Showing posts with label Government Bailout. Show all posts
Showing posts with label Government Bailout. Show all posts
Thursday, October 25, 2012
Silver Will Outperform Gold Going Forward
Gold and silver will continue to be a safety hedge in regard to inflation and a place of safety, as out-of-control governments continue spending and central banks continue to feed their addiction.
Contrary to any political leader today, with the exception of Ron Paul, there is no will to deal out the medicine that would be needed to halt American and other nations from going off the fiscal cliff.
There are some emerging in the Tea Party movement, but I think there it'll take some years before they are trained enough in economics (assuming they understand the need) to be able to make the right decisions for America over the long term.
They have the instincts right concerning slashing government spending and reducing the size of government, but there still a need for them to learn that the Federal Reserve must be abolished or there will never be an end to the hellish practices that are economically destroying the nation.
The Federal Reserve is the rich uncle enabling the irresponsible child to continue on in their ways. Only cutting him off will do the job, but the rich uncle has basically destroyed the child be making him dependent upon his for sustenance. That's the case today with America and other countries that have given out government promises of economic security and protection, with central banks financing them as the main economic growth engine of these countries.
All of that is falling apart, as evidenced by Europe, and it will spread everywhere that those unsustainable practices are employed.
Now as far as all this relates to gold and silver, gold is primarily the hedge that is used by knowledgeable investors to protect their assets against this government and central bank folly, with silver its weak cousin throughout a lot of history.
While gold will continue to rise up over time, as there will be no real steps taken to stem the tide of government promises. As already has been shown, people will rise up - most times violently - in response to what they have been socialized and trained into believing is their right, when it is no longer available to them, silver will rise up even more.
I say this because historically, the ratio between gold and silver has been at about 16. In other words, it would take sixteen ounces of silver to buy one ounce of gold.
So where gold prices stand today, at about $1,725 an ounce, the price of silver should be at somewhere about $108 an ounce. But it has been hovering around $32 an ounce instead. That makes the gold-silver-ratio about 54 today.
The fact that silver has more than doubled from $15 an ounce three years ago to over $31 an ounce today, points to the fact that investors are seeing the unfolding currency crisis, which only hard assets like gold and silver can protect against.
Historically, the price movement of silver usually soars when a currency crisis emerges, and it will outperform the price of gold. At least that's the usual practice. And while silver hasn't outperformed gold over the last decade, the hefty price movement of gold will keep it from moving up in the way it has over the last ten years, as measured by percentages. Silver, on the other hand, is poised to soar, which will bring it back closer to the historical ratio it has usually enjoyed.
This has happened several times since World War I, and will surely do the same over the next several years, and maybe out as far as a decade. A number of commodity and silver experts see silver as being among the best asset classes to own over the next ten years.
There is no certainty as to when gold will breach the $2,000 an ounce mark, but when it does, and as silver moves towards its historic ratio of 16, we could see silver at $125 an ounce. And as gold prices move higher, silver will ultimately adjust and go upwards with it.
All of this of course assumes the current practices of the central banks and governments continue. There is nothing in the near term that would suggest it will change in any way for years to come. Hi-Ho Silver!
Tuesday, October 9, 2012
Greece Won't be Repaying Debt
For those who really understand what's happening in the euro zone, it isn't surprising in light of the visit by German Chancellor Angela Merkel to Greece, that it highlights the fact that Greece won't be repaying its debt anytime soon, which according to the IMF, will climb to an astounding 171 percent of gross domestic product (GDP) in 2012 and 182 percent in 2013.
The IMF adds that Greece won't be able to pay the five-year debt reduction target that was the foundation behind receiving the $130 billion euro bailout. The original goal of cutting the debt level of the country to 120 percent of GDP by 2020 is now considered an impossibility by the IMF. It says the existing debt will now need to be restructured. Some economists saw this coming even before the bailout was put into effect, and many in Greece continue to demand that the austerity measures required to receive the money be, for the most part, rescinded.
Talking to CNBC, former deputy minister of economy and finance, Peter Doukas, said, "The Greek debt is not repayable at this point. The economy is too weak to afford a 300 billion euro ($387.9 billion) plus debt." "Perhaps now isn't the best time to talk about it, but very soon we're going to have to talk about rescheduling of Greece's official debt. It simply isn't repayable," Doukas added.
Doukas concluded, "There's going to be an official debt haircut or restructuring or rescheduling of sorts. My feeling is that it needs to go 15 years further in terms of maturity and a cutting of interest rates by at least 1.5 percent." Personal incomes have plunged by 25 percent in Greece, and unemployment among young people has soared to 55 percent.
The question now is if Greece can in any way be trusted. The outrageous obsession by some in the euro zone to keep the failing and tenuous region together appears to at this time, be willing to be done at any cost.
But Greece and other economically failing states have exposed the soft underbelly of the agreement, and it's only a matter of time before some of these states are required to take real austerity measures in order to get their loans, or they'll be forced to go back to operating economically using their own currencies.
At this time the will to save the European Union remains strong, and some leaders will continue to take the misguided and immoral steps to keep it together no matter who it hurts. That can only go on for so long before outrage from the productive workers and markets that are more free than the failing socialists governments weighing on economic Europe, rise up and rebel against those parasitical states that continue to drain the coffers of the region.
Those wanting to use Europe as the stepping stone for a new world order know this could set them back for many years if it fails now. They are doing everything to ensure it doesn't, but the fallout from those efforts could trigger even more problems than the fall of the EU, euro and euro zone would bring.
At this time is appears it doesn't matter to those attempting to lead this attempt at a global coup.
The IMF adds that Greece won't be able to pay the five-year debt reduction target that was the foundation behind receiving the $130 billion euro bailout. The original goal of cutting the debt level of the country to 120 percent of GDP by 2020 is now considered an impossibility by the IMF. It says the existing debt will now need to be restructured. Some economists saw this coming even before the bailout was put into effect, and many in Greece continue to demand that the austerity measures required to receive the money be, for the most part, rescinded.
Talking to CNBC, former deputy minister of economy and finance, Peter Doukas, said, "The Greek debt is not repayable at this point. The economy is too weak to afford a 300 billion euro ($387.9 billion) plus debt." "Perhaps now isn't the best time to talk about it, but very soon we're going to have to talk about rescheduling of Greece's official debt. It simply isn't repayable," Doukas added.
Doukas concluded, "There's going to be an official debt haircut or restructuring or rescheduling of sorts. My feeling is that it needs to go 15 years further in terms of maturity and a cutting of interest rates by at least 1.5 percent." Personal incomes have plunged by 25 percent in Greece, and unemployment among young people has soared to 55 percent.
The question now is if Greece can in any way be trusted. The outrageous obsession by some in the euro zone to keep the failing and tenuous region together appears to at this time, be willing to be done at any cost.
But Greece and other economically failing states have exposed the soft underbelly of the agreement, and it's only a matter of time before some of these states are required to take real austerity measures in order to get their loans, or they'll be forced to go back to operating economically using their own currencies.
At this time the will to save the European Union remains strong, and some leaders will continue to take the misguided and immoral steps to keep it together no matter who it hurts. That can only go on for so long before outrage from the productive workers and markets that are more free than the failing socialists governments weighing on economic Europe, rise up and rebel against those parasitical states that continue to drain the coffers of the region.
Those wanting to use Europe as the stepping stone for a new world order know this could set them back for many years if it fails now. They are doing everything to ensure it doesn't, but the fallout from those efforts could trigger even more problems than the fall of the EU, euro and euro zone would bring.
At this time is appears it doesn't matter to those attempting to lead this attempt at a global coup.
Monday, May 24, 2010
Democratics Want Union Bailout: $165 Billion
The Democrats can't spend enough money fast enough, and the outrageous idea of taxpayers having to pay for their retirement after they have mismanaged their pensions, is sickening at best, and criminal at worst.
Think of it. The Democrats' special-interest groups who are overpaid and pressure, threaten and mock those who aren't part of unions, are now wanting the rest of us who are in fact responsible with our money to bail those bums out after even above-market wages and benefits are wasted by them, as they can't hang on to their pension money.
Don't get the idea this is because of the recession, because it isn't, as they pensions were in trouble in 2006, before the impact of the housing bubble and banking problems.
Senator Bob Casey, (D-Pa.), has introduced legislation which would cost the rest of us a minimum of $165 billion, and because of life expectancy, would be far beyond that. Think of the bankrupt social security fund to see where this is going to go.
What really needs to happen is to have an investigation of these pensions and their union overlords to see who's draining them, as it sounds fishy when the unions are suddenly begging for more money, and that's after the hideous bailouts of the union automakers who were priced out of market by their outrageous wages and benefits, which we are still paying for, and which they borrowed more taxpayer money to pay off.
The hearing is set for Thursday, and our representatives had better toe the line and reject this outright. Obama also better learn to say the word "no" to these beggars, who are making more than the average American, who is now being called upon to bail them out. If this doesn't get your angry and ready to rid Washington of the Democrats and their endless willingness to spend money on their constituents, nothing will.
And even if you're a Democrat, you should be outraged that they're already talking about spending more money, which has already brought an enormous amount of destruction to the country, which has yet to be experienced when the banks start lending, businesses borrow, and the price of everything goes up.
Think of it. The Democrats' special-interest groups who are overpaid and pressure, threaten and mock those who aren't part of unions, are now wanting the rest of us who are in fact responsible with our money to bail those bums out after even above-market wages and benefits are wasted by them, as they can't hang on to their pension money.
Don't get the idea this is because of the recession, because it isn't, as they pensions were in trouble in 2006, before the impact of the housing bubble and banking problems.
Senator Bob Casey, (D-Pa.), has introduced legislation which would cost the rest of us a minimum of $165 billion, and because of life expectancy, would be far beyond that. Think of the bankrupt social security fund to see where this is going to go.
What really needs to happen is to have an investigation of these pensions and their union overlords to see who's draining them, as it sounds fishy when the unions are suddenly begging for more money, and that's after the hideous bailouts of the union automakers who were priced out of market by their outrageous wages and benefits, which we are still paying for, and which they borrowed more taxpayer money to pay off.
The hearing is set for Thursday, and our representatives had better toe the line and reject this outright. Obama also better learn to say the word "no" to these beggars, who are making more than the average American, who is now being called upon to bail them out. If this doesn't get your angry and ready to rid Washington of the Democrats and their endless willingness to spend money on their constituents, nothing will.
And even if you're a Democrat, you should be outraged that they're already talking about spending more money, which has already brought an enormous amount of destruction to the country, which has yet to be experienced when the banks start lending, businesses borrow, and the price of everything goes up.
Monday, May 3, 2010
Gerald Celente and Bailout Bubble
Gerald Celente, one of more accurate identifiers of trends, has stated in the recent past that one of the more dangerous aspects of the current economic situation is the failure or refusal to call the government spending in the economic crisis a bailout bubble.
Celente has stated, "With no more massive economic bubbles available to blow up, they’ll set their sights on bigger targets."
As we're seeing now and Celente has said will happen when the bailout bubble explodes, is the government will somehow put up a smokescreen and put the blame on someone or something else to escape being seen as the cause of the bubble, along with their partner the Federal Reserve.
While Celente hasn't said this directly, it seems they are probably already creating the storyline for when the bailout bubble bursts in order to hide their culpability in the matter.
Celente has said they will look for a scapegoat to put the blame on as the public panicks and is ready to vent their anger, fear and frustration on the perceived creator of the catastrophe.
According to Celente, it's possible we may be taken into a war in order to divert attention away from the source of the bubble.
He doesn't predict the timing of the bubble bursting but says it's almost a surety that it will.
Celente has stated, "With no more massive economic bubbles available to blow up, they’ll set their sights on bigger targets."
As we're seeing now and Celente has said will happen when the bailout bubble explodes, is the government will somehow put up a smokescreen and put the blame on someone or something else to escape being seen as the cause of the bubble, along with their partner the Federal Reserve.
While Celente hasn't said this directly, it seems they are probably already creating the storyline for when the bailout bubble bursts in order to hide their culpability in the matter.
Celente has said they will look for a scapegoat to put the blame on as the public panicks and is ready to vent their anger, fear and frustration on the perceived creator of the catastrophe.
According to Celente, it's possible we may be taken into a war in order to divert attention away from the source of the bubble.
He doesn't predict the timing of the bubble bursting but says it's almost a surety that it will.
Thursday, February 25, 2010
Gold Rising 30% in 2010?
Gold Rising 30% in 2010
According to the London Market Bullion Association, gold could rise close to 30 percent in 2010, as continual concerns over central banks printing money, sovereign defaults, quantitative easing and outrageous government stimulus programs weigh on the minds of investors.
It's unknown what will happen if the British pound collapses, as a number of investment experts like Jim Rogers and Marc Faber are predicting, and that could cause gold prices to go through the roof as investors and consumers look for somewhere safe to place their money.
Now that the government stimulus programs have been proven to be mass failures, the growing realization we aren't close to being out of the recession yet is settling on people, and that will cause even more to move toward gold as a haven.
In the short term it doesn't look like any new gold mines are coming online either, making gold a possible rare commodity as funds continue to buy physical gold to back them up. That is another possible factor which could move gold prices higher in 2010 and beyond.
Gold Rising 30% in 2010
According to the London Market Bullion Association, gold could rise close to 30 percent in 2010, as continual concerns over central banks printing money, sovereign defaults, quantitative easing and outrageous government stimulus programs weigh on the minds of investors.
It's unknown what will happen if the British pound collapses, as a number of investment experts like Jim Rogers and Marc Faber are predicting, and that could cause gold prices to go through the roof as investors and consumers look for somewhere safe to place their money.
Now that the government stimulus programs have been proven to be mass failures, the growing realization we aren't close to being out of the recession yet is settling on people, and that will cause even more to move toward gold as a haven.
In the short term it doesn't look like any new gold mines are coming online either, making gold a possible rare commodity as funds continue to buy physical gold to back them up. That is another possible factor which could move gold prices higher in 2010 and beyond.
Gold Rising 30% in 2010
Saturday, November 14, 2009
Where are Copper Prices Heading?
Copper Prices
The interference by the government in the economy has made it more difficult to know which direction copper prices will go, as the articial propping up of certain industries can also give a temporary bump up in prices.
Copper is of course one of the best indicators of the economy, as it signals whether people are buying or hoarding their cash.
Copper prices exploded upwards in 2009, but have flattened out since around August at about $2.80 to $3.00 a pound. During the summer months copper price per pound fell to around $2.20.
There is no doubt there will be a big move in copper prices sometime soon, but the question is whether that move will be up or down.
I think we could use the $2.20 a pound lows in the summer of 2009 as a sign that demand has slackened and people aren't spending. On the other hand, if prices start to rise well above $3.00 a pound, say like $3.20 or more, it would probably be a good indication that inflation is rearing its ugly head and prices will continue to shoot up.
Because we don't know how badly the government will continue to print money, copper prices are a good indicator of how much they're really doing it and how people are responding.
Copper Prices
The interference by the government in the economy has made it more difficult to know which direction copper prices will go, as the articial propping up of certain industries can also give a temporary bump up in prices.
Copper is of course one of the best indicators of the economy, as it signals whether people are buying or hoarding their cash.
Copper prices exploded upwards in 2009, but have flattened out since around August at about $2.80 to $3.00 a pound. During the summer months copper price per pound fell to around $2.20.
There is no doubt there will be a big move in copper prices sometime soon, but the question is whether that move will be up or down.
I think we could use the $2.20 a pound lows in the summer of 2009 as a sign that demand has slackened and people aren't spending. On the other hand, if prices start to rise well above $3.00 a pound, say like $3.20 or more, it would probably be a good indication that inflation is rearing its ugly head and prices will continue to shoot up.
Because we don't know how badly the government will continue to print money, copper prices are a good indicator of how much they're really doing it and how people are responding.
Copper Prices
Sunday, January 25, 2009
Commodities: Corn Futures Under Pressure
There are many reasons and variables why commodities in general are making an expected comeback, while agricultural commodity grains continue to struggle.
Corn is one of those, as it dropped for the second day in a row, while its commodity counterparts outside of grains made significant increases, including oil, gold and silver.
Corn futures, and other grain futures will continue to battle to retain price thresholds as the economic slowdown cuts back on governments spending money in the U.S., which in general has higher grain prices.
The price of corn futures has already fallen over 50 percent since early summer, and there's nothing in play that will keep that from continuing on.
While the Argentine drought has cut into wheat, corn and soy production, it doesn't look like it'll cause any shortages, as global production has been up this year.
There has been nothing wrong with the grain this year, as the yield for corn has been good, and production solid. That's not the problem, as with oil. There's just so much people are willing to spend this year across the world, and demand, more than anything else is what's driving corn futures, as well as most other commodity markets.
Now that government spending have been irresponsibly brought into the mix, farmers, companies and investors are looking to them for solace, rather than allowing the market to clean itself out and poorly run businesses to fail.
So with corn storage, production and yield being fine, the deciding factor will be the economies of the individual countries and the willingness to spend on grains, including corn.
Until the pocketbooks are opened up again, corn futures, along with all grain futures, will continue to be under downward pressure.
Accordingly commodity grains and the corn belt that produces them will struggle until the economic conditions improve. From what it looks like, it'll be some time before that battle will be over.
Corn is one of those, as it dropped for the second day in a row, while its commodity counterparts outside of grains made significant increases, including oil, gold and silver.
Corn futures, and other grain futures will continue to battle to retain price thresholds as the economic slowdown cuts back on governments spending money in the U.S., which in general has higher grain prices.
The price of corn futures has already fallen over 50 percent since early summer, and there's nothing in play that will keep that from continuing on.
While the Argentine drought has cut into wheat, corn and soy production, it doesn't look like it'll cause any shortages, as global production has been up this year.
There has been nothing wrong with the grain this year, as the yield for corn has been good, and production solid. That's not the problem, as with oil. There's just so much people are willing to spend this year across the world, and demand, more than anything else is what's driving corn futures, as well as most other commodity markets.
Now that government spending have been irresponsibly brought into the mix, farmers, companies and investors are looking to them for solace, rather than allowing the market to clean itself out and poorly run businesses to fail.
