Dear All,
One of the most often repeated and incorrect statements by the "experts" on financial television and those whose comments appear in print is that current dollar weakness is the result of the unwinding of the "safety trade" whereby investors are now willing to take on greater risk and sell the safe haven that the dollar represents. How utterly ridiculous. Financial market participants are fleeing the dollar precisely because it is being increasingly seen as unsafe. These "experts" often hold titles such as "Chief Investment Strategist" or "Equity Strategist" of this firm or that. The sand is shifting beneath their feet but they are oblivious and regurgitate the same drivel. Wall Street is full of lightweights from top schools with nice suits.
Cheng Siwei, a former vice chairman of the Communist Party's Standing Committee was in Italy this past weekend and as reported by Ambrose Evans-Pritchard, had this to say about China, gold and U.S. monetary policy. For those who care to understand, the interpretation is this. There is a floor underneath the gold price:
"...Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not stimulate the market...If [the Fed] keep[s] printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies."
Wegelin & Co is Switzerland's oldest private bank. Barely reported is this significant event. The bank has announced in an erudite commentary entitled "Farewell America" that it is advising clients to pull entirely out of United States assets. You may wish to read this first rate analysis of the disturbing trends that drove it's decision. Click here: http://www.wegelin.ch/
The point here is not whether or not it actually happens, but that it is even being discussed at all.
Click here: UN wants new global currency to replace dollar - Telegraph
The U.S. continues to follow the Japanese "Denial Model" of financial crisis management. This model will work as successfully here as it has in Japan for the past 20 years. United States banks continue to absurdly overstate their assets which, with the blessing of the cowards comprising the Financial Accounting Standards Board, they refuse to write down. Accounting standards in America have become trivialized and would be outright comical were it not so terribly a serious matter. As an illustration of the degree of lying that has become ubiquitous, on August 15th, when BB&T acquired failed US bank Colonial Bank, it immediately wrote down Colonial Bank’s real estate loans and real estate construction loans 37% by 67% respectively. Had these loan valuations actually changed to this degree from one day to the next? Obviously not. The writedowns were taken simply as a result of their having been deferred (i.e. lied about) by Colonial all the way until it's collapse at which point a new owner ultimately wiped the slate clean. I again point out that Colonial's lies were entirely in conformance with FASB guidelines. Click here: Bankers Want G-20 to Rein in FASB, IASB
Far from being over, the financial crisis is worsening with the consequences merely being shifted into currency debasement. The dollar will be the ultimate reservoir of all the bailouts, waste, free lunches, profligacy and printing. It is going to be seriously devalued. Superficial observation may focus on improvement in "nominal" statistics, but unless you apply accurate adjustments to the effects of debasement, you will be led astray. Make no mistake, the Federal Reserve and Treasury want to lead you astray. Because the effects are subtle and so misunderstood, it is easy for them to do. If most of Wall Street is clueless how hard is it to pull the wool over the eyes of the average American? Only when inflation runs rampant will some begin to understand.
What three generations of Americans have taken for granted -- the sanctity and pre-eminence of the U.S. dollar, is ending. As much as possible, you need to opt out of the financial system for the next several years. Physical gold (and silver) is the way to do it. It's popularity ebbs and flows but in times of waning confidence in paper assets gold has always been the go-to investment. When most catch on there will be a panic into gold. The right silver and gold stocks will produce extraordinary profits.
Gold has not worked its way higher since 2000 in a straight line. There have been corrections and much volatility along the way. But as of today it has since quadrupled in price and many precious metal stocks have done considerably better than that. For those who saw the big picture, refused to trade and remained calm and in position it has paid off handsomely. The same will hold true for the next few years.
The "coiled spring" that I made reference to a few weeks ago is uncoiling. Risking being caught out of position by trying to catch bottoms and tops in this generational precious metals bull market is foolish. Doing nothing and sitting tight for extended periods of time is often the most profitable, albeit difficult endeavors in investing. If you haven't yet done so stake your position and then, for the next several years...do nothing.
My best,
Jeff
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