There is NO fiat currency that will remain a storehouse of value for what you have worked all your life for.” Jim Sinclair
Wall Street brings out their big-gun bullion banks gold analysts every chance they get to discredit gold. The line is “gold is too expensive.” Gold will correct to $800 or less.” “Gold is in a bubble.” Well, let me bring out a couple of my big guns. Bill Fleckenstein, whose “short” fund was legendary for its profits over the past 10 years and Fred Hickey, Bill’s buddy. Are both very bullish on gold. They both own gold and advise their readers to do the same. They are well respected mainstream pros who clearly see what is happening and offer up gold as an island of safety.
Several of my readers corrected me for a statement that I made in this blog on Friday. I wrote “Today was one of the busiest days we have had at Miles Franklin in months. All of our orders were “sell” orders and we didn’t have a single “buy” order.” I meant that all of the orders we wrote up were for us to “sell” gold and none were for us to “buy” gold. Several readers took it to mean the opposite. Sorry for the confusing way I wrote that sentence.
Lately, what is happening is an occasional cartel attack on gold and it is usually over in a day or two. That is NOT a bear market pattern. They can get the mindless funds to dump contracts on Comex but strong physical buying follows as the price drops, and then gold quickly rebounds. The gold market will continue to be volatile and in fact, the price swings will get bigger and bigger. On the horizon are $100 a day swings, so don’t be fazed by a mere $20 or $30 move. The same is true for silver as well.
Susan and I had dinner on Saturday with friends. One of them is very concerned over the fall in value of her managed stock portfolio. I urged her to sell all of her shares and move into cash, several weeks ago. I take Russell’s warnings seriously. Her advisor told her to stay put because there is over one trillion dollars in corporate war chests that will soon turn the economy around. I don’t think so. Until unemployment reverses and consumers pour back into the malls and car dealerships, companies are not about to expand and re-hire. The demand is simply not there. Later in this blog, check out John Williams data on the economy. Here is his chart on M-3 and recession – does this look like the kind of economy that will motivate corporations to spend their war chest???
I told my friend that she should think about “risk versus reward.” If her money manager earns his keep, he will grow her portfolio by 8% a year – in fact, let’s give him 10%. So, if she takes my advice and exits the market to cash, for the next six months, she could forgo 5% potential gain. But if I am correct, her portfolio could easily drop twice that amount, or more. Why take the risk of fighting a primary trend bear market? Richard Russell’s PTI hit a new low again on Friday – the fourth day in a row. This is not the time to be bullish. It is the time to be safe.
You may wonder why I didn’t tell her to buy gold. She has more than one-third of her assets in gold as it is, so for her, cash is the place to be. I am not trying to be self-serving, I am trying to help a friend do the right thing. If it were me, I’d get more gold, but I can sleep well at night with a heavy load of gold and silver and most people can’t. The most important thing is, after all, SLEEP.
It puzzles me why some investors still don’t understand why gold prices are rising. Gold doesn’t track the CPI tick-for-tick, as many seem to believe; rather, gold is looking ahead to the type of destructive policies outlined in Bernanke’s helicopter speech. Maybe Bernanke was bluffing, but those with capital are going to keep buying gold just in case.
Gold is money, and it will be, after this version of the U.S. dollar loses credibility. More people recognize gold as money when paper money pays zero interest. Who knows how long it will take the Fed (and other central banks) to start the next round of money printing? Some are already screaming for it, and many more will if stocks fall another 20% in short order.