It is a matter of almost holy writ with us here in the Whiskey Bar that "the poor man's gold" is something we should be buying with every spare non-silver dime we have. We believe! We believe!
We believe on fundamentals, technicals, and common sense.
We even believe all this in the face of the recent gyrations in the market.
In May silver shot up dramatically, so why is it falling dismally in June? Beats me, Babes, it truly does. By every standard I can devise silver is still the investment of choice:
For sixteen years straight mining has not kept up with demand.
So...why did it fall again today? Quite frankly, I have no idea, and I don't really care. I like $13.85 silver a lot better than I did $15.50 silver last month so long as I'm purchasing, as I expect to be for some years to come! I chortled happily today when I bought over eighty ounces at $10.85 or $11.32, depending upon whether the weight was in Troy or Avoirdupois. Either way, I did well. I picked up another forty-odd ounces for $500.
Those who are familiar with my "TOIS" (Traynham's Own Investment System, pronounced "toys," because that's what I buy) know that I read the market via complex technical, psychological, and analytical market runes (otherwise known as Craig's List and e-Bay.) The torrent of silver available through such markets has reached flood level as 20% joblessness (no matter what the government says) and a minimum of 6% inflation (again, no matter what Obama says) devastate the land.
The shortsighted are turning loose of family treasures and luxury items rather than tightening their belts, and they will regret it bitterly sometime in the next five years.
Never before has the market been so advantageous for the buyer of used vehicles, fine china and other luxury goods, farm machinery, and livestock. As I noted in yesterday's article on Morning Whiskey, we just bought a pair of very fine horses for a quarter of what they would have cost last year. We want a diesel truck (for reasons covered in past articles), and made a short list quickly and easily of two dozen that would have done splendidly, the most expensive of which was $2,000. MDC (My Darling Charles) chose a Big Bubba that has been in use as a repo truck, meaning it comes with what is virtually a small crane and heavy chains worth a quarter of the price we're paying.
This country is in big trouble economically from crashing stock for 2010 and real estate prices. We expect the bond market and commercial real estate to totter next. Taxes are rising, income is falling, hours are being cut, the USA is averaging 625,000 lost jobs a month, and Congress intends to tax our cattle for emitting methane. BRIC is maneuvering to replace the dollar as the standard currency. Nobody more significant than Sri Lanka is discussing a gold standard. The far left is dismembering the carcass of business and distributing the bleeding hunks to favored voter blocks.
MDC and I spent our usual luxurious three hours sitting on the terrace watching the sun go down over the lake and laughing at the antics of the animals. We came up with one slight possibility of an explanation. Remember the Hunt Brothers? Back in the late Seventies they almost cornered the market in silver, and after that splendid idea failed went back to running one of the nation's biggest trucking companies. It could just be that the increasing costs of trucking and the possibilities of a breakout in silver made surviving Hunts think May was a good time to turn loose of some of their glittering hoard. A look at volume for the year might be enlightening, along with speculation about whence came genuine Ag, although it may be the rise was promulgated through mining top stocks to buy. I still say it doesn't matter, buy it when the price is advantageous.
I expect the day to come when I have to admit that I erred in not paying what silver cost when I had the chance at current levels. That has happened to far better than I. Silver is particularly vulnerable to this error because there is usually a limited amount of the physical metal to be had at any time. Don't say that you weren't warned that my gleeful hand rubbing today over buying at twenty and thirty per cent. under spot won't give way to mourning that I didn't buy much more even though it was $15-20/ounce.
I miss the good old days of the Eighties when I hunted for cyclicals and charted happily every day, but I think we have a better chance to make really big gains now than have been possible for ordinary, sensible people since the Great Depression. I love reading the market suggestions the big guns of Agora Financial offer us regularly, but day in and day out you can protect yourself and your future through small, common sense purchases. Food, fuel, trade goods, sterling you can hold in your hand, ammunition (if you can find it!), tobacco, alcohol, and soap...those will be the daily hard money in the future I see coming.
Why is silver falling? Who cares! Just go buy all you can get your hands on.
Warm regards and happy shopping,
Linda Brady Traynham
P.S.: Afterthought. Writing is how I pull out the conclusions my mind has reached, and even I didn't know until I typed the words above that my inner Cassandra has started to say, "Stop looking for bottoms and bargains. Pay what it costs to accumulate while the opportunities are there." Cassandra is right: it is very satisfying to purchase goods at 20% below market, unless six months from now you look at spot and wail, "I could have bought thousands of ounces at the going rate and would have a 35% 'profit' on it right now."
Many hours later: I went and practiced what I preached and contracted for a thousand ounces of sterling, my idea of Really Big Money (RBM, as the Mogambu Guru would say.) Pain, shame, disgrace, some of it I paid as much as $15/ounce for. Unlike the Stock Market, e-Bay is functioning at two a.m.
My thrifty instincts are utterly outraged and I have probably lost all claim to being one of the world's greatest shoppers, but Cassandra went back to sleep after muttering, "Good, smart girl. Keep doing it until you run out of cash allocated to spend on metal."
Adrian Ash writes us again briefly today from deep within the recesses of the BullionVault. He shares some interesting news about US savings and consumption…
"The newswires reckon, 'Investors are nervous because consumers are saving more than they're spending.'"
