Market Predictions From Grandpa
Grandpa Bouchard stopped in town yesterday seemingly to rave about the stock market, cycles, charts, patterns, and the idiots of the world. Grandpa is retired now, but he has been a broker among a myriad of other things. He has spent 10-16 hours per day for 60 years researching the market - and he has some pretty strong opinions.

He said just about everything fits into one of 16 (or so) patterns and it is so easy to predict what will happen next if you identify the right pattern.

One of them is a depressionary cycle that was supposed to hit a year ago. He told us to get our money out of the market and even to get it out of banks. He was a year off, but it was a 240 year cycle leading into a depression that he identified quite a while ago and it is hard to get down to exact dates when the cycles are that big. Of course it is cool that his predictions are starting down the path that he felt they would, but if he continues to be correct then things will get far more scary than they are now.

Grandpa told me (with crazy eyes) WAIT FOR GOLD TO HIT $650. As in, he's positive gold will continue to drop in price at least to $650 per ounce. Once it does then I should buy up gobs and gobs of it because it will go through the roof for years and years.

So, why are precious metals dropping in price even though demand is through the roof? Have my lessons in economics been a complete waste? He says this: Hedge funds and the other very large owners of gold and silver have to sell now because they need cash to stop the bleeding - that is helping to drive the price down over demand because they are bigger players. They should be all sold out soon which is when those with demand (regular people) will start getting their hands on it...and when prices will skyrocket.

Overall Grandpa B is worried about having almost anything sitting in the stock market as a whole. He is actually serious when he says this will be a Great Depression unlike the 1929-1932 time period. He thinks nearly every financial institution will collapse and he has asked my cop dad which gun he should purchase to protect his home from the crazies in the coming years.

"A depression is when money goes back to it's rightful owner". - Grandpa Bouchard

Unfortunately my grandpa thinks things will get far more difficult than I can imagine (with me being 28 years old and never having lived through difficult times during my lifetime). However, he believes the U.S. will fair better than most of the rest of the world. Sure, there was a housing bubble in the U.S. with home prices going up an average of four times their value over some number of years I can't remember. However, over that same period England's home prices went up 12 times, Ireland 20+ times! Most countries went up a similar amount. So, if a $100,000 house in the U.S. drops down to it's real value at $25,000 that's pretty tough to deal with. However, in Ireland that $100,000 would drop down to about $4,000! My head would asplode.

Labels: economy, gold, grandpa, money, silver, stock market

  ¶ 9:27 AM 7 Comments

  Deleveraging, Depressions, and Bailouts Oh My! I hate those greedy, evil and selfish banks as much as you do. This predicament is a terrible spot to be in. However, do you want to have another depression? The depression was the result of a "do nothing" policy. The government never stepped in and things were pretty bad for a while. They would have been worse if a world war didn't start up after a few years.

Anyway, $700b bailouts suck, too. I've been paying my mortgage and other debts, so why should I take on more to cover the sorry louts that can't pay up (and to cover the banks sorry behinds for ever approving them in the first place!).

However, have you ever heard of The Paradox of Deleveraging? The same principal carries in the opposite direction. If *I* am thrifty then *I* save money. However, problems happen when *everybody* does the same thing. If *everybody* suddenly becomes thrifty then they do not save money! By spending money I am providing somebody else's paycheck. If everybody stops buying things then *I* do not have a paycheck because of how everything interacts. The paradox of deleveraging is similar because it isn't one or two banks failing - it is all of them!

The third option that isn't being talked about is nationalization a la Sweden a few years back. Not everybody is a fan of it, though. Fannie Mae and Freddie Mac are already pretty much nationalized...so why not some more financial institutions? I haven't come to a conclusion on this one yet.

-<---------->-

I did want to say that the powers that be are finally checking into the silver market. It seems that when demand is through the roof, supply is pretty much gone, yet prices go down it raises some eyebrows.

Labels: banks, depression, government, money, silver, taxes

  ¶ 2:17 PM 4 Comments

  Great Depression II In the 20s and 30s W.W.I was simple the World War. Maybe we'll start referring to 1929-1932 as G.D.I because it was simply the first of it's kind.

I don't want to be a doomsday nutcase, but I am deeply scared about the world we live in. I'm not scared of life ending - I'm scared about catastrophic economic collapse. Something that can shake the world more than a 10.0 earthquake, a worldwide wipe out of retirement savings, financial institutions, and debt/credit.

Grandpa Bouchard, my mom's dad, was nearly vibrating a few months back because he was so excited about the massive collapses he predicted would be coming in the near future. He was never specific, but he felt like many banks would fail and we might just see times not-so-different than those during the Great Depression. He was envious that I was young enough to experience it, learn from it, and make it out on the other side someday. I guess it is possible that much of what is remaining of his retirement savings could get wiped out. I certainly hope not because if that turns out to be the case then the Average Joe will be in a much worse predicament.

