Load Up on Gold and Silver

Robert Hsu, March 07, 2008

The market has spoken. The verdict is in.

Bernanke's drastic rate cuts have failed.

Not because, technically, they cannot work, eventually, but because no one has confidence today that they will.

Humans, you see, live in the present. Example: No one goes to med school to become a doctor one day years from now. You go to be a doctor–the time spent getting there is mentally collapsed into an instant.

If the future is to be real in us, we must believe in it TODAY.

Bernanke, enlightened and skilled technocrat that his is, missed this.

There wouldn't have been a problem if we didn't have a problem.

He pushed all the buttons on the money machine that the manual said he should push. But he lost the confidence of the markets. And markets are humans, living in the present.

And without our confidence now, he's as powerless as the Wizard of Oz.

Last week, the market plunged 315 points in one day, and 2-year Treasuries plummeted to 1.63%.

The vote of No Confidence is in.

The freeze is on, my friend. The financial winter is deepening.

"There probably will be some bank failures," Bernanke now admits. In other words: "I have completely lost the confidence of investors."

What Next?

Japan springs to mind.

The Japanese experience is not the experience of dropping rates to zero, you understand.

It is the experience of dumping an entire nation's public trust and confidence in the Pacific Ocean and drifting, undriven, unmotivated for two decades.

Americans are naturally more optimistic, it is true, but no one fools them twice. And history will record that, on Bernanke's watch, trust was broken.

In August I said I feared the worst.

Now I believe the worst.

Today I am actually, for the first time, frightened.

How we got here is a long story, involving Bretton Woods, Enron, Sarbanes-Oxley, Fannie Mae, Greenspan and a couple of wars for starters.

The short version is: we lost our way.

The solution is what it always was: it is up to you and me as individuals to be guided by our own inner compass.

And True North on that compass for many of us is gold. Gold and silver, both free of government meddling. Unpolluted and rightly called: precious. Only these currencies cannot default.

Load up on both now.

Here's how.

Getting Real

Start with what you already own.

When was the last time you had an insurance appraisal done on the jewelry in your house? I'm prepared to bet you are shockingly under-insured.

In London, jewelry stores are in a state of daily pandemonium as folk line up with fistfuls of necklaces, rings and brooches for reappraisal. Wedding bands are being repriced weekly. Gold bands are now so expensive, couples are switching to palladium.

What's happening in Britain echoes what I saw with my own eyes in Tokyo in the 1980s. Working couples, their confidence in the Central Bank shattered, stashed what they could in gold jewelry.

A hoarding mentality replaced a spending mindset.

In the malls of Shanghai, Hong Kong, Mumbai, Singapore and Beijing, the jewelry stores are besieged by couples turning wages into hard assets.

I've seen it with my own eyes.

Demand in the region for gold is up (officially) 26%! Double that if you want a figure close to reality.

Consider: gold is still at less than half way to its inflation-adjusted peak of $2,239.67, hit on January 21, 1980. At $1,000 an ounce, we have a long way to go.

If you are skeptical of the official CPI numbers used in the $2,239.67 calculation then you must conclude: we have a SUPERB run ahead of us.

Plus, with oil up and the dollar down, we have two more powerful forces, not present in 1980, to account for this stampede.

So you can see, gold could easily double from here.

Which means silver could TRIPLE, or better, as you'll see.

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