"But if it really was the 15-year high in US personal savings rates ― way up at 6.9% of gross income ― that spooked investors, just wait until Wall Street gets down to crunching Uncle Sam's give-and-take in the latest Commerce Dept. figures.
"And heaven forbid the Chinese take a peek at US consumers' earnings...
"Falling below zero for the first time since 1960 or earlier, nominal US wages have fallen off a cliff in the last six months.
"Gross income earned from employment has fallen year-to-date each month in 2009, dropping in May to its lowest level since Oct. 2007 and down more than 2% from the peak of last August.
"So how come consumers spending AND saving both rose last month, while pay packets shrank?
"'Obviously, for the long run, it has been desired for decades that Americans save more,' said one fund manager to Reuters from Illinois. 'But in the midst of this recovery [sic] and the stimulus packages that have been put forward, the hope would be to have them spending the money now.'
"And there's the devil in the detail: the government stimulus.
"The Bureau of Economic Analysis's Personal Income & Outlays release shows government benefits last month hitting a record both in dollar terms and as a proportion of gross personal earnings, rising above 17.9% of income across the economy.
"For comparison, Uncle Sam's donation to US personal income peaked at 14% during the early 1990s recession. The five-decade average is 11.1%.
"Unemployment insurance benefits, meantime, were almost twice the dollar volume in May of October last year. And yet the Street's apparently worried by US citizens putting too much money aside, rather than by how much Washington's stepped up to support them.
"Still think the fiscal or monetary stimulus will make for the exit any time soon...?"
Roving Whiskey Reporter Samantha Buker checks in from the other side of the editorial room to remind us not to count debt out quite yet…
"In case you thought frugality was in…debt is out...and America's mortgage lenders are returning to their senses, think again.
"Overheard at a dinner party...
"One lender argues to a housing counseling agency that one couple's total combined sum of $100,000 in student loans doesn't qualify for the 'long-term' debt category. Why? Because the loans don't start coming due for another two years. Until then, let the house payments begin!
"Two years looks like a long-term commitment to me? Or are they gonna flip the house for more than it's worth once they finish up their master's degrees? That kind of bubble math belongs to the 2005 loan origination history books, not today's balance sheets.
"Well, the folks in charge of dolling out the dough call the shots. For its part, the housing counseling agency demanded the corroborating OK from its guv'ment superiors in writing. That way, should the house go back to the bank, it can say that it recommended: 'these folks shouldn't buy a house' and the guv'ment said: 'Yes, they can.'
"In the meantime, this young couple through its joint accounts, will continue to live it up on borrowed money, maximizing joint credit cards.
"But the real punchline here is that once their dream house is secured, the couple plans to get married.
"Kinda takes the punch out of getting married when you've already bound yourselves in the chains of debt. At least in a divorce, the court can split the burden 50/50. Right now, one of them could be on the hook for everything ― the creditor just wants someone, anyone to pay.
"This is probably the one great American circumstance in which the 'Nanny state' ain't being a good German Shepherd...despite that lovely title to our newest watchdog: Consumer Financial Protection Agency.
"Maybe the state hasn't yet gotten the memo from the Feds. (Well, it's true that the House still holds the power to quash it. Then there's the slow-turtle Senate, and Christopher Dodd distracted by Obama's health care reform.)
"Strangely enough, any time states attempted on their own to 'protect consumers', the chief bank regulator, Office of the Comptroller of the Currency, took the states to court and won. The result: Lending standards weakened, and predatory lending rampaged on.
"The new CFPA will actually, according to Elizabeth Warren, of the Congressional Oversight Panel, will put more regulators out of jobs. However, we see nothing in this Harvard-born plan towards increasing the intelligence of the American public when it comes to taking what amounts to 'fairy money' that turns to sticks and leaves, blackens your credit and foists you on to the pyre of bankruptcy."
As I was about to hit the send button on today's issue, Sam sent me a bit of today's news. Hot off the presses…
A divided U.S. Supreme Court ruled on Monday that the New York attorney general's office can investigate whether national banks discriminated against minorities seeking mortgages.
The justices overturned part of a ruling by a U.S. appeals court that blocked state Attorney General Andrew Cuomo from investigating or enforcing the fair lending laws against national banks because they are subject instead to what has been viewed as less stringent federal regulation.
In a 5-4 ruling, Justice Antonin Scalia, one of the Court's more conservative members, joined the four most liberal justices in allowing Cuomo to bring lawsuits, though he could not at the same time issue subpoenas.
The ruling struck down a regulation by the Office of the Comptroller of the Currency that essentially preempted states from enforcing their own fair lending laws, even when federal law appeared inadequate to protect consumers.
Scalia said it would be "bizarre" for states to be blocked from enforcing valid, non-preempted laws against national banks, such that "the bark remains, but the bite does not.
Tomorrow, Dan Denning will grace us with a wonderful, intelligent missive. We won't be seeing Dan this year at our annual Agora Financial Investment Symposium…but that's no reason you shouldn't be there. I mean, how often do we get to celebrate The Daily Reckoning's 10th Anniversary?
Only once, that's how often! So join us and help us make it a year to remember. And of course, you'll get to hang out with your loveable Whiskey Bar manager and some of his most steadfast contributing scalawags at the Whiskey Bar panel discussion. And the booze will be exquisite.
Speaking of booze: it is time to escape the clutches of big government for just a spell in bourbon-induced whimsy. I'll see you all here tomorrow.
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