It could be said that wise counsel never grows out-dated, and many of the topics discussed in WCM's Bullion Market Insights are really timeless in scope.  Observations have been made on the Macro-environment in many instances, a perspective that can only change significantly over long periods of time.

   



November 30, 2005:  American Ostriches To Be Plucked and Cooked.


I have an unusual amount of bile to spill forth today, but I will try to stick to the gist of my monthly essay.  Having survived Danbury and Hartford, CT, and Boston, MA rush-hour traffic during the Thanksgiving holiday week, I have some pent-up, unexploded anger to vent.  And I would be remise if I did not thank all of the New York drivers that caused me to find expletives that I had forgotten since college, making my drive from Hartford to the Virginia line a most memorable one on the journey to and fro.  The New York Driver's Manual must specifically instruct in how to tailgate out-of-state drivers such that a gnat would get wing-burn attempting to separate the bumpers of offender and offended, in how not allowing a merging vehicle to enter the highway is productive to New York tourism, in how cutting a center-lane vehicle off by another gnat wing from not only the left, but also the right, is a first step challenge to applying for racing school, and in how to make obscene gestures at your victims such that the true twang of a New York accent can almost be heard.  Little did these Road Idiots know that some of my military buddies in Iraq had shipped some confiscated RPG's to me AND I just couldn't figure out how to steer with my feet and aim accurate enough not to hit the obnoxious Connecticut and Massachusetts drivers with the same round.

SO I HEREIN DECLARE THAT CIVILITY IS DEAD IN THE UNITED STATES, but you knew that already, and you have not paid the electric bill this month to view this ezine for such dated, most-obvious observations.

But, if I am lucky (and there is a God!), some of the Thanksgiving Turkeys that I met behind the wheel this past week will be some of the American Ostriches that are currently being plucked and readied for the oven of Financial Roasting.

Now the Sage of Wexford is not one to blow his own horn (except when it is on my Subaru), but I think I deserve an electronic round of applause for my 2005 forecasts for gold and silver.  Remember just last month that the Sage, still unbloodied from U.S. highway travel, made the following prescient predictions:

"In my humble opinion, we will see an exponential rise in precious metals prices into March of 2006; that is, an acceleration in the weekly price appreciation.  Target gold at $525, silver at $9.35, palladium at $270, and platinum at $1,005."

Well, shiver me timbers, but Platinum got within FIVE worthless Dollars of $1,005 per ounce and will probably get there before WalMart marks the entire store down by 25% for Xmas 2005.  And how about that Ancient Relic, GOLD, that just broke $500 per ounce this week, and after a pull-back or two to shake out the nervous nellies, will likely now reach $525 before Saint Nicholas decides to stuff your "Holiday" stocking with much-needed coal.  And, goodness gracious, the Sage is only a pitiful FIVE worthless Dollars away from hitting his Palladium forecast also.  When I'm hot, I'm hot.  So now that I have some credibility ......... a trait that is sorely lacking in Washington, lend me your ears (but not your ex-wives!) and listen when I say, SILVER WILL PLAY CATCH UP VERY SHORTLY AND BLOW PAST MY $9.35 MARCH, '06 TARGET LIKE A PORK-BARREL SPENDING BILL IN CONGRESS.  I am going to go out on a limb and re-target silver at $10.15386025 by March, 2006.  You have to use fractional cents these days because that is what government statistics are worth ....... if you were stupid enough to pay for them!

And why are the metals going into a parabolic rise, besides the fact that the Sage said they would?  The world has awoken to the ancient fact that all currencies, and governments for that matter, are credible only as long the populace believes that both will maintain their values to support their standard of living.  In today's heady times, their credibility also means that the current maladjusted global economy can be rectified (re-adjusted) without severe economic and financial tsunami's in each and every local village.  So the rush to the precious metals at a time when overall inflation is still historically tame (6% ain't that bad!) is the clearest sign yet since the 2001 Bull Market in Gold and Silver began, that the people of the world no longer believe that the Intellectually Challenged Governators of the World can keep their proletariat fat out of the increasingly energized fire of cleansing economic and financial flames.  Periods of excessive credit and speculative asset bidding are always followed by periods of economic contraction and asset re-valuations, whether that asset be stocks, bonds, or real estate.  The enlightened populaces of the world are eventually better students of history than their got-to-get-re-elected leaders, and even the Village Idiot is coming to the conclusion that America has lived beyond its means for decades and the rest of the world will not escape paying the unpaid bills in company with their Yankee brethren.

WE HAVE ENTERED THE SECOND PHASE OF THE SECULAR BULL MARKET IN PRECIOUS METALS.  The loss of confidence that I have repeatedly mentioned in previous dewdrops of wisdom is taking hold in the minds of global investors pertaining to ALL CURRENCIES AS A STORE OF VALUE.  Note as the U.S. Dollar renewed its dead-cat bounce (apologies to you feline lovers) this Fall, that the metals just ignored the daily price rises in the Greenback and continued on their merry rallies.  The link between precious metals and the Dollar has been broken in this new phase of the Gold/Silver Super Bull.  Pullbacks going forward will be more from speculators and futures traders taking profits, than global pricing considerations vis a vis the Dollar.  Fasten your seat belts.  YOU AIN'T SEEN NOTHIN' YET!

Let me go back to gray ink unless I am to lose the effect of Emphasis-By- Color (ECB).  I have gotten so frustrated with U.S. investors over the last decade in their inability and unwillingness to recognize over-priced assets and runaway markets that I not-so-fondly compare them to Ostriches when the occasion arises.  Case in point:  How about that Santa Claus rally that Wall Street is trying to conjure up from the bowels of OverpricedStockLand?!!  If the large institutional investors were not trying to better their chances of employment and fat salaries next year by assisting via the futures markets a third year in a row to manufacture positive stock market results, what fundamental reason could possibly exist for stocks to rally in late 2005?  Let's look at the real world instead of that painted by the Talking Heads of Financial Media:

1.)  The peak in corporate profits is likely behind us as energy, raw materials, current employee and retiree health benefits, unfunded pension liabilities, and repatriated overseas profits all squeeze the bottom line going into 2006.  Stocks are hardly cheap at 20 times earnings on the S&P 500, and year-to-year comparisons in 2006 are likely to diminish with each successive quarter.  The long term growth in corporate profits cannot exceed the growth in GDP for any extended period of time; in fact, they match exactly over long periods of time.  Corporate profits have exceeded the 3% to 4% GDP growth rates over the last 4 years, and the possibility of continued excess corporate profits diminishes greatly as we enter 2006.  A P/E of 20 implies 20% earnings per share growth in 2006, and most analysts just don't see that happening, even the ones that make things up.  Ten percent growth is more likely, if that.

2.)  The trend in short-term interest rates is still up.  Have never seen a stock market ignore the trend in interest rates over my 30 years of investing.  Regardless of how many Dollars that Asian central banks have to throw at 10-year Treasury Notes in 2006, these buyers of last resort will have less ammo and less inclination to increase Dollar reserves as the year progresses.  A global economic slowdown is already baked into the cards for 2006, just keep score of even the falsified government reports, and with fewer sales of merchandise to debt- and energy-strapped Americans, the Asian cash machine is going to slow down.  Helicopter Ben has no choice but to continue to increase short-term rates into the Second Quarter of 2006 to maintain very shaky credibility for the Post-Sir-Alan Federal Reserve by showing a resolve against persistent inflationary pressures and to attempt to protect a Dollar that could crater at the least sign of inconsistency at the U.S. central bank.  There have never been more glaring fundamental reasons not to own the U.S. Dollar.

