I told-you-so-ism? soon, very soon.

I’ve been holding off for awhile on whether I should begin to post the “I told you so!” articles. This is not the classic I told you so yet, but it certainly is a “why the hell have you not realized something is happening” post.

The U.S. dollar has not plunged yet like I expected, precious metals have not hit my projections for the year. Still a myriad of other signals are turning my way. Am I happy? No not really, what I’m feeling is anticipation and fear. I’m anticipating a major blow up very soon and this level of anxiousness has left me so fixated on keeping up with the news I’ve been remiss in posting. In fact I’m so amazed at the level of articles and growing panic building in some commentators that I can’t understand why the majority of people out there have still not gotten a whiff of the stench that is the world economic system. Why do I fear? I fear I have not squeezed hard enough and have not put aside enough metals or commodities stocks. I fear I’ve banked too much on the inflationary death of fiat argument and not the deflation cash is king argument. No one can know how this will pan out for sure but at least I’ve tried to do the right thing and inform others. I do know the “all is fine, let’s borrow more and worry later” mentality was wrong, which puts me ahead of the vast majority. Everyone chant, “I’m not the dumbest, I’m not the dumbest”


So what’s been happening? Well we’ve got the credit crunch and yes while the Central Banks of the world have been pumping lots of liquidity to the Banking industry there is still no guarantee that this money will be loaned to the holders of commercial paper. Banks seem reluctant to supply the amount of money needed and each month untold billions will need refinancing. A lot of this paper is not subprime mortgages but packaged credit card, car and other small loans which so far have not seen the default spikes like the mortgage market. In the near future you could see car dealerships, furniture stores, credit cards deals of no payments for 6 or 12 months fall apart for lack of credit, you might even see an inability to get substantial non asset backed credit hit the market. This will kill an economy based on not saving but buying forward against future earnings, retailers and car companies do not have the cash to personally hold all the loans they make and if the market won’t buy up this paper than no sales and a total collapse of the consumer economy. I expect within 2-3 months to have my unsecured credit line pulled, not because my credit is bad but rather credit is too tight to freely dole out to the likes of me. This is the time to put aside some cash, real cash, in safety boxes or home safes. U.S. readers especially saw the run last week at Country Wide and should take this as a warning, if you’ve got savings take 1 or 2 months worth out of the bank and grasp it close to your chest.

If you think there is no credit crunch why do you think Bell Canada is trading $2 below its agreed purchase price in recent weeks? It’s simple, enough people believe that 40 billion dollars in financing is not achievable and the sale will fail. There is a 2 dollar discount build into the stocks price today to offset this risk of buying Bell at this price.

The U.S. housing industry is continuing it’s plunge and 45-50 billion dollars of ARM resets will take place every month for most of the next 2 years. We’ve only seen the tip of this iceberg; unsold houses in the U.S. have reached 3.85 million units. I suspect 5 million is easily attainable and a deflationary spiral could endanger 20 million homes. The end is truly nigh.

There are all sorts of proposed bailouts of homeowners and lenders but I suspect they will help only the institutional players and make virtual debt slaves of the others.

You will note on the side bar the total U.S. debt. As I understood it 8.9 Trillion was the government legal debt cap and while probably not entirely accurate we should see a panicked congress recalled to up the limit within days as it will surpass 9 Trillion in hours of this post. The next cap will probably top out at 10 Trillion and will not hold even as long as the next election.

As for our lovely shinny metals the last 4 trading days have been up 3 for 4 and have gained about 26 dollars on gold and nearly .50 on silver. Silver is still under performing but last week with ratios about 57:1 I made a small purchase.

I also went bottom fishing last week and picked up a couple of junior minors, since my readership is so low and I don’t think any amount of manipulation could actually make be rich I think I will begin to discuss some of the companies I’m holding in future posts. Hell send me your favourites and we can discuss them. Paper assets are still in danger but I sure like a physically backed mine better than a financial backed by lies, junk bonds and fiat dollars. I also jumped back in on energy a number of weeks ago and even with today’s nat gas prices I would encourage everyone to consider these as an addition to metals.

Some day I have no doubt 2000 oz of silver could buy me a farm, until then I intent to accumulate.

Long fall to darkness

The recent bridge collapse in Minneapolis was seen by many as a simple accident or a one off example of poor management but in reality it was a symptom of a profound event that most of the public are blind to, the fall of the American Empire. For many years the U.S. has been burning the candle at both ends, with its endless cycles of spending and debt without ever maintaining the necessities of modern life. The recent collapse is not a one off item or an accident it is a symbol of the systemic rot taking place in U.S. There are estimates claiming that in the U.S. an astounding 73,000 or 12% of all bridges are structurally deficient.
Further 80,000 are functionally obsolete meaning they are not designed for the amount of traffic they currently carry. For years, be it slack highway maintenance or failing to fully fund the corps of engineers, the U.S. government has not been doing its job in maintaining the essential infrastructure of the nation, Minneapolis and New Orleans were just two of the many disasters that the U.S. is destined to suffer for the lack of money and planning.

There are the additional infrastructure problems regarding the power grid, city water supplies, sewage, refinery capacity, poorly maintained or insufficient rail lines and public transit.

Added to this infrastructure mismanagement is U.S. spending on the Iraq war and the normally huge military spending, which continues despite the apparent victory in the cold war. To date, the Iraq war is estimated by the congressional budget office is about 450 Billion That of course is the accounted costs, hidden costs for procurements, mercenaries like Black Water and long term costs of supporting military widows and cripples will add significantly to this stated cost. For decades The U.S. has been spending on its military as if they were on a war time footing and yet they never caught on to the concept of guns or butter but rather thought guns and butter with plasma screens and SUVs thrown in was a long term sustainable proposition; Morons the lot of them.

Peak oil and the dependency on foreign energy is a huge threat and there is no real plan to conserve, innovate, or diversify a means to self sufficiency..3


Another interesting item (as shown on the side bar with the debt clock) is the growing U.S. debt which as you read this sentence will climb by 100,000 dollars. The total debt at the time of my writing is $8.951 Trillion U.S. dollars, the total unfunded liabilities which include expected payouts of Medicare, government pensions etc is estimated by the GAO to be in the neighbourhood of $53 trillion, a staggering figure. For years the U.S. governments have been raiding various trust funds like those for pensions and health coverage, spending the money, not replacing it, and giving the funds IOUs in place of the interest baring vehicles that would make these funds at least partially self funding over time.
The U.S. has a hard choice ahead, renege on promised benefits, or devalue the dollar to the point that they will honour their commitments in word if not in value.

The U.S. has been selling U.S. debt to mostly foreign investors at a rate of over a billion dollars a day for many years. A new twist on this need for daily influxes of cash has been the U.S.’s recent trend of issuing and borrowing money through the Federal Reserve since fewer and fewer foreign suckers in the open market are taking part in treasuries auctions; this is simply printing money and devaluing all existing dollars. This monetization of debt is a sure fire sign of the coming collapse of the U.S. dollar and the ability of the U.S. to maintain it’s pretension of empire for much longer. Recent reports from China hint that they may be willing to use the threat or action of dumping of U.S. debt on the market as an economic weapon against the U.S. Even such threats could panic bond holders and crash the U.S. dollar in a flash of computer controlled trading.

There is also the spreading contagion from the sub prime mess which has reached French, German, and Canadian banks as well as hedge funds as far away as Australia. Estimates I've seen have priced the funds specializing in sub prime debt from about %50 down to virtually nothing like the case of the Bear Stearn's funds. The total losses are not foreseeable at this point since only a tiny number of the holders of these sub primes have announced warnings, there is however going to be a huge out cry in coming weeks as people begin to request redemption of invested funds only to find them frozen by the hedge funds trying to maintain solvency.

The distress has forced the selling of other assets to provide liquidity; the fear a stock crash has prompted Central banks around the world to provide billions in loans to banks so they will not crash the markets with panicked selling. In the last week the EBC, the Fed, the Japanese and Australian Central Banks have injected over 350 Billion dollars into the market in the form of loans to banks. This week South Korea and Malaysia have stated they will do the same to support the market if needed. Of course this is not old money they were hiding under their beds for hard times this is all freshly created money pulled out of their asses and thrown into the market to keep the bubble alive. This is just another inflationary practice which should support the prices of our lovely piles of silver and gold but you should also expect volatility as some organizations sell their holdings to make ends meet in the short term.

If you've watched the markets recently you've seen some hard falls followed by amazing end of days runs which attempt to erase the worst part of the loses, some analysts are claiming this is the work of the Plunge Protection Team a group reportedly put together by the U.S. administration to manipulate the market with the goal to moderate crashes.
How deep their recent interventions are is unknown but it is know that they don't have any real money but they do have the ability to create new money on a whim, more inflation, more bubbles and one more step from fiscal reality

The U.S. is heading for a long fall, which will likely include bankruptcy, a dollar crisis and certainly a diminishment of the roll of America in world affairs. Not unlike Rome did, the U.S. is fighting wars it cannot win with money it does not have and with citizens who no longer have the zeal, belief in righteousness or simple bloodlust required to be big dog on the street, for the most part they are only concerned with bread and Circuses. Rome collapsed by inches as measured by loss of influence, debasement of its money , military setbacks, social decadence, sound like anyone you know? Unfortunately today the markets are intertwined and risk is spread out to the entire world, if the U.S. goes the way it looks to be going everyone will get hurt.

What can you do?

Dump financials, go to cash, minimize debt, try to build up your metal holdings to 10% of your portfolio and hold on. There are still many questions, will banks go under? Will the U.S. Gov manufacture a bailout? Will they allow an orderly deflation or print their way to hyper inflation? Is Canada too dependant on the U.S. to survive their crash? Be defensive, be smart and be attentive, things will move quickly when it starts falling apart.

Damn I'm busy and so are the markets

Holidays, work, and home all keeping me too busy to say much on the metals markets the last few weeks but there was certainly lots to talk about.

Metals have taken a beating but so has the U.S. dollar so in my mind there is little reason for the recent slump other than the usual summer doldrums we have witnessed for the last few years.

Others might say that there has been some liquidation of metal positions to cover other expected losses stemming from the CDO/Hedge fund melt down underway. I suspect there is some fear and indecision in the market but there is no real sign of a huge sell off, I believe it's summer apathy, and market indecision.

Had I the funds I would have dived in heavily last Thursday which I believe was bottomish. Be assured that under no circumstances in today's age of flaky paper products would I be tempted to liquidate even a small portion of my position.

Oils States are dropping the U.S. dollar peg, the dollar itself is weak, banks, hedge funds, mortgage brokers are all going to shaken to their cores as the twin towers of debt and leverage come crashing down. Today I'm not worried about Jihadists in the streets but those Vikings in places of financial power who are in a war to download their debt and losses onto unsuspecting investors and fund managers. Their war will also be taken to the halls of government as they demand and beg money and concessions that can only reward them for misbehaviour and further fan inflation.

There is no rational reason to expect metal weakness, while markets can be irrational they can only fake it so long before reality bites them in the ass. Today Wall Street is walking quickly and often checking over their shoulders.

I'm at my wits ends and I don't know which threat to worry about next, financial chaos, or peak oil and eventual starvation Read This for a scare. I've noted before that the money contrarians and the environmentalists don't communicate and specialize in their own worlds. Perhaps the level of dread is too much for them but the big picture is ugly and must be seen.

The answer

Get out of debt - a depression is coming and debt will strip you of your property. I've managed this but keeping out of debt is also an issue, some day soon (1-2 years) I'll need a new car.

Buy some metal- Since we can't trust the counterfeiting governments to maintain a valid currency with the ability to maintain it's value, we must divert some portion of our wealth into something they can't forge, silver and gold. I've done this but can one ever really know how much is enough? As of today Silver and Gold are certainly good buys, the market chaos is giving everyone both warning and opportunity to buy, don't ignore the gift.

Self sufficiency - If you have the means, buy land and learn how to use it. Buy it collectively if you must but access to land is life. All the silver in the world is useless if there is no food to buy, no power to heat, no place to live.

Depressing post, sorry it's that kind of week.

There is still a bright future for silver and gold

Overall, May has been a poor month for Gold starting about 680, peaking at about 688.80 and falling to 652.50. There certainly have been some good dips for buyers and with the added strength of the loonie in recent weeks now certainly looks like a great time for Canadians to add a bar, coin or nugget to their stash. For Americans however, they’d better RUSH to get into the market before the dollar totally dissolves.

Silver was similarly brutal this month but with yesterdays and today’s move back up towards 13.44 it’s nearly recovered it’s entire months loses in 2 days, I hope it holds. The gold silver ratio is almost back to 49, a signal that silver will continue to out perform gold?