I was reading a few articles and they didn't scare me - but that's because I already scared myself by wildly speculating what could happen.

So many of the banks out there are interconnected such that the rapid failing of a few could bring down the whole lot of them. The Fed pretty much had to bailout AIG a few days ago. If they didn't I think things could have quickly become exponentially worse.

It's no wonder my favorite commodity (silver) has spiked (along with gold, oil, etc) - these things are considered "safe" thus many are buying them up because they don't know exactly what stock will lose them their life savings next. At least gold and silver have a REAL value to fall back on...

Labels: doomsday, economy, money, recession, retirement, silver, stock market

  ¶ 11:30 AM 4 Comments

  Convincing You About Silver It doesn't seem like you are all convinced that silver is a good thing yet. Think again.

I already presented my case by showing that industrial use is growing every year (after all, silver is the most reflective, conductive, (etc) of the pliable precious metals). The world's existing supply has nearly been depleted. One of the richest sultans or oil czars out there could actually buy all of the known silver in the world (if they wanted to). Very little silver exists, it's as simple as that.

However, that article I linked to has something even more interesting to say:

Let me state that clearly - one (maybe two) U.S. bank holds a net 36% share of the entire COMEX silver market. The same one or two U.S. banks hold 82% of the total commercial net short position. This is a concentration that is unprecedented; maybe double or triple or more what the Hunt Brothers held on the long side in 1980. Without these, one or two traders, there would hardly be any commercial silver short position at all. This makes the big concentrated short a danger to everyone, including the market itself. That’s why the regulators must act now.

This bank(s) will probably go out of business (is it JP Morgan/Chase?) because it will simply not be able to buy out all of the shorts it now owns. That may not make perfect sense to you, but this is a way to sort of think about it: One unlucky bank owes the world massive amounts of the not-readily-available silver, and when push comes to shove it will simply be unable to pay up. When it makes the attempt silver's value in dollars should sharply increase.

The gamble is worth it! Worst case it's an even trade, best case you make a pile of money.

Labels: money, silver, stock market

  ¶ 9:47 AM 2 Comments

  Silver Spoons

"[Silver] was politically demonetized beginning in 1873 and ending in the late 1930s when Roosevelt's silver manipulations forced China off the silver standard. Removing all that monetary demand for silver naturally made it lose value against gold, and rising industrial demand could not yet soak up the excess supply."

It makes you wonder whether the United States is as rich as it is because it went off of both the gold and silver standard. Maybe the fact that America started living off of credit and fiat money (money that the government mandates is legal tender but really has no actual value) gave it the leverage to spring ahead of everybody else. However, we all know that fiat money can have the bottom fall out from under it (see the Japanese Yen in 1989 - it is still recovering. I wonder if it was smart in the short run (of 100 years or so) but dumb in the long run. Sure I can buy expensive houses, cars, jewelry, and great stuff on credit - but that doesn't mean I can afford that debt and continue living that far above my means in the long run.

Historically gold was more expensive than silver because there was 8 to 12 times as much silver as gold. I don't know if anybody has been paying attention, but we've already mined 95% of the worlds surface silver. Nowadays there is 7 times as much gold as silver! Also, silver has a rising demand every year because it has an ever increasing industrial use. In other words we have used 90% of the worlds surface silver in the past 100 years and we are using more every year, yet it still doesn't cost very much.

The government wanted us off actual bullion (silver, gold, etc) as currency so it forced us to use worthless paper money instead. It's an "agreement" that the government has forced upon us. When we run out of money, the government simply prints more. I feel like we've been living in a land of make believe our whole lives and somebody is just going to stop playing the game sometime soon. We're living in the money Matrix and I've just figured out the facade that has been in place this whole time. There is no dollar.

Is it possible that the dollar (well, all of the world's fiat money) could collapse? I mean, do you understand that at a point in time the paper money we had were representations of actual bullion (silver or gold) that was held in a safe repository somewhere (like a bank)? Paper money exactly represented trading gold/silver for other goods or services. Now it is simply paper money that represents...uh...well, the government tells us it has legal value. Dimes and quarters used to have 90% silver in them and were roughly equal in value to the precious metals inside. In 1965 they changed half dollars from 90% to 40% silver and most other coins were filled with worthless metals. Let's just say that coins prior to 1965 are worth a bit more than face value.

Anyway, I haven't plunged into this yet, but I plan on grabbing up all kinds of silver and perhaps gold since it never really loses value. It fluctuates in the market, but over time it is more dependable and stable than almost any other commodity. In the long run your pile of silver and gold can be traded for more and more of the increasingly worthless money we use to buy things with.

Labels: money, silver

  ¶ 9:01 AM 15 Comments