3.)  Mutual fund cash positions remain at a historically low level around 6%, showing one more indicator of over-confidence in the prospects for U.S. stocks.  Sentiment indicators without exception show statistics that are typical at a market top, even while not at historic extremes, than at a market bottom.  It is very typical for secular bear markets to have periods of stock appreciation, and 2003, 2004, and now 2005 fit nicely into a counter-trend pattern that has more probability of reverting back into stock devaluation than otherwise going forward.  Stock trading in 2005 has displayed a listlessness and lack of buying power that is characteristic of failed bull moves going back to 1929.  Stocks have merely displayed a massive distribution of shares from the smart money in 2005 into the over-eager hands of novice investors who cannot imagine another avenue to create their retirement nest-eggs.  Investors literally have their heads in the sand, Ostrich-style, when it comes to evaluating and investing in alternative, non-traditional, out-of-favor investment vehicles.

4.)  The engine of growth since 2002 has been the U.S. housing market, a market that to professionals who make their not-insignificant living at it will now admit has flattened and even retraced in most U.S. markets.  We are down about 7% from the July peak in my neck of the woods.  Thanks primarily to the totally irresponsible monetary policies of the retiring Sir Alan Greenspan, asset speculation jumped from the stock market over into residential and eventually commercial real estate over the last 4 years.  The excess headcount of realtors, appraisers, mortgage brokers, settlement services, and lending units (to include Fannie Mae?) is already in the process of being rationalized.  Rationalization is just a fancy term for headcount reduction .....firings, and job losses in construction and building materials production and distribution is soon to follow.  Residential home building (next to auto and airline) could be the worst industry to be employed within in 2006 and 2007.  Many of the new subdivisions started this summer are going to go into dormancy, dotting the countryside with a most unappealing scene of projects gone bust.  I saw them in the Washington area in 1991 on a mega-scale, and WE ARE GOING TO SEE THEM AGAIN IN UNPRECEDENTED NUMBERS.  Literal dustbowls of non-completed construction.

5.)  The bull markets in precious metals, U.S. rare coins, and colored diamonds have been roaring virtually under the public's radar screens since 2002.  But the numbers of "Enlightened Investors" is increasing exponentially alone with the prices in the metals as we exit 2005.   Investing is a zero sum game when it comes to available funds.  What funds go into alternative investments such as tangible assets cannot be used to support the stock or bond markets or real estate markets, and a reduction in global liquidity always accompanies rising interest rate and economic contraction periods.  Due to a U.S. Government whose spending is out of control, rising taxes are also a real possibility into 2006, but as an election year, the bullet won't be bitten at the Federal level to the detriment of future generations.  But local and State government tax increases are another matter entirely.  Investment funds will be harder to come by in 2006, and only those markets with the greatest appreciation potential coming off of historically low price bases will receive incremental funds, at least from prudent/experienced/successful investors.  Stocks will be sold in 2006, despite efforts by the Plunge Protection Team to keep the Ponzi Scheme going.  STOCKS GOING FORWARD ARE NOT GOING TO HELP YOU REACH YOUR RETIREMENT GOALS.

6.)  Dividend yields on U.S. stocks are still hovering below 2%, when throughout 70 years of stock market history they have provided 40% of the total 11% average annual return.  This implies an historic dividend yield of 4% to 5% at a time when money markets are now breaking the 2.5% to 3% Greenspan barrier.  Risk-free cash is going to provide income investors with greater and greater prospects going into 2006, providing previously absent competition to equities.  U.S. stocks have been a very poor income device since 1995, and increasingly interest rates, almost a given for a compromised debtor country as the U.S., will take money out of stocks into less risky, higher yielding instruments.  Bonds do not fit into that category as there is increasing interest rate risk beyond 90-day maturities, not to mention default risk that is currently not reflected in U.S. bond pricing.  Investors are going to have better income choices in 2006 than U.S. stocks.  And the risk of technical default on U.S. Government Obligations in the future will become a topic broached more frequently in global investment circles in 2006.

AND FURTHERMORE, IF THERE ARE ANY SKEPTICS LEFT OUT THERE AFTER THE SALIENT ARGUMENTS MADE BY THE SAGE ABOVE, BEHOLD:

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So as the Sage rides his trusty steed into the sunset of another stellar ezine composition (crowd cheering in background), he knows That The Truth Is Out There.  It has been made clear to all those willing to listen over the last 5 years of forecasting precious metals' prices and trends that the Sage of Wexford has more than just a modicum of knowledge of what he speaks.  (Since no one sends me congratulatory bottles of Cognac at Xmas to reward me for being so right-on on so many topics, self-congratulations are all I have!)

Americans are waiting too long to get their financial houses in order for the very difficult period that lies ahead.  They have way too much debt in relation to an income stream that could easily diminish with the economy's prospects in the months and years ahead.  This is one flock of Ostriches that peered out of his/her hole just long enough to observe the precious metals bull racing by, but back in the hole went his/her head, obscuring the reality all around him/her.  Wall Street and Uncle Sam will pluck the American Ostrich of his or her last financial feather, and the vicissitudes of economic and financial system retracement will cook his goose.  Who ever thought this species of Ostrich would become extinct?!



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December 23, 2005:  Bells Are Ringing.


Putting my Grinch outfit back in the closet, I even listened to some Christmas music to try to get into the spirit of the holidays before sitting down to the keyboard to compose this abbreviated ezine.  As Americans, probably more than any other society on the planet, we have much to be thankful for as 2005 winds down to the remaining days.  We must wholeheartedly give thanks to the brave men and women around the world fighting on our behalves for the cause of freedom.  Whether we believe that this cause or that cause is just or unjust, we all know that those who make the ultimate sacrifice or stay maimed for life in the service of their country are the true heroes of our Nation.  Regardless of our individual political beliefs, there is one thread that should wind through everyone's mind this time of year:  Thank God for letting me live in a free society, blemishes and all.  We never know how good we have it here Stateside until we spend some time overseas.  And we should also know that the Cause of Freedom is not free.  Never has been.  Never will be.

Further, we should all look forward to 2006 with anticipation of a fresh start to attempt to accomplish our New Year's Resolutions and of any and all opportunities that are presented to us.  Not that our prejudices and shortcomings are going to magically melt away at 12:01 a.m. on January 1, 2006, but that another chapter in our lives is unfolding for us to take advantage of and hopefully enjoy.  Being a bullion ezine writer over the years is especially difficult this time of year, for it should be a time of reflection and thanksgiving, not one of dire warnings of Christmas' Yet-To-Come.  I have spent the preceding 357 days ringing the claxon, so I should not have to do it during this festive season.  Oh, that I could skip down the snow laden avenues without a care in the world.  But the world around us does not stop just because we are celebrating the Holidays, and we need to be just as vigilant over the next 8 days as we have been all year.  In the days of old, just making it from one Christmas to another was an accomplishment, and the settler never left his trusty rifle unloaded even during the most festive of seasons.  Who really wants to be sober during a time often filled with insobriety, but there always has to be some temperance in how we indulge ourselves during even lighthearted times.  Ah, for the guidance of the village elder.

So I have made my list and am checking it twice.  And I don't really care who has been naughty or nice.  I am just trying to set out little candles that will guide me through the Holiday night into 2006:

1.  The U.S. Dollar will resume its downward devaluation in 2006, especially after Federal Reserve interest rate increases cease around mid-year and the trade imbalance approaches $1 Trillion on an annual basis..

2.  The U.S. housing market will continue to retrace due to affordability and supply issues, kicking a major support out from under the economy.  Home prices will decline over 10% in major American housing markets year-over-year.

3.  Energy and commodity price pressure will continue to negatively impact growth in 2006 as Asian economies continue to grow well above trend for the next 2 years and supply disruptions become more frequent due to geopolitical unrest in key oil-producing regions, especially South America.

4.  Inflationary expectations will continue to be a problem for financial markets while a credit/default risk premium finally filters into intermediate and long-term U.S. and corporate debt yields.  However, the yield curve will invert prior to April, 2006, due to Federal Reserve concerns about Dollar stability and structural inflationary pressures.

5.  The MegaBear in U.S. stocks will re-emerge in 2006 as investors seek greater liquidity, interest-bearing investments, and alternative investments such as the precious metals and other tangible, non-real estate assets; corporate earnings growth will be well-below forecast and negative in many cases.