So with corn storage, production and yield being fine, the deciding factor will be the economies of the individual countries and the willingness to spend on grains, including corn.
Until the pocketbooks are opened up again, corn futures, along with all grain futures, will continue to be under downward pressure.
Accordingly commodity grains and the corn belt that produces them will struggle until the economic conditions improve. From what it looks like, it'll be some time before that battle will be over.
Saturday, January 24, 2009
Commodities: Silver Price Going Up
Commodities are starting to resume their upward run, and silver and gold should lead the way.
Investors have been waiting for a breakout, and that time arrived on Friday, as gold and silver exploded in price, with silver surging by 57 cents or 5.1 percent to $11.932.
Silver is similar to platinum in that it is both an investment and industrial metal, making investors look at two sides of the equation in making decisions on whether to invest or not.
It rings true when those watching silver say there's probably little resistance to it moving up to $14 an ounce. Silver could very well be on the cusp of a second move within the commodity bull market in general, and silver bull market in particular.
This is all more than just a moment of fashion or blip, it's definitely the beginning of a new upward move, as silver trends higher in an ongoing rally. Support levels should continue to move upwards, with no short-term signs of a peak in this bull run.
Investors are taking this move to heart and are getting more bullish on silver as an investment as the U.S. dollar begins its inevitable decline, as massive U.S. debt continues to be incurred in response to endless government bailouts.
There haven't really been a series or chain of events that have handed this gift to investors, it's only been a matter of when - not if - silver and gold were going to start rising in price again.
Forced liquidation and deleveraging have been the only circumstances that have held the commodity bull market from rallying even more, and it looks like those are winding down, and money is available to flow back to commodities.
Companies looking for cash to cover debt had to unwillingly sell off their silver and gold assets - along with other commodities - in order to get cash to survive.
Speaking in terms of percentages, we could see silver prices outperform all metals in 2009, a real gift to weary commodities investors who have looked at the sector as having its charm wear off.
Whether the charm has left or not, this is a fine place to be in, and we'll cross the peak destination of the commodity road when we get there. For now, silver will be a tremendous investment for 2009, and the bull rally should continue for some time.
Investors have been waiting for a breakout, and that time arrived on Friday, as gold and silver exploded in price, with silver surging by 57 cents or 5.1 percent to $11.932.
Silver is similar to platinum in that it is both an investment and industrial metal, making investors look at two sides of the equation in making decisions on whether to invest or not.
It rings true when those watching silver say there's probably little resistance to it moving up to $14 an ounce. Silver could very well be on the cusp of a second move within the commodity bull market in general, and silver bull market in particular.
This is all more than just a moment of fashion or blip, it's definitely the beginning of a new upward move, as silver trends higher in an ongoing rally. Support levels should continue to move upwards, with no short-term signs of a peak in this bull run.
Investors are taking this move to heart and are getting more bullish on silver as an investment as the U.S. dollar begins its inevitable decline, as massive U.S. debt continues to be incurred in response to endless government bailouts.
There haven't really been a series or chain of events that have handed this gift to investors, it's only been a matter of when - not if - silver and gold were going to start rising in price again.
Forced liquidation and deleveraging have been the only circumstances that have held the commodity bull market from rallying even more, and it looks like those are winding down, and money is available to flow back to commodities.
Companies looking for cash to cover debt had to unwillingly sell off their silver and gold assets - along with other commodities - in order to get cash to survive.
Speaking in terms of percentages, we could see silver prices outperform all metals in 2009, a real gift to weary commodities investors who have looked at the sector as having its charm wear off.
Whether the charm has left or not, this is a fine place to be in, and we'll cross the peak destination of the commodity road when we get there. For now, silver will be a tremendous investment for 2009, and the bull rally should continue for some time.
Sunday, December 28, 2008
Commodities: Riots in the Streets of America
Bob Moriarty in an explosive interview on what he sees in the not-too-distant future for America, and how people can prepare for the unsettling times.
The Gold Report: Bob, what do you think of the Fed’s latest move—cutting to a flexible zero to a quarter rate? Where do you see us going?
Bob Moriarty: We are to the point where we are about 14 feet from going over the edge of Niagara Falls. We haven’t gone over the edge yet; we haven’t gone to a total collapse. We don’t have riots in the streets; we don’t have a revolution. That’s coming; that’s about two to three months off.
Here’s what we’ve got: the Fed has committed to $8.5 trillion of taxpayers’ money to bail out the worst run companies and banks. It hasn’t worked. Now, they’re at a 0% to .25% on the Fed Funds rate for funds for banks, which means if you go down and you pay $100,000 for a T-bill for 90 days, your return is zero, which is to imply that there is zero risk to investing with the government. Anybody who actually believes that is going to be in for a real shock in the first quarter of next year.
GM has lost has lost $80 billion dollars in the last four years. They’re burning through $2 billion a month when everything is going well. Their sales are down 37% in November; the mathematical probability of GM surviving is zero. But we’re going to pour more taxpayer money down that hole. AIG's also turned into the proverbial black hole. I would think that at $300 billion or $400 billion or $500 billion or $600 billion, somebody’s going to wake up and say, “You know, we’re losing a lot of money here.”
TGR: It’s getting to be real money at that point.
BM: What we have done is guaranteed hyperinflation in the United States. We have guaranteed the destruction of the United States. We will have riots starting in the first quarter of next year; we will default by the summer of 2009.
TGR: Default on how many of the bonds? All? Or just some?
BM: 100%. The US government is going to default. Treasuries, Fannie Mae, Freddie Mac, the whole lot. It’s the end of empire. The United States government will not exist in its current form a year from now.
TGR: When you say “its current form,” what form will it take?
BM: I don’t know. It’s a really good question. I’m sure it will be a total state of chaos. I mean we’ve never been here. I think the analogy of the Soviet Union is probably the closest; we could break up into a series of little fiefdoms. But here’s what’s important to understand—the United States government has failed at every single level. It is too big; it is too unwieldy; it doesn’t work.
TGR: So, what does it mean? We’ve got impending chaos in the United States—and the financial markets will continue to go downward. Are we talking globally or U.S.?
BM: U.S. primarily, but globally because the U.S. is so important. The U.S. is the linchpin right now, but the rest of the world is going to have to learn to get by without the United States. What George Bush and Dick Cheney have done is essentially destroyed the United States; they have bankrupted the country. We are going to end up having our troops march out of Iraq to the nearest border because we can no longer afford to pay for them. We’re going to go into Zimbabwe-type inflation where they’re printing off $200 million dollar bills to buy a loaf of bread.
TGR: Other than moving to a nice island in the Caribbean, what does an investor or a resident of the U.S. do?
BM: You have to prepare; first of all, it’s important to prepare mentally and that means doing some education. Second, you don’t want to be in debt. You don’t want to be buying real estate. You don’t want to be taking any chances financially whatsoever. You want to be investing in real resources: good solid producing gold companies or silver companies or energy companies. You want to really hunker down.
TGR: If the financial markets continue to get clobbered, I would assume the gold equity stocks would continue to get clobbered?
BM: I don’t think they will. Here’s what is going to happen. There is actually a lot of money sitting on the sidelines. I’ve heard there's billions of dollars waiting to be invested in resource stocks. Resource stocks are selling for 5 cents or 10 cents on the dollar; that’s not going to last for very long.
What I want to get across to everybody is and it’s very important, is that when you go through chaos, the worse it gets, the more inclined you are to solve it. There are some easy solutions to this financial situation in the United States.
First of all, we downsize; we stop spending all this money at the federal level; we stop spending money at the state level. We end up with a much smaller government that isn’t trying to make every decision for every person all the time. Big government doesn’t work any more. We need to change that. We need to go back to self-sufficiency; we need to go back to citizens participating in government.
We need to go back to Economics 101 where you invest to make money, save money. The gold companies that have the business model of print shares and drill, print shares and drill—those guys aren’t going to succeed. But the guys who have producing assets and real stories, they’re going to succeed beyond their wildest imagination.
We need to kill the Federal Reserve System and go back to honest money. That’s 90% of our problem right now. We are all playing at investing with Monopoly money backed by nothing. It’s about as smart as you sitting down at a high stakes poker game, you have a wad of $20 gold pieces and everyone else is playing with their Mobil Oil credit card. Those fools will bet on anything, it’s not real money.
TGR: Can they perform in a falling financial market?
BM: Of course.
TGR: Assuming gold is rising.
TGR: Do you see think a lot of these juniors have bottomed? A lot of the producers have doubled off of bottoms.
BM: Yes, they have actually—they bottomed in October. If you go back to what I was saying back then, I said we were at a bottom. They had definitely bottomed. The HUI has doubled since then and no one noticed.
The general stock market is going to be good until maybe January or February. But it’s going to get far worse after that. We have some real problems that will be surfacing between now and then. But there’s an enormous amount of money sitting on the sidelines waiting to go somewhere safe. When people realize that resource stocks are the only safe haven, they’re going to go up more than anybody can imagine.
