If this is Control – What does Out of Control Look Like?
Thanks to all of you that asked for my son’s movie link – here it is - enjoy: http://vimeo.com/24734772
Many years ago I was one of a VERY small handful of forecasters. In 2000 I suggested that the stock market bubble was about to bust – and recommended gold for the first time. In 2002, I talked about War in the Middle East, in 2003 we talked of the upcoming housing bubble, and then in 2006 talked of the entire financial backbone being in trouble. I’ve always preached silver and gold to the point that it’s sounding like a broken record to many of you, and me!
Well, now that every major bank in the U.S. has TWO sets of books – do you think the Central banks, the IMF, the World bank, or the Federal Reserve are any different? My point is: if the real world movers and shakers can simply print all the money they want (and keep it off one of the sets of books) then what is all of this manipulation about? I suggest that it’s all about ‘Control’, and ‘Control’ is all about making money – and in many cases: JOBS! Currently, the U.S. Government offers up security (in the form of ‘assistance’) to one out of every six individuals (16.6%). Now, is that 16.6% enough to get elected/re-elected? (FYI – often ‘tipping point’ theory looks at 18% to be the controlling percentage from which much of a remaining market place will ‘turn’ your way.)
Taking a step back, money is simply the exchange of value for labor, and if you produce something of value you will be rewarded for your efforts by receiving "money". But what if those at the very top don't really need your money (since they can make all they want), maybe what they really want is your LABOR to be directed by THEM? So what if the goal is to get the 16.6% to 18% - suddenly much of our ‘backward’ job creation theories make sense. For example: what if you’re a 20-something, and you can’t even get a job at McDonalds because they’re busy hiring college grads or professionals who’s jobs have been eliminated? Where's your hope for a "brighter future? Your hope lies (at least right now) with the U.S. Government – and that same Government probably has ‘purchased’ your vote!
Switching gears - everyday we hear about Greece and how it really doesn’t matter if they default on their obligations – because they’re just (well) Greece! Well I ask you, how many of the big banks in the U.S. are involved in insuring Greek debt? The answer is all of them! When Greece defaults, major American institutions will be on the hook for several hundred Billion dollars. Do these institutions HAVE several hundred Billion lying around? Absolutely not – they’re insolvent with the toxic crap they have on one of those sets of books now. So, when Greece rolls over, and the default insurances are demanded - where's that money going to come from? It needs to come from these banks, and yes these are the: “Too Big To Fail” Banks! So the U.S. taxpayer is going to foot that bill as well – yes? But since tax revenue isn't great enough to pay for the existing Government obligations, they will have to hunt for more money in very unusual ways. The Government has already borrowed public pension funds money, and they will be coming after your 401K next (mark my words)! There are very limited avenues left:
- Companies can’t expand when facing Obama-care, $100 oil, and the EPA.
- Infighting will be supreme during the upcoming presidential race (due to the closeness the Government is to that ‘tipping’ point).
- The Federal Reserve will continue QE3 via reinvesting the maturing debt they've already amassed, and they will "force" banks to mop up Treasuries in order to keep interest rates down.
- The dollar will continue to plunge in purchasing power, and gold, will slowly continue to move higher.
So, what do you do? The message is the same as it was 11 years ago – buy gold. Spend below your means. And with Father’s day coming up – share a meal or two with friends and family – the really important things.
We’ve dropped 1,000 DOW points in a month – and we’re Down Again! We sold out of most of our long positions on May 2nd – 4th figuring the end was near, but did make the mistake of not going short. I said last week – I continue to be scared of going short simply due to the manipulation that the Ben Bernanke and POMO money have shown so many times in the past. I’m also very conscious and deeply respectful of the thousands of readers and your wellbeing – and therefore I never want to steer anyone into trouble. Yet, I should have followed my gut. I should have jumped to the short side. The economy is not in a soft patch as so many are suggesting, the economy is showing it's true colors. The selling is being blamed on the end of QE2, but that's so silly – there will be no end to QE, it just wont' be labeled QE. Yet without ever growing amounts of stimulus, the economy will continue to slow.
Failing to close above DOW 12,000 was indeed significant. They may try and rescue it as we come into this week, but the overall direction still appears to be sideways and down. I tend to think the best move for those that don't play the short game is to sit on the sidelines and not get long. Sure there will be bounces, some of them powerful, but this is the first time in two years where the market looked ripe for a fall and "They" DID NOT rescue it. Remember, we’ve peeled off almost 1K DOW points since May 1, and some form of dead cat bounce is in the cards. But frankly there's nothing out there to suggest any bounce is going to hold.
Not much has changed actually:
Our long holds still look like: SLV, NG, AAU, DNN, AVL, SLW, SQM and USSIF.
We continued buying physical gold and silver and will being to lean on the short side going forward with double and in some cases triple EFT’s such as DXD and TZA. Please be safe out there!
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