Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
What Fake UK Unemployment Statistics Predict for General Election Result 2019 - 6th Dec 19
What UK CPI, RPI and REAL INFLATION Predict for General Election Result 2019 - 5th Dec 19
Supply Crunch Coming as Silver Miners Scale Back - 5th Dec 19
Gold Will Not Surpass Its 1980 Peak - 5th Dec 19
UK House Prices Most Accurate Predictor of UK General Elections - 2019 - 5th Dec 19
7 Year Cycles Can Be Powerful And Gold Just Started One - 5th Dec 19
Lib Dems Winning Election Leaflets War Against Labour - Sheffield Hallam 2019 - 5th Dec 19
Do you like to venture out? Test yourself and see what we propose for you - 5th Dec 19
Great Ways To Make Money Over Time - 5th Dec 19
Calculating Your Personal Cost If Stock, Bond and House Prices Return To Average - 4th Dec 19
Will Labour Government Plant More Tree's than Council's Like Sheffield Fell? - 4th Dec 19
What the UK Economy GDP Growth Rate Predicts for General Election 2019 - 4th Dec 19
Gold, Silver and Stock Market Big Picture: Seat Belts Tightened - 4th Dec 19
Online Presence: What You Need to Know About What Others Know About You - 4th Dec 19
New Company Tip: How To Turn Prospects into Customers with CRM Tech - 4th Dec 19
About To Relive The 2007 US Housing Market Real Estate Crash Again? - 3rd Dec 19
How Far Will Gold Reach Before the Upcoming Reversal? - 3rd Dec 19
Is The Current Stock Market Rally A True Valuation Rally or Euphoria? - 3rd Dec 19
Why Shale Oil Not Viable at $45WTI Anymore, OPEC Can Dictate Price Again - 3rd Dec 19
Lib Dem Election Dodgy Leaflets - Sheffield Hallam Battle General Election 2019 - 3rd Dec 19
Land Rover Discovery Sport Brake Pads Uneven Wear Dash Warning Message at 2mm Mark - 3rd Dec 19
The Rise and Evolution of Bitcoin - 3rd Dec 19
Virtual games and sport, which has one related to the other - 3rd Dec 19
The Narrative About Gold is Changing Again - 2nd Dec 19
Stock Market Liquidity & Volume Diminish – What Next? - 2nd Dec 19
A Complete Guide To Finding The Best CFD Broker - 2nd Dec 19
See You On The Dark Side Of The Moon - 2nd Dec 19
Will Lib Dems Win Sheffield Hallam From Labour? General Election 2019 - 2nd Dec 19
Stock Market Where Are We?  - 1st Dec 19
Will Labour's Insane Manifesto Spending Plans Bankrupt Britain? - 1st Dec 19
Labour vs Tory Manifesto Debt Fuelled Voter Bribes Impact on UK General Election - 30th Nov 19
Growing Inequality Unrest Threatens Mining Industry - 30th Nov 19
Conspiracy Theories Are Killing This Nation - 30th Nov 19
How to Clip a Budgies / Parakeets Wings, Cut / Trim Bird's Flight Feathers - 30th Nov 19
Hidden Failure of SIFI Banks - 29th Nov 19
Use the “Ferrari Pattern” to Predictably Make 431% with IPOs - 29th Nov 19
Tax-Loss Selling Drives Down Gold and Silver Junior Stock Prices - 29th Nov 19
We Are on the Brink of the Second Great Depression - 29th Nov 19
How to Spot REAL Amazon Black Friday Bargains and Avoid FAKE Sales - 29th Nov 19
Central Banks’ Gold Buying and Repatriation Spree - 28th Nov 19
Another Precious Metals’ Reversal Coming Right Up! - 28th Nov 19
Stock Market 100% Measured Moves May Signal A Top - 28th Nov 19
Don’t Look for Investing Advice in the Media - 28th Nov 19
Why You Should Buy Trailer Park Stocks - 28th Nov 19
Will YouGov General Election Forecast 2019 be as Wrong as their REAL Forecast was for 2017? - 28th Nov 19

Market Oracle FREE Newsletter

UK House prices predicting general election result

Real Investment Returns Are What Count...SO BUY GOLD!

Commodities / Money Supply Apr 04, 2007 - 10:28 PM GMT

By: Richard_J_Greene

Commodities

There is no shortage of commentary in financial newspapers, hemming and hawing over such matters as GDP growth, or the CPI data, or even the same store sales of major retailers. The fact of the matter is that all such releases are virtually worthless since their unit of measure being reported is in a fluctuating measure that is constantly changing – the US dollar; (or any other paper currency for that matter).

