A Few Thoughts…

It’s been a rather interesting week! Not that all weeks aren’t interesting, but it often happens that the economy, and the markets and people’s rights will remain put.

This week however, we saw the Dow lose over 600 points (350 yesterday)… this takes the Dow down over 13% YTD… Foreign stocks tumbled alongside… the bottom fell out of the silver market (look at the 5 day SLV chart) only to regain its footing… Oil shot over $140 a barrel for the first time ever (and OPEC said it sees 170 but not 200)… the Supreme Court voted in favor of the 2nd Amendment, the right to bear arms… There may be water on Mars… There may not be ice in the North Pole… and the list goes on.

News and Markets

It seems that people are getting just so much smarter by the day. Goldman Sachs even advised some of its clients to go short recently. Wow! About time, no? The funniest thing is that I can easily see some fools going short, watching as stocks rally through the week, cover out of fear of Dow 14,000, and then losing their short positions (and shirt positions).

Sure there is excess fear in the marketplace, but as we all know by now, fear on Wall Street is designated by the day. If the Dow rallied 400 points tomorrow, there goes all the fear! This is not the type of bad sentiment that bear markets are made of.

Global Warming
Let us turn to a caveat of modern heresy, an issue that has people more scared than before Y2K… Global Warming. News comes out that there is no more thick ice in the North Pole and that whatever ice does remain should be melted come summer. Yet in the same article, it mentions how this has enabled, for the first time in history, access by ship to the top of the world and to deep sea drilling sites never before available. You make some you lose some.

Inflation/Deflation
Barclay’s and others have recently expressed concern of surmounting pressure against the Fed from inflation as they feel the Fed has been placing too much weight on the deflation issue and not enough of surging commodity prices. This bodes very well with our general Deflation theory, that of “Equities Down, Commodities Up”.

Losing Money In Silver?
Can you? Think about something for a second. Between 1850-1900 the average wage was 1 silver dollar (31.1 grams). Today, the average worker earns about $170 a day. This makes silver undervalued by over 10 times.

Similar to labor, silver and gold also buy the same amount of goods that they did in comparable times in history. Volatility in silver is relative only to the Dollar, a fiat currency backed only by the faith and credit of the United States government. Thus what varies is people’s belief in our country, not the true value of the goods we own.

In terms of value, at the peak of previous business cycles it would cost you over 20 ounces of gold to purchase the Dow Jones Industrial Average. At the trough however, it often sold for about an ounce. This represents the truth behind business and expansionary cycles, that in essence value is only that which you accumulate in real value not in sales, product or market cap.

Have a wonderful weekend and as long as your boss pretends that you’re highly paid… you can pretend that you’re busy.

~~~

Friday proved interesting as markets fell considerably. This doesn’t bode well for as they say “Bad Fridays are often followed by lousy Mondays”. In addition this week the DJIA has fallen over 20% off its high making it an official Bear market. I see 10,400 our next point of support.

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