retirement… but all these new taxes are a real slap in the face to responsible citizens who are planning for a better life.
And then there is the Internet tax that is lurking in the shadows. And rising state taxes too. Every dollar taken by government in the form of new and additional taxes is a dollar no longer available to spend in the economy. Most Americans are really struggling just to get by. Saving is becoming very difficult since rising prices and rising taxes are taking away the extra money that could be used for saving – or buying gold and silver. And it will only get worse.
In yesterday’s Dow Theory Letters, Richard Russell reminisces about how little it used to cost to buy a soda or go the a movie. He wrote:
I live in La Jolla, which is a wealthy seaside town. Yesterday I stopped at an ice cream parlor for a scoop of ice cream. The price was $3.75 for a single scoop. What was more amazing was that people were lined up for ice cream cones. I remember paying a nickel for a one-scoop ice cream cone back in 1962.
And it occurred to me that a dollar bill today is like a quarter ten years ago. People today pay outrageous prices for the same stuff I used to pay a nickel or a dime for. In other words, money has almost lost its meaning and value. There is a restaurant down the street from my home that charges $8 for valet parking! And people pay it. I used to work loading trucks for $18.75 a week. I used to take the New York subway all over Manhattan, Queens and Brooklyn for a nickel. I used to eat a good lunch at the Automat for twenty cents. I used to go to a double feature movie house for fifteen cents (the Alden movie theater on 65th Street at Broadway).
Do I sound like a grouchy old man? Sorry, I’m just demonstrating what’s happened to our money and how little people today think of our money. It’s a sign of the times. We’re all frogs in the pot that’s heating over the stove. The water is 180 degrees, and pretty soon we’ll be parboiled, and we won’t know it. “Give the Fed time, and we’ll all be broke, but we’ll never know it.” “Flow gently sweet inflation.”
I found Russell’s comments very interesting because I had just finished looking at an old ledger I found from 1969 – 1970 that detailed how much I paid for mint German Lugers back then. I only collected the highest condition guns, then and now. (The prices quoted below are for 99% or better condition, all original items.)
The prices were fascinating because I have participated in two Rock Island Auction sales in the last four months and here is what the same variations in similar condition sold for in 2013. This is what happened in less than 45 years. The comparison is astounding.
In 1967-71 I sold industrial paint and resins and earned between $30,000 to $35,000 a year. That was BIG money then. To put it in perspective, I purchased a red Mercedes 250SL in 1972 for $10,000. I built a beautiful four-bedroom colonial home in the suburbs for $40,000. In general, it costs 10 + times more to buy these items today. But gold is up 42 times and most of the Lugers are up 25 to 70 times.
Gold and these high-quality collectibles have gone up a huge amount in “dollars.” Collecting high quality and scarce German Lugers has been an outstanding investment (and a lot of fun for an old 20th Century European history buff like me). On average, the Lugers did as well as gold (some better some not quite as well).
Being involved with the Lugers has given me a unique perspective of inflation, or dollar debasement over time. The guns are the same (and so is the ounce of gold) but it takes more and more dollars to buy the same item year after year. I sold my collection in 1972. I considered trying to buy back in a few years later but the prices had doubled. I thought that was too much and stayed away until the last six months. Now look what they cost! What they chronicle is the loss of purchasing power of the dollar from the time Nixon closed the gold window in 1972 until now.
A 2 Tiered Market
I wrote as far back as 2007 that the metals “markets” would become 2 tiered. There would be 2 prices, the paper market and the real physical market. We may be at the beginnings of this event becoming reality. Particularly in silver this is already the case though it did happen back in 2008 and the 2 markets eventually converged again. The longer that the current divergence where paper “prices” are lower than physical, the higher the likelihood that the permanent decoupling is among us.
I said way back in 2007 that the signs for a default in the paper markets would include the outright sales of the ETF GLD. They have shed over 16 tons since the beginning of the year (which oddly enough is about the same amount that the Chinese public bought physically over just one weekend). We have been under the assumption that the entire event was engineered, but what if we are wrong? What if the “event” was “forced?” Let me explain further, what if traders of futures saw a big (or many big) orders lining up to sell GLD? What if the sellers of GLD were not selling because they were bearish of gold? What if they were selling because they believed that GLD doesn’t really have the gold? What if they were selling because they intend to turn their proceeds into physical metal? Is it possible that the futures crash was a front running or even a response to investors shedding GLD shares? Probably not and it would not explain 1/2 of the world’s total gold production being dumped in less than 2 days.
Think about the above questions and then ask yourself if you personally are skeptical of “paper gold.” If so, then wouldn’t others also be? Is it possible that some big, “dumb” money just figured it out? Yeah I know, “big money” is not supposed to be “dumb,” they are normally portrayed as the “smart” money, otherwise how did they get to be “big” money in the first place? During my years of dealing with pension plans, charitable trusts and other large pools of capital, you would be surprised at how “mentally dull” many of the directors and trustees are in reality. It is very possible, most likely even probable that some big money, somewhere, “just now figured it out.” Did this actually happen? I have no idea and your guess is as good as mine… but the “paper” products will one day be exposed and what has just happened is all part of the process.
You can pretty much bet that more and more are just now figuring it out. How can I say “just now?” Easy, because where was the spotlight shined last month? Directly on gold and silver and people would naturally start asking more questions. These questions are logical ones and since we live in a world where not much can be trusted, which way do you suppose investors will lean? Actually, we have already seen “which way” they are leaning. Heck, even the president of the CME (COMEX’s direct competitor) has come out and said that people want the coins as opposed to paper.
In my opinion it is not only possible, but highly probable that ETFs like GLD can and will see days where they drop over 10% while the real physical metal goes the opposite direction and maybe even in bigger fashion. THIS is the “panic” that we have to look forward to. Investors are panicking out of their paper product that “represent” gold but is not gold. I may not know when this circus will end but I think I know for sure how. The end game will be one giant “cash call” where everyone asks for their metal at the same time… only to find out that it’s not there and may never have been. This will not be a “run” on a bank. No; this will be a run on the system itself.
GOLD PRICE
SILVER PRICE
PLATINUM PRICE