It is akin to weighing yourself on a bathroom scale but allowing the amount of ounces in a pound to constantly fluctuate. What good would that kind of data be to anyone? Yet this is precisely what analysts and commentators debate with constantly in the financial press and on stock market shows such as CNBC.


The same can be said of technical analysis of stock trends or anything else. Technicians swear by their charts and the various support and resistance levels as if they are Bible, meanwhile their measuring unit – the dollar is constantly changing. This makes the prognosis suggested by the charts meaningless. As an example, look at some of the major stock averages such as the Dow or the S&P.

While the Dow has made new highs and the S&P has come within shouting distance of its 2000 highs, the story looks completely different if we look at those averages in terms of a measuring stick that holds its value such as gold. If we were to use gold as the measuring unit rather than the depreciating dollar, we would see that the Dow and the S&P are off by over 50%, a bear market event that has not ended by a long shot.

John Maynard Keynes certainly had it right when he quoted Lenin saying, “There is no subtler, no surer means of overturning the existing base of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and it does it in a manner which not one man in a million is able to diagnose.” Worldwide money growth is growing now in excess of 14%. If we consider the economy is growing 6% in real terms which is probably generous then inflation is in excess of 8%. This can probably be considered the minimum inflation rate we have been experiencing recently in the United States as well.

For those that wish to review economic statistics that have not been tortured into admitting whatever the Government wishes, we recommend: www.shadowstats.com which is compiled by John Williams. On this site he shows what the numbers would reveal before all of the adjustments, substitutions, and manipulations. After reviewing the data it becomes quite apparent that we have been in a recession for over a year. The reason so few have any idea that we are in recession is because 99% + of those looking are relying on inflation estimates that are vastly understated. As an example, any retailer that has less than 8-10% same store sales is actually experiencing negative real sales growth unless they can depend on continually expanding their store base which should be a difficult task in what is in actuality a recessionary environment.

Getting back to Keynes' above quote, he may well have the ratio correct in that very few see “the hidden forces of economic law on the side of destruction” which is causing ongoing misallocations of capital. The retailer that continues to expand its store base while not recognizing the tide has turned in the economy due to the whitewashed Government statistics is committing just such a misallocation. Another great example is the recent homebuilding boom that was stimulated by unhealthy doses of inflation, particularly easy money to highly credit unworthy speculators.

Under normal credit conditions and realistic measures of the economy the boom would never have reached the excesses it has which are so vast that it will likely take many, many years to work off the supply. Under the circumstances of our present day monetary system it can still not be stated conclusively that there will be huge declines in home prices in dollar terms, however, it is a pretty sure bet that home prices will continue down in real terms for many years and will not keep pace with inflation. Do you think home prices declined in Weimar Germany where inflation rates reached annual rates of millions of percent?

The high rates of money growth worldwide are making it more and more difficult to hide the real situation with bogus measures and manipulation. More and more people are beginning to get the sense that something is just not right. There are strong signs over long periods of time that this process has been going on for a very long time. Fifty years ago a man could support his family with his single salary but over time it became necessary for the wife to get a job as well. Then many people found it necessary to get a second job or do something on the side to make ends meet. Folks, this is a declining standard of living and it is far from ending.

We notice issues being brought up in the financial news today for the first time, that we have seen for years; so we know that realization is spreading and it will only be a matter of time before the smarter people discover how to protect themselves. For those that have tried to remain safe by staying in cash, currently they can only keep from losing more than 5% of their purchasing power per year by keeping their money in the bank. This is because if you can get around 4% in the bank while inflation is really closer to 9%, you are losing purchasing power of 5% a year.

This is a difficult concept for the average person to come to terms with since as Keynes alludes, very few understand the confiscatory nature of inflation. Bonds and inflation-adjusted securities are similarly a poor choice largely due to being short-changed by the severely underestimated measures of inflation. Once this is understood it will dawn on a person that he will have to find returns of 8-10% right now just to keep pace with inflation and the depreciating value of his money. Similarly, a retailer will have to maintain 8-10% sales growth just to stay even. When you look at all of the alternatives along with the very high debt levels that have been run up to overcome these hurdles there are very few investments that have performed recently to that extent with the hope of maintaining a similar pace in the future.

We clearly have negative real interest rates today. With such inflation in the system we need to avoid paper investments which are created at will in favor of real things which at least can not be created out of thin air. Bringing it down to the very basics gold and silver have always functioned as money and will be turned to in mass as more and more understand what is happening to our money system.

Buy Gold and Buy Silver if you want any hope of preserving and creating wealth in the years ahead.

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.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules