-- Posted 5 June, 2007 | | Discuss This Article - Comments:
Source: SilverSeek.com
"It was a gray morning as I walked around the city beneath the spires, steeples, cupolas and turrets, walked through history, really, with intermittent rain and fog as conduits to the past. Prague is a lesson. My attention turned from the great kings and queens, courtiers and ladies-in-waiting decked in their finery, and from the suffering, patient peasantry that supported them for so long, to the sieges, wars, brutality, boiling in oil, quartering--the manifold violence that Prague has endured.
Czechs shake their heads, not their fists, at us. "You don't understand the progression," a 65-year-old teacher named Benes said to me. "Iraq had a monster in Saddam, and you removed him. Liberators. The trouble is, what then? We had our monster in Hitler. I remember the Russians entering Prague in '45. Liberators. I cheered their tanks. But liberators who stay become oppressors. The next time Russian tanks came, in '68, I did not cheer." ~~ The View From Prague
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Well, one thing is settled again, gold and silver have now resumed their appreciation against the US dollar, and most other currencies as well. If that's so then what's wrong with the equity stocks of the precious metals? Why do they still languish or seemingly not keep apace with the rise of G & S? We've always thought and been told that the underlying precious metals stocks are supposed to have 3-to-1 leverage. Again, we have to adorn our Relativity Thinking Cap for clues to an answer.
Why do people buy gold (or silver) anyway? Now, that answer most of you know. Why do governments occasionally hoard it, and sell it otherwise? Governments do so because their subjects want it more than the offered money substitutes. The citizens become terrified of losing their hard earned savings and wealth. This is so because gold meets the time-honored criteria of being money. Those characteristics are, and gold still is:
- Relatively scarce
- Universally recognized
- Easily divisible
- Durable
- Intrinsic value
Give those criteria some contemplation. And you thought you bought gold as an "inflation hedge"! Yes, you did, and it's because gold's competitor, the US dollar, is rapidly losing these characteristics of money. Gold, as the last refuge from paper money substitutes has always had the required characteristics to qualify. This has always been so before recorded history. Central banks have inserted themselves into the role of monetary alchemists. And they have always, without exception, failed to give their citizens a substitute qualifying on these five essentials. And, yes, these phony money substitutes can, and do, fool most of the people all the time. In the beginning, America was handed a Christian government which granted the people a natural God-given money. But, we've blown it, haven't we. Now we say we give all the glory to Him, but still worship at the alter of dishonest money. That has always been man's character in the history of the world - that is in all instances, but one - and that was 1789 when the US Constitution was ratified by the individual states. Is the world's one time reverence for America on the downward path because of its dishonest money? I think so. Our one-time adherence to honest weights and measures has been corrupted. Indeed, if it is he who owns the gold that makes the rules, should we as citizens entrust representative governments to own our gold?
Yesterday's Alchemist
Today's Alchemy Lab
All of which brings us to why the stock substitutes for the underlying physical metals? We discount with extreme prejudice the ETFs right off the bat. They have no underlying value, are dishonest money substitutes, and I shall not even legitimize them with commentary.
Mining stocks do, however, represent future and present value as their ores are mined or held as resources for the future. By purchasing equity ownerships we are hopeful their earnings will grow at a quicker rate than their underlying product. I don't know precisely why the HUI has lagged or traded sideways in relationship to the metals since late 2003. But, as we've stated on numerous occasions we must look at relativities to get some balance. Relative to alchemist paper, we know everything is going up. That being so, of the "things" going up while paper declines, what is going up the quickest relatively?
Of the precious metals in a secular bull market we know that silver, although more violent in its volatility, has historically gained the most in alchemy units and gold units. Lacking a suitable Silver Stock Index, I've used the silver price itself in relationship to the HUI on a monthly chart. The further out you go in time reference charting, the more the result lags. As you can see since 2003 holding silver instead of HUI stocks (predominantly gold stocks), you would have been better off.
Alchemy notes were not where you'd want to be in either case as silver's price in alchemist notes has continued to gain. The shaded blue area is that of the number of silver ounces to "buy" all the stocks in the HUI. In 2003 the HUI would have cost you over 45 ounces while as of yesterday you could have bought them for 24.58 ounces. We know that it takes 20 ounces of gold to "buy" the DJI, and that the G/S Ratio is in a secular decline favoring silver, so the next level of focus is what's the best medium to buy in silver. Before I go any further, I cannot emphasize enough that first you MUST have the physical metals in your personal possession. Both gold and silver. Because of its volatility silver is your speculative play in this strategy. You also should have some savings parked overseas. The imposition of capital controls is a real possibility for a government fighting its last battle to retain its power. Gold ownership will be shifting to the people from the government, and tyrants don't like that! Control by force will be their last resort, and having the guns will be able to enforce their edicts. You need not be "rich" to have an overseas account. I am not rich in alchemist notes, but speaking relatively, I will be "rich" in gold and silver ounces relative to my neighbors. When most come to the realization that they better have some gold "just in case", all their alchemist notes piled high will not be sufficient to buy the ounces that I have today. In fact, if a new replacement alchemist note is offered by a government by any name, and my tangible asset ratios are at their extremes, I might even decide to sell them my ounces, and buy what they've been selling! Providing it is safe, of course, from government interference in my private affairs. And, that's a BIG consideration.
Take a look at the MACD histogram above the area chart. You can set the MACD defaults to any integer configurations you wish. I left them at their defaults. The red bars have turned up (favoring stocks over silver) in about March. But, as monthly numbers lag, you must go the weeklies for a picture more representative of the present. The reason I use a monthly in this presentation is to give the reader a more expansive view of past performance. The weekly plots would have been too closely compacted as to distort the image. You can see a weekly chart
here. A G/S Ratio chart
here. An HUI/GOLD chart
here.
So, summarizing, the message is clear. For right now silver's the place to be, and as you can see with the SSRI overlay, selected silver stocks are the place to be. Eventually, by watching the HUI/SILVER Ratio we'll see the silver stocks come into favor over the underlying metal price as they both will appreciate together with the stocks leading.
One generation of informed citizens is not enough to change the tide. But two, ours and our children's generation, could be just enough to restore our freedoms, reduce big government, restore the reserved powers to the states, and save our sovereignty.
Work on it. Till the soil. Plant the seeds.
The day will come when they'll come to you for financial survival advice.
Be there.
- - CV
-- Posted 5 June, 2007 | | Discuss This Article - Comments:
