Thursday, March 7, 2013

Are We Wrong?

It is an important question for us to ask:  Are we currently wrong about the direction of the economy and finance?  We must ask ourselves this question so we can learn if we, those who have chastised the fiat ponzi of finance and the psuedo-science of economics, can figure out if we are right and if so how right we are.

Let's start off the the precious metals sector:  This is a sector of investment that has been relegated to such catigorizations as - for doom and gloomers and a fear trade, speculation (whatever the hell that means but probably as a reference from the media about day traders), and other such things like "stupid", for it just sits there and has no growth potential like a company, and it does not pay a dividend.

These are of course the tactics of the banking owned and operated media to give the exact opposite take on the metals themselves.  First, they are productive, as precious metals are the underlying fundamental technology behind all technology.  There is no computer without PM used as a conductor, there are no solar panels without silver, there are no catalytic converters without platinum; there are no bombs for the military - even thought we could do without that, the US run world economy couldn't.

Second, the fact that it does not grow as a company means it also does not shrink like one - not having counter party risk may be the most important reason for owning PM; not having dividends paid out is fine when you are not worried about your investment going under.

Is it the fear trade?  Why not the smart trade?  Why don't people think it is smart to own what was used for thousands of years as money?

Who cares what the traders do in the pits?  Most of what they do is upon command from the very banks that have crashed the economy over and over and over and over and over again.

Stocks are at all time nominal highs priced by the dollar, King of all Fiat.  Bonds are priced at all time highs, pegged by all Central Banks buying them en masse.  Does this mean anything to me?  The wealth created by the rise of nomianly priced equity has been equal to the inflation of the denominated currency.  Bonds are artificially high, and if there is one word that comes to mind when something is priced high it is "bubble" - and bonds make up the greater of finance when compared to equity:  If bonds collapse all hell breaks lose.  People will want to go to cash but inflation will steal a consistent return from their pocket.  People may want to go to stock but pick a stock, I dare you; tell me which company will do well in such an environment.

That leaves us with commodities, but how will you invest in them?  The futures market?  How do we know that futures are trading accurately?  Trust the CME?  Sure, that sounds smart.  If we ever wanted to take delivery we would lug around a barrel of oil?  Ten thousand barrels of oil?  Sounds crazy.  Trading futures is especially mad if the dollar and other fiat continues to break down, because those currencies are how you will take payment.

I have been saying for years equity would rise.  I wrote an article years ago how we would skip through DJ 13k (I was way ahead of course) but I stuck by it.  Now I am wondering how much higher we can go; specifically, can equity go higher without a significant breakout in gold?  Without a significant breakdown in FX?  Without a significant breakdown in bonds?  Or all of the above.

We are at an inflection point, and how interesting that my last call at LH's Market Watch on PM was for gold and silver to break out in April and May (read the last article).  Get ready boys and girls....the mountain is about to turn into a volcano. 

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