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You Would Have Thought It Was a Gold Bull Market!

Commodities / Gold & Silver Jun 28, 2007 - 05:22 PM GMT

By: Richard_J_Greene

Commodities

There are just an overwhelming amount of bullish factors for gold and silver that are still cleverly being camouflaged so that the fewest possible can see them.  From this point forward; remember the words of former Fed Chairman Paul Volker from the 1970's, “the one mistake that I made was in not capping the gold price.” 

Do not forget that statement because they did not forget this time and that has created the most incredible investment opportunity for those that see through it that has ever existed.  Control and manipulation in precious metals markets has reached a new level of transparency this year in an effort to discourage interest in the precious metals for their traditional investment merits.


A key event awakening the world to the continuing decline to worthlessness of fiat currencies led by the dollar; was when China was disallowed from spending some of its stockpile of reserves to purchase Unocal.  China has amassed close to $1 trillion in reserves and has been instrumental in prolonging the viability of the U.S. dollar by recycling trade surpluses into U.S. bonds despite massive trade and budget deficits that can be traced to Americans consuming far in excess of what they are producing. 

The most basic of economic principles has been totally lost on the American public.  Due to being led by feeble economic minds such as Ben Bernanke and Alan Greenspan, the American public has to be among the most economically illiterate empires in history.  We have been on the verge of bankruptcy for so long that most don't even have slightest hint that we would have crashed long ago if not for the arm twisting of other Central Banks by the U.S. to run similarly irresponsible monetary policies worldwide.  The problem is right here in the United States and it starts with a lack of savings.  (By the way, define saving as: that left over from the rewards of production that has not been totally consumed rather than the more commonly accepted; borrow money or extract equity to flip into the nearest asset bubble.) 

Yet our fearless financial leaders, (clowns), Helicopter Ben or Mr. Magoo would have you believe we Americans are bravely shouldering the world's burden because we are more willing to consume with money we are borrowing from our trade partners and buying things we have not yet earned and taking rewards that others have earned and that we will be unable to repay.  This is another form of the Adolph Hitler style of truth: say it often enough and they will believe it.

A debt-based fiat currency system that has now fully expanded worldwide has only one way to go and that is toward final collapse.  Now that the U.S. has bought some time by convincing other countries to increase their money growth rates even higher than the U.S., we are at such high rates of growth worldwide, (on the order of 15%) that we are literally hurtling toward either hyperinflation or economic devastation. 

The U.S. is in a box and seriously at the mercy of other countries' decisions because inflation is rising and we can not raise rates due to the leverage, particularly in housing, and we can not lower rates for fear the dollar will rapidly implode.  Thus with money compounding worldwide at a 15%+ clip annually led by Russia at a 57% annual rate, inflation will be too obvious to even the biggest economic dullards.  Even by holding rates constant the Fed would, in effect be easing aggressively as real rates would become even more negative than they already are.  If you can not feel the walls closing in then you haven't noticed the many countries that have spoken of diversifying their foreign exchange reserves or increasing their commitment to gold. 

Syria and Kuwait are the latest examples of countries that have had enough of the excessive money creation in the U.S. and have moved to de-link their currencies from the dollar.  Our foreign policies have been heavy handed economically, militarily and financially.  We are failing on all fronts and stand ready to slap China in the face with trade sanctions even while they have been most instrumental in keeping our currency from plummeting.  We should fear the risk of a military aggression on our part is a bigger and bigger risk as our other two methods of control are weakening considerably.  This would be an even bigger mistake.  The U.S. dollar is on the way out and just because officials have convinced other countries to wreck their currencies at a faster rate does little to salvage anything except perhaps a little more time.

The U.S. continues to bleed enormous trade and budget deficits, has lost its industrial base, finds fewer takers of its oversupplied currency, and can't even manufacture borderline positive economic statistics despite massive fraudulent manipulation. The World Gold Council earlier this month said world gold demand is running 31% above a year ago while supply continues to decline.  The world's largest producer, South Africa, saw gold production fall 7.5% last year to an 84 year low and continued declining in this year's first quarter at an even greater rate despite an almost tripling of the gold price in the last five years. 

Gold production peaked in 2001 at 2645 tonnes and fell to 2470 tonnes by last year.  Five of the top producers: South Africa, Canada, Australia, Peru, and the U.S. produced more than half that total in 2001 with 1330 tonnes and saw that drop off to only 1095 tonnes in 2006.  These stats make a pretty compelling bullish case yet gold is trashed in the press, the TV, financial advisors, and especially the bullion banks and the gold cartel.  They have resorted to an especially incredible tactic of late; instead of smashing down gold when negative news for gold is released, they especially whack it when gold positive news is released.  Despite these attempts gold has held up even with heavy Central Bank sales, heavy shorting in the futures markets, double leasing of the same gold, and attacks on the gold ETF which has been driven down with dollars being thrown at these paper markets.  Meanwhile, jewelry sales are up 17% and physical demand was high on any sell-offs.

The tide is turning as gold as a percentage of global currency is now down to 10% from a high of 84% back in 1950; so the Central Banks are running out of ammo to cap the gold price.  Of course, those investors that continue to make their gold investments in the paper markets of the futures markets and the gold and silver ETF's are helping to cap the price because the gold cartel will someday run out of gold but they will never run out of paper.  These instruments are what help them to crush the charts of the stocks and the metals causing chartists and technical players to pile on downswings.  There is more technical analysis on the major gold websites than ever…forget them, they do not matter.  First of all 99% of them are trying to chart gold and the stocks in dollars and that is a totally frivolous effort. 

The dollar is a measure of nothing with unlimited supply at any point in time.  Technical analysis is another tool being used to cap gold and gold stocks, nothing more at this point.  Don't listen to technical analysis and don't listen short term price explanations of the days action.  If you do, you will notice: higher interest rates are bad for gold; lower interest rates are bad for gold; high oil prices are bad for gold; lower oil prices are bad for gold; get it?...EVERYTHING IS BAD FOR GOLD!  That's what they have to get you to believe for the currency system of the world to make it through one more day.  When that one more day doesn't come if you listen to these people you will be left far behind and in an incredibly short timeframe.

Since 1970 the money supply of the world has increased more than 20 times the industrial production of the same period.  This IS inflation.  There is now more paper money added to the existing pile of money in the world EACH YEAR, close to $4 trillion, than the value of all the gold mined in human history and the pace is accelerating to the point that the paper money is beginning to be selectively rejected.  Do you not believe that holding gold and silver will not go up more in value than paper nothing?  This is all you ever have to know about gold and silver. PERIOD!

There is a favorite saying that I like very much attributed to Sidney Greenberg: “A successful man is one who can lay a firm foundation with the bricks that others throw at him.”   

They are throwing bricks at you right now and they are made of gold and silver.  GRAB THEM!

By Richard J. Greene
http://www.thundercapital.com

© 2007 Richard J. Greene
Richard is Managing Partner, Portfolio Manager of Thunder Capital Management. Richard graduated from St. Leo College, received his MBA in Finance, Management and International Business from the University of South Florida and is a Chartered Financial Analyst (CFA).

Thunder Capital Management LLC was founded in July of 1999 with the mission of creating wealth while preserving capital. Founder and Portfolio Manager Richard Greene, who utilizes his unique combination of expertise and experience in a wide range of markets, industries and investment vehicles, oversees all investment activities of the firm.

This article is made available for informational purposes only and is not intended to be an offer to sell or the solicitation of an offer to buy interests in any fund. Such an offer will only be made upon the delivery of a confidential offering memorandum which are available to pre-qualified persons on request.

Richard J. Greene Archive

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