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Sunday, March 3, 2013

Collapse Preamble or Just More Straw On The Back of The Camel?

There are a number of economic signs or indicators popping up, seemingly unrelated - but I'm not so sure.  These could be nothing more than a string of mutually exclusive events which indicate nothing beyond the fact that they happened.

My gut says differently.  My gut says these are indications of further degradation of our economy, that a whole lot of folks smarter than me see ugliness in our future, and they're fortifying their positions.

The snowball is a-rollin' and growing with every turn.

For example -

Billionaire stock sales - focused in consumer goods and financial stocks.  Warren Buffet sold all or large portions of his positions in a number of consumer product companies.  Johnson and Johnson, Kraft and Proctor and Gamble.  John Paulson sold JP Morgan, Sara Lee and Family Dollar.  George Soros sold mostly financial stocks - JP Morgan, Citigroup and Goldman Sachs.

Massive numbers of Insider stock sales

Recently announced layoffs (100,000 total?) in the financial industry.

Eight major retail chains closing between 11% and 33% of their stores.

Economy shrinking or barely growing (depending upon when you read the government, eh, statistics)

None of this sound good.  Yet, you look over the other shoulder, and you've got the stock market toying with record highs.  WTF?

I believe the stock market, right now, is a game of Musical Chairs.  People are looking to earn more than they can get with a bank account or buying bonds.  I think the only reason folks are in stocks is because it's the only thing with any kind of decent returns.

But it's wicked risky.  If the aforementioned indicators are correct - everything signalling 'contraction' - we've got a pretty significant crash ahead of us.  If that happens, the last guy standing will be toast.  Timing is everything.  Is the "smart money" already out?  Or is this a false flag?

For some more head-scratching, look what's happening with precious metals.  Uncle Ben Bernanke confirmed that the Federal Reserve Bank will continue devaluing the dollar via QE3 through 2016.  PMs should be soaring as the dollar crumbles into oblivion.

Instead, the dollar strengthens and PMs are on life support.  Again, WTF?

One of the reasons the spot price of gold has been in a slide is because our friend and socialist, George Soros, sold a buttload of it - worth over $100 million.  But he didn't sell physical gold.  He sold paper gold - Exchange Traded Funds (ETFs).  This sale preceded, and perhaps lubricated, the current slide.  Everyone saw Soros dumping gold, and they decided to follow.

I've yet to figure out why the dollar is getting stronger.  I know it's not the dollar getting stronger on its own - that it's other world currencies getting weaker, but still... I have difficulty believing the rest of the world continues to get worse at such an alarming rate.

The bulk of the decline is due to selling.  There are tools available that show how a price drop or increase is affected by the dollar going up or down, and how much is due to buying or selling pressure.  For instance, if gold drops $10, it will show that $3 was due to the dollar strengthening, and $7 is due to selling pressure.

Here's where it gets a bit weird.

With all of this selling, we should be awash in silver and gold.  Yet the exact opposite is true.

In our PM store, we've seen a noticeable shortage of silver, initially, and now gold.  One of our biggest wholesalers has been out of most types of silver for the past couple of weeks.  Silver rounds and bars, American Silver Eagles, Canadian Maple leafs, Morgan and Peace dollars, 90% Junk silver, 100 ounce silver bars.

This isn't some Podunk outfit.  They do half a billion dollars in business a year.  Yet they're tapped out of much of the most popular types of silver.  Now, lots of common types of gold are coming up short, as well.

And premiums (the amount charged over spot prices) are rising, pretty significantly.  Our wholesalers have upped the ante by 10% to 25%, and that's being passed along to our customers.  There's IS a physical shortage, and the laws of supply and demand are kicking in.

What's that tell us?  That the paper PM and physical PM markets are separating.  People don't give a damn that PM spot prices are tanking.  They want tangibles in their hands.  Now.  Because they know that once the dust settles, the US dollar - already only worth 4% of its former self - will join the ranks of the German Reichsbanknote and the Zimbabwe Dollar in the dustbin of world currencies hyper-inflated out of existence.

Other than numismatic (collectible) varieties, I haven't been able to keep an American Silver Eagle in my store for over 12 hours.  They are usually sold to us, then they're out the door to a buying customer - all in the same day.

The only ones I can guarantee for delivery (right now) are customers that walk in with a cashier's check for the purchase of a monster box - 500 ounces in one fell swoop.

So, is all of this madness a preamble to us going over the cliff to hyperinflation in the near future, or is it just another piece of straw being placed on the back of the camel?

I just don't know.  I guess no one really could know for sure.

What I DO know with certainty is that the dollar will fail.  Maybe next week, maybe next decade.  Lots of things can affect the timing.

Our debt will never be paid off with our 4-cent dollars.  It will either be defaulted upon, or our government will officially devalue the dollar as Germany and Zimbabwe (and LOTS of others) have done in the past.  Check out Argentina to see how it's working right now in real-time.

It ain't pretty.

Ferfal - the blogger who lived through the worst parts of the Argentinian crash said that the one common thread of folks in his (now former) country was that they wished they had more precious metals when it all crumbled.

Not dollars.  Not canned soup.  Not toiletries.

Precious metals.

Think on it.  It is unlikely you can store enough of everything you'll need during hard times.  While barter is a skill everyone must master, you will eventually need something that your barter goods won't "buy".  You're going to need money, and the only type that has maintained its purchasing power throughout time, is gold and silver.

Some scoff and say that you can't eat precious metals.  True dat.  But gold and silver have been currency for the past 5,000 years.  I'm guessing they will still be good in the near future.

Copyright 2013 Bison Risk Management Associates. All rights reserved. Please note that in addition to owning Bison Risk Management, Chief Instructor is also a partner in a precious metals business. You are encouraged to repost this information so long as it is credited to Bison Risk Management Associates.


Adam said...

Yes the stock market is being manipulated. How else can you account for the fact that sequestration was coming and it was supposed to "destroy" the country and the market is at all time highs?

Everything is being manipulated at this point. I agree that it's all a question of timing. I sold a lot of stocks back in 2011 expecting the market to correct. It never did. I lost that timing gamble. Now the issue is that yes, the only way to get a return on your money is to invest in the stock market. I can walk around the Wal-Mart parking lot and find more money than I get from my bank accounts in a given month. If I'm not getting any interest, why not buy PMs?

I do think PMs should be after you have everything else you'll need such as food etc. I still don't think it'll happen before the 2014 election. They have managed to kick the can this much so unless something bad happens such as a terrorist attack, nothing much will change in the foreseeable future.

Chief Instructor said...

Adam, I've got to tell you, I think PMs have moved up the list. I used to preach that PMs should only be purchased after all other prepping needs have been covered, and you have sufficient cash reserves to weather an unexpected financial storm.

Well, I think the storm is, if not upon us, we're feeling the leading winds. PMs are almost as liquid as cash. I can go to any coin shop, pawn shop, most jewelry stores or any Cash For Gold shop and have cash in hand 5 minutes after I plop down gold or silver coins.

In my game plan, it has moved up from being considered akin to a 401k or CD, to a savings account. I have no intention of spending that money, but if I need it, it's there, and spendable almost immediately. And I add to it on a regular basis.

I hope you're right about everything holding off until 2014. Your logic makes sense, in that if it all comes a-tumblin' down while Barry is in office, it could seriously hurt his chances of getting Dem control of the Senate and the House.

We shall see...

Anonymous said...

How do you store large quantities of PMs? Bury? Consolidating in your house seems like asking for trouble.

Chief Instructor said...

Anon, it's the old, "don't keep all of your eggs in one basket" idea. Multiple, geographically disperse locations.