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There is
something going on in the United States. I can’t quite put my finger on
it but there seems to be a change in the attitude of the people. There is a
pervasive sense of panic that has permeated every part of our society. I
think that our citizens have come to the realization that we have come to a
point that unless there are drastic actions taken by our leaders, our great
nation is in for a systemic failure. I base this feeling I have on watching
the tape and noticing a pattern of heavy selloffs, large purchases of gold
and silver, a constant bombardment from the media that we are in serious
trouble with the amount of debt we have amassed, growing unemployment, low
wage menial jobs and big banks teetering on the brink. To emphasize my point
on the banks we need look no further than Bank of America’s CEO Brian
Moynihan saying that the bank was well capitalized and then selling Warren
Buffet 5 billion dollars of preferred shares of stock. “Something ain’t right in Kansas, Dorothy!”
A pervasive
feeling of doom has crept into the very fabric of our society. Worst of all
our people have lost all respect for our leaders and have come to the
realization that the partisanship that has taken hold of our government has
made our representatives incapable of dealing with the mountain of problems
that face our nation.
While I
feel that the average citizen (not my readers) is woefully incapable of
grasping the insolvency that faces our nation. I think people innately sense
that something is very wrong but are unable to articulate the problem and
worse have no idea how to fix it. The sad fact is that our once great nation
is moving into an unavoidable systemic failure. Most people feel that our
representatives and the banks have neither the will nor the solutions for
dealing with the Armageddon that is facing our nation.
Under the
era of President Reagan we started the deregulation of the banks. This
philosophy hit its crescendo under President Clinton who proclaimed that
every American should own his or her own home. The realization of the
American dream of home ownership, however was a ruse
perpetrated by the greedy bankers to increase the annual bonuses. This was
not capital creation – it was capital destruction. The apex of capital
destruction has taken place over the last three or four years under the guise
of quantitative easing. Credit dispensation and monetary growth (debasement)
was doled out under the illusion of coming to grips with controlling the
problem. This was a classic case of the tail wagging the dog. If you give a homeless person money, he will buy some coffee and a
sandwich but not much more. I think this is a perfect analogy of how the
middle class has been treated. They have been given just enough money to
spend.
The public
has been told by the media that the cause of business’s lack of desire
to spend and hire is the lack of confidence that has been shown as people
would rather pay off their debt rather than go on a spending spree to Banana
Republic. Sadly the true reason that businesses don’t spend on creating
wealth and jobs is the broad deep insolvency and poor business risk which has
emanated from the poor housing market, the failed banking sector and the
woeful industrial base.
So
what’s in store for tomorrow? Dr. Bernanke gives his speech at Jackson
Hole and every talking head has a different spin but I am sure he will simply
say that if and when stimulus measures are needed he is ready to step up. In
other words he will say nothing. Gold and silver sure acted like that was
what he intended to say today. It was only 3 short days ago that we were in
fill blown correction mode.
While Gold
hit an all time high on Tuesday, a full blown
correction lasted for two whole days as the gold ETF (GLD) closed at $172.36
yesterday and the silver ETF (SLV) also put in a very strong showing. As it
closed it staged a tremendous show of strength and closed up $1.28 at $40.00.
PSLV closed up 3.45% at 19.17 and AGQ closed up 5.65% at 220.27or up $11.70.
This does not feel like a sell off to me. I will stick to my guns and call
for gold at$2,200.00 by January and silver at $55.00 - $60.00 with an outside
chance we may see $100.00 silver.
In
conclusion, I wanted to share something I learned. Yesterday, my brother and
I had a conversation today and we came to the conclusion that silver was more
like money than gold. While silver has always been called poor man’s
gold, remember I have often written that I was a gold bug since I was 8 years
old and since I am now 58 I had many years of going to the store for my
mother with two quarters for milk and bread and yes - those quarters were
silver. Neither my brother nor I could ever remember in our lives using gold
as money but using silver as money was just a plain common occurrence. I am
long GLD, IAU, PHYS, UGL, SLV, PSLV, and AGQ until I see a real sell off I
will remain so. As long as there is runaway debt contagion and worthless
paper money I will continue to hold my physical gold and silver and their
ETF’s.
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