So, there are two things I would do with new money. First of all, gold and silver serve as an insurance policy against chaos. If you cannot put your hands on some physical gold, physical silver, it’s like living without an insurance policy. When you need food, if you don’t have gold or silver, you’re going to be a bit shocked. Second of all as far as an investment program, beyond the insurance policy, you want to be in real assets. That’s gold or silver or energy producers or near-term producers, or companies with a good business model.
TGR: Any names you could share with us?
BM: Look at the recent Haywood Securities report, "Junior Mining: Report on Cash Sustainability." Now, 96 companies currently traded at discount to their last reported net working capital. This is the greatest opportunity to invest that I have ever read or heard about; it’s absolutely unimaginable. It’s not going to last very much longer, but stocks could move up. The really bad gold stocks are going to move up 500%.
TGR: You mentioned that you looked at gold and silver as an insurance policy and recommend investing in real assets. Do you have a recommendation of a percentage of the portfolio that people should be holding in these? How much cash should they keep for future opportunities?
BM: Ah, very little. Cash is going to be the most dangerous thing you can invest in. Cash, T-bills, T-bonds are going away; they’re going to be worth zero. You’re going to walk into a bank one day and your ATM machine is not going to work, and your cash is going to be no good. I would think two to three months' living expenses, if you can do that in cash or silver, would be a very high comfort level. That percentage will change depending on what people have. Everybody—I really want to emphasize that—everybody needs to have some physical gold or silver.
TGR: Bob, you don’t see that we’re going to get this hyperinflation kicking in or it’s going to be so short, it won’t matter?
BM: Hyperinflation is starting to kick in now. I think you’re going to see it turn shortly. The government has been flooding the system with money and in short order it’s going to try to find a safe haven. Here’s what to look for. If you take a look at a chart right now, the 10-year, 30-year bonds have gone curve linear. They’re going straight up to the moon. Any time a market does that, it’s about to crash. When the bond market crashes, it’s going to be 15 on the Richter scale. It’s going to be enormous. It’s far more dangerous than the stock market crashing. When the bond market crashes, the hyperinflation starts.
TGR: And what’s your timeline on that? You were saying before, January or February?
BM: The bond market is literally going to start crashing any day now. I mean it’s very, very soon. I think that the stock market is good through January or February. I think the resource market will start up in an explosive way literally in a few weeks or so. It’s actually going up now. If you go back the last month or six weeks, it’s gone up a lot more than anybody would believe. Everybody thinks, “Well, my gold stocks are all down, I’m going to lose money hand over fist.” But they’re actually 50% better off now than they were in October.
TGR: Bob, earlier you mentioned investing in real assets. You said gold and silver and energy producers. That’s a pretty broad-based statement; could you give us an idea of what you mean when you say energy producers?
BM: Coal producers, oil producers, natural gas producers—energy is absurdly cheap now; it was absurdly expensive at $147. You can buy energy producers really cheaply, and I have written up a number of them on 321energy.com. I like anything real, anything that’s based on Economics 101. We’re going to take something of value and we’re going to increase its value, and we’re going to sell it to the public for a profit. That’s just a really good business model.
Here’s what I want to emphasize, and what’s important to get across—I don’t want to sound like I’m totally negative because I’m not totally negative. The worse it gets in the United States, the more impetus there will be to say, “Hey, what caused this in the first place? And what can we do to prevent it in the future?” And the answer to that is quite simple. We got off the gold standard in 1933 and in 1971, and that let government grow totally out of control. We need to rein government in; we need to go back to government of the people, by the people, and for the people. The way to do that is to go back to a gold and silver based currency. Once we do that we can start investing with some kind of common sense.
TGR: So the good news is that through all this chaos there will be some change in the way the government operates?
BM: Government will be much smaller; I think that any rational American can look at big government and say, “Hey, wait a minute. This doesn’t work.” And the funny thing is it’s not because I’m a liberal or I’m a conservative. I’m not sure there is any such thing as a perfect liberal or a perfect conservative, even though we act like they’re two totally different things. Big government doesn’t work; we need to go back to Economics 101 and only spend the money that you earn.
TGR: OK, other than getting mentally ready, getting into gold and silver and real assets, do you have any other thoughts on where to put our cash if we have any cash right now? What about other commodities, such as food commodities?
BM: Absolutely. I believe in peak oil, and peak oil is an analog of peak food. So, it requires X number of calories of energy to produce X number of calories of food, so when you run out of cheap energy, you run out of cheap food. Americans are going to be very angry. We have a very dangerous system in the United States where we essentially have a day and a half’s worth of food in our food stores. It’s a just in time now system. And it’s very vulnerable to civil disorders.
TGR: Is there an investment play within the food component?
BM: I think anything in food. Strangely enough, what I like is fertilizers. Fertilizers are a real cheap way of betting on food. Some of the big food companies, like R Gill, are just as corrupt as everybody in Washington, everybody in Wall Street, so I can’t recommend them. I don’t know that big food stocks are good, but maybe equipment manufacturers would be a good bet.
TGR: Bob, do you think there’s any gold in Fort Knox?
BM: That’s a really good question. I hope there is. But I don’t know. The really interesting thing is nobody in the government has ever even pretended that they might do something with it. If it was me, I’d go count the bars; I’d figure out who owns them and I’d come up with some kind of currency tied to gold, you know—1 gram notes, and 5 gram notes and 10 gram notes. I think mathematically there probably isn’t, but I don’t know. Nobody knows.
TGR: And there’s no accountability?
BM: Ah, are you kidding? George Bush is president of the United States.
TGR: Yes, but soon he won’t be. You know, I’ll write a letter to Obama and ask him. Well, Bob, as usual, it’s always great to do these interviews. We appreciate it.
Bob Moriarty and his wife, Barb, launched 321gold.com as a private website seven years ago, when they were convinced gold and silver were at a bottom and wanted to help others understand what they needed to know about investing in resource stocks. Since then, they’ve introduced a second resource site, 321energy.com. Bob travels to dozens of mining projects a year. He was one of the first analysts to write about NovaGold, Northern Dynasty, Silver Standard, Running Fox and YGC Resources, among others. Prior to his Internet career, Bob was a Marine F-4B pilot at the age of 20 and a veteran of over 820 missions in Viet Nam. Becoming a Captain in the Marines at 22, he was one of the most highly decorated pilots in the war.
Visit The GOLD Report
The GOLD Report is Copyright © 2008 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material only in whole (and always including this disclaimer), but never in part. The GOLD Report does not render investment advice and does not endorse or recommend the business, products, services or securities of any company mentioned in this report. From time to time, Streetwise Inc. directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
The Gold Report: Bob, what do you think of the Fed’s latest move—cutting to a flexible zero to a quarter rate? Where do you see us going?
Bob Moriarty: We are to the point where we are about 14 feet from going over the edge of Niagara Falls. We haven’t gone over the edge yet; we haven’t gone to a total collapse. We don’t have riots in the streets; we don’t have a revolution. That’s coming; that’s about two to three months off.
Here’s what we’ve got: the Fed has committed to $8.5 trillion of taxpayers’ money to bail out the worst run companies and banks. It hasn’t worked. Now, they’re at a 0% to .25% on the Fed Funds rate for funds for banks, which means if you go down and you pay $100,000 for a T-bill for 90 days, your return is zero, which is to imply that there is zero risk to investing with the government. Anybody who actually believes that is going to be in for a real shock in the first quarter of next year.
GM has lost has lost $80 billion dollars in the last four years. They’re burning through $2 billion a month when everything is going well. Their sales are down 37% in November; the mathematical probability of GM surviving is zero. But we’re going to pour more taxpayer money down that hole. AIG's also turned into the proverbial black hole. I would think that at $300 billion or $400 billion or $500 billion or $600 billion, somebody’s going to wake up and say, “You know, we’re losing a lot of money here.”
TGR: It’s getting to be real money at that point.
BM: What we have done is guaranteed hyperinflation in the United States. We have guaranteed the destruction of the United States. We will have riots starting in the first quarter of next year; we will default by the summer of 2009.
TGR: Default on how many of the bonds? All? Or just some?
BM: 100%. The US government is going to default. Treasuries, Fannie Mae, Freddie Mac, the whole lot. It’s the end of empire. The United States government will not exist in its current form a year from now.
TGR: When you say “its current form,” what form will it take?
BM: I don’t know. It’s a really good question. I’m sure it will be a total state of chaos. I mean we’ve never been here. I think the analogy of the Soviet Union is probably the closest; we could break up into a series of little fiefdoms. But here’s what’s important to understand—the United States government has failed at every single level. It is too big; it is too unwieldy; it doesn’t work.
TGR: So, what does it mean? We’ve got impending chaos in the United States—and the financial markets will continue to go downward. Are we talking globally or U.S.?
BM: U.S. primarily, but globally because the U.S. is so important. The U.S. is the linchpin right now, but the rest of the world is going to have to learn to get by without the United States. What George Bush and Dick Cheney have done is essentially destroyed the United States; they have bankrupted the country. We are going to end up having our troops march out of Iraq to the nearest border because we can no longer afford to pay for them. We’re going to go into Zimbabwe-type inflation where they’re printing off $200 million dollar bills to buy a loaf of bread.
TGR: Other than moving to a nice island in the Caribbean, what does an investor or a resident of the U.S. do?
