Moober can vouch for this. Woodshedder and Fly as well. Back in 2009, after one of the worst precious metal (and overall market) meltdowns in my lifetime, I started to plow back into the precious metal markets in the middle to third week of February. I was early.
Oh boyo, those were a painful two weeks plus, I’ll tell ya. But as I recall, we bottomed right around the end of the first week of March (the sixth or seventh?). It was glory days for the PM’s after that, right into 2010.
So I was feeling real good about getting back in during the first week of February. Real good. I guess I should have held off maybe two more weeks, eh? Ah well, let’s just say that we are running into the same exact kind of egregiously oversold market conditions we saw back then. Given the tenor of the rest of the market, and the gobbets of fake money-digits entering the global economy via the cake-batter hoses of the world’s central banks, this is an insane and untenable condition.
It will not continue.
I will not add here, but wait until the turn is in. I’ve saved a little something for the insanity.
Happy New Year, we’ve got a lot of work to do. It’s 2013, and individual liberty is in peril like it hasn’t been since the early 1930′s, and it’s up to thoughtful people to stand up for it, or see it perish from this land.
Ironically enough, the provenance of our problem is one of base economics. Economics are simply the study or limited resources, which are what defines our world as much as much as the laws of physics. Prior to the development of market capitalism, the laws of economics translated into a near zero-sum, Hobbesian nightmare where resources were either stolen or distributed by force, and what laws existed held constant only for the very elite protected classes. The advances of the Mercantilism and the Enlightenment combined trade and innovation with the concept of a “rule of law,” which eventually gave rise to our modern manufacturing and service based economy. The resulting system — characterized by the pursuit of profit through mutually agreeable exchange, protected by an agreed upon set of rules that define contracts and protect private property, has created the highest standards of living, in human history. It is referred to today as the modern capitalist economy.
All of that has come into peril however, due to an obnoxious side effect of the modern economy… the welfare state. In practical terms, the advent of the “progressive state” — more commonly termed “statism” — grew out of 19th century German social philosophy that married social engineering and bureaucracy, mostly in pursuit of a particularly Germanic “order” which was a concept quite foreign to the more libertarian precepts of the Anglosphere (especially in it’s North American precincts). These philosophies found a friendly ear in the U.S. in both academic (which sought to improve) and governmental (which sought to control) circles. As capitalism flowered, these philosophies (Marxism being only one of the more well known) found purchase, ironically, in the leisure classes endowed with a surfeit of time thanks to the capitalist system.
Such helpful souls are with us even today, and marked mainly by their interest in saving ourselves from ourselves, using their approved prescriptions. You call them busybodies in a limited neighborhood setting, but given enough money and power, those over-interested folk can easily shift to full time totalitarians. Congress is replete with them. Their prescriptions, all engendered with the best intentions, tend not consider your individual rights, whether property or civil, being far more interested in the rights of the collective body. In fact, these well intended chaps regard the Constitution that enshrines your individual rights as a hoary anachronism, no longer relevant for this brave new innovative world of progress. After all, Thomas Jefferson never had the internet, now, did he?
But it has been ever thus, wherein governments enjoined in greatest intention, dedicated to the greater glory of civilization, usually fall to ruin as a result of centralization, corruption, bureaucratic bloat, and in the end, lack of accountability. We thought we had that tendency towards “the Fall” covered, when we put our country together in September of 1787. We had checks and balances with regard to the “three legs of government,” and of course the mighty Bill of Rights, whose first two amendments guaranteed a check on the sovereign from the very roots of the citizenry.
But institutions are corrupted, and rights are overlooked, or worse, discarded. When did the first Amendment only guarantee free speech rights to the established (corporate) press for instance? And when did the second amendment become obsolete? When did the Fifth Amendment become so corrupted that it justified government takings that would be distributed to “more suitable” private interests, rather than for specific public purposes? What has happened to the Ninth and Tenth amendments, and the fealty they paid to the States? Moreover, what has happened to our ability to preserve our monetary base — our very sovereignty?
