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SSB NEWS - July 1, 2010
Gloom Galore In Cyberspace
There are a lot of scary videos cyber-circulating as well as internet chatter implying precious metals are about to skyrocket, especially silver.
These are probably signs that prices need to correct for a while. And if I'm wrong then it's a good thing you have at least some silver.
As we've been expecting, the stock market has started it's next big leg down, most real estate continues to fall, interest rates are correcting downward and the precious metals rally has lost momentum. Most things are going down in price showing evidence of deflation which is a contracting of the total printed money AND credit.
And all over the world there are trends by governments to stop printing and spending too much money. It's reached the US with the main message of the Tea Party to stop the presses. These are all deflationary trends. At the bottom of the deflation hundreds and probably thousands of banks will fail. Let's use the time between now and then to build your core silver position.
Below is advice that I would agree with from someone who has been analyzing precious metals for a long time.
The 2010 Silver Buying Guide
By Jeff Clark, Senior Editor, Casey's Gold & Resource Report Thursday, June 24, 2010
"Since reaching a low of just under $9 per ounce in November 2008, silver has more than doubled in price. and it's now closing in on its highest point in more than a decade.
This price strength from the "poor man's gold" has spilled over into tremendous investment demand especially so for silver coins.
The U.S. Mint sold more Silver Eagles in the first quarter of this year - just over nine million - than any prior quarter in its history. The Royal Canadian Mint produced 9.7 million silver maple leafs in 2009, also a record.
I'm a huge long-term bull on silver and gold. The only way the Western world can pay for its huge unfunded liabilities is to print more money which is very bullish for precious metals.
But I'm also a contrarian. With so much investment demand toward silver right now, the hard question is, "Should I be buying silver right now?"
The following chart (not shown in this reprint) shows how far silver is below its inflation-adjusted peak reached in 1980.
From a big picture point of view, silver hasn't run up all that much in the past decade. (Silver would be over $100 an ounce adjusted for inflation.)
So, my advice to anyone who does not own silver, and wants the long-term wealth protection precious metals offer, go ahead and buy. The risk of buying silver at current prices is lower than owning none at all.
Silver could fall more easily than gold when the economy is found to be more fragile than what many believe. Approximately half of silver's demand comes from industrial uses, so it's more susceptible to selloffs than gold if the global economy gets weaker (we at Casey Research believe it will).
Further, summer usually brings pullbacks in precious metal prices. This is the tendency, though we can't guarantee this summer will follow past trends. Still, our best guess is to anticipate another leg down sometime this year, perhaps this summer."
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Should things unfold this way it allows us more time to prepare for whatever happens when the crisis reaches an extreme and economists finally call the recession a depression. The best analogy is the period from 1920 to 1929 was like the period from 1982 to 2007. The crash from 1929 - 1932 was like the period from 2007 - 2016 (still unfolding obviously)
On July 8, 1932, the Dow reached its lowest level of the 20th century and did not return to pre-1929 levels until November 1954. http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 (http://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929)
The difference with the time lines is that this time everything is taking 3 times longer. The first big rally we just had from March 2009 through April 26, 2010 lasted about 3 times longer than the comparable rally after the 1929 crash. The entire boom lasted 3 times longer. The bust is, so far, on track to do the same thing, implying a stock market low in the year 2016 i.e. a 9 year decline as opposed to the 3 year 1929 - 1932 decline where stocks lost 90% of their value. Cash and the steady accumulation of silver is one way to prepare for deflation which still not one person in 1000 both understands AND expects. (Except of course the smart readers of this newsletter :-) )
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In preparing this month's Markets section I re-read what I wrote last month. What's interesting is that about everything I expected to happen did happen. Stocks did go down. The US Dollar is still taking a pause in its uptrend. Interest rates did fall. Precious metals didn't do exactly as I thought though the last part happened in that gold made a new high so silver turned up. There were a couple reports of some real estate going up in price but that's old data from the time stocks were having their bear market rally that ended April 26, 2010. That was the equivalent of the bear market rally after the 1929 stock crash - except it lasted 3 times longer. This whole "everything is taking 3 times longer than the 1920's boom and bust explains a heck of a lot of what's happened the past 28 years. Some say history repeats itself. Others say that's bunk and just because something happened before it doesn't guarantee it will happen again.
I say history does tend to repeat itself but in a different way no one expects it to since markets always fool the majority of people at every major turning point. To have a grasp of what may really be going on at least gives us a working theory on what to expect while every day we see if things are occurring as expected. I find it fascinating to watch history unfold as we live through the greatest boom and bust cycle of the past 300 years. Stay tuned to "As the World Changes."
While it's not terribly comforting to truly believe how bad the great economic depression will be (33% unemployment, massive bank failures, Dow Jones average in single digits, a major war starting sometime after the economy bottoms like the Civil War and World War II which both began AFTER the economic collapse had bottomed), I guess that's still better than being clueless like much of the public is. Most people are expecting things to get better or we are on the verge of a "double dip" (which will be more like a "super dip"), or a hyperinflationary collapse. I'm not. I expect a hyperdeflationary collapse and THEN a possible currency crisis and huge run higher in silver prices. I recommend both silver and cash. Obviously I don't think you should have any money in stocks, bonds, investment real estate, or mutual funds. I'm not an investment advisor so these are just my thoughts.
THE MARKETS
US Stocks - Short term trend remains down. Downside potential remains historic. Long term trend down though mid 2016. This phase down in stocks will be larger than the 2007 - 2009 decline. It has already started and the public is clueless. I expect ALL world stock markets to fall.
US Dollar - Short term trend is neutral to down as the USD has been consolidating it's recent gains. Intermediate term US Dollar trend remains up. This rally (now correcting / pausing) could last another year or so. Long term trend down, as is the case of all unbacked paper currencies since the beginning of history.
Interest Rates - Short term rates down but near a low. Long term trend remains up but interest rates may stay in a low range for months.
Precious Metals - Short term trend is turning back down or will after one more push up to it's recent highs. Long term trend is up. At some point in the future I believe that paper currencies will have to convert to some type of precious metals backing. We want to be in silver BEFORE that happens. Interest in silver continues to grow as evidenced by the record breaking Silver Eagle sales and of course the fact prices have been rising.
Real Estate - Down.
The Economy - Down. Deflation will accelerate. Unemployment should ultimately double before this deflation ends. The largest measure of money supply in the US, M3, is contracting at a rate that is only comparable to the Great Depression (see http://news.goldseek.com/PeterCooper/1275321600.php (http://news.goldseek.com/PeterCooper/1275321600.php) )
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Silver Eagles - Get 'em while you can :-) (our slogan has never been more true)
Thank you for all you are doing to help people own silver,
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