BM: You have to prepare; first of all, it’s important to prepare mentally and that means doing some education. Second, you don’t want to be in debt. You don’t want to be buying real estate. You don’t want to be taking any chances financially whatsoever. You want to be investing in real resources: good solid producing gold companies or silver companies or energy companies. You want to really hunker down.
TGR: If the financial markets continue to get clobbered, I would assume the gold equity stocks would continue to get clobbered?
BM: I don’t think they will. Here’s what is going to happen. There is actually a lot of money sitting on the sidelines. I’ve heard there's billions of dollars waiting to be invested in resource stocks. Resource stocks are selling for 5 cents or 10 cents on the dollar; that’s not going to last for very long.
What I want to get across to everybody is and it’s very important, is that when you go through chaos, the worse it gets, the more inclined you are to solve it. There are some easy solutions to this financial situation in the United States.
First of all, we downsize; we stop spending all this money at the federal level; we stop spending money at the state level. We end up with a much smaller government that isn’t trying to make every decision for every person all the time. Big government doesn’t work any more. We need to change that. We need to go back to self-sufficiency; we need to go back to citizens participating in government.
We need to go back to Economics 101 where you invest to make money, save money. The gold companies that have the business model of print shares and drill, print shares and drill—those guys aren’t going to succeed. But the guys who have producing assets and real stories, they’re going to succeed beyond their wildest imagination.
We need to kill the Federal Reserve System and go back to honest money. That’s 90% of our problem right now. We are all playing at investing with Monopoly money backed by nothing. It’s about as smart as you sitting down at a high stakes poker game, you have a wad of $20 gold pieces and everyone else is playing with their Mobil Oil credit card. Those fools will bet on anything, it’s not real money.
TGR: Can they perform in a falling financial market?
BM: Of course.
TGR: Assuming gold is rising.
TGR: Do you see think a lot of these juniors have bottomed? A lot of the producers have doubled off of bottoms.
BM: Yes, they have actually—they bottomed in October. If you go back to what I was saying back then, I said we were at a bottom. They had definitely bottomed. The HUI has doubled since then and no one noticed.
The general stock market is going to be good until maybe January or February. But it’s going to get far worse after that. We have some real problems that will be surfacing between now and then. But there’s an enormous amount of money sitting on the sidelines waiting to go somewhere safe. When people realize that resource stocks are the only safe haven, they’re going to go up more than anybody can imagine.
So, there are two things I would do with new money. First of all, gold and silver serve as an insurance policy against chaos. If you cannot put your hands on some physical gold, physical silver, it’s like living without an insurance policy. When you need food, if you don’t have gold or silver, you’re going to be a bit shocked. Second of all as far as an investment program, beyond the insurance policy, you want to be in real assets. That’s gold or silver or energy producers or near-term producers, or companies with a good business model.
TGR: Any names you could share with us?
BM: Look at the recent Haywood Securities report, "Junior Mining: Report on Cash Sustainability." Now, 96 companies currently traded at discount to their last reported net working capital. This is the greatest opportunity to invest that I have ever read or heard about; it’s absolutely unimaginable. It’s not going to last very much longer, but stocks could move up. The really bad gold stocks are going to move up 500%.
TGR: You mentioned that you looked at gold and silver as an insurance policy and recommend investing in real assets. Do you have a recommendation of a percentage of the portfolio that people should be holding in these? How much cash should they keep for future opportunities?
BM: Ah, very little. Cash is going to be the most dangerous thing you can invest in. Cash, T-bills, T-bonds are going away; they’re going to be worth zero. You’re going to walk into a bank one day and your ATM machine is not going to work, and your cash is going to be no good. I would think two to three months' living expenses, if you can do that in cash or silver, would be a very high comfort level. That percentage will change depending on what people have. Everybody—I really want to emphasize that—everybody needs to have some physical gold or silver.
TGR: Bob, you don’t see that we’re going to get this hyperinflation kicking in or it’s going to be so short, it won’t matter?
BM: Hyperinflation is starting to kick in now. I think you’re going to see it turn shortly. The government has been flooding the system with money and in short order it’s going to try to find a safe haven. Here’s what to look for. If you take a look at a chart right now, the 10-year, 30-year bonds have gone curve linear. They’re going straight up to the moon. Any time a market does that, it’s about to crash. When the bond market crashes, it’s going to be 15 on the Richter scale. It’s going to be enormous. It’s far more dangerous than the stock market crashing. When the bond market crashes, the hyperinflation starts.
TGR: And what’s your timeline on that? You were saying before, January or February?
BM: The bond market is literally going to start crashing any day now. I mean it’s very, very soon. I think that the stock market is good through January or February. I think the resource market will start up in an explosive way literally in a few weeks or so. It’s actually going up now. If you go back the last month or six weeks, it’s gone up a lot more than anybody would believe. Everybody thinks, “Well, my gold stocks are all down, I’m going to lose money hand over fist.” But they’re actually 50% better off now than they were in October.
TGR: Bob, earlier you mentioned investing in real assets. You said gold and silver and energy producers. That’s a pretty broad-based statement; could you give us an idea of what you mean when you say energy producers?
BM: Coal producers, oil producers, natural gas producers—energy is absurdly cheap now; it was absurdly expensive at $147. You can buy energy producers really cheaply, and I have written up a number of them on 321energy.com. I like anything real, anything that’s based on Economics 101. We’re going to take something of value and we’re going to increase its value, and we’re going to sell it to the public for a profit. That’s just a really good business model.
Here’s what I want to emphasize, and what’s important to get across—I don’t want to sound like I’m totally negative because I’m not totally negative. The worse it gets in the United States, the more impetus there will be to say, “Hey, what caused this in the first place? And what can we do to prevent it in the future?” And the answer to that is quite simple. We got off the gold standard in 1933 and in 1971, and that let government grow totally out of control. We need to rein government in; we need to go back to government of the people, by the people, and for the people. The way to do that is to go back to a gold and silver based currency. Once we do that we can start investing with some kind of common sense.
TGR: So the good news is that through all this chaos there will be some change in the way the government operates?
BM: Government will be much smaller; I think that any rational American can look at big government and say, “Hey, wait a minute. This doesn’t work.” And the funny thing is it’s not because I’m a liberal or I’m a conservative. I’m not sure there is any such thing as a perfect liberal or a perfect conservative, even though we act like they’re two totally different things. Big government doesn’t work; we need to go back to Economics 101 and only spend the money that you earn.
TGR: OK, other than getting mentally ready, getting into gold and silver and real assets, do you have any other thoughts on where to put our cash if we have any cash right now? What about other commodities, such as food commodities?
BM: Absolutely. I believe in peak oil, and peak oil is an analog of peak food. So, it requires X number of calories of energy to produce X number of calories of food, so when you run out of cheap energy, you run out of cheap food. Americans are going to be very angry. We have a very dangerous system in the United States where we essentially have a day and a half’s worth of food in our food stores. It’s a just in time now system. And it’s very vulnerable to civil disorders.
TGR: Is there an investment play within the food component?
BM: I think anything in food. Strangely enough, what I like is fertilizers. Fertilizers are a real cheap way of betting on food. Some of the big food companies, like R Gill, are just as corrupt as everybody in Washington, everybody in Wall Street, so I can’t recommend them. I don’t know that big food stocks are good, but maybe equipment manufacturers would be a good bet.
TGR: Bob, do you think there’s any gold in Fort Knox?
BM: That’s a really good question. I hope there is. But I don’t know. The really interesting thing is nobody in the government has ever even pretended that they might do something with it. If it was me, I’d go count the bars; I’d figure out who owns them and I’d come up with some kind of currency tied to gold, you know—1 gram notes, and 5 gram notes and 10 gram notes. I think mathematically there probably isn’t, but I don’t know. Nobody knows.
TGR: And there’s no accountability?
BM: Ah, are you kidding? George Bush is president of the United States.
TGR: Yes, but soon he won’t be. You know, I’ll write a letter to Obama and ask him. Well, Bob, as usual, it’s always great to do these interviews. We appreciate it.
Bob Moriarty and his wife, Barb, launched 321gold.com as a private website seven years ago, when they were convinced gold and silver were at a bottom and wanted to help others understand what they needed to know about investing in resource stocks. Since then, they’ve introduced a second resource site, 321energy.com. Bob travels to dozens of mining projects a year. He was one of the first analysts to write about NovaGold, Northern Dynasty, Silver Standard, Running Fox and YGC Resources, among others. Prior to his Internet career, Bob was a Marine F-4B pilot at the age of 20 and a veteran of over 820 missions in Viet Nam. Becoming a Captain in the Marines at 22, he was one of the most highly decorated pilots in the war.
Visit The GOLD Report
The GOLD Report is Copyright © 2008 by Streetwise Inc. All rights are reserved. Streetwise Inc. hereby grants an unrestricted license to use or disseminate this copyrighted material only in whole (and always including this disclaimer), but never in part. The GOLD Report does not render investment advice and does not endorse or recommend the business, products, services or securities of any company mentioned in this report. From time to time, Streetwise Inc. directors, officers, employees or members of their families, as well as persons interviewed for articles on the site, may have a long or short position in securities mentioned and may make purchases and/or sales of those securities in the open market or otherwise.
