The Times, They are a Changin'

By: Matt Hilliard | Thu, Jan 19, 2006
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It goes without saying that any portfolio manager with a respectable sum of money would be prudent to put a hefty portion into gold, and I don't mean gold futures or gold stocks. I mean gold bars, coins... whatever. In the last year or so I have seen every single gold to "x" ratio chart imaginable and it does look stunningly bullish for the metal. But why put yourself in a situation where you have to convert your gold investment back into worthless paper? You might want to hide it too. Otherwise you're no better off than those in the stock market, except you have 3 wheel-barrows full of currency instead of none...on the other hand those nights do get cold.

If this house of cards comes down as history has shown us, then make sure you have a chisel and some gold blocks because you may need something with which to barter. But the powers that be in this game are "oh so smart", you can bet they have their hands on every lever available to make sure that everything appears normal until the very end. What we need is a good long deflationary period. What gets me is the inability of those in power to realize the necessity of natural cycles. The current bust gives way to the next boom. We are taught about Adam Smith's "invisible hand" in high school, yet that is obviously not the policy. The only invisible hand I think of today is S&P futures buying at critical moments. But hey, that might be a big value investor.

The decision to hide the M3 money supply numbers is also suspicious. The reality is that if M3 had truly become useless as they claimed, then they would have continued to publish it along with the phony inflation data. Or maybe we could have an M3 excluding "liquidity bailouts". Honestly, I have no evidence that the PPT has been mingling in the markets, but I know that the legislation for it exists. And the language is very clear in it regarding "investor confidence". In the end I suspect we will end up like Japan. If the fed is tinkering in the stock markets it will become painfully evident at some point, and the jig will be up. How many Hindenburg omens would it take? I doubt that 90% percent of the U.S. population realize the gravity of the current situation, the thing that stinks about long term credit cycles is that almost everyone is dead that remembers the last one. Although it is quite terrifying, the enlightened investor should not look at a possible 1929 situation as reason to panic, but as one hell of an opportunity.

The stock market has been acting strong since '06 started. It must be the Jim Cramer tech rally. Early last week I actually heard a CNBC reporter crowing because the retail investors weren't jumping back into the market fast enough. That is the last thing to worry about! Besides, a few more days of gains put them on the scent. It is not surprising that the market has acted as it has, as debt mounts and home prices slide the market will provide confidence at the most inopportune time. Once this blow-off top is in place and we start to come down, a lot of questions will be answered. How long that will be remains to be seen. Until then one must exercise patience and caution.


Author: Matt Hilliard

Matt Hilliard

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