I could go on all night, and I’ve been struggling, struggling for answers. Right now I face a depressive realization, and yes, it entails a cliff. It’s not, however, the silly “fiscal cliff” the warring homunculi of Congress currently battle for in their kabuki theater show. It’s the cliff of the Constitution itself. Have we sailed, finally, into a post-Constitutional America? Where the same authoritarian statist bodies have used populism and demagoguery to establish totalitarian control in our once free land?
I know we will see for sure in 2013. We will see if our hollowed out press has finally given up the ghost, and allowed themselves to become nothing more than organs of the State, banging the gong for whatever grasping, illegal policies the Administration feels it can get away with. I expect Executive Orders by the handfuls. This Executive is not one to wait on consensus for his plans to come to fruition. We will see the true mettle of this country in the response these moves provoke. But wherever you stand — even if it is with the current forces in power — I beg you to remain vigilant, and to plan well for your families. Unintended consequences will abound, as they did in the 1930′s. All we can do is prepare for continuing ill times. God bless.
If you’ve read this far, you are probably deserving of my take on the precious metal markets. I am still enthusiastically bullish, especially at these prices. I will only remain so if we drop 10% from here. Many of you (trader types), will frown at that last, but I cannot be of more service than to give you what I am doing personally. The Fed has opened the window to an eventual runaway inflation. And they may believe that the sophisticated tools they are using to expand the money supply while retiring toxic debts will not rebound upon them because of their ability to shrink as quickly as expand. What they do not take into account, however, is the amount of dollar-based credit outside their control, and outside their boundaries. I am especially thinking of the dollars housed in sovereign banks as assets anchoring other poor balance sheets in countries in even worse shape than our own.
Fiat money can only be abused for so long until it begins losing its elastic properties. Eventually, the confidence will be lost in the U.S. Wonder Machine… especially with four more years of sub 2% growth accompanied by trillion-plus deficits. If you do not deign to go the riskier path of the miners (EXK, AG, GDX, SIL), then at least get yourself some physical coinage or bullion. Hard assets are your only surcease here, your only stop gap.
I’ve had some trouble getting a post out about this Newtown, CT horror show. You might imagine why. I have a seven year old. He’s an outlier, and I’ve always worried about him. Now that seems almost ridiculous, and yet…
There’s no way you can’t fall on your knees. In grief, in relief. In relief. That’s wrong, I know it, but the absolute realization that something like this can happen… that it is even possible… makes one want to put their kids into a box until they grow up.
The pain is visceral and it’s borne of impotence. You want to strike out, make things right. In this way you cannot even blame the illogical left with their knee jerk proscriptions against gun ownership. It almost makes sense, given the emotional quotient.
But one has to ask what makes any sense? Arm the teachers? Seems extreme, and perhaps too much to ask. But what about security personnel? One, two..? … training will be important. Reinforced classroom doors? Is it worthwhile? I guess I’d have to ask if protecting our kids is worthwhile. How much should we spend on that? Can we maybe move the TSA budget to that arena?
I do know there are some 250 million guns extant in the U.S., and even an absolute prohibition will not keep guns out of the hands of criminals, and crazies. Does it make sense, then, to concentrate on keeping guns out of legal hands, instead of perhaps working to better counsel — and control — the mentally ill and dangerous?
Shockingly, or not, I am still in love with silver and gold here. True, AG got it’s ass kicked today, malevolently, because it purchased another mine at an egregious premium. Their loss is your gain. Take advantage. But wait one day before you buy. In the meantime, SLW and SIL are great. As is GDXJ and GDX.
Breaking away for a second to remind you to pay attention here. We are headed into Santa Claus territory, and I don’t think it will be coincidental when we see the gold and silver elves coming out for their annual drunken bacchanal.