Tuesday, December 23, 2008
Wednesday, December 17, 2008
Wednesday, November 12, 2008
Commodties: Recessions are Healthy
Recession wouldn't hurt commodities that much if governments didn't interfere in free market
Most Americans and people around the world need to get a better grasp of basic economics, as the ongoing boom/bust cycle which has lasted for decades is in motion again.
Much of this is happen because of the government attempting to "save" people from the pain of these times of adjustments and make it worse by their interference. This same old story is happening again in this period of time, and it always prolongs the pain and suffering, rather than help it.
Recessions can be likened to a human body that doesn't receive much nutritional input at all, and the body reacts by failing in some way that is painful. The body is speaking to us that there is excess somewhere, and we're doing something wrong.
To pour on more excess in order to temporarily take away the pain only prolongs the suffering. Yet that's what the government does when politicians try to buy votes by continually throwing money at problems.
Recessions are an event which tells the economy there are excesses going on, and that we need to change what we're feeding it if we want to retain a healthy economy.
In other words, a lot of people, businesses and banks have made mistakes when things were going good, and as a result a recession has occurred. Now that it's a reality, consumers and businesspeople need to make the types of adjustments that will make the economic body healthy again.
Things like building up their savings while cutting back on spending. Businesses will respond by cutting prices in order to spur spending; that makes things affordable for people buying not using debt (credit cards or home refinancing).
When things are forced to be liquidated, money is set free from poor investment decisions and put to work in more productive activities. Work production increases because people are concerned about losing their jobs. Businesses streamline operations and costs, and work hard to retain and grow their customer base by improving their products and services. If they don't, the company would go out of business, along with their jobs.
Government interference is an attempt to create an artificial economic surge, which ends up causing more damage than good, as the problems which caused the recession in the first place aren't dealt with and will extend the recession. This is what happened in the Great Depression in the U.S., which would have lasted only a couple years if the economy hadn't been tampered with.
In our current economic crisis, we are experiencing an unprecedented interference by governments around the world, and it looks like many more are ready to join the bandwagon. It's bizarre in that bad debt has been the main cause of the problem, and now more bad debt is being thrown at it.
What inevitably will happen is more money will be printed to pay off that debt, and inflation will spiral out of control. How long will it take to pay off the trillions being printed out of thin air? Nobody knows. The amount being put into the global marketplace is unprecedented.
That and the illusion things are getting better by businesses and consumers causes the same underlying problems to go on uncorrected.
So things will continue to go on in this cycle history repeats itself over and over again because the problems which caused the economic disease in the first place are doomed to happen again and again.
All of this happens because the government is attempting to keep people from experiencing pain. But like doctors will tell you: pain is necessary. If we don't have pain, we wouldn't know something was wrong with a particular part of our body.
Think of individuals who have bodies that don't feel pain, and when they're children they break their bones and injure themselves in extremely unhealthy ways because the body doens't send a signal of pain to communicate something excessive is going on.
That's what happens every time the government interferes and gives the economy the pain-free drug of more money. It keeps the pain from being felt or lessoned so people and businesses can keep on going without having to adjust their behavior.
We're doomed to see this type of economic response happen again and again until we learn and decide not to allow this to happen.
As for commodities, they'll participate in the decline in response to the misguided efforts of government interference.
Most Americans and people around the world need to get a better grasp of basic economics, as the ongoing boom/bust cycle which has lasted for decades is in motion again.
Much of this is happen because of the government attempting to "save" people from the pain of these times of adjustments and make it worse by their interference. This same old story is happening again in this period of time, and it always prolongs the pain and suffering, rather than help it.
Recessions can be likened to a human body that doesn't receive much nutritional input at all, and the body reacts by failing in some way that is painful. The body is speaking to us that there is excess somewhere, and we're doing something wrong.
To pour on more excess in order to temporarily take away the pain only prolongs the suffering. Yet that's what the government does when politicians try to buy votes by continually throwing money at problems.
Recessions are an event which tells the economy there are excesses going on, and that we need to change what we're feeding it if we want to retain a healthy economy.
In other words, a lot of people, businesses and banks have made mistakes when things were going good, and as a result a recession has occurred. Now that it's a reality, consumers and businesspeople need to make the types of adjustments that will make the economic body healthy again.
Things like building up their savings while cutting back on spending. Businesses will respond by cutting prices in order to spur spending; that makes things affordable for people buying not using debt (credit cards or home refinancing).
When things are forced to be liquidated, money is set free from poor investment decisions and put to work in more productive activities. Work production increases because people are concerned about losing their jobs. Businesses streamline operations and costs, and work hard to retain and grow their customer base by improving their products and services. If they don't, the company would go out of business, along with their jobs.
Government interference is an attempt to create an artificial economic surge, which ends up causing more damage than good, as the problems which caused the recession in the first place aren't dealt with and will extend the recession. This is what happened in the Great Depression in the U.S., which would have lasted only a couple years if the economy hadn't been tampered with.
In our current economic crisis, we are experiencing an unprecedented interference by governments around the world, and it looks like many more are ready to join the bandwagon. It's bizarre in that bad debt has been the main cause of the problem, and now more bad debt is being thrown at it.
What inevitably will happen is more money will be printed to pay off that debt, and inflation will spiral out of control. How long will it take to pay off the trillions being printed out of thin air? Nobody knows. The amount being put into the global marketplace is unprecedented.
That and the illusion things are getting better by businesses and consumers causes the same underlying problems to go on uncorrected.
So things will continue to go on in this cycle history repeats itself over and over again because the problems which caused the economic disease in the first place are doomed to happen again and again.
All of this happens because the government is attempting to keep people from experiencing pain. But like doctors will tell you: pain is necessary. If we don't have pain, we wouldn't know something was wrong with a particular part of our body.
Think of individuals who have bodies that don't feel pain, and when they're children they break their bones and injure themselves in extremely unhealthy ways because the body doens't send a signal of pain to communicate something excessive is going on.
That's what happens every time the government interferes and gives the economy the pain-free drug of more money. It keeps the pain from being felt or lessoned so people and businesses can keep on going without having to adjust their behavior.
We're doomed to see this type of economic response happen again and again until we learn and decide not to allow this to happen.
As for commodities, they'll participate in the decline in response to the misguided efforts of government interference.
Tuesday, November 4, 2008
Commodities: Jim Rogers - America is bankrupt
Commodities will increase in price as last bubble - US Treasury Bonds - bursts!
America is bankrupt, according to investment legend Jim Rogers. "The American government bonds are the world’s last bubble and the price of commodities has to increase."
Charismatic
The famous and charismatic investor, guru if you will, Jim Rogers, visited ABN Amro Netherlands last Friday. RTL Z was at ABN headquarters as well and recorded a number of statements, investment tips and opinions about the world economy.
Rogers
During the seventies Jim Rogers (66) managed a successful hedge fund with George Soros. After that, he traveled and went into commodities.
Last Friday Rogers went at it in front of a roomful of ABN private banking clients. We had an exclusive 15-minute interview with Rogers.
The most important points:
America is bankrupt. American government bonds are extremely overvalued. "The world’s last bubble." America is in debt for over 13.000 billion (13 trillion) dollar and adds a 1.000 billion dollar debt each year. According to Rogers this can not continue for long. Therefore, he went short in long-term US goverment bonds. “These bonds have peaked.” By the way: Rogers owns Dutch government bonds. “They are safe.”
"The fact that the dollar is gaining rapidly is only temporary", Rogers says. “All hedge funds were short on the dollar and because of the appreciation of the dollar there is a short squeeze for the dollar. Managers have to close thier positions and they have to buy dollars instead.” “This is temporary, within a year you have to get rid of the dollar. Fundamentally it is a drama.”
Commodities
Last year we spoke Rogers as well. At that time he advised us to invest blindly in commodities and agriculture. That was a bad advice, because Rogers’ commodities index (Rici) has fallen around 40 per cent last year, while ABN’s African Commodities Certificate dropped even from 11 euros to 5 euros during that time.
Oil
Rogers: "Whether oil costs 45 or 145 dollars, it doesn’t really matter. What does matter is that with oil, like with many other commodities, supply is decreasing while demand is increasing. In the long run this will result in a considerable increase in prices."
"The question is not if the price of a barrel of oil will increase again, but how expensive a barrel of oil will be eventually?"
"The oil supply will fall with 6 to 9 per cent each year, according to the IAE. The demand for oil will increase in China and developing countries. This has nothing to do with economy, the market is simple. It is simply the law of supply and demand."
High inflation
Rogers has been telling his commodity-story for a few years now. On Friday he sighed while saying: "People don’t understand that the commodity-market will be bullish, this will lead to high inflation."
Commodity prices will be a lot higher in the future than they are now.
"The world is going to change, there is no way around it. If you don’t understand that and you don’t adapt you will be suffering in five years. The Chinese see on TV how we live in the West. They want that too! That generates an enormous demand for products and materials."
"All countries in the world have been printing money, the United States in particular. That created a huge amount of money, resulting in the icing on the cake for commodity prices. But fundamentally you have to look at supply and demand."
