Dipping In Silver

"I've spent a lot of time pitching gold, but not enough on silver. It's been on fire lately. The ETF "SLV" provides a nice purchase option."

Random Roving, October 4, 2010

SLV made over a 100% gain after that post.  The "slope of the sand pile" then became a little too steep.  The naysayers say that the commodities run is over.  I disagree.  The Dow/Gold Ratio indicates that we're in for several more years of precious metal price growth.  I bought some more SLV today on this nice dip.



Silver ETF "SLV"



The Cooperative Metal

Gold has now sustained its price above the psychological barrier of $1500/ounce.  At this present moment, it's selling for $1544/ounce.  Unbelievable to some.  Right on track for others.  The best part about gold to date is that it's cooperated so well from a technical chart perspective.  It builds nice long bases and conforms to pattern prediction such as the "reverse head and shoulders".  Of course, this cooperation can change tomorrow.  There is concern as Robert Prechter warns that "everything is up".  Commodities and equities were moving in similar tandem leading up to the 2008 crash.

My recent picks were quite good it I don't say so myself.

Gold ETF "GLD" with recent buy points.

Buy On The Cheap

"Most Americans know little about gold. While they sleep, we buy on the cheap."
Sean Broderick, Weiss Research

Kinda Corny

"The smallest corn inventories in 37 years are a sign farmers around the globe are failing to produce enough grain to meet rising consumption, even as planting expands and food prices surge."
Source: Bloomberg

"Commodities gone wild: Things will rise rapidly in price....food, fuel, gold, oil, grains, uranium, copper."
Random Roving, January 1, 2010

And yes, there is a corn ETF (symbol CORN).

Corn ETF

A Dow Gold Ratio Update

I've made numerous posts regarding the Dow/Gold Ratio.  Here's some updated charts.  The cycle quietly continues its trend like the "boiling frog".  As a reminder, it's been a "decade of zero".  My February, 2002 gold pitch is still holding strong.  I'm sticking with my prediction of a ratio equal to 1 at the final bottom.

Dow/Gold Ratio (Source: Fred's Intelligent Bear)

Dow/Gold Ratio (Source: Fred's Intelligent Bear)

Source: http://home.earthlink.net/~intelligentbear/com-dow-au.htm

Golden Perspective

"From the first moment I saw Ron Paul on C-SPAN (at some point before the Internet Boom) I felt that he must have been sent to Earth from another planet. How else can you account for such honesty, determination, and courage when faced with the doublespeak from financial officialdom? To just take one example of Paul’s determination to call the emperor naked, in February of 2000 Paul challenged Sir Alan Greenspan regarding increases to M3 which at the time had well exceeded the Fed’s own targets. Greenspan responded with some sort of excuse that money is difficult to define so Paul shouldn’t worry about one definition of it, but Greenspan was forced to admit that many of the various monetary aggregates used by the Federal Reserve have left something to be desired. Without missing a beat, Ron Paul concluded his questioning to Greenspan with the quip, “So it's hard to manage something you can’t define.” (You will note that the Fed stopped publishing M3 data around 2006).  Representative Paul’s honesty- almost childlike in its probity- is one of many characteristics associated with those from a planet far, far away: Planet Goldbug. Other character traits include fierce independence, skepticism toward any dogma or orthodoxy, and a defiant desire to wake earthlings up from their stupor regarding various lies on planet Earth. Although many residents from Planet Goldbug believe in the power of reason, they understand the rampant and manipulative abuse of reason by many in authority on this planet. So I have always felt that Goldbugs by definition have respect for heterodox, mystical, or hidden forms of knowledge. Sometimes this respect for heterodox thinking has led the opponents of honest money to denigrate buying gold as a “religion” (by which it is taken to mean that such investing is irrational.) However, I am just fine with the apparent accusation that owning precious metals transcends conventional definitions of reason. I take my cue from the gentleman who coined the term Goldbug, Edgar Allen Poe, in this regard. Poe belonged to the great tradition of nineteenth century romanticism, a tradition which understood the complex, contradictory, and humbling aspects of human consciousness.  Poe’s short story with the title The Gold-Bug (published in 1843) relates the supposed story of a man, Le Grand, who was bitten by a bug made of gold. The bite gives Le Grand supernatural power- clairvoyance really- to find the long-lost treasure of Captain Kidd (deposited somewhere along the southeast coast of the United States) in order to restore the Le Grand family fortune. At the end of the story, Poe has Le Grand relate to his friend that the power of the Goldbug was not what led to the treasure, but rather Le Grand’s own reasoning powers, or ratiocination. But in keeping with Poe’s usual portrayals of the mystical and terrific in his stories of ratiocination (meaning ones ability to reason in a superhuman manner) the reader is left wondering if it wasn’t in fact the transcendent knowledge of the Goldbug which aided Le Grand after all. A large part of Poe’s writing leaves room for intuition and magical insight, implying that these are as much a part of reason and intelligence as anything else. An important point to keep in mind the next time someone derides gold and silver investing as a “religion.”  Part of the reason why Goldbugs are often mocked as “conspiracy theorists” is due to their over tuned ratiocination- their well honed skeptical stance, attempting to uncover the hidden truths in this world. Honesty and candor- practiced to perfection by people like Representative Paul- are values from this different, golden planet. And when those values are betrayed, Goldbugs speak up. There are several other distinct, unusual traits possessed by Goldbugs, as well. One is faith in the autonomy of the individual- no matter how difficult it may seem to give the individual power over his/her own life. It may be mocked as naïve, but the alternative to faith in the primacy of the individual is the world of Big Brother. No man should be king, and no expert is qualified enough to dictate to others how to live. Freedom may be scary, but Goldbugs thrive in the spirit of embracing self-sufficiency, or independent living, and demand that individuals accept responsibility for their actions. (I know, another very corny platitude.) Governments by definition lie to their subjects-- I mean citizens. It is the same now as it has ever been. Power corrupts and absolute power makes men not only corrupt but stupid as well. I could go on and on, but you get the idea."
Ryan Jordan
The entire article:
http://financialsense.com/contributors/ryan-jordan/greetings-from-planet-goldbug

Dead Cat Dow Bounce

I received this video from an anonymous source. Great stuff.

A Ten Year Look

It's no secret that I've been touting gold and "black gold" since 2002. I'm still amazed how many people feel that the contraction in their 401k's started in October 2008. Like the "boiling frog", it started very slowly and quietly in late 1999.

I've presented the DJIA-Gold Ratio numerous times that clearly illustrates a shift from equities to commodities in late 1999. 1999 you say??? Yes, I believe that this cycle rolled over in late 1999. The chart below presents these facts very clearly.

Chart Source: http://www.businessinsider.com/heres-what-the-record-run-in-silver-means-2010-9

Burglars Catching The Trend

It appears that the "bad guys" are catching the trend.
"A New York man, who is facing a federal conspiracy charge for allegedly committing 37 gold-related burglaries in Northern Virginia last year, was sentenced Thursday to a year in jail for an incident in which he broke into a house, was confronted by a resident, fled and took nothing.  Dagoberto Soto Ramirez, 27, was arrested along with his wife, Melinda Soto, 34, and a third New Yorker, Francisco Gray, 39, last November, and charged with a string of burglaries in Fairfax and Loudoun counties, all targeting Indian and South Asian residents who kept gold in their houses."
Source: Washington Post

A Shift Toward The Big "D"

"In my October 2008 post, Four Potential Outcomes, I presented what I believed to be the four potential outcomes in the near future. Outcome #1, deflation, appears to have already swiftly occurred devasting asset prices in all sectors including commodities. The "missing piece" is that from an Austrian economics perspective, credit and money expansion need to deflate also. As we know, the opposite is occurring on a staggering level."
Random Roving, March 26, 2009

Well the chart below provides the "missing piece".  Money supply is tanking rapidly.  An Austrian economist would declare that deflation is here.  That would mean a decline in the value of everything. 

