And the band went on playing

David Schectman

Things are changing right before your eyes but they are moving in slow motion and it’s hard to grasp the significance of what is happening. Tonight (late Tuesday), silver touched $18, gold hit $1069 bid (an all-time high) and the dollar crashed below its critical support at 76 (USDX). Meanwhile, the usual suspects at CNBC, Bloomberg – plus Kitco’s resident fool Jon Nadler see only the “risk” of owning gold. Why is it that gold is the only bubble that they see? What about a bubble in the dollar and a bubble in the stock market and a bubble in the bond market? Those, my friends, are the real bubbles. Gold is rising because there is a great deal of sophisticated buying of (physical) gold coming in from China, India, Russia, the Middle East and Europe. Even a few of the central banks, led by Russia and China, have become buyers. The only thing holding gold back below $1100 right now are the so called “commercials,” (JPMorgan, Goldman Sachs, etc.) who are massively “short” gold (and silver) on the “paper” Comex market. They’ll get their behind handed to them soon enough and it couldn’t happen to a nicer group of crooks. The only thing holding the dollar up in the 76 range is – well actually, nothing is holding the dollar up now and that is very bad news for us because as the dollar goes, so goes America.

There is so much insecurity out there that most of you are afraid to act now and shed your (collapsing) dollar investments for (rising) precious metals. It’s really not your fault for being afraid to act. How confusing it is when you are told by “expert” after “expert” that gold is oversold, gold is overpriced, the economy is starting to recover, the dollar is about to rebound, there is no inflation, just deflation, and only crazy goldbugs own gold. My suggestion to you is: Pick your “experts” carefully. Listen to the ones who have been RIGHT for the past few years! And who might they be? Well, I guess I’m one. Somehow, I have managed to be correct in both my advice and my timing for virtually all of this decade. I don’t lay claim to inventing the wheel and I’m not the world’s brightest economist (actually I’m not an economist at all – just a lowly history and philosophy major who happened to start studying economics in the mid ’80s). My success is a result of figuring out, over many years, who the real experts were and who to listen to. Here is a short list of some of my favorite “experts.” These are the guys that I have frequently quoted on these pages for many years: Jim Sinclair, Richard Russell, Bill Murphy, Jim Willie, Howard Katz, John Williams, Gerald Celente and Bob Chapman. You should compare their advice to the Elliott Wave guys, to Jon Nadler, to the “deflationists” and to the CNBC cheerleaders. Which group of so called “experts” has given you the best advice? If you listened to the wrong group you would not, or do not own any gold or silver now and would have missed the first leg up of what will turn out to be the biggest bull market of all. The truth is, eventually you will participate, but at a much higher cost to you. And, if you wait too long you may not be able to escape to the safety of precious metals at all – the demand will be so great that physical gold and silver coins and bars will not be available even at much higher prices. We got a taste of that last fall (with gold $350 an ounce less than it is now).

So there you sit, many of you, frozen like deer in the headlights of an approaching car, afraid to make a choice. I have news for you. You can’t avoid choosing. By not choosing (to diversify out of dollars) you are in fact making a choice – you are choosing to stay in dollars. This, my friends, is a big mistake! It is a mistake that has already cost you dearly. By listening to Cramer, Prechter, Nadler and your stock broker and money manager you probably have managed to ride your portfolio into the ground, or at best, are only “slightly” down now, and you missed the entire massive rise in gold for nearly a decade. Let me ask you a question – what asset do you own that is worth more today than it was in 2000? Could it be your stock portfolio? Your real estate? Your “cash” holdings in bonds and money markets?

In this decade, the Dow plunged from an all time high, around 14,000, to the current value around 9,800. From January 1, 2000 until January 1, 2009 the inflation adjusted return on the S&P 500 including dividends was -2%. I don’t have the real estate numbers at my finger tips, but I figure the house that I built 4 years ago is worth 25% or 30% less today than what it cost me to build. The dollar has come down from 126 (USDX) to its current (falling) level of 76. That represents a LOSS to you in buying power of around 40%. If that’s not bad enough, Jim Sinclair states with certainty that the dollar will plunge below 72 in the next few months, on its way down to the 60s or even the 50s. With interest rates at an all-time low, you certainly have not kept pace with the loss of the dollar (inflation) if you were in bonds or money market funds. And then there is gold – which is UP 324% since 2001. Most of you, listening to the wrong group of “experts,” missed the run up, didn’t you? On the one hand, your dollar assets lost value and on the other, gold was the best performing asset class of any. Well actually, silver hung in there pretty well too. Silver was around $4.50 in 2000 and is now around $18. That represents a GAIN of 300%. Most of you probably don’t have any silver either. If you are part of the minority that did buy gold and silver all the way up, congratulations! And the good news is that the best is yet to come.

