Populist Rumblings

By: Rodney C. Cook | Mon, Aug 18, 2003
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Steady as she goes. Despite a rather exciting news week, the lines of probability continue to guide the financial markets. Debt based financial asset trends remain downward while cash based financial assets work higher.

Precious metal shares have been very robust. If these shares are correct then further declines in bond prices are in the cards, as are higher prices for the physical. Silver appears, from both a technical and a fundamental perspective, poised for significant gains. And actions in the futures pits and in the commodity exchanges around the world indicate potential increases in physical deliveries in the coming months. The upside potential in silver is increasing and now significantly outweighs the downside risks.

Solid Signals, Mixed Emotions

So what could de-rail my bullish perspective for gold, silver and their shares? Nothing much in the long run. The bullish consensus among investors, technicians, and pundits make me nervous in the near term (Perverse Outcomes). But the neo-Keynesians influence over our current administration will not wane easily (Refault). Volatility is in the cards (Accelerating Change). However, it appears that the Fed may have forgotten a primary marketing tenet: listen to your customers. And the buyers of bonds, both Fed and GSE mortgage backs, have something to say. And they are, indeed, collectively most significant. Rates are poised to rise further as the international demand for Yankee debt ebbs.

Populist Rumblings

Now the Bush administration is facing an election next year. Where jobs are a critical campaign element. An element that they have acknowledged. So the neo-Keynesian globalist's goal of exporting US jobs is in conflict with political expediency. Will strategery come into play through political necessity? Will neo-Keynesian policy be thrown to the lions of populist revolt? Not quite yet of course, but the recent jury nullification of the IRS's taxing authority is evidence of growing populism. A populism that has not been factored into the detached financial ambitions of our financial masters.

So the populist resistance to exporting jobs together with the continued effects of foreign dis-hoarding of bonds must be making this camp a bit anxious. Compensatory mechanisms are coming into play. And the neo-Keynesians need an ally in their financial war against the retro-Socialists in the Euro camp. Much to my dismay, they appear to have the upper hand in Iraq with the derivatives kings extending their influence and dominating the proposed imperial dollar centric banking system (Patriot's Gold). But this is a small battle. And they are increasingly vulnerable.

Art of War

So the honorable master Snow continues to court China's cooperation. China must remain a strong market for our debt. And float the Yuan in a systematically controlled fashion (Perverse Ourcomes). But what does America have to offer? Taiwan perhaps? Is this how the debt will be re-paid? Now if I were China, I would agree to just such an arrangement. And then ignore it. Gaining political influence over Taiwan, and still leveraging the dollar from its imperial role. Just as their client state of North Korea has reneged on matters nuclear, China may well renege on matters financial.

Golden Compass

So watch gold shares. The technicals strongly indicate that we may get a breakout here. If so, then gold and its shares may be foreshadowing a fundamental shift. The end of the false dawn scenario (False Dawn). And increased monetary destruction within the neo-Keynesian sphere of influence. In the stock, bond and real estate prices. But if we get a break to the downside of the major significance, then the honest money crowd has underestimated the extent to which derivatives have been used to stack the deck. But derivatives cannot rebuild stocks of silver, or gold reserves, or energy infrastructure. Any break to the downside will not end the primary trend upward for gold. Only obscure it.

Trump with a Joker

I have speculated that the Fed may have some interesting plan for monetizing mortgage backed debt (Housing Cover Clause). Ultimately it will fail. As have all historical efforts to save a failing fiat. Such a scheme may even be exceptionally popular with the debt slaves. Forestalling the inevitable for months, or even years. But a reconstituted dollar backed with inflated real estate would still be backed by just debt. And for this debtor nation there will be no salvation in fiat. And the slave will recognize debt for what it is, and revolt en masse (Bondage).

The dollar's ultimate decline will induce tremendous volatility from most any perspective. Even gold, silver and their shares may be compromised in fiat pricing by a classic liquidity trap. But remember, after all, they have intrinsic value independent of their prices in fiat (Dirt Poor). As do real estate and other hard assets. The intrinsic value will remain. And the neo-Keynesians will use every desperate measure possible to wrest this value from the masses. Where control by fiat may just skip the inconvenience of a currency as intermediary. And attempt to create some new -ism that will make the fascisms of history appear tame.

Golden Dawn

So if the tipping point is at hand, remain steadfast. Measure your earthly wealth in debt free tangible assets. And do not let price declines cause too much duress. Or a hasty plunge into collectivist thinking. For gold, silver and paid for real estate will help provide for you and your loved ones in the extreme. And it is this ability to provide, and hence educate others close to you in honest monetary systems that will ultimately prevail. And regardless of the tribulations, the sun will ultimately set on the spiritually bankrupt neo-Keynesian empire. And rise again in a golden dawn.


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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