Sunday, February 13, 2011

Any Idiot Can Screw Things Up, It Takes Real Genius to Wreak Complete Destruction

I am preparing for an interesting week.

Economic reports for the week are pretty thin on Monday and Friday. It is the Tues.-Thurs. time frame where things might get interesting. Silver is trading at 30 and a real storm is brewing there. The government manipulated PPI and CPI inflation figs get released mid week. As I live in this alternate universe, I would not be surprised to see some ghastly number and subsequently see CNBC's Steve Liesman wax poetic on how inflation means our economy is healthy. Of course the markets will go straight up no matter what happens because the FED has effectively disabled it to the extent that any short sellers are now at home knitting, drinking Key Light, and waiting for June to arrive and the end of QE2. At that point we will see the next unveiling of Bernanke's grand experiment.

I have the utmost confidence in Bernank. Once in awhile, even the idiots figure out they are screwing up and they switch gears. But not this guy.

I'd like to mention an odd concept on why buying gold and silver is simply wealth preservation. Any idea that you are actually accumulating wealth is inaccurate at least until the dollar is declared DOA.

Late last week, I was talking to a guy who was thinking of investing a five figure amount in gold and silver. The only means we have to value gold and silver is via fiat currency. In other words, gold and silver are only worth what somebody is willing to sell it for in (currency) and what we can sell it for later on.

Let me explain it like this. If you buy groceries today and it costs you 60 bucks, you must go sell two ounces of silver to buy those groceries. One year from now, that same grocery basket may cost you 120 dollars. At that point in time, silver must be trading at 60 bucks an ounce for you to redeem 2 ounces of silver to have the same purchasing power. You have not gained anything. However, you have not lost anything. The person who works for 12 bucks an hour and lives paycheck to paycheck has lost 60 bucks. You should ask your employer to pay you in gold or silver.

The rise in this stock market is completely illusory as well. The market goes up while inflated dollars chase it. It has not gone up. It simply ascends numerically as the value of a dollar descends.

Inflation is an insidious disease that robs you of your work product and buying power. The only way to protect your wealth is by buying tangible items of value that will rise and counter-balance your lost buying power at any given point in the future. That banks have manipulated the true price of gold and silver with worthless currencies cannot last. People getting in on the ground floor may reap a bigger benefit when currency and precious metals ultimately unhinge.

Running in place on the treadmill is certainly better than suddenly stopping and having the belt dump you ass over tea kettle. (My dad always said that)


Bushwack said...

First time visitor.. You sound like you know what the hell you are talking about. I'll be linking you on my best of the web page. The stock market is confusing as hell to me, I'm pretty much stagnant in my investments. I've made a lot of money over the last couple years but only because of a buyout/takeover that paid bigtime. I'm invested for retirement and I don't buy gold. Although I wouldn't mind finding a bunch of it...I'll be back.

Brian said...

Thanks Bushwack for stopping by and all of your kind words...hope to see ya' around!