Source: Shadowstats.com

Woulda Coulda Gold Shoulda

The pre-blog "gold emails" from 2002/2003 are still looking mighty fine! I present these not to boast, but to say "it's still not too late!". When it hits $2000/ounce, you're going to say "Woulda Coulda Gold Shoulda!".

Emails from the pre-blog days.

Wealth Preservation - The Road Ahead

The 80's and 90's were all about wealth accumulation. Now with a change of cycle, one must ask the question, "how do I preserve what I have?".

"The question that remains, if you get out of stocks and property, how do you hold your wealth? I favor a risk-averse approach. I would not hold debt instruments, and I would steer clear of most stocks, and be very suspicious of high dividend stocks, which may find it tough to maintain cash flow for dividend payments, if their cash flows wane in a shrinking economy. We are coming into a time when "cash will be king" once again. But cash must be held in sensible currencies, and in safe institutions. I would avoid stashing money in currencies of debtor countries which may be headed towards default. And bonds of those countries are even worse, since capital values will fall, if they indulge in aggressive money printing. This leaves the savings nations, like China and some other countries in Asia (like Singapore), and some special cases, like Norway, which have little or no debt, and big oil savings. I have some money held in US dollars for the time being, since that currency is benefiting from an unwind of dollar-carry trades as stocks and other assets are sold. We saw a similar upthrust in the dollar, when de-leveraging hit in 2008. When the dollar begins to falter, and commodities begin to bottom out, I may consider moving more deeply into the currencies of commodity exporting countries, like Canada and Australia. Even now, I continue to hold a decent part of my cash in C$. There is certainly a role for Gold in a low risk portfolio, since it can be regarded as the only "currency" which is not someone's else's liability. As long as it is held safely in physical form, there is zero risk of a credit default. You are not relying on someone's willingness to pay, or their vagaries of cash flows from tax collections or volatile business activities. I will take some risk, but it will be in a measured way involving a minor part of my portfolio in leveraged instruments like puts on the general indices and volatile junior mining shares. This way, I aim to protect the bulk of my portfolio, by leaving it invested in save haven instruments, but I may still be able to grow the size of my portfolio, by investing a minor part of the total portfolio in high-geared "bets" when opportunities appear."
Michael Hampton, AKA Dr.Bubb - February 10, 2010

The entire article:
http://financialsense.com/fsu/editorials/hampton/2010/0210.html

The Next Commodity Boom

"The recent bout of low commodity prices and the continuing weakness of the financial system are setting the stage for another, even bigger commodity boom. For a short while, high commodity prices had been drawing capital into commodity production, but that stopped when prices fell. Now, while government bureaucrats are funneling hundreds of billions to weak banks, sick insurance companies, clueless automakers, and the politically well connected, the capital needed for new mines, pipelines, drilling projects, refineries, and crops has dried up. There will be consequences. When the economy crawls out of the current recession, today’s paucity of investment in commodity infrastructure will leave us with meager supplies and roaring prices."
James Quinn - July 2009
The entire article:
http://theburningplatform.com/economy/bet-on-stuff-1

The Switch Is On

"Since March of this year alone, the U.S. dollar has plunged 14% and the Reuters-CRB index — a measure of the price we pay for oil, gas, food and other major basic necessities of life — has surged 30%."
Martin Weiss - Weiss Research Inc.

Puplava On Inflection Points

In the DJIA/Gold Ratio series I often refer to the turning points as inflection points. Below is an interesting perspective from Jim Puplava that I emailed to many in November, 2004. He was right "on the mark".
........................................................................................................
"We are now at an historic inflection point in history—with no turning back the clocks. Had our political leaders from Reagan and Clinton to Bush I and II been more fiscally responsible, we wouldn’t be facing the largest monetary storm in history. That monetary storm lies directly in front of us. Bernanke and Greenspan may summarily dismiss high oil prices, but for most of us who live in the real world, higher energy costs are going to be inflationary. Investors need to start preparing for $100 oil. Higher oil prices will eventually permeate all aspects of economic life, driving the costs of basic necessities higher. In the future you may be able to buy a flat screen TV, DVD player or personal computer at a cheaper price, but the cost of everything else will be rising. The things that you need in everyday life will all be going up: your grocery bill, your utilities, the gasoline that powers your car, visits to your doctor or dentists, tuition, and lastly, taxes."

"The economy will vacillate between periods of deflation and inflation, with each recession bringing forth a temporary reprieve from what will be an inexorable rise in the general rate of inflation. Eventually wars, deficit spending, a rising mountain of debt, and peak oil will lead towards hyperinflation in the United States. Already, the U.S. is exhibiting many of the pre-hyperinflationary conditions that are so prevalent in many South American and Eurasian economies."

Evidence points to several factors that will lead us there:
-Large budget deficits
-Deteriorating international trade balances
-An eroding international currency
-Eroding financial confidence
-Growing protectionism
-An expanding war on terrorism and the need for security
-Growing entitlements

"Whether the U.S. experiences hyperinflation or simply higher inflation rates will be dependent on the political will of its leaders to rein in spending and bring its fiscal imbalances into order. At this point, it appears hopeless with over $51 trillion in unfunded Social Security, Medicare, and pension liabilities now growing at over $2 trillion a year. History teaches us that debt imbalances of this magnitude are always inflated away."

"An expanding money supply, abundant credit, and negative interest rates are inherently inflationary. When investors realize that they can borrow money at next to nothing rates and invest that money in hard assets and get an immediate return, the demand for such assets rises. This leads to higher prices, asset bubbles or inflation. This is what is going on now in the financial markets, the real estate market, and in the commodity markets. A flood of money and credit throughout the world is driving asset bubbles and inflation. Central banks can create money and credit, but they are unable to direct where that money flows. One of the chief characteristics of inflationary cycles is asset bubbles. First, it was stocks in the 1990s. Then, it was real estate and mortgages in this new century. It is now working its way through to the commodity markets. The new bull market in commodities will dominate the financial markets the balance of this decade and the next."

"As debt levels rise in the U.S. at unprecedented levels, the Fed will increasingly become impotent. Unlike Volcker in 1979, today’s U.S. economy is far more debt laden. Because of this huge debt overhang and the huge asset bubbles that support it, the Fed’s options are limited. The Fed simply can’t afford to raise rates in the same decisive and single-minded way that Volcker did during 1979-1982. The Fed’s new mantra is "measured." This means that real interest rates will remain negative for a long period of time."

"No matter how high inflation finally gets, it is abundantly clear that the financial markets are undergoing a paradigm shift from a bull market in paper to a bull market in commodities or "things" as I like to call them."

"Investors will need to focus on a different class of assets. Real assets are going to be the big winners in this new emerging bull market. Commodities are becoming "The Next Big Thing." Precious metals, base metals, energy, water, and food are where the next fortunes are going to be made. Precious metals have, will, and are going to lead this new bull market. It is in regard to precious metals that I devote the remainder of this essay."

Jim Rogers On Commodities

Jim Rogers has long been a commodities bull. I've enjoyed reading two of his books on the subject matter. He compares the recent commodity correction to the 1987 stock crash. He describes it as a correction in an overall bull market.

"Everything is in a period of forced liquidation, so everything is going down with no regards to the fundamentals." Jim Rogers

An informative interview:
http://www.youtube.com/watch?v=Kggi97JFulE&feature=related

The Next Big Thing....Things!

a interesting new article at financialsense.com.....

Given all of these uncertainties, where should one invest this year? I believe the "Next Big Thing" is going to be in "things" such as commodities. The big winners in this decade are going to be gold, silver, and energy. Other commodities from sugar, coffee, cocoa and grains, to other soft goods will also be winners. Commodity prices will rise because of two trends: a declining US dollar and rising populations and industrialization of developing economies.
The time for paper is over and the rise of "things" has just begun. Another trend that is taking place is what Marc Faber calls the reemergence of the emerging economies. Economic power is moving from the West to the East and this trend is irreversible.