6.  Political infighting in Washington will reach a feverish pitch in 2006, an election year, to the detriment of current and future Americans and the stability of our fiscal posture in the world.  The No Brainer Forecast.

7.  The signs of a recession will be evident by the Third Quarter of 2006 well before the Federal Reserve under Bernanke can react with their inevitable reductions in short-term interest rates.  However, Americans will not be in a position to undertake new borrowing regardless of the cost of money due to employment, income growth, and debt service constraints.

8.  Military action, covert or overt, will be taken against Syria and possibly Iran on a limited strike basis to counter insurgency activities of these countries in Iraq prior to the first-stage withdrawals of American troops from this theater ....... all prior to the U.S. Fall elections.

9.  The European Union, at least on a monetary basis, will show clear signs of unraveling with a subsequent underperformance by the Euro as nationalism and domestic economic interests of struggling member states take precedent over common union considerations.  Gold and silver will be direct beneficiaries of this eventuality as there is no Super Currency available to take their historic places as Stores of Wealth.

10.  Gold and silver will hit new Bull Market Highs in 2006 as more and more global investors realize that politicized central banks will attempt to devalue their domestic currencies indefinitely to postpone the inevitable recession and re-adjustment period ahead.  Gold is forecast to hit $685 per ounce, Silver $10.65, and Palladium $415.  No call on Platinum.

11.  The probability is greater than 70% that we will see not One, not Two, but Three major financial institution/intermediary failures in 2006 as purportedly massive hedged bets turn out to be basically un-hedged speculations of historic magnitude.

12.  Central Banks around the world, as predicted 3 years ago by this writer, will begin amassing greater gold and even silver reserves, a trend that was continued this year by China, Russia, and South American countries as political aversion to the U.S. and its currency transform into monetary action.

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You could call these the Twelve Forecasts of Christmas, 2005, which time will show to be right on, close, or way off by this time next year.  Always keep a round in the chamber, even if you keep the safety on.  That's partially how our Forefathers made it to the next Christmas as the odds were never fully on their side in the Rough and Tumble Days of Yore.  Expect Rough and Tumble Days in 2006 plus.


Happy Holidays, Merry Christmas, to all of my clients, future clients, and ezine readers.  Thanks as always for making 2005 a banner year for Wexford Capital Management.  Wishing you and yours a 2006 illuminated with Golden and Silvery Bling.

David W. Young, Chief Grinch

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January 27, 2006:  PM Pullback Could Be From Much Higher Levels.


Precious metals investors during the current Mega Bull Market since 2001 have become accustomed to periodic, multi-month corrections in the precious metals.  I know first-hand in my day-to-day dealings with existing and prospective clients that many are sitting on the sidelines right now with available cash waiting for gold to trade under $480 per ounce again and silver to trade under $8.50.  I have seen many commodity bull markets in my 30 plus years of being involved with them, and I must say that the skepticism being displayed by many investors as to the sustainability of current gold and silver prices is usually a recipe for prices to just steadily work themselves higher.  Intermediate peaks in markets usually occur when the majority of investors and pundits expound that even greater highs are just around the corner, and that is not the consensus view now in the precious metals markets.  Everyone is hanging on the edges of their seats waiting for the typical 10% to 20% correction in the metals that can last from 4 to 8 months, BUT I personally don't think we are going to see one any time soon.

Not that I am the eternal optimist, as you all know better by now, but there is a fundamental set of ingredients that have changed in the gold and silver markets over the last 6 months that will fool many an investor trying to time entry points into new or additional purchases.  While some may label the current price action in the precious metals as frothy and speculative, I think there have been plenty of interim shake-outs to wash out the weakest hands within the individual metals, leaving more long-term investors than ever before.  It is not easy to trade physical gold and physical silver, so more and more bullion investors are becoming content with just riding the long-term trend and not being overly concerned about all of the squiggles in between.  Where paper contracts are being used to fulfill a misguided desire to trade, there is the realization that Uncle Sam through his minion, the I.R.S., has his hand firmly in the till by reducing net returns through ordinary income rates.  I know fully well that many purely technical aspects of the gold and silver markets may suggest an over-extended condition; however, I think overbought conditions will last well into Spring of 2006 for the fundamental reasons set forth herein (I sound like a lawyer!):


1.)  The public no longer accepts the Official Inflation Numbers from K Street (OINKS).

One of the most compelling ingredients for owning precious metals fell into place in 2005, with the surge of crude oil in excess of $70 per barrel.  Any American who was still not sure that he or she was being lied to regarding the Consumer Price Index was handily convinced of shenanigans by the BLS when official numbers in August, September, October, November, and December in 2005 showed surprisingly little overall price pressures (month-to-month overall changes of 0.5%, 1.2%, 0.2%, -0.6%, and -0.1% as gasoline and energy costs soared!).  When you get your credit card summary for 2005, just compare it to your 2004 summary for the categories of utilities, gasoline, groceries, clothing, home improvement items, and prescription drugs to see that 3.4% inflation in 2005 was far off the mark.  Housing costs were shown only to have increased 4.0% in 2005 versus 6.0% in 2004 in arriving at this 3.4% number.  Give me a break!

And there is no indication that energy costs, as just one category, are soon to subside as oil regains the $68 per barrel level and economic growth in the fastest developing countries of India and China continue to chug along in the 7% to 8% range, easily double the developed countries' rates.  And all know that in a prior era where companies were loath to pass cost increases on to customers, that there was a lag time before price increases showed up at the cash register.  Well, companies are passing those higher costs on more freely in 2006 to attempt to save dwindling profit margins, and I am paying 15% more today for Unleaded Gasoline than I did in January of 2005.

INFLATION AT THE REAL WORLD LEVEL IN 2006 WILL GET WORSE BEFORE IT GETS BETTER, AND PRECIOUS METALS INVESTORS AROUND THE WORLD ARE ANTICIPATING THIS PROBABILITY.


2.)  The public no longer believes that Government Officials will work to preserve the value of the domestic currency, The Dollar.

As another ivy-tower economist takes the helm of the largest economy in the world, investors are more convinced than ever that Helicopter Bernanke will pull out all of the stops to attempt to keep the financial markets and the U.S. economy afloat in 2006.  And as the debt-laden American consumer loses his or her ability to use the Home ATM for incremental income with higher interest rates and lower home prices, it will be the classic example of too much money chasing too few goods ....... monetary inflation personified.  But in order to keep the Ponzi scheme going, Bernanke will have to change course in 2006 from a tightening mode to a loosening mode and the currency markets are smelling the end of interest rate increases in 2006-to-date Dollar trading.  The Dollar has rolled over even at this early date this year, and Government Officials would much rather sacrifice the international value of the Dollar than face the inevitable consequences of fiscal largess, lax lending standards, and rocketing money & credit expansion that have existed for the past 5 years.

Any American traveling overseas today is painfully aware of the diminishing purchasing power of the U.S. Dollar.  Recent Treasury auctions are a grim reminder that eventually foreign buyers of Endless American Obligations (EAOS) wise up to the fact that a negative total REAL return after U.S. inflation (subtract 5%) and currency devaluation (subtract 10% to 30% in 2006?) is detrimental to both their short-term and long-term financial health.  Did I mention that the issuer of this magic stream of paper should have a Junk Bond status from Moody's with $55 Trillion in Unfunded Liabilities not showing up on the balance sheet of Dollar Incorporated AND A MERE 4.5% YIELD HARDLY REFLECTS THIS FISCAL REALITY VIA RISK PREMIUM?!!!

As Americans, we can be assured that Mr. Bernanke will follow in Alan Greenspan's overrated, highly political footsteps in erring on the side of monetary ease versus prudent central banking.  Since Mr. Greenspan never doled out the harsh monetary medicine to establish a balanced and fundamentally sound financial system and economy in his 18 years at the helm, and Bernanke states he merely wants to follow Sir Alan's superb lead, we can expect the Dollar to suffer even more than it has to date under the new Fed Chairman.  As with Sir Alan, it will be too little, too late with Heli-Bernanke.

