Red Shields

By: Rodney C. Cook | Tue, May 27, 2003
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Well this has been an interesting week. Snow's post G7 commentary seems to confirm the strategy I inferred a few weeks ago (see Refault, 5/10/03). By talking down the dollar, it appears that the US is being less stealthy in its plans to devalue and export deflation. George Soros and his close friends are not amused. Is his open disdain indicative of the Euro camps counter strategy? This is like watching the gods throw lightning bolts at each other from atop Mount Olympus.

Old Europe Banksters
At the center of the Euro camp are many from the House of Rothschild. While their lineage is a bit more diffuse than it was, say 200 years ago, the extended family and their close personal friends have amassed untold wealth. Ever win the game of Monopoly and just keep feeding out money to your favorite players to keep the game going? This is the position the House of Rothschild enjoys in much of the world. And Soros is widely regarded as their mouthpiece.

So Soros says he is short the dollar and long several currencies that have no explicit link to the dollar. Including gold. But this would seem to indicate that he and his buds would profit handsomely with the US Treasury easing off a strong dollar policy. So why is Georgie miffed?

Because the reality is that "they" are nearly always moving the opposite directions of what "they" say. Or preparing to do so. I am sure they are short the dollar, but likely have been taking profits all the way down and rolling positions forward. And they have been doing this for at least a year, if you give Soros credence. So they feel the dollar will continue down long term, but have booked profits, and expect to book more. Profits in gold? Do they want more?

The Rothschilds proper have dealt almost exclusively in government bonds and gold for centuries by changing positions inter-generationaly in sync with the long cycle. Central banks, from the perspective of this long cycle, just being useful idiots or paid shills. And fiat currencies just transitory instruments. Just guessing, but I would expect that many in this camp still have an abundance of US treasuries, and are a bit worried about unloading them at decent prices. Decent prices measured in both gold and in their precious Euro. And the US treasury is indeed interested in re-purchasing this debt with cheaper dollars. Me thinks that this is the real point of contention here.

It has been said that the House of Rothschild makes fortunes off the bankruptcy of nations. Is America next? Well, we can't possibly pay off the debt load that this country has incurred. So eventually we will face bankruptcy. Or we default though inflation. So as the long cycle unfolds, and these old world banksters strategy of the centuries plays out, will they soon increase their ownership of the collateral for the loan. Or just more of it.

Err, ah, isn't that you and me?

Gold
So what of Soros being long gold? Are many in this camp they really short? Or have they largely finished accumulation, and will be selling into strength? For the next 30 years. Soros' interesting commentary indicates that for many in the camp this day is dawning. But it will not likely be a knife-edge like event, with everyone waking up to an astronomical gold price and some sinister banker with a deed of title to the world's soul. In fact the "event" has probably already commenced as this old world camp herd those within its sphere of influence in the desired direction. And as the wavelength of the long cycle unrolls underfoot, it will be felt by very few.

So gold broke 370 this week. This is where the dreaded cabal of gold shorts is supposed to be decimated. Of course, that was supposed to happen at 334. And 300 something. I lose track. And I certainly don't play these so-called lines in the sand. It is likely that we may well get a run-away market to the upside. Maybe even right now. But I don't try to time it. Just have a long term position in the physical metal. I expect that any such spike will catch me by surprise, not being one of the extended family. More likely we will continue to see volatile action. Sufficiently volatile that investors entering on price surges are singed, especially on shares, and reluctant to establish strong long positions. It can take some time to establish such a position. Especially on the generational scale.

Silver Joker
So the magnitude of this long cycle wave is historic. Even in the span of centuries we have a record. Certainly in the creation of our credit fiat monster. So are even many in the old European camp financially threatened? Of course. They have taken big hits in historic down cycles. So what may they do to hedge? As the central banks banker, where do they go? Given that their systemic threat is disruption to the relatively smooth accumulation of additional wealth via government bonds, the threat is default. Default in currencies as well. And the need for a new circulating currency that would function under conditions of extreme stress. Gold is the obvious choice, at least for a store of value in central banking, but perhaps there is a role for silver as the ultimate hedge. George Soros has made sideways commentary to this effect and the old boys club is buying up in ground reserves. As they hope for the best, playing gold as their ancestors and benefactors have for centuries, they are planning for the worst by playing silver. Now who am I to disagree? It seems that a small hedge position in silver for us little guys is in order. And no one is paying attention right now.

Debt Slave Strategy
So it seems that many wiser than I see a least a small potential for revolutionary financial meltdown. Incremental in its pace, likely playing out over several years, but revolutionary in its magnitude. Where currencies exhibit the transitory nature in some unknowable manner. Where silver will likely have an increasing monetary role. Where, with a little gold in my pocket, I can buy this worthless wretch and set him free. And fill my belly by buying beans and bacon with silver.


 

Author: Rodney C. Cook

Currently Rod is the founder and manager of Bull Trout Capital, a boutique investment company, and author of the FishWrapper, a private investment newsletter. Bull Trout Capital was founded to maximize returns based upon long cycle dynamics and Austrian economic principles. Dr. Cook uses internet based methodologies to identify sectors, strategies and shares that will most likely outperform at the current point in the cycle whilst maximizing upside exposure to potential economic dislocations. The FishWrapper features Dr. Cook's personal investments, methods and strategies where he has demonstrated extraordinary returns. Before Bull Trout he founded Sightward and authored patents (now owned by InfoUSA) to forecast human behavior on the internet; co-founded Ark Interface (now owned by xSides) to develop and patent innovative computer user interfaces; founded Optimas (now owned by Media Cybernetics) for medical and scientific image processing systems; and founded BioSonics Imaging division and developed their Optical Pattern Recognition System. Dr. Cook began his career as a Biometrician for the International Pacific Salmon Commission applying his doctoral dissertation in applied pattern recognition from the University of Washington College of Ocean and Fisheries Science.

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