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How many of you can honestly say you are richer today than you were 9 years ago? Not very many. How many of you who took our advice and purchased gold, silver and mining shares are worth more today than you were 9 years ago? Yes! I see a lot of hands raised out there. I can tell you this much – my net worth has never been higher, not even close. And the same is true for my son Andy. We listened to our own advice. If you haven’t acted on what we have been telling you, it’s about time that you did, don’t you think? Don’t take my word for it – look at the numbers. We have been right! This is not about patting myself on my back. My track record speaks for itself. My newsletter library is on the Miles Franklin website. Go back and see what I had to say. Six months ago, when gold was under $900 I told you that it would finish the year at least at $1100. And so it shall. I was willing to personally take the plunge years before most people got involved because I could see what was coming and was not afraid to act. In 2001 I moved ALL of my wife Susan’s 401K money out of traditional stocks and bonds and put it 100% into mining shares. Her money manager looked at me like I was crazy. He still does, in spite of the outstanding results we obtained. Old habbits die hard! Believe me, she was uneasy with the move, at the time, but she is pretty happy these days as her portfolio is up hundreds of percent and the best is yet to come. I am trying my best to open your eyes and help you protect yourself before it’s too late. Let me make it simple – IT’S NOT TOO LATE TO BUY GOLD AND SILVER. IT’S NOT TOO LATE TO LIGHTEN UP ON YOUR DOLLAR-BASED PORTFOLIOS. THE BULL MARKET IN PRECIOUS METALS IS JUST STARTING TO HEAT UP AND THE BIG MOVES ARE AHEAD OF US, NOT BEHIND US.

I was talking to a friend of mine last night. He took my advice last summer and put virtually all of his money into physical silver and into a few mining shares that I recommended. He has done well. So what does he tell me last night? He says “the experts are advising that we should move into oil.” Yes, oil should do fine. Gold and silver aren’t the only assets that will do well going forward. But (pardon the analogy) if you have a near-perfect wife, why would you go bar hopping looking for someone who might be better? Those of you with gold and silver are already WINNERS. If these assets turn out not to be the very best choices, they will be darn close. All you have to do is sell dollars, buy physical metals and some well thought out mining shares and you win! Speaking of mining shares, if you need help in deciding what to buy, and you really should use specialists, and I suggest that you contact Global Resource Investments, Ltd. In Carlsbad, CA. This is Rick Rule’s firm and they have been around for a long time and they specialize in the mining shares. Contact them at www.globalresourceinvestments.com or call them at 800-477-7853. I have personally met with them and feel comfortable recommending them.

Back to the conversation with my friend – he told me “the experts are saying that gold is only rising in dollars, not in other currencies, so this is not a real bull market.” And to think that these guys call themselves “experts!” Go to Kitco’s website (www.kitco.com) and drop down to the bottom to the section titled EXCHANGE RATES. In the left hand column, click on euro or yen (or any currency) and a graph will pop up. On the top of the graph, click on 5-year or 10-year and you will see the performance of BOTH the dollar and the currency that you choose in red and blue lines. Sure, gold has been higher in the other currencies even though the gold in dollars is at an all-time high now, but the TREND for the past 5 years has been UP. Gold is once again TURNING UP in all of the currencies. This should come as no surprise since every country is in the process of “debasing” their currency in order to support their own export industries. Debasing, of course, means inflating away and that is why gold is rising in Pounds, Euro, Yen, Yuan and the rest of them. Gold is THE STANDARD, gold is MONEY, gold is what all of the currencies are measured against. Gold doesn’t rise or fall. It takes more or less of a given currency to buy gold. Gold is the standard! Gold is money! It’s been that way for thousands of years. And that is what I say to people who tell me that gold has no use and doesn’t pay any interest. Money that holds its value doesn’t have to pay interest. For nearly 135 years, from 1776 until 1913 there was virtually no inflation (except for a brief period during the Civil War) and you could set aside an ounce of gold for decades and it would not lose any buying power. All that changed with the creation of the Federal Reserve in 1913. In less than 100 years, the Fed has destroyed over 95% of the purchasing power of the dollar, which lost its gold convertability in 1933. Nixon completely de-linked the dollar from gold in the fall of 1971 and there has been Hell to pay ever since. In 1913, $100 was the same as 5 Double Eagles ($20 gold pieces). Today 5 Double Eagles are worth around $6000. So, my friends, which form of “money” best held its value? In 1913 gold was worth approximately $20 an ounce. Today it is worth around $1070 an ounce. Gold has increased by 53.5 times. It should be worth more. Gold has been held back by years of central bank selling and leasing of gold. Governments and central banks want you to believe that gold is a relic of the past and not worth owning so they can keep up the myth of paper currencies. If gold rises too fast, it warns you of inflation and/or problems in the economy. That is gold’s role. So, kill the messenger, suppress the price of gold, and all is well with the dollar and the Yen and the Pound. Really now? All is not well and those of us who understand that simple fact have long since moved out of paper and into gold and are in good shape.