I am hoping that on Friday I will have moved a large amount of money from “here” unto “there,” and then will have some time to sport about with you, old time style, half-inebriated and full of fun. Until then, GDX, GDXJ, and yes, even NUGT will be attractive in the Christmas season. On the silver side, those of you who have cursed and gnashed your teeth about EXK can consider this the time to “make your bones,” or whatever other ethnic cliche you’d like to use. AG is still my favorite silver dog, and SLW and SIL my core recommendations for the noobs. That said, PAAS and MVG can be berry berry good to those of a speculative bent.
More speculative than any of those, however, is AAU and TC. If you have 2% of your portfolio that you reserve for dice throwing at 3 AM in a dirty alley laden with crack whores and vein poppers, then those are your available plays. Do not cry to me if you are blackjacked, but please remit 15% to the Salvation Army if you do bank coin.
Best to all of you, and hoping to spend many days of merry and bright with you in the latter part of this month…
I sit here and sip my newly distributed Pappy Van Winkle 15-year (rocks, a couple), and reflect on the consequences of today’s market shaking Presidential press conference. Despite the obsequiousness of the White House Press Corps, some important truths were uncovered, many of them centering around basic math and fundamental civics.
For one thing, the President is either being extremely forgetful, or dishonest about the makeup of our current deficits. As some of you may recall, Mr. Obama is quite fond of blaming our current fiscal deficit situation on either the “two wars” of Afghanistan and Iraq that he “inherited,” or “the Bush tax cuts” of 2003. Let’s leave aside the fact that federal revenues have risen considerably—as a result of tax cut driven growth– since the days prior to the Bush tax cuts. Let us also confirm (by Mr. Obama’s own declaration) that the war in Iraq is “over,” at least for now. That means that the “causes” Mr.Obama loves to blame for spiraling deficits are, save for a war in Afghanistan that he has escalated according to his own plan (see below), are not really material to the gargantuan deficits we are facing right now. So what is, then?
Any “stimulus” spending is arguably a problem because it’s top-down gov’t allocated spending, considered mostly “one size fits all” for the citizenry, and by that standard alone grossly inefficient. The even greater problem with regard to such programs is that they raise the baseline spending in these categories permanently, unless specific cuts are made in those areas where spending was increased that first time. This is what is causing our budget deficits to balloon far past what we had seen in the allegedly horrible “Bush Years.”
As you can see, the problem clearly is not revenue, and it’s not even overseas spending (although Mr. Obama has seen fit to increase that spending too). The problem is domestic levels of spending that show few signs of abatement any time soon.
Today, the President suggested that an additional $1.6 trillion dollars in tax increases – levied wholly on the heads of the investing and producing citizens of the economy (otherwise known as “the evil rich”) – will help solve this crisis. But even allowing the Bush tax cuts to lapse will only produce another $75 billion a year. How is that going to help attack the deficit? Answer, it won’t at all, and what ’s more will likely become counterproductive as capital hides in inefficient and economically non-beneficial havens.
Fly’s tax attorney and others like him will be grinning wolfishly if this benighted “plan” comes to fruition, but only those spinners’ children will eat better, while the rest of us will have to contend with cold salt pork and beans as we continue to endure The Obama Winter.
The only answer is restructuring my friends, and that will entail some significant spending reductions and – yes! – entitlement reform. Barack Obama still has an opportunity here to salvage his legacy. If he can play “Nixon Goes To China” and pull off the hard work of entitlement reform, he will be forever after revered as a Sainted President. If he’d rather continue down the path to perdition and Obamacare folly, well….
At least Mr. Cain Thaler will be grinning.
Many Bollinger Band Crash Trades were triggered in the PM segments this afternoon, and I believe I may partake in some rebound shooters (perhaps in GDX and GDXJ) to reap the reflexive bounce back due those names. I think SLW and SIL are also prime candidates and if I see a “wash and bounce” tomorrow, I may even grab some NUGT and or AGQ. We should be very close to done with this pain, however, so hang on at least, even if you don’t feel like trading.
