Tuesday, May 19, 2009


May 19, 2009

What is happening in America today is mind boggling. Common sense has been replaced with collective thought. Right is wrong, up is down, and black is white in our thought and speech repressed society. Our Constitution is hanging by a thread in a room filled with knife wielding radicals. Heaven help us.

Disagree with any of the far left Marxists and you are a “Domestic Terrorist.” Express a religious belief, like Miss California, Carrie Prejean did, and expect a character assasination from the “Gay Mafia.” Suggest fair treatment as a bond holder of Chrysler and get a take it or leave it dime on the dollar offer. Get used to it. This is how a totalitarian dictatorship works.

In a country where investors are told to take a haircut, capitalists are viewed as fodder for the guillotine, and profits are reserved for the UAW and Obama, we no longer need markets of any kind. It’s called Communism folks and free markets don’t exist in this toxic environment.

One should not be surprised with the growing numbers of entreprenures who are fleeing our ever increasing Socialist society for greener pastures overseas. Fleeing to countries that believe in and want capital expansion and the benefits that free market innovation brings.

It is really quite simple. You can shear a sheep over and over but you can only skin it once. Eventually, you will chase capital, entreprenures, and investors out of America. And what will be left? A third world country, laced with equal poverty for all, ruled by a dictator.

One thing is fore sure. Under this administration, government and only more government is the only answer to every perceived crisis. They are removing self-reliance and replacing it with utmost faith in our elite ruling class. Nothing good can come from this.

The dollar is getting spanked, and rightly so. We are printing 50 cents for every dollar we spend. The dollar has to be sacrificed to keep 10 year treasuries at low yeilds so all the jumbo mortgages that are about to adjust can adjust at lower rates. You see, mortgage rates are linked to 10 year treasuries. This short term stragety might limit the number of coming mortgage defaults on these jumbos, but it will guarantee higher yields on the 30 year bonds we are peddling to pay off our titanic debt. Sooner or later, pop goes the weasel.

The U.S. economy is standing on the rim of the Grand Canyon and we are about to go over the edge. Unfortunately, we are going to hit every ledge on the way down and wind up a heap of bloody and broken bones at the bottom. Survivors of this nightmare are going to be few and far between. Wealthy people will become poor and poor people will cease to exist.

Wall Street knows the sins of their fraudulent derivative schemes are going to explode in their laps. Chasing impossible yields with highly leveraged bets can’t go on forever. They desparately need the trillions of dollars sitting on the sidelines back into the equity markets to hide their deceptive practices. Don’t be fooled by this market rally as it is nothing more than a dead cat bounce. It has no legs and no fundamentals to support a sustained rally – it is nothing more than a magic show. The only thing missing is David Copperfield pulling a rabbit out of his hat. Frankly, we are more likely to see monkeys fly out of Geithner’s butt.

The single best asset you can own right now is gold. The limited number of people who see its merit will survive. The manipulation of gold by the central banks to foster paper currencies is coming to an end. You must look beyond the talking heads on Wall Street! Ignore equities and buy gold!

If just 5% of American investors put 10% of their holdings into gold, the lid would come off this boiling pot. The dollar would be scalded beyond recognition, equity markets would dissolve, and a depression like no other in recorded history would land on our shores. Believe me, Wall Street is scared to death that this could happen and is doing everything in its power to downplay gold as a viable investment.

Secretly, I would wager that these Jim Cramer types have a stockpile of gold to protect their assets. What a crime. They recommend investors buy into this bear market rally just to grease the wheels of their trading machinery. Herd mentality and water cooler conversation keeps this wealth destruction game going. Unfortunately for them, at the Pearly Gates, St. Peter will be pulling the flush lever.

As I write this letter, two interesting trends are being tested. The S&P 500 broke resistance at 915 but could not hold at this level. The trend is now heading down. We should test the March 6,500 lows by mid-summer. If you bought into this rally, I suggest you sell your long positions and establish some short positions. If you are thinking about jumping into the markets at this level, DON’T. Jumping in now will be like diving into a pool with no water – you are going to break your neck.

On the other hand, gold has broken through resistance at $925. If it can hold at this level, we will test $1,000 again in the near term. Depending on the panic that will ensue when the markets collpase again, we should continue a substantial up trend in gold and test $1,500 by year end. Add to you position in physical metals. Avoid ETF’s and pool accounts.

The hidden gem in this scenario is a star that is about to go super nova – SILVER! Silver will mimic the gold trend testing the $15 level near term and the $20 level by year end. With retail supplies tight, mine production down, and gold above $1,000, more investors could shift to silver for wealth preservation. With extremely limited supplies of above ground silver, a flight to safety into this asset could send prices to the moon. You must own physical silver in your investment portfolio. Once again, avoid ETF’s and pool accounts. Anything backed by paper is subject to fraud and corruption. In a room full of liars, you need to look under the rug for the truth.

I leave you this week with two quotes to ponder:

“When all government, in little as in great things, shall be drawn to Washington as the center of all power, it will render powerless the checks provided of one government on another and will become as venal and oppressive as the government from which we separated.” - Thomas Jefferson

“The Constitution is not an instrument for the government to restrain the people, it is an instrument for the people to restrain the government – lest it come to dominate our lives and interests.” - Patrick Henry

1 comment:

Anonymous said...

Please, please, please resume your podcast!