GOLD AND SILVER AS THE CURRENCIES OF LAST RESORT ARE FUNDAMENTALLY SOUND ADDITIONS TO INVESTOR PORTFOLIOS DURING A RENEWED PERIOD OF DOLLAR DEVALUATION.

3.)  The public no longer believes that traditional financial assets and real estate will provide them with sufficient future appreciation necessary to build their retirement nest-eggs.

This is a mouthful and a mind-ful, but the U.S. stock market did squat in 2005, and is likely to do equally poorly in 2005 as the peak in corporate earnings becomes more apparent progressing into the year.  Cost pressures are not insignificant in Corporate America, 2006, just delve into the excuses given by still-overpaid corporate executives for missing analyst's earnings targets for the just-ended Fourth Quarter, 2005.  Energy, raw materials, employee healthcare, and unfunded pension liabilities in 2006 are likely to take major bites out of the bottom line, at a time when overall global demand is likely to plateau.  Exporters may be assisted by a declining Dollar, but the export component of our economy is not sufficiently large to carry the day over the diminishing 2006 prospects for domestic consumption and business investment.  Today's release of Fourth Quarter GDP growth of a meager 1.1% crawl is more of an indication of things to come than an anomaly in my humble opinion; trends have been known to start with just one bad data point.

The bloom is finally off the Real Estate Rose (REAR).  Not until home prices doubled in many markets over the last 5 years, but sellers are now sitting on their once super-hot properties for months even as builders continue to stamp new supply out well above forecast demand.  I have forecast a 10% decline in home prices this year, while even smarter analysts than myself are forecasting as much as a 20% retrenchment in residential home prices.  And studies show that perceived wealth is more tied to home appreciation than stock portfolio gains for the majority of Americans, so expect this rationalization in the housing sector to have an even greater effect on consumer spending than a soft stock market in 2006.  In fact, the roll-over effects of a marked softening in the housing market will almost assure a weakening in corporate profits and, hence, earnings growth in 2006.

American investors are very much trend followers when it comes to investing.  You don't have to hit them upside the head with a baseball bat to get them to acknowledge the surge in the price of gold from under $480 to $560 today and the surge in silver from under $8.50 to $9.60 today in just about 75 days.  The Precious Metals Bull has gotten their attention, even if it had to kick them in the head a few times to do so.  And $850 gold and $50 silver are price levels that most of them still remember.

MONEY GOES WHERE IT IS TREATED BEST.  AND RIGHT NOW ONE OF THE HOTTEST INVESTMENTS IN THE WORLD IS GOLD AND SILVER.  SUCCESS OFTEN BEGETS MORE SUCCESS.


4.)  The public no longer believes the financial press about the difficulty in owning physical gold, silver, palladium and platinum.

Since we have a global marketplace for these precious commodities, it is not just U.S. demand that will continue to propel precious metals prices ever higher.  One can look to Japan, China, India, Europe, Southeast Asia, South America, and Eastern Europe and see more and more press about the incremental demand coming from these regions for precious metals ownership.  Whether it be the opening of the Shanghai Exchange for gold trading or the approval of a silver ETF from Barclays in London, the increases in public demand for precious metals in 2006 is both historic and widespread. 
The days of worrying about the effect of Central Bank sales of gold are now behind us as it becomes apparent that central bankers in China, South America, and Russia are more comfortable with lower Dollar reserves and higher gold reserves.  More central banks will begin new repurchase programs for gold and eventually silver as the Dollar continues to lose value on global currency exchanges in the months and years ahead.  The days of anxiously waiting for annual jewelry demand figures from the World Gold Council are over, as we enter a period of pure investment demand that is destined to dwarf the jewelry component of total demand.

Many investors in India, China, and Southeast Asia would never think of owning any form of gold or silver other than in real, physical form.  They have experienced decades and centuries of broken promises made by rulers and governments, and know too well how fiat currencies have sunk into disrepute with their values approaching ZERO.  They have a very long history of precious metals ownership and this tendency is likely to increase as disruptions resurface in economies, financial markets, and currencies in 2006 and beyond.

For Americans, millions of dollars of gold and silver are shipped from Coast to Coast using either UPS or Registered Mail services each and every day.  In fact, USPS Registered Mail is used increasingly for even silver shipments since the new Flat Rate Boxes make it more economical than previously, and it is a very secure method to ship valuable items with an exceptionally low claim history. Packages are always kept to a size and weight so that they are manageable not only for the carrier, but also for the recipients.  Those investors that choose not to take physical possession always have the option of enlisting the services of a bullion depository such as Delaware Depository Service Company, DDSC, in Wilmington, Delaware, where segregated storage is maintained for their bullion holdings at around 1.5% per annum.  Their website is at www.delawaredepository.com.  There are few impediments to owning physical precious metals today; one's efforts in doing so have been richly rewarded to date, and are more than likely to continue to be very rewarding in the months and years ahead.

THOSE IN THE FINANCIAL MEDIA AND ON WALL STREET WITH A VESTED INTERESTS IN KEEPING INVESTORS IN PAPER, "Promise To Deliver or Pay" ASSETS ARE NOW FACED WITH THE REALITY OF SUPERB PERFORMANCES IN TANGIBLE ASSETS, TO INCLUDE RARE COINS, GOLD & SILVER BULLION, AND COLORED DIAMONDS.  THE ONLY DIFFICULTY INVESTORS SHOULD HAVE TODAY IS IN DECIDING WHAT PERCENTAGE OF THEIR ASSETS THEY SHOULD ALLOCATE TO THIS ASSET CLASS.

(20% would not be imprudent based on the totality of the financial and economic imbalances and excesses we find ourselves in today, but we are in uncharted waters, so traditional allocation percentages may be too conservative!)

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When an asset is moving up in price due to the fundamentals behind demand changing solidly behind it, even in a compressed timeframe, it is likely that price appreciation will continue on trend for periods of times that are much longer than usual or expected.  I feel strongly at this junction that we have entered one of those periods for both gold and silver.  Granted, we will have minor corrections along the way, but based on the fundamental sea changes enumerated above, I feel they will be both shallower and shorter in duration than what we have experienced over the last 5 years in the bullion markets.  Investors around the world are both willing and able to step into the bullion market upon virtually each and every minor pullback and I expect them to continue to do so for many more months to come.  I also expect more and more Central Banks to step in on the Buy Side as well, creating a shallow floor under the vast majority of corrections.  As I have reiterated many times before, the paperhangers on the Comex/Nymex will have less and less influence on the overall price picture for both gold and silver in the evolving period ahead.  Gold, silver, palladium, and platinum are Global Commodities that are traded around the world 23 hours a day with non-U.S. marketplaces getting more incremental volume by the week.  Bullion trading was not invented here.


 

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February 25, 2006:  Most Americans Still Unprepared For The Maelstrom Ahead.


I think Americans are basically somewhat lazy when it comes to their financial affairs.  Easier to buy a mutual fund than do the research and constant monitoring required with individual equities.  Who cares if equity mutual funds are highly inefficient from a taxation standpoint where you can be a proud owner of a fund for only a day and end up paying taxes on capital gains that you did not generate.  Since stocks have provided approximately 10% average annual appreciation with dividends reinvested over long periods of time, it is a God-given right that this appreciation rate will occur over the next 10 years.  So what if there have been many 20-year periods where stocks provided absolutely zero returns for the loyal long-term holder.   And what if we just entered one of those generational periods in 2001?!  Since money markets pay a paltry 3% to 4% currently, well below the Real Rate of Inflation (ReRI), it makes no sense to have liquid reserves when one could plop the whole cache down on the Roulette Table of Wall Street and let her ride?!  Who needs to be liquid when it is so easy to buy and sell stocks with a 3/8 percent one-way transactions cost?  And as followers of this financial newsletter or that trading service, what are the odds that I will get caught with my stock prices down when I need the cash or find a better opportunity?!  Americans obviously continue to hear the Siren Call of Wall and Broad and pour Billions of Fiat Dollars into equities in late 2005/early 2006, at a time when the most savvy of successful investors are selling to the gullible public all the paper proportional interests in companies (E-Q-U-I-T-I-E-S) they can shovel out the back doors of their portfolios?  And where did it get these Lazy American Investors (LAI's) during both periods of time?  A couple of percentage points that did not keep up with the Real Rate of Inflation north of 6%!  Ah, go with what has worked well in the recent past, they say.  No need to discuss the danger signs on Wall Street here.  I am playing my tune to a deaf audience.

