The Age of Entitlement and Need to Own Gold (GLD, SLV, SGOL, IAU, AGQ)
Bob Kirtley: “Cassius suggests that the people get the government they deserve”.
This can be a good thing, if (and it’s a big “if”) the people do their homework and vote based on facts, not on rumor or innuendo – Shakespeare in Julius Caesar
Many of our leaders, writers and philosophers have said similar things down the years and it would appear to be apt today. It’s time for us to admit that we vote for those who offer us the most regardless of how it will be paid for. As voters we are all for getting the economy sorted so long as it doesn’t involve our entitlements being diminished in any way at all. After all we have become accustomed to these benefits and our expectations have been raised by the political elite of all ideologies to ever increasing heights that are actually way beyond our pay station. To win an election the politicians need to be popular and they do that by promising the voter a better future without the voter having to exert himself too much. Alas we continue to fall for this three card trick in the vain hope that it will be alright on the night. Fat chance!
In the United Kingdom the Brits were intoxicated by the Blair/Brown ticket and thirteen years later the chickens came home to roost with a new coalition government implementing a program of austerity bringing with it the misery we have seen all across the southern nations of the European Union. France has elected François Gérard Georges Nicolas Hollande on a promise of a better future and already his popularity has fallen dramatically as the French electorate realizes that he just cannot deliver, further more France now appears to be heading towards its own fiscal cliff.
On the subject of fiscal cliffs the United States has its very own cliff looming with an ETA of 01 January 2013. One gets the feeling that this won’t be the best start that we have had to a new year. The reelection of President Obama means we will be in for more of the same with the only difference being that the president will not be standing for office again, so being mister popular carries less weight than it did prior to the election. So his policies of tax, borrow, print and spend will remain intact as that is what he does. More and more people will become dependent in one form or another on the government benefits and less dependent on their ability to stand on their own two feet and grasp the problem by its throat and wring the life out it. Benefits for the needy were a good thing many years ago, but today they have grown massively into a life style choice that is bleeding the very life out any economic recovery. Until government spending is cut and cut hard we can only expect the economy to stagger from one crisis to another begging for the next stimulus package which it is now addicted to.
It really is a very sad to see the United States, Europe and Britain in this mess with the only solution on the table being an increase in liquidity. This is not the remedy for insolvency and it does not improve the health of the economy.
We also have the sword of Damocles being lifted from Ben Bernanke’s head so he now has a free reign to run those printing presses as he wishes.
These two events will conspire to drive the dollar into the end zone; its demise along with a number of other fiat currencies is now almost a sure thing. In our opinion the main beneficiaries from the loss of the dollars buying power will be hard assets such as gold and silver.
As the penny drops and more and more people realize that the folding stuff is not holding its value and they will seek refuge elsewhere and when they do it will be an almighty stampede, as they will move in tandem to enter the precious metals market. As you probably already know, there are very few people who can tell you the price of gold and/or silver these days, as they are fairly oblivious to what is going on. However, as jobs disappear and the need for food stamps accelerates they will get the message that all is not well.
Gold and silver will make the headlines for record breaking reasons which in turn will induce a demand for them bordering on the irrational. This will be the first sign that precious metals are entering the parabolic phase where an unquenched desire morphs into a maniacal action thus driving prices to unimaginable new highs.
There is not a lot we can do about this other than to try and protect ourselves and those around us by taking action in the form of insurance against the ill wind that is coming our way. In our minds the best insurance is the acquisition of gold and silver as it cannot be diluted by any government and therefore will hold its purchasing power as it has done for five thousand years or so.
As for the dollar we could see it improve over the near term as money comes out of the stock market due to a number of uncertainties and returns to the sidelines. This should not be seen as a bullish sign for the dollar as that money will not remain idle for long. Once things start to settle down investors will be keen to put their funds back to work. The interest payment derived from holding this currency is so low that it is a negative return in real terms so it will be re-deployed promptly.
Finally, if you can curtail some of your frivolous spending and live a more Spartan life style in order to generate the cash to invest in hard assets right now, this could be your saving grace. Please give it some consideration as there isn’t a lot of time left for us all to get into position and be able to ride this one out.
Have a good one.
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Related Tickers: SPDR Gold Trust (NYSEARCA:GLD), iShares Gold Trust (NYSEARCA:IAU), ETFS Gold Trust (NYSEARCA:SGOL), iShares Silver Trust (NYSEARCA:SLV), Ultra Silver ETF (NYSEARCA:AGQ).