The United States
Rogers has been negative about the United States for a long time. "You should be worried, America is out of control". The enemies of the United States are currently looking into how to profit from the weaknesses of the United States. When we asked him: Obama or McCain? he answered: "Neither of them. They are both turkeys, they take the wrong decicions."
Bernanke or Trichet?
Rogers is not a big fan of Bernanke, the president of the Federal Reserve. With a big smile Rogers tells us: "Bernanke will continue to print money until there are no trees left in America."
He is more positive about Trichet of the ECB. At least he knows what he is doing and what it’s all about.""
Banks
Rogers is fiercely against bailing out the banks. "That has never worked. Let them go bankrupt. Right now bad-managed banks are saved with money from good banks and from you and me. After that, the failing but nationalized banks are going to compete with the well-managed banks and they gain their market share. Ridiculous. The Bail-out plan is a disaster. In 1929 we had a recession but after the government interfered, it became a depression. You should not interfere."
Stocks
Rogers: "You can make good money with stock-picking, perhaps even more than with commodities, but only if you pick the right equity at the right moment. The stockmarket in the west is still too expensive. But the market is extremely volatile. In the five years to come you can earn money with trading ranges".
China and Russia
"Do know know what the problem is? When at work, the Chinese people ask when they can work and what they can do. We ask how day's off we have. That’s a big difference."
Rogers has bought Chinese equities in the last few weeks. "I don’t know if we have reached the bottom, but the market is low. I am a bad timer, by the way."
"My daughter is five years old and she speaks Mandarin fluently. After the dollar has collapsed as a world currency, there is only one currency that could take over that role: the renminbi. That could happen in 15 to 20 years. Other currencies cannot take over the role of the dollar, including the euro."
Russia
The former Soviet Union will be split up in even more smaller countries. And with that, there will be some wars."
"In Russia you are lucky if they kill you right away. You are unlucky if they first arrest you, then keep you in prisson for 15 years, torture you and kill you after that". He joked.
"What you see therby is that the Russians take their capital abroad, while the Chinese take it home."
City or countryside?
According to Rogers farmers have a bright future. "within a few years farmers will drive Maserati’s and all stockbrokers will be cabdrivers."
In Holland you could have a farm with a lot of land at the moment. “Agriculture has been out of vogue for 30 years, but now it will be hot because the demand for food will increase greatly."
“The stupidest thing you can do right now is to sell your farm and buy a house in the city instead. The housing market is in decline."
War
And finally: "If a war breaks out, it will begin in the Middle East. Amsterdam will be last. I would love to live here if the weather was any better... Amsterdam should have been 600 miles further to the south!"
The Treasury bond market continues to look like it's about to burst, and commodities will be the only place of safety left for investors.
America is bankrupt, according to investment legend Jim Rogers. "The American government bonds are the world’s last bubble and the price of commodities has to increase."
Charismatic
The famous and charismatic investor, guru if you will, Jim Rogers, visited ABN Amro Netherlands last Friday. RTL Z was at ABN headquarters as well and recorded a number of statements, investment tips and opinions about the world economy.
Rogers
During the seventies Jim Rogers (66) managed a successful hedge fund with George Soros. After that, he traveled and went into commodities.
Last Friday Rogers went at it in front of a roomful of ABN private banking clients. We had an exclusive 15-minute interview with Rogers.
The most important points:
America is bankrupt. American government bonds are extremely overvalued. "The world’s last bubble." America is in debt for over 13.000 billion (13 trillion) dollar and adds a 1.000 billion dollar debt each year. According to Rogers this can not continue for long. Therefore, he went short in long-term US goverment bonds. “These bonds have peaked.” By the way: Rogers owns Dutch government bonds. “They are safe.”
"The fact that the dollar is gaining rapidly is only temporary", Rogers says. “All hedge funds were short on the dollar and because of the appreciation of the dollar there is a short squeeze for the dollar. Managers have to close thier positions and they have to buy dollars instead.” “This is temporary, within a year you have to get rid of the dollar. Fundamentally it is a drama.”
Commodities
Last year we spoke Rogers as well. At that time he advised us to invest blindly in commodities and agriculture. That was a bad advice, because Rogers’ commodities index (Rici) has fallen around 40 per cent last year, while ABN’s African Commodities Certificate dropped even from 11 euros to 5 euros during that time.
Oil
Rogers: "Whether oil costs 45 or 145 dollars, it doesn’t really matter. What does matter is that with oil, like with many other commodities, supply is decreasing while demand is increasing. In the long run this will result in a considerable increase in prices."
"The question is not if the price of a barrel of oil will increase again, but how expensive a barrel of oil will be eventually?"
"The oil supply will fall with 6 to 9 per cent each year, according to the IAE. The demand for oil will increase in China and developing countries. This has nothing to do with economy, the market is simple. It is simply the law of supply and demand."
High inflation
Rogers has been telling his commodity-story for a few years now. On Friday he sighed while saying: "People don’t understand that the commodity-market will be bullish, this will lead to high inflation."
Commodity prices will be a lot higher in the future than they are now.
"The world is going to change, there is no way around it. If you don’t understand that and you don’t adapt you will be suffering in five years. The Chinese see on TV how we live in the West. They want that too! That generates an enormous demand for products and materials."
"All countries in the world have been printing money, the United States in particular. That created a huge amount of money, resulting in the icing on the cake for commodity prices. But fundamentally you have to look at supply and demand."
The United States
Rogers has been negative about the United States for a long time. "You should be worried, America is out of control". The enemies of the United States are currently looking into how to profit from the weaknesses of the United States. When we asked him: Obama or McCain? he answered: "Neither of them. They are both turkeys, they take the wrong decicions."
Bernanke or Trichet?
Rogers is not a big fan of Bernanke, the president of the Federal Reserve. With a big smile Rogers tells us: "Bernanke will continue to print money until there are no trees left in America."
He is more positive about Trichet of the ECB. At least he knows what he is doing and what it’s all about.""
Banks
Rogers is fiercely against bailing out the banks. "That has never worked. Let them go bankrupt. Right now bad-managed banks are saved with money from good banks and from you and me. After that, the failing but nationalized banks are going to compete with the well-managed banks and they gain their market share. Ridiculous. The Bail-out plan is a disaster. In 1929 we had a recession but after the government interfered, it became a depression. You should not interfere."
Stocks
Rogers: "You can make good money with stock-picking, perhaps even more than with commodities, but only if you pick the right equity at the right moment. The stockmarket in the west is still too expensive. But the market is extremely volatile. In the five years to come you can earn money with trading ranges".
China and Russia
"Do know know what the problem is? When at work, the Chinese people ask when they can work and what they can do. We ask how day's off we have. That’s a big difference."
Rogers has bought Chinese equities in the last few weeks. "I don’t know if we have reached the bottom, but the market is low. I am a bad timer, by the way."
"My daughter is five years old and she speaks Mandarin fluently. After the dollar has collapsed as a world currency, there is only one currency that could take over that role: the renminbi. That could happen in 15 to 20 years. Other currencies cannot take over the role of the dollar, including the euro."
Russia
The former Soviet Union will be split up in even more smaller countries. And with that, there will be some wars."
"In Russia you are lucky if they kill you right away. You are unlucky if they first arrest you, then keep you in prisson for 15 years, torture you and kill you after that". He joked.
"What you see therby is that the Russians take their capital abroad, while the Chinese take it home."
City or countryside?
According to Rogers farmers have a bright future. "within a few years farmers will drive Maserati’s and all stockbrokers will be cabdrivers."
In Holland you could have a farm with a lot of land at the moment. “Agriculture has been out of vogue for 30 years, but now it will be hot because the demand for food will increase greatly."
“The stupidest thing you can do right now is to sell your farm and buy a house in the city instead. The housing market is in decline."
War
And finally: "If a war breaks out, it will begin in the Middle East. Amsterdam will be last. I would love to live here if the weather was any better... Amsterdam should have been 600 miles further to the south!"
The Treasury bond market continues to look like it's about to burst, and commodities will be the only place of safety left for investors.
Wednesday, October 22, 2008
Commodities: Jim Rogers - In the Footsteps of Japan
Jim Rogers - America Following in Footsteps of Japanese Bailout Mistake
On CNBC's Squak Box Wednesday, Jim Rogers reiterated his call for Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to resign for artificially undergirding poor performing "zombie banks" that should have been allowed to fail.
Citing the debacle of the Japanese government 18 years ago when they made the same mistake, Rogers said their stock market is still 75 to 80 percent lower than it was then.
The Japanese government decided at that time they weren't going to let poorly run banks fail, and they've reaped the consequences of those actions ever since. That could very well be the fate of the U.S. in the years to come.
For now, along with the Swiss franc and Japanese yen, Jim Rogers is continuing to invest in agriculture, and also other strong performers like Asian water treatment companies.
As Rogers points out, we shouldn't go in the failed footsteps that have kept Japan in a state of no growth for decades.
