we have come to a point that unless there are drastic actions taken by our leaders, our great nation is in for a systemic failure. I base this feeling I have on watching the tape and noticing a pattern of heavy selloffs, large purchases of gold (NYSE:GLD) and silver (NYSE:SLV), a constant bombardment from the media that we are in serious trouble with the amount of debt we have amassed, growing unemployment, low wage menial jobs and big banks teetering on the brink. To emphasize my point on the banks we need look no further than Bank of America’s CEO Brian Moynihan saying that the bank was well capitalized and then selling Warren Buffet 5 billion dollars of preferred shares of stock. “Something ain’t right in Kansas, Dorothy!” [Read: Precious Metal ETFs: Gold & Silver Price Targets For Year End Continue To Rise]
A pervasive feeling of doom has crept into the very fabric of our society. Worst of all our people have lost all respect for our leaders and have come to the realization that the partisanship that has taken hold of our government has made our representatives incapable of dealing with the mountain of problems that face our nation.
While I feel that the average citizen (not my readers) is woefully incapable of grasping the insolvency that faces our nation. I think people innately sense that something is very wrong but are unable to articulate the problem and worse have no idea how to fix it. The sad fact is that our once great nation is moving into an unavoidable systemic failure. Most people feel that our representatives and the banks have neither the will nor the solutions for dealing with the Armageddon that is facing our nation. [Read: Could This Be The Beginning Of A Recession?]
Under the era of President Reagan we started the deregulation of the banks. This philosophy hit its crescendo under President Clinton who proclaimed that every American should own his or her own home. The realization of the American dream of home ownership, however was a ruse perpetrated by the greedy bankers to increase the annual bonuses. This was not capital creation – it was capital destruction. The apex of capital destruction has taken place over the last three or four years under the guise of quantitative easing. Credit dispensation and monetary growth (debasement) was doled out under the illusion of coming to grips with controlling the problem. This was a classic case of the tail wagging the dog. If you give a homeless person money, he will buy some coffee and a sandwich but not much more. I think this is a perfect analogy of how the middle class has been treated. They have been given just enough money to spend.
The public has been told by the media that the cause of business’s lack of desire to spend and hire is the lack of confidence that has been shown as people would rather pay off their debt rather than go on a spending spree to Banana Republic. Sadly the true reason that businesses don’t spend on creating wealth and jobs is the broad deep insolvency and poor business risk which has emanated from the poor housing market, the failed banking sector and the woeful industrial base. [Read: Think Gold Is Not Manipulated? Think Again!]
So what’s in store for tomorrow? Dr. Bernanke gives his speech at Jackson Hole and every talking head has a different spin but I am sure he will simply say that if and when stimulus measures are needed he I is ready to step up. In other words he will say nothing. Gold and silver sure acted like that was what he intended to say today. It was only 3 short days ago that we were in fill blown correction mode.
While Gold hit an all time high on Tuesday, a fill blown correction lasted for two whole days as the SPDR Gold ETF (NYSE:GLD) closed at $172.36 yesterday and silver also put in a very strong showing. As it closed it staged a tremendous show of strength and closed up $1.28 at $40.00. The Sprott Physical Silver Trust ETF (NYSE:PSLV) closed up 3.45% at 19.17 and ProShares Ultra Silver ETF (NYSE:AGQ) closed up 5.65% at 220.27 or up $11.70. This does not feel like a sell off to me. I will stick to my guns and call for gold at$2,200.00 by January and silver at $55.00 – $60.00 with an outside chance we may see $100.00 silver. [Read: Gold Investing: Can Gold’s Run Be Stopped?]
In conclusion, I wanted to share something I learned. My brother and I had a conversation today and we came to the conclusion that silver was more like money than gold. While silver has always been called poor man’s gold, remember I have often written that I was a gold bug since I was 8 years old and since I am now 58 I had many years of going to the store for my mother with two quarters for milk and bread and yes – those quarters were silver. Neither my brother nor I could ever remember in our lives using gold as money but using silver as money was just a plain common occurrence. I am long GLD, IAU, PHYS, UGL, SLV, PSLV, and AGQ until I see a real sell off I will remain so. As long as there is runaway debt contagion and worthless paper money I will continue to hold my physical gold and silver ETF’s.
I have an MBA in Finance and 38+ years of market experience. In 2009, I knew the market was seriously oversold and committed a serious amount of capital to the market. Needless to say things went quite nicely but I always remebered 2 important things. Hubris equals failure and the market can remain illogical longer than you can remain solvent. Please feel free to email me at firstname.lastname@example.org.