IF SUCCESSFUL LONG-TERM INVESTING WAS TRULY EASY, THEN WE ALL WOULD BE MILLIONAIRES.

Successful long-term investing takes a lot of time, effort, study, research, foresight, money, intelligence, and a little bit of luck.  Americans in the New Millennium are not of a mind-set to pay the price to attain the Golden Ring.  If I stay the course in the equity market, over the long-term, I will do quite well (they rationalize as the S&P swoons 30% over the next 12 months!).  WELL .... it all depends on what period of time you may have plunked your money down and how much time you still have on this planet to break even, much less make a killing.  We have entered a very dangerous period for equity investors with investor confidence very high, with debt levels very high, with trade imbalances very high, with interest rates going higher, with geopolitical tensions very high, with oil prices going higher, and with unregulated derivatives positions very high.

Americans remain basically unprepared for the maelstrom ahead.


They are spending more than they make on a monthly basis with a now solidly negative savings rate, and they can no longer readily convert home appreciation into spendable dollars with rising interest rates and topping/softening home values.  They are falsely confident that the Spender of First Resort, The American Consumer, can continue to keep the credit-driven U.S. economy aloft, but they do not realize that these spendthrifts have already flown too close to the sun and the binding wax of easy credit is melting.

They have virtually no liquid reserves that would see them through a 6-month unemployment period, the minimum level recommended for even optimistic economic times.  Cash is trash when one can spend oneself into Consumption Nirvana or throw another pair of dice at the Financial Asset Roulette Wheel (FARoW) known as Wall Street.

They have more credit card, installment, and mortgage debt than at any time in American history in relation to both net income, net worth, and National GDP.  Paying cash for anything is paramount to being a Depression Era Beggar (DEB) who just doesn't realize the economic benefits of using the free-flowing credit system and repaying with inflated dollars many years down the road.  That, of course, is assuming they have the necessary income and liquid assets available in the coming years to pay these record debt balances off AT ALL!

They have allocated little or nothing to Physical Gold and Silver as they erroneously consider them unwieldy as an investment class and with high mark-ups that they erroneously believe that they may not recoup on resale.  They fail to realize that bullion depositories are readily available for off-site storage of precious metals, particularly silver, and that the spread between selling and buying prices for bullion products at wholesale are usually a fixed dollar amount that has changed little over the course of the current Mega-Bull Market in Precious Metals that began in 2001.

They continue to place their trust in the general and financial news media to ascertain the state of the economy and the financial markets.  In general, they do not seek out contrary opinions, but feel content to sheepishly follow the consensus view that good times will last indefinitely because we are such a creative people with boundless productivity and adjust so quickly to change and adversity (for the latter, only if we see it coming!).  The new Fed Chairman is going to crank up the Printing Press to solve any and all U.S. economic problems!  But too much supply of anything, in this case Dollars, leads to lower prices, a.k.a. Dollar Devaluation or Collapse.

They throw away the free benefit of hundreds of years of history that shows unequivocally that financial and economic systems built upon fiat currency systems and limitless money and credit creation are doomed to failure and retrenchment.  They wrongly assume that foreigners and Foreign Central Banks will continue to purchase Dollar Assets because they have no liquid alternative (gold and silver are not liquid??!!) and a vested interest in keeping the Ponzi Scheme going.  They fail to recognize the constant pressure under U.S. interest rates, both from the Fed that is desperate to defend the worthless Dollar at the short-end and foreign bond buyers who NOW demand more interest to put more money into a depreciating asset, The Dollar, at the intermediate- and long-end.

They continue to favor paper, promise-to-pay or promise-to-deliver, assets over tangible, physical, kick-with-your-foot assets in an era of blatant accounting fraud, corporate self-enrichment, criminally negligent oversight and supervision, and ever-creative embezzlement.  If they think their assets will be truly safe, accurately accounted for, and delivered as promised when the Maelstrom Winds begin to blow, I have a bridge I would like to sell them.  Unless all of the have-not or don't-have-enoughs get frontal lobe lobotomies, then the current "haves" had better quit whistling past the graveyard by putting unfounded trust in purported fiduciaries who give them a flimsy piece of paper to represent their ownership interest in "something".  Leaps of Faith will not serve them well in the Maelstrom ahead.

They are not prepared for the unexpected, seminal tremor that will catch even the Sage of Wexford off guard as to its magnitude, longevity, and destructive results.  I have expounded till you are blue in the face about the fissures opening in the earth's economic and financial crust, but I would not be at all surprised if the Seminal Tremor is an event totally unpredicted to date.  But rest assured, in an historic period of credit/monetary excess, asset speculation, and global ethnic tension that the odds favor an earth shattering tremor and quake that catches the majority of the world, not just Americans, by surprise AND TOTALLY UNPREPARED.  Are you adequately prepared?


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Since my fingers are tired and my brain always is, I will wrap it up here.  Oh, and on the precious metals ........ 

THEY ARE POISED TO BLAST OFF.  THE RECENT ABRUPT CORRECTION IS OVER AND WE ARE GOING TO NEW HIGHS HERE.  THE RICHTER SCALE IS REGISTERING SEISMIC ACTIVITY NOW!

BUY GOLD AND SILVER AT TODAY'S PRICES, HOLD YOUR NOSE IF YOU HAVE TO, BUT REALIZE THAT THE GLOBAL FISSURES ARE GETTING READY TO BURST WIDE OPEN.  I'M PUTTING MY MONEY ON A GLOBAL FINANCIAL EARTHQUAKE ANY DAY NOW. 

We will see $650 gold and $12 silver before Summer, 2006!  Just want to see if you are paying attention.  Head for high ground.  D. W. Young, the Prophet (a.k.a. Profit) of the Shenandoah.



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March 8, 2006 SNIPPET:  U.S. Interest Rates Going Higher AND Not A Negative for Precious Metals.


I just love it when a plan comes together.  I have virtually been a lone voice in the wilderness in calling for higher U.S. interest rates even during a period of increasingly visible economic slowing in the States.  But the jig is finally up for foreign investors in accepting nominal U.S. interest rates that do not compensate them for U.S. inflation in the 6% to 8% zone and the real prospect of further Dollar devaluation down the road, if not this minute.  Furthermore, the lack of fiscal discipline at the Federal Government level with political wrangling at an all-time high and an American consumer who continues to borrow to spend both tell investors in U.S. paper that the house of cards is getting shakier by the day.  So if a borrower's financial and economic condition weakens as ours unquestionably is as we progress into 2006, then lender's, domestic or foreign, are going to require higher coupon payments in order to convert their Dollars or foreign currencies into U.S. debt instruments.  I have waited until the 10-year Treasury Note, a key vehicle for setting mortgage rates, was solidly about the resistance level of 4.6%, and for at least 4 trading days now we have been above that level and are approaching 4.75% as I type.