Recent reports on the silver industry have disputed the arguments that silver stocks are declining. My take on this issue is; if 77 million ounces of government sales are required for supply to meet demand, then the shortage is still growing. These governments’ vaults are not endless and will be drawn down to nothing eventually, likely sooner than later.

Silver investment demand is raging (64.5 million oz) and if the market thinks greedy little investors like me are going to part with our hoards before we see multiples of 10 they’ve got another thing coming. They assume that invested silver will be available to the market when they need it, yes it is available, but certainly not at today’s prices. As prices rise more investors will see the trend and will jump in making it harder for silver users to shake loose supplies. Once that silver vault in India runs dry or the demand for the superconducting cables from AMSC takes off prices will run and run hard. Supply is tight and a relatively small investment fund of 500 million could suck up 27% of NYMEX’s 130 million oz supply at today’s prices. If each Canadian tried to buy 4 ounces or $60 worth they would run out. Less than ½ of all Americans could buy 1 ounce before they ran out. Now imagine the world population…… WAITING……..STILL WAITING…… ah, now you get it, there is almost none left. In pure, deliverable form there is less silver in the market place than gold. Today's price does not reflect this and I'm not selling until it does.

So why haven’t you bought any yet? Yes I mean you, and you too Lois.

There has been a lot of waffling by metal commentators in the last 2 weeks, I guess they are taking heat from their subscribers and are trying not to over inflate expectations of an immediate rally but I don’t see anything to worry about long term, which is the only thing I’m concerned about.

I see Spain verging on bankruptcy as bullish for metals and dangerous for the Euro

I see the U.S. Democrats bending over backwards to let Bush continue his war and his spending, as adding more market risk, more debt, more chance of a U.S. fiscal crisis, and in the end more need for a metals hedge.

I see reports of 6.7% food inflation in the U.S., U.K. 6%, and China 7%, Government claims of 2-3% core inflation are garbage.

This week Kuwait unpegged its currency from the U.S. dollar and has moved to a basket of currencies. If the other oil states go this route it will signify a vote of no confidence in the greenback and greater weakness will follow.

Iran’s move to no longer accept the dollar for oil is gaining momentum as current figures has non dollar transactions near 70%.

All these things paint a picture of fiscal mismanagement, political risk, and inflation. Sounds like trouble to me.

When troubles hit you want to be debt free, have real money, and even better your own productive land, if you have all 3 you’re laughing.

The Pain in Spain is an anti Fiat Refrain

I've mentioned before about the high level of gold selling over the last few months and now the who and the why of this selling has finally come to light. On first look it appeared to just the run of the mill gold liquidation used by many central banks to weaken gold and in turn strengthen the U.S. dollar. The U.K. Telegraph however reports that 80 tonnes of the recent selling can be attributed to Spain, further they claim that it’s not dollar motivated but pure survival as Spain struggles with a burgeoning account deficit that as recently hit 9.5% of GDP

Spain in order to cover its expenses has been selling off its gold. These sales have resulted in Spain’s foreign currency reserves falling from 41.5 Euros to a meagre 13.2 Billion since 2002. This amount is only 12 days of imports and the continued shrinkage of these reserves could jeopardize Spanish Economic stability.

Portugal and Greece are reported to have similar reserve shrinkage problems and should they run out of cash the other EU Central Banks are obligated to act as a “lender of last resort”. Should any one of these countries falter it will spread the pain over the entire Euro Zone.

What does this matter to silver and gold?

1. We know that the Euro is not necessarily a risk free alternative to the U.S. dollar
2. We see the real instability of the Euro which is a further indictment of Fiat currencies in general
3. More people will get scared as the 18 month window for Spain’s shrinking reserves approaches, some of these scared people will invest in metals, earning early investors a healthy profit.
4. We learn it was not a deliberate attack on the gold price, not that it’s relevant. Still it got sold softening the price so now we should take advantage of their misfortune.

Prices look soft; paper looks suspect, do your self a favour and go buy some silver.

Update

I tripped onto another reference to this story
http://news.goldseek.com/GoldForecaster/1179936000.php

It's is believed that a Spanish housing boom that has tripled prices in recent years is about to pop after anti speculation laws were passed. If spain should have a housing slump like the U.S. is suffering now it will certainly be a likely trigger for finacial crisis.

Hell even Mogambo commented on this today, Ha I beat him to it, so I get to say "We're freaking doomed!"