Other Jim Rogers Articles:
Jim Rogers: We're Facing an "Inflation Holocaust"
Jim Rogers: History Reveals Bailouts do more Harm than Good
Jim Rogers: Government Bailout a Huge Mistake
Jim Rogers: People Don't Understand Commodities
Jim Rogers Says Commodities Should Come Back Strongly
On CNBC's Squak Box Wednesday, Jim Rogers reiterated his call for Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to resign for artificially undergirding poor performing "zombie banks" that should have been allowed to fail.
Citing the debacle of the Japanese government 18 years ago when they made the same mistake, Rogers said their stock market is still 75 to 80 percent lower than it was then.
The Japanese government decided at that time they weren't going to let poorly run banks fail, and they've reaped the consequences of those actions ever since. That could very well be the fate of the U.S. in the years to come.
For now, along with the Swiss franc and Japanese yen, Jim Rogers is continuing to invest in agriculture, and also other strong performers like Asian water treatment companies.
As Rogers points out, we shouldn't go in the failed footsteps that have kept Japan in a state of no growth for decades.
Other Jim Rogers Articles:
Jim Rogers: We're Facing an "Inflation Holocaust"
Jim Rogers: History Reveals Bailouts do more Harm than Good
Jim Rogers: Government Bailout a Huge Mistake
Jim Rogers: People Don't Understand Commodities
Jim Rogers Says Commodities Should Come Back Strongly
Tuesday, October 14, 2008
Commodities: Plunge in Copper Prices
In spite of all the enthusiasm engendered by those who misguidedly think the government interference in the markets through the bailout plans will change the realities of the marketplace, all you have to look at the base metal commodity copper to see the folly in that belief.
Since copper is one of the more important commodities, being used in so many applications, it is definitely a bellwhether as a key measurement of the health of the economy.
With that in mind, we can see from the charts below that over the last year demand has slackedned, and the price reflects that accordingly; not only in America, but across the world.
While copper enjoyed a little temporary jump over the last 24 hours, it feel last week to a low of $2.12 a pound. It's been about 3 years since we've seen prices this low.
Since copper is one of the more important commodities, being used in so many applications, it is definitely a bellwhether as a key measurement of the health of the economy.
With that in mind, we can see from the charts below that over the last year demand has slackedned, and the price reflects that accordingly; not only in America, but across the world.
While copper enjoyed a little temporary jump over the last 24 hours, it feel last week to a low of $2.12 a pound. It's been about 3 years since we've seen prices this low.
30-day Copper
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/base/spot-copper-30d.gif)
The point? Don't let temporary fixes and the governments around the world attempting ease our minds as a reason to think this is going to change the economic realities we currently live in. It'll take years to flush out the problems in the system, and throwing money at the problem historically has fueled the fire, rather than help put it out.
60-day Copper
|
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/base/spot-copper-60d.gif)
Copper is a key measurement in the demand for products around the world, and a bellwhether for commodity demand in general, as it's used in cars, new homes and appliances, along with many other products. And as you can see from the charts, demand has been falling for some time.
1 Year Copper
|
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/base/spot-copper-1y.gif)
Monday, October 13, 2008
Dow Jones in Largest Point Gain in History
The Dow Jones Industrial Average surged up by 936 points Monday, the largest gain in the history of the index. As far as percentage goes, the 11 percent upward move was the second-largest in the history of the Dow, and the largest since March, 1933.
Much of the positive move is credited to the Treasury Department giving out some details on the proposed "rescue plan." Of course the horrible performance of the Dow last week guaranteed there would be a significant rebound soon. Still, it was an impressive move by any standard of measure.
Another significant factor in the record-breaking upswing was early announcements that banks in Europe would start investing in troubled banks as well. The groundswell spread from there.
The Dow closed the session at 9387.61. Also enjoying he up day was the S&P500 Index, which swelled by 11.6 percent, ending the day up by 104 points.
The Nasdaq also moved up at similar levels, finishing the day up 195 point, or 11.8 percent.
While everyone was exuberant over the news, we do have to realize that the market is going to go up and down in large swings over the near term, and will have to get used to that as a temporary way of economic life.
Much of the positive move is credited to the Treasury Department giving out some details on the proposed "rescue plan." Of course the horrible performance of the Dow last week guaranteed there would be a significant rebound soon. Still, it was an impressive move by any standard of measure.
Another significant factor in the record-breaking upswing was early announcements that banks in Europe would start investing in troubled banks as well. The groundswell spread from there.
The Dow closed the session at 9387.61. Also enjoying he up day was the S&P500 Index, which swelled by 11.6 percent, ending the day up by 104 points.
The Nasdaq also moved up at similar levels, finishing the day up 195 point, or 11.8 percent.
While everyone was exuberant over the news, we do have to realize that the market is going to go up and down in large swings over the near term, and will have to get used to that as a temporary way of economic life.
Friday, October 10, 2008
Commodities: Where Jim Rogers is Putting His Money
The commodity Jim Rogers considers important: currencies
Last post we talked about Jim Rogers' view on the interference by governments which will inevitably lead to inflation. In this case Rogers is calling it an "inflation holocaust."
So what is Jim Rogers doing at this time to make some money? He's continuing with a couple of his favorite currencies. Rogers is investing his large amount of cash in the Swiss franc and Japanese yen. He also said he's continuing to invest in agricultural products.
![[Most Recent Exchange Rate from www.kitco.com]](http://www.weblinks247.com/exrate/24hr-chf-small.gif)
Agricultural products have also participated in the reason plunge in commodities, as demand across the world has fallen because of economic concerns and some of the high prices in connection with the former demand.
![[Most Recent Exchange Rate from www.kitco.com]](http://www.weblinks247.com/exrate/24hr-jpy-small.gif)
This will probably change around fairly soon as no matter what happens with metals and other commodities unrelated to gold or food, agricultural products, as well as gold, will continue to rise in price in the months ahead, as inflation rises in response to the misguided attempts by the U.S. government and others around the globe that continue to interfere with the markets.
Last post we talked about Jim Rogers' view on the interference by governments which will inevitably lead to inflation. In this case Rogers is calling it an "inflation holocaust."
So what is Jim Rogers doing at this time to make some money? He's continuing with a couple of his favorite currencies. Rogers is investing his large amount of cash in the Swiss franc and Japanese yen. He also said he's continuing to invest in agricultural products.
Agricultural products have also participated in the reason plunge in commodities, as demand across the world has fallen because of economic concerns and some of the high prices in connection with the former demand.
This will probably change around fairly soon as no matter what happens with metals and other commodities unrelated to gold or food, agricultural products, as well as gold, will continue to rise in price in the months ahead, as inflation rises in response to the misguided attempts by the U.S. government and others around the globe that continue to interfere with the markets.
Friday, October 3, 2008
Wednesday, October 1, 2008
Jim Rogers: History Reveals Bailouts do more Harm than Good
The assertion by Jim Rogers that government intervention in the market will cause more pain then help is absolutely correct. Interference in the markets during the Great Depression, in reality, caused the Great Depression. Honest economists say it would have only lasted a very short time without interfence from the government.
If there hadn't been government interference during that time, the marketplace would have cleaned itself out and lasted only a very short time.
Our present situation
"Capitalism is where the market does its work. These guys [Alan Greenspan and Ben Bernanke], for the last 8 to 10 years, have refused to let the market do its work to clean itself out," Rogers said. "You let things collapse…and you have a clean growth afterwards."
The obsession by the professional politicians to become heroes in the eyes of the easily swayed population will eventually be destructive rather than helpful. They're doing it because they hope by time the next election cycle comes around people will forget what happened and vote them back into office.
Either that, or things will be so much worse than they are now because of government action, that politicians will be able to bluff their way through and make themselves look like they're fighting for Americans even more, even though they've made the problems worse.
It's unfortunate that Americans overall don't understand why these problems are happening and the source of them. Until we become more economically literate, the boom and bust cycles will continue as government continues to make problems worse by inserting their abusive policies into the marketplace.
As far as Rogers and what he's investing in now, he says commodities will continue to offer superior returns over stocks in the near future, and he's also investing in China as it loosens up its monetary policy.
Tuesday, September 30, 2008
Some Say Wait on Commodities Till Things Settle Down
The volatility in the economy, especially in relationship to base metals, gold and oil, have some experts saying investors should wait for a few days until things unwind and there's more clarity in the overall picture. I also think that's the best thing to do in current circumstances.
There are too many variables not usually connected to the market that make things at this time more unpredictable than usual.
With fear being a main driver at this time, we have to be cautious in what we do, as the rejection of the bailout package in America suggests.
Fear is being used as a tool by some now to get things done in the way they want them done. With this in mind, it makes it impossible to know with any reasonable accuracy in the short term which way things will go.
Even many analysts, normally glad to be in the spotlight, were quiet on Monday, as anything they say could go the opposite direction with ease.
I would wait a few days to allow things to settle down.
There are too many variables not usually connected to the market that make things at this time more unpredictable than usual.
With fear being a main driver at this time, we have to be cautious in what we do, as the rejection of the bailout package in America suggests.
Fear is being used as a tool by some now to get things done in the way they want them done. With this in mind, it makes it impossible to know with any reasonable accuracy in the short term which way things will go.
Even many analysts, normally glad to be in the spotlight, were quiet on Monday, as anything they say could go the opposite direction with ease.
I would wait a few days to allow things to settle down.
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