It is inevitable that U.S. interest rates are bound to go much higher over the coming quarters, even if Helicopter Ben cranks up the Printing Press of Federal Reserve Credit; my Sage of Wexford Crystal Ball (SaWCaB) says we will be looking at 8% 10-Year rates by summer of 2007 regardless of Bernanke's reversed liquidity pedal to the metal or not and regardless of the rate of economic growth here.  We have become a second class credit from an income statement and balance sheet standpoint, and the world is finally waking up to this unfolding reality.  Inflation expectations have crept back into intermediate and long-term bond yields, as anyone who has ventured out into the real world of reality shopping and monthly bill paying knows that the Government is telling us just another fat lie when they suggest overall U.S. inflation is less than 4%.  The U.S. Dollar is in trouble never mind the short-term blip we are seeing today, and investors in U.S. paper are going to demand (and get!) higher and higher interest rates in order to invest here.

Interest bearing instruments are not direct substitutes or even fair competition to the Precious Metals.  Do not confuse the unique characteristics of Tangible or Hard Assets with Financial or Paper Assets; the former is no party's liability to pay or deliver while the latter is based upon the Full Faith and Credit of the Issuing Party.  In order to obtain that whopping 8% that I am forecasting, you have to take back a promise to be paid not only interest but also principal many years into the future.  Even with Uncle Sam today, you have to wonder how the rules may be changed in mid-stream to the Government's advantage in the years ahead, and what you know for certainty today is that Uncle Sam is going to pay you back in devalued Dollars of reduced purchasing power both here and abroad.  It has been the history of governments to continually devalue their currencies to keep themselves in power with economies buoyed by easy credit and free spending.  And America today is at the top of the heap in this respect!

If we go into a German-style, pre-WWII hyperinflation due to Bernanke's penchant for curing all ills with easy credit and cheap money in the tradition of his predecessor, Sir Alan, then the medium of exchange used to make these payments and in which this portion of your wealth will be tied up (in interest bearing U.S. private or Treasury obligations) .......... U.S. Dollars ..... will sink like a stone in the currency markets.  There are too many Dollars in global circulation now, whether in physical or book-entry claims against the U.S., and flooding the world with even more of the diminished Greenback will just hasten its demise as the world's reserve currency.

So expect the stock market to continue its sporadic swoons prior to going into a full-fledged decline that will take out the 2003 lows; even 5% rates are better than current results in U.S. stocks and, certainly, more certain.  The precious metals will do just fine (futures traders at it today to make their Mercedes payments) since they are in a class by themselves that have survived the declines of numerous currencies over the millennia.  They are a currency unto themselves.  While they pay no interest, they do have a history of maintaining their buying power over hundreds and thousands of years.  And we only need them to serve us well over the next 20 years.



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March 30, 2006:  I Told You So.


Ah, to be a Pied Piper of the bullion trade only to look behind and see 2 chipmunks, a squirrel, and a mouse following your lead.  However, they have Cheshire Cat Smiles on their furry little faces and have a spirited gait to show the spectators on the sidelines how the most modest of mammals can stride to the top of the heap.  I told everyone who cared to listen (and I have rented Bernanke's helicopter for the afternoon to drop leaflets titled "Buy The Metals, You Mentally Challenged Spendthrifts!") that we were going into an exponential, parabolic rise in both gold and silver, and everyone just waited by their mailboxes to get the latest COT report to decide what the entrails of the Precious Metals Chicken really said!!!!  When you have watched as many asset markets as these hazel peepers have, after awhile you can sense the strength or weakness in a market just by watching it's intra-day and day-to-day price behavior.  There are so many things that are Rotten In Denmark (besides crucifixion for the sin of religious caricatures), that the planets were literally aligning for a buyer's panic in Gold and Silver that just reflects the seething, subconscious or conscious panic of investors as to the heightened probability that a major financial accident is going to happen.

I have said recently that we will probably see $635 Gold and $12 Silver in the next 60 days, but on both counts that could prove to be a conservative forecast.  Isn't it great that the physical spot price is taking the market away from the futures traders to the extent that they must run for the hills on their short positions or be trampled to death by the snorting PM Bull!!!

As a financial type that started his Financial Analyst career in the Motor City, I find it somewhat gratifying that GM (aka, Gross Malfeasance) is not too many steps from Bankruptcy.  The young-preppies that worked at GM in the mid-70's always made more money, got better benefits, and wore better threads than us non-automotive bean counters.  Having bought a 1973 Pontiac GTO as my first ever personal transportation, I was always astounded how they could pay the blue-collar and white-collar tabs that they did with such copious splendor and virtually reckless abandon.  Since I was constantly picking up Pontiac parts that popped off while underway and replacing the transmission twice and the engine once, it was always puzzling that this self-proclaimed leader in automotive design and manufacture could get away with its ruse for as long as it did.  Fit and finish were terrible on the vehicle, plastic compounds converted to unknown materials over time, and my repair record files took up an entire metal file cabinet.  What goes around, comes around.  I have not purchased an American vehicle since in some 42 years of driving.

Enter the world of financial engineering (since GM couldn't master automotive engineering), GM ventured afield big time with GMAC.  In a myriad of smoking paths that may make Enron look like a minor derivatives player, GMAC now has a book of business in Collateralized Debt Obligations (CDO's) to the tune of $1 Trillion notational value.  This is the major financial accident that I think is going to bring down the House of Cards so applauded by politicians such as Greenspan as purportedly increasing the efficiency and liquidity of the financial markets.  Glancing at my computer screen, I notice, once again with smug gratification, that the 10-Year Treasury Note Yield has ballooned to 4.87% this afternoon.  We have Fed Funds, the shortest of maturities, yielding a mighty 4.75% today, and the 10-Year showing a time premium of just 12 basis points (0.12%).  Certainly, the strains of inadequate cashflow at GM, with meager prospects of significant improvement in the quarters ahead, do not have a bearing on the U.S. Treasury Note Yield, but the opposite does apply.  Aside from the fact that GM's debt was just downgraded to junkier junk today, the re-introduction of maturity and risk premiums to the Treasury Yield Curve does have a direct impact on the ability of GM to survive.  (The Sage ponders the Question of whether foreign investors have awoken out of their decade's long coma regarding the stability of U.S. finances and full repayment probabilities!)

Cash shortfalls at GM cannot be easily bridged with additional debt financing as the cost to service such debt, much less to place it, is going up disproportionately for a bad credit risk with the current steady increases in U.S. interest rates.  The sale of impaired assets, such as GMAC where Robert Rubin himself could not figure out the real value vs. exposure quotient for their book of derivatives, is not a long-term solution for the company or even a short-term one if the market continues to mark down their intrinsic, ongoing business values.  A strike by Delphi employees at this juncture would be a death knell also as a cessation of most production would cut off whatever inadequate cashflow the company's automotive operations are currently generating.  Soaring interest rates and soaring tempers of line personnel will likely prove too much for the GM dynasty in the end; talk about a demoralized workforce!  It is always about odds in both surviving and investing, and the odds do not favor GM surviving in a declining market share environment exacerbated by a declining total U.S. automobile sales environment.  

The recession has already begun.  The Government's sub-4% inflation fudges are just masking a real GDP contraction of 1% to 2% when the REAL INFLATION RATE OF 8% IS APPLIED.

Not to mention that rates are going up much higher and faster than anyone has projected to date.  Helicopter Ben is determined to show he ain't no patsy when it comes to fighting inflation, so expect Fed Funds to be 5.5% before Fall.  CDO's and derivatives in general are structured under assumptions of "expected" price and yield patterns, and when the apple cart is tilted ever so lightly out of kilter, the leverage involved in these instruments magnifies the price change in the underlying asset by 10 to 100 times.  Just study what occurred when Long-Term Capital Management failed in 1998.  Sir Alan will not have finished his overpriced memoirs before the GM derivatives implosion sends a shock wave of nuclear proportions throughout the global financial markets.  While the Refco commodities trading company failure seemed out of the blue, the failure of GMAC and GM will have been predicted by many an analyst with a normal benefits package.  Hence, risk premiums are being built into not only bond yields, but also traditional hedge-class assets such as the Precious Metals.  And PM demand and prices are soaring to reflect the growing crowd of newly awakened investors.

