RANTING ANDY – “To live, man must hold three things as the supreme and ruling values of his life: reason, purpose, and self-esteem” – Ayn Rand, Atlas Shrugged
Given today’s “new world” of manipulation, of markets, perception, and, if TPTB had their way, the cores of our being, I decided to take a different tack this morning, one a bit more ZEN in nature than RANT. Fortunately, this morning at the gym I read John Galt’s famous radio address from Atlas Shrugged, which inspired this missive, particularly its title and opening quote.
Freedom-fighters are by nature constantly under attack, per my Indiana Jones analogy from yesterday’s missive, and what we are doing now is just that – for ourselves, our friends, family, and future generations. The “essence of being” is understanding the meaning of life, which of course is different for each person, in some cases highly complex, as Albert Einstein’s pursuit of quantum physics, but more often than not simplistic, man’s innate desire to live, love, and reproduce.
For me, the meaning of life is empowering people to help themselves. Despite the gathering evil around us, the laws of nature cannot be repealed. Thus, my sole goal is to help you through the ongoing, rapidly building storm, driven by the aforementioned guiding lights of reason, purpose, and self-esteem.
I have felt childishly helpless dozens of times in my 9½ years of being 100% invested in Precious Metals, and those that know me have heard me state “they always win” more than a few times. However, such statements were expressions of frustration, NOT belief, and each episode has made me stronger, wiser, and more determined. Less so to “win”, than to avoid “losing” to a far less intelligent and noble (though infinitely more powerful) opponent.
Persistence alone has been a moral victory, but ownership of physical gold and silver is what guarantees the positive outcome. The crimes perpetrated against PM investors this year dwarf any other market manipulations EVER, but do not impact me because the VALUE of physical gold and silver NEVER declines, nor does one’s brokerage account when his primary asset is bullion. Yes, I hold my “cash” in the form of GTU and SVRZF in brokerage (NOT bank) accounts, but that represents just enough for emergencies and thus does not materially decline during raids such as the ones experienced in November 2010 and January, March, May, and now September of 2011, to name just a few.
This weekend, I espoused three market scenarios for the coming week, based on the outcome of the G-20 meeting, and I am not afraid to republish them here:
Scenario 1: A lack of OFFICIAL response will be viewed as a failure to reach an accord, resulting in COLLAPSING STOCK AND CREDIT MARKETS WORLDWIDE, and likely within days the first European bank shutdowns, which would in turn spill over to the rest of the ailing money center banks in the Western World (say goodnight, Bank of America and Morgan Stanley). If this occurs, gold and silver could succumb to additional near-term selling from the announced margin increase, amidst a liquidity-based selling frenzy of all markets worldwide. Of course, the other assets would not recover, while later this Fall gold and silver would resume their inexorable rises to $2,000/oz and $50/oz, respectively, and WELL BEYOND.
Scenario 2: A coordinated statement that Greece will be officially defaulted later this Fall, with detailed plans on how the damage will be contained by bailing out ANY AND ALL BANKS WITH SIGNIFICANT EXPOSURE TO GREEK DEBT. Per the tables above, the French “Big 3 Banks” might be nationalized in the process, as there appears little chance they could survive their massive exposure to Greek debt, as well as to other PIIGS such as Italy and Spain. In my view, this is the most likely result, which should stabilize global markets TEMPORARILY, yielding a return to the pre-smash gold and silver prices within weeks, if not days.
Scenario 3: A SURPRISE announcement that, following fruitless discussions regarding plans for a “controlled Greek bankruptcy” later this Fall, the G-20 has decided to bankrupt Greece now. I view this as the least likely outcome, which would cause the maximum amount of market havoc (and likely the first $200+ gold up day).
Obviously “Scenario 3”, the least likely and most catastrophic scenario did not occur, although give it time, it certainly might in the coming months. “Scenario 2” did in fact occur this morning, but in a very unconvincing manner, not far from “Scenario 1” to be frank, as obviously the main conclusion of the G-20 meeting was that there was no conclusion, only that more platitudes were required to buy more time (assuming, of course, that the markets don’t CALL THEIR BLUFF and plunge).
Frankly, I was shocked to see European markets flat when I awoke this morning, as the G-20 appears to have been a huge failure, by my estimates. Simply stating that members believe an increased European Stability Mechanism is more likely hardly qualifies as decisive action, particularly given the likely political ramifications of “strong players” such as Germany, Austria, the Netherlands, and Finland, whose general populations overwhelmingly are against bailing out the PIIGS, or PIFIGS when you include France.
However, it didn’t take long to realize the REAL conclusion of the G-20 meeting, to JOINTLY, and MASSIVELY, step up the level of stock market support and Precious Metals attack. While at the gym, for instance, these meek headlines crossed the tape, causing Dow futures to surge 150 points and European bourses to rocket up 2%-3%.
ECB said to debate new 12-month loans at the October 6th policy meeting where they may discuss a rate cut
- EU may speed up ESM enactment to stem the crisis with Euro aides discussing setting up the fund in 2012 a year early.
This is NEWS?
This is exactly what ECB ministers have been saying for the past week, a week when sovereign and bank bond and credit default swap spreads rose to record highs (a trend that CONTINUES THIS MORNING!), while stock prices plunged. Never mind PAPER gold and silver prices, which have been temporarily broken as indicators of ANYTHING other than the level of Cartel manipulation. I am talking about credit spreads continuing to WIDEN while the now GLOBAL PPT runs up stocks on “non-news” to influence PERCEPTION of the unwashed masses and doting, paid-in-full media.
Either way, in the final analysis we are currently stuck between Scenario’s 1 and 2 – one, in that no OFFICIAL plan was offered, but two, in that not-so-subtle PROMISES of a MASSIVE BAILOUT were insinuated by multiple officials. Somehow, comments from numerous G-20 officials expecting a Greek default have been ignored, despite the obviously catastrophic ramifications of such an event. Instead, focus was placed on the potential to “wall in” Greece and prevent contagion from spreading, as if a) that is remotely possible or b) Greece was the ONLY “problem child.”
In due time, readers, in due time. The laws of mathematics cannot be repealed, and simple equations PROVE none of these nations will EVER pay off their debts, and in many cases even the INTEREST PAYMENTS in coming months. And given the global entanglements of essentially ALL Western banks and sovereign nations, there is not a shred of doubt that what affects one will affect all.
As for Precious Metals, once again I cannot emphasize enough that this is the GREATEST PRECIOUS METALS BUYING OPPORTUNITY OF ALL TIME, as the current massacre is NOTHING more than yet another, albeit more intense, PAPER attack (with perhaps a dab of official, liquidity-driven selling as icing on the cake). No sooner did the CME announce MASSIVE gold and silver margin hikes on Friday afternoon, AFTER perhaps the most precipitous price decline in PM history, the Shanghai Gold followed with an EQUALLY LARGE silver margin increase, targeted SOLELY at taking down the paper price as much as possible.
Unlike the CME, a U.S. government-controlled entity charged principally with manipulating “strategic” commodities, the Shanghai Exchange is run by the CHINESE GOVERNMENT, an organization whose PRIMARY GOAL is to acquire as many valuable resources as possible with its rapidly depreciating hoard of $3.2 TRILLION dollars. There is NO DOUBT the Chinese further weighted the “falling knife” to try and draw out as much PHYSICAL metal as possible. Dollars are MEANINGLESS to them, as they are well aware most of their $3.2 trillion (and growing) reserves will eventually be worthless. Thus, they will engage in ANY AND ALL activities that might maximize the purchasing value of those dollars before the final currency crisis hits, permanently destroying its ability buy such valuable assets.
Unfortunately, the PHYSICAL market is getting TIGHTER, as I see APMEX is still quoting spot plus $164 for purchases of less than 20 gold eagles on credit, despite the price of gold being $60/oz lower ($1,598 vs. $1,658) then the prevailing price this weekend. In other words, on an apples-to-apples basis, the premium for such coins expanded in the past 12 hours from 9.9% to 10.3%. And by the way, here is another anecdotal piece of evidence of tightening PHYSICAL demand I received this weekend, a picture of the line at an Inglewood, California coin shop on Friday afternoon – TWO HOURS LONG.
Before I go, I wanted to vehemently reinforce my KNOWLEDGE, not BELIEF, that what we are witnessing in the Precious Metals markets is nothing different than what occurred in the fall of 2008, when gold and silver were ATTACKED by the Cartel to make sure they did not act as the safe-haven assets they have been from time immemorial. Yes, it has become popular mantra, even among the gold community, that “2008 was a liquidity event, but 2011 is a solvency event”.
True, and not true.
Yes, 2008 was a liquidity event, but it was ALSO a solvency event, as numerous major bankruptcies occurred, such as Lehman, Bear Stearns, Wachovia, AIG, Fannie Mae/Freddie Mac, Northern Rock, Countrywide Credit, IndyMac, Citigroup, Royal Bank of Scotland, General Motors, Chrysler, etc., etc., etc.. Yes, some of those companies were acquired, but such transactions occurred, ALL with government backing, because they, too, were BANKRUPT! Not only that, but FASB, yet another fraudulent U.S. government agency, was forced to change accounting rules simultaneous with the rollout of TARP, TALF, and a host of other publicly-funded bailouts to prevent a broad swath of other banks around the world – Goldman Sachs, Bank of America, and Morgan Stanley in the States, for example – just to prevent a mass bankruptcy filing of the ENTIRE FINANCIAL SYSTEM.
Gold and silver were VICIOUSLY ATTACKED back then, the tell-tale signs being the same as today – MASSIVE waterfall declines at the same times of day in the U.S. PAPER markets, time and again, just as they are now. In fact, gold and silver briefly showed their true colors at the height of the crisis in February 2009, when they temporarily broke the Cartel chains and surged to new highs simultaneous with the Dow hitting its lows! Yes, the Cartel counterattacked to calm this “crisis”, but the footprint still remains, the same footprint that saw gold and silver SOAR last month due to the EXACT same solvency issues we are witnessing today.
The only difference between 2008 and 2011 is that insolvency and lack of liquidity is DRAMATICALLY WORSE, and that essentially ALL fiscal and monetary “bazookas” have been fired, only to shoot blanks. Not only that, in 2008 it was only the BANKS that were under fire, whereas now both banks AND sovereign nations are flirting with financial collapse.
Yes, the Central banks will continue to announce massive bailouts with printed money, with the new wrinkle that they are now doing so in a COORDINATED FASHION (such as last week’s joint dollar swap facility from Fed, the BOE, the ECB, and the SNB). But in the end, they are just debauching their currencies further, currencies that are already on the brink of collapse due to dilution.
Greece will NOT be contained, even if TPTB buy a few weeks, or even months, of erroneous market PERCEPTION. And the Euro Zone will NOT survive the destruction of so many of its members, nor will the BIG KAHUNA, the U.S. despite the “reserve currency” status of the dollar, as GLOBAL SUPPLY of dollars will at some point in the near future SWAMP supply.
Furthermore, never forget that no matter how much manipulation is used to prop up the stock markets and sovereign bonds in the coming weeks, it will have ZERO impact on REAL ECONOMIC ACTIVITY, which will continue to plummet into the abyss, or SOLVENCY, which will continue worsen with each passing day.
One’s mindset should be 100% focused on PROTECTION, NOT PROFIT, just like it was during the Great Depression of the 1930s. Unfortunately, when World War III erupts due to the mass hyperinflation likely to occur in the Western World, the U.S. standard of living will never again recover.
In conclusion, I wanted to EMPOWER you further with another historic quote from Atlas Shrugged, a guidepost that keeps me grounded through difficult times as today:
“If devotion to truth is the hallmark of morality, there is no greater, nobler, more heroic form of devotion than the act of assuming the responsibility of thinking.”