If there’s one thing this recent election has taught me, it’s that large money works, and especially so for incumbents. I have to admit, given the Obama Administration’s horrible economic performance ($16T in debt, 26 mm out of work, 47 mm on food stamps), its near-totalitarian interference in markets via regulatory and legislative fiat (EPA coal & oil policies, Obamacare) and the series of scandals so common to the Chicago Machine politics of post-electoral pay-offs (Solyndra), extra-judicial bullying (Fast and Furious) and outright criminal incompetence (Benghazi), I thought there was no way the American people could re-up for more. But I guess enough money was spent, in just enough critical counties, to sufficiently demonize a genuinely nice guy who was trying to play it “nice” (probably to his chagrin) right to the end. Kudos to the players – the pros – like Axelrod and Jarrett. They had a plan and it worked.
Mr. Romney, you will be second guessed to a fare the well, and your lack of even McCain-level support will surely continue to raise questions. Perhaps there were enough Cain Thalers out there who wanted to see the whole system washed out, the Dems hung with it, and the process begun a new. I think you could have been more aggressive in the final weeks, and you took too much from the first debate win. I will not gainsay you, however, as I know your 20 years of unpaid service to your fellow citizens stand as their own testimony.
Unfortunately, reality doesn’t need a vote, and reality is now coming on a fast track. The dismal economic performance we’ve endured these past four years– hoping they would end mercifully this past week– is now slated to continue, barring some sea change in the Obama Directive. Anyone want to bet on the POTUS changing his stripes any time soon? The President’s recent announcement that increased taxes on the employment engine were necessary for his ongoing cooperation with the “Fiscal Cliff” negotiations should be fair warning. Thus far the analysis seems to read that he has learned nothing.
I would take some solace in the possibility of a “Bill Clinton” final four years, if only the Senate had mellowed. It did not, however, and in fact got more radical with the addition of two new far left Senators from the States of Massachusetts and Wisconsin. Bewildering especially was the inclusion of Elizabeth Warren in the Hall of the Hundred Most Powerful. Apparently, after being annealed on the moral forge of vehicular manslaughter, long term race fraud was just a mere bagatelle for the majority of the Bay State’s citizenry. A “Blue State,” for sure.
Given that there will be no Gingrich Congress to arm wrestle the much more ideological Obama to fiscal discipline, I expect nothing but more fiat excess and Executive consolidation. As a result, businesses will continue to be reluctant to invest, capital will “hide,” and more unemployment, crime and municipal stress will result as our debts and long term liabilities continue to skyrocket. None of this will be good for the long term health of the Republic, if in fact a republic we still own. I know even the famed Mr. Franklin (“You have a republic, Madame, if you can keep it!) might harbor his doubts at this gray pass.
It’s ironic, I guess, that despite my despondency, I’m still reasonably well situated for this turn of events. Do I own growth stocks like AAPL and DDD? Do I own hot retail like ULTA or CAB? Do I own… (ahhh, you get the picture!). NO! I own a bunch of commodity plays that I am using as a hedge against what I like to call Bernanke’s Despair and you can call “QE (n+1).” We are staring at unfunded liabilities out the wazoo, and entitlement spending alone that outstrips current tax receipts by hundreds of billions of dollars. Bad debt and mispriced assets remain on balance sheets, particularly on those of your resident Too Big To Fail Bank (no Dodd-Frank). There is only one way out of this mess, and it’s the same thing I’ve been preaching to you for the last five years of our journey. PRINTPRINTPRINTPRINTPRINT.
You know the usual suspects, so I won’t belabor them. In particular right now, I like the way ERX looks right now (for those of you asking me about the oil plays in the last comment section). I like it better than UCO, too, fwiw, as it is bouncing right now off its 200 week EMA ($44.72). I don’t think it has many days left to pop. I of course love RGLD below $90. A gift to your grandchildren, as I’ve been telling you since it was in its low $30’s. For the speculators amongst us, keep an eye on TC… I think it’s finally getting it’s mojo back.
The next four years should be interesting… in the way of the ancient Chinese curse “May you live in interesting times.” Unfortunately, I believe China will be the least of our troubles, and soon we will look nostalgically back on the times when all we had to worry about was burrito accounting fraud.