We have entered fast market conditions in the Precious Metals where daily price swings are going to get a little crazy.  Nothing new here under the circumstances and nothing new here from a historical standpoint.  For those of you who have failed to heed the melodious piping of the Wexford Pied Piper, your best approach to finally get in the Gold/Silver game is to Dollar Cost Average in.  I can't predict with 100% certainty where the markets will turn around into a normal correction (usually retracing as much as 50% of the most recent move) or I would be laying on some exotic, sunlit beach with a bevy of beauties on every appendage.  We could go to $685 Gold and $15 Silver before this run is exhausted.  It will not be the end of the Super PM Bull Market, just a gut-wrenching consolidation period that all bull markets require to head to even higher heights.  I hope that you will have liquidated more paper assets  well prior to that time to pick up the relative bargains, not in financial instruments, but in tangible, physical assets.

THE PRICES OF THE PRECIOUS METALS ARE REFLECTING IMPENDING REALITY.  AND THAT REALITY IS THAT A MAJOR FINANCIAL ACCIDENT IS IN THE PROCESS OF DEVELOPING, U.S. INFLATION IS DOUBLE THE OFFICIAL RAGE, THE DOLLAR IS RE-ENTERING IT'S BEAR MARKET, THE STOCK MARKET IS TOPPING OUT, READY TO RE-TEST ITS BEAR MARKET LOWS, THE U.S. ECONOMY IS ROLLING OVER INTO RECESSION, AND U.S. FINANCES ARE DETERIORATING BY THE DAY.  Any questions?!!!


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April 22, 2006:  Corrections Will Be Shallow & Brief.


Have you ever known the Sage of Wexford to be afraid to go out on a limb and make a preposterous prediction that only garners wild bursts of laughter from the conventional bullion or financial crowd?!!  Now, it is not Friday's very spectacular comeback for both gold and silver (and the platinum sisters) that makes me expound such bold statements, but it is the condition of our condition that leads me to believe that most waterfall days in the precious metals will be soon following by multi-percent up days on a persistent basis.  Gold and silver will regain the lost ground and make new highs in a matter of weeks, not months or quarters as prior to Fall, 2005.  Remember that I made a similar prediction on the last 3- to 4-day correction, prompting the then smug Sage to pen the title, "I Told You So." for his most recent missive.

The behavior of the precious metals, particularly during violent corrections and recoveries, tells me that a ray of sunshine is waking up the sleepyheads in InvestingLand that are beginning to realize:

1.  That they have been lied to for the last several decades by Government officials as to the real state of our economy and financial system.

2.  That the currency that the vast majority, if not 100%, of their assets is priced in is headed for Reserve Currency Extinction or at a minimum, Banana Republic Devaluation (can you say 30 cents on the Dollar?).

3.  That bankruptcies and defaults are lining up in the U.S. and eventually around the globe that will be massive, unexpected for the unsuspecting, and highly disruptive to economic well-being and financial system stability.

4.  That inflation is truly running at 7% to 8% per annum in 2006 and likely to head higher until the global economy is thrown into a severe recession (DEEpression?) that will be basically initiated by grossly excessive debt levels at the consumer and all local, state, and Federal levels in the United States.

5.  That U.S. interest rates are headed to 8% plus for the conventional mortgage by summer of 2007 as all investors, foreign and domestic, demand more risk premium for insipient U.S. inflation, dwindling economic prospects, Persistent Fiscal Irresponsibility, and junk-status debt accumulation in the U.S.

6.  That geopolitical risks today from rouge nations are at an unprecedented level when the capabilities of weapons of mass destruction, nuclear or chemical, and terrorist attacks on large civilian centers are factored in.

7.  That liquidity is still sloshing around in the global financial system despite all of the B.S. rhetoric from central bankers that they will continue to raise interest rates to "quell inflation" when money supply growth continues to surge, loan and engineered debt instrument creation still swells, and Real Interest Rates are still negative in most countries.  It is this same liquidity that is going into commodities such as the Precious Metals in this Second Phase of the generation Bull Market, and as liquidity begins to dwindle with economic activity and deflationary defaults, it will be the liquidity created by asset liquidations in stocks, bonds, real estate, and bank C.D.'s that will propel the metals to unthinkable heights, such as $2,500 Gold and $75 Silver (new long-term targets for the Sage who guarantees nothing except that he will be vocal!).

8.  That changes in Comex margin requirements are a sure-fired way for the exchange to assist some of its highest-fee-generating customers that are caught heavily short Silver by instantaneously causing a 10% plus correction the very next trading day the new margin requirements are effective.  Highly leveraged players scramble to increase their equity percentages by outright selling of their silver contracts to generate required cash, particularly heavily leveraged/speculative/ hedge fund-hot money longs, such that the shorts have a chance to cover their positions more favorably, i.e., close them out to stop the bleeding or even go long at $11.95 silver coming off the Sage's prescient $14.58 target level.  I TOLD YOU SO!  Like shooting fish in a barrel, and it will continue to happen as the Silver Train races forward.  Comex/Nymex will just say that they are merely trying to assure market liquidity and discourage excessive speculative when in fact they have acquiesced in the seeds of speculation for many moons!

JUST UNDERSTAND THE NATURE OF THE BEAST AND YOU CAN ROAST HIM AT THE STAKE BY NOT BEING SHAKEN OUT OF YOUR POSITIONS AND EVEN, HEAVEN FORBID .............. BUYING THE DIPS!

But you have to have nerves of steel and real conviction to buy such rapid dips and there is never any guarantee that a secondary reaction or further decline will not occur within the next several trading days after the initial reaction.  But if gold hits $725 and silver hits $20 plus early next year, do you really care all that much if you bought last week at $12 versus $13 versus $14?!!!

Now say after me, "DOLLAR COST AVERAGING IS A SMARTER WAY TO BUY GOLD AND SILVER THAN TRYING TO BE GEORGE SOROS JUNIOR".

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You get the picture and many new investors in the metals are FINALLY getting the picture.  Those who are waking up to the unfolding reality of very severe economic and financial conditions just ahead are taking the opportunity on pullbacks to make initial or additional investments in the Precious Metals.  They learned lots of bad investing habits in attempting to beat the stock market through Market Timing since August, 1981, and now they feel vindicated to enter a gold or silver position at $620 or $11.95 when of course many of my readers entered years ago at much lower levels.  

BUT WE WELCOME THEM WITH OPEN ARMS BECAUSE THEY WILL GUARANTEE THAT THESE GUT-WRENCHING MULTI-DAY PULLBACKS WILL BE SHALLOW AND BRIEF.  And seasoned PM investors will continue to buy the dips.



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May 16, 2006 SNIPPET:  Stay Focused On The Golden Ring.


Since none of you readers have sent me a bottle of Cognac for any of the past 8 Christmases that I have been writing this FREE newsletter, I thought long and hard about kicking my feet out of bed at 6:00 am this morning just to provide you with some periodic dewdrops of Sage Wisdom.  But since visitor traffic to this site swells around the end of the month with freeloaders looking to glean some tidbit that will turn their $5,000 bullion investment into $1,000,000 in a matter of months, I sometimes (but hardly ever!) take pity on their plight.  Greed and impatience have done more to compromise more investment strategies than probably any natural occurrence of any asset market.

INVEST FOR THE LONG-TERM, DON'T LEVERAGE YOUR POSITIONS UNLESS YOU GET FREE PROZAC, AND LIQUIDATE FUNDAMENTALLY UNSOUND INVESTMENTS TO PARTICIPATE IN THE FUNDAMENTALLY SOUND ONES.

By "unsound" I mean most stocks, bonds, real estate, and any other asset that depends on healthy economic growth, a sound financial system, modest inflation, low interest rates, a stable Dollar, and historically low prices.  See, in just one sentence I can head back to bed!  If you concentrate on just the fundamental reasons for owning an asset, and not get all wrapped up on trying the beat the market, taking short-term gains cause you can, and over-analyzing exit and entry points, you will do very, very well IN THE LONG TERM.

Maybe I will stick to teal-colored text in this issue, since that is the color of my retinas right now.  BY LONG-TERM, AND TAKE THIS DOWN, I MEAN THE NEXT 5 TO 10 YEARS.

If you think that the fundamental reasons for owning precious metals are going to melt away with the Lever Pullers in Power (LPP's) having solved most of the massive STRUCTURAL PROBLEMS that exist in the U.S. and the world in the next several years, THINK AGAIN.  It could easily take 20 years to get the United States back on a firm financial footing and that means a Dollar backed by something more than just a promise to pay.  You are seeing history in the making in this CURRENT EXTREMELY FRAGILE FINANCIAL AND ECONOMIC PERIOD.

Okay, I am going back to Gray, since the world is really not Black & White in one's ability to comprehend its working, but a shade of this and that.

Remember O' Impatient Ones that when you sell physical gold and silver and palladium and platinum to lock in an intermediate gain, you have the privilege of paying Uncle Sam 15% to 28% on a Long-Term Capital Gain (or higher if you sell within a year of purchase!!!).  So when you hit the re-entry price right on the money (1 in 10 Million chance of doing so), you will only have 85% to 72% of the net proceeds from sale dollars to reinvest after you send the April 15th check to Uncle Sam.  Where is that money going to come from?  The cookie jar?  You are going to have to liquidate another asset, even if it is a CD, at likely an inopportune time for that asset market, in order to maintain the same dollar level of investment in the precious metals.  This is hardly theory, this is reality!  TRADING OF PHYSICAL BULLION IS IMPRACTICAL, COSTLY, AND SUBOPTIMAL FROM AN INVESTING STANDPOINT.

Not only do you risk hernia, AND WCM ASSUMES NO RESPONSIBILITY FOR PHYSICAL INJURY DUE TO IMPROPER LIFTING BY CLIENTS OF ANY OF OUR BULLION PRODUCTS (individual product weights are clearly disclosed on our websites!), but provides meager incremental profits ...... if any at all.  What you are missing in the supposition that you can beat the market's long-term results by trading is that you will have to come close to the interim high on selling and close to the interim low on repurchasing 70% of the time.  THE ODDS ARE STRONGLY AGAINST YOU IN THIS SUPPOSITION.

If you cannot go another day without trading, do it with paper instruments.  They are much easier to lift, package, and ship, but you will still have the privilege of paying Uncle Sam IF YOU GUESS RIGHT.  I will never recommend any paper instrument related to the precious metals (so don't ask me for any free advice on same!), not only because I strongly believe many instruments will default in some fashion over the next 5 years, but I am not in the business of doing so.  I am in the business of buying and selling Tangible Assets:   U.S. Rare Coins, Precious Metals Bullion, and Fancy Colored Diamonds.  I firmly believe in the long-term success of these assets that are totally outside of the financial markets and negatively correlated to them.  I have personally learned over 30 years plus of investing that my best investment results were obtained when I held an asset the longest possible period of time.  (And I wore myself out in trading positions with just the accounting work alone.)

For instance, I have a specialized U.S. rare coin collection that will go to auction this Fall.  Most of the coins were acquired in early 1998 when the rare coin market had trouble giving material away.  That is over 8 years ago, and for the first 5 years I watched the collection do virtually nothing, if not go down in price during certain early periods.  I am not sure at all what my net long-term total appreciation will be, but anticipating a continued frenzy of buying in U.S. rare coins partially due to the super bull market in gold and silver, I expect that as much as 25% of the total appreciation will occur between now and September- October.  This may be wishful thinking, but not unreasonable given the nature of markets, especially during rarified periods.  We are in one of those rarified periods of history where normal assumptions about price behavior of assets goes out the window as being too conservative.  To sell too early may be the greatest sin going forward (other than trading one's butt off), but I am realigning my investment portfolio to put more emphasis in other tangible asset areas.  Plus I am over-weighted in U.S. rare coins, having put significant sums into that area beginning in July, 1997 when it was hardly fashionable to do so.

And it is really not fashionable (yet) to put money into precious metals.  I would still venture to say that less than 5% of the U.S. investing population has any investment dollars in gold/silver/platinum-group assets, and it will take $850 gold to get to 10% of the population.  People love to buy around old highs, because that is where they are finally convinced that the asset has prospects for even higher prices.  And paying $850 for Gold and even $50 for Silver will not be too much in this SuperNova Bull Market.

Where do I think Gold and Silver will go now in 2006 and early 2007?  The Sage now thinks that we will see $1,000 Gold and $20 Silver sometime during the First Quarter of 2007.  The U.S. Dollar is entering a period of near-collapse, inflation is just beginning to accelerate, commodity prices will stay high due to emerging economies in Asia, Central Banks of note such as China are now selling Dollar assets to diversify (partially into GOLD), the economy is rolling over due to excessive debt and satiated demand, and the oars of leadership are all being pulled in diverse directions with the Ship of State spinning in circles.  National Guard at the southern border?  Heck, send in Special Ops training platoons.  What about some of those femme-loving alligators from Florida???  Put warning flags on top of their amphibian heads in Spanish and watch the water crossings go to zero.  But I digress and we are actually paying people to solve these immigration, a.k.a. "invasion", problems.

But "Oh, Omnipotent Sage" you ask, so I can show the wifie or husbandie how brilliant I am at timing entry points into the bullion market, "what about the blasted SHORT-TERM???"  Since I have not had breakfast yet or even my first cup of Java, my very little brain cells, in both count and individual size, may not be up to snuff yet, but in the interest of entertainment:  How about a short-term low in Gold of only $650.05 and a short-term low in Silver of $12.35478.  Of course if I really knew the answer I wouldn't tell you, hoarding this insider knowledge so I could corner the markets and retire to Iceland 10 years sooner than planned.  I have bought my own hot springs there to heat my modest hut until the lights go out.  Gold will hold up better because the central banks are quietly buying back that which they just sold over the last two decades, and silver will pull back a tad more on a percentage basis because it is a thinner trading market and had a more spectacular run of late.

Your guarantee for me being right is equal to the price of this ezine.  But then we go to new interim highs of $850 on Gold and $17 on Silver before you can call your bullion broker to get back in.

It is after 8 am and I have to go make a buck instead of just writing how one could make a buck.  In the LONG-TERM, and now that that phrase is burned indelibly into your foreheads today so YOU WILL NOT FORGET, GOLD WILL GO TO $2,500 AND SILVER TO $75.  Since the inflation-adjusted high of Gold is really $2,100 putting the 1980 high into 2006 Dollars (heaven forbid!), $2,500 per ounce may well prove to be conservative.  As for Silver, $75 to $100 per ounce may be more realistic, but I will end here with you on the edge of your seats and frantically calling your stock broker, your bond broker, and your real estate broker to sell everything!

Not only do we have the fundamentals improving daily for higher and higher prices in the precious metals, but we have more and more constraints on supply that we did not have 10 and even 20 years ago.  There is not an infinite supply of gold and silver in old Mother Earth, and rising energy costs of extraction, labor strife, mine nationalizations, increased environmental standards, and poor mining practices virtually guarantee even more constraints going forward.  More on that perhaps at a later time after some of you freeloaders have put a dime in the WCM tin cup by actually placing an order for WCM bullion, rare coin, or diamond products.  I am not totally altruistic in writing this free ezine.  As a famous discount clothier often says, "AN EDUCATED CONSUMER IS OUR BEST CUSTOMER".

After seeing a DVD movie on the Great Depression a month ago, I can only say:  "Hey Buddy, can you spare a dime?"  Hard times ahead.  Hard assets only will endure.

Hey StarBucks, make that a double Mocha Latte with a peppermint stick (and throw in a shot of Cognac when no one is looking).


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June 10, 2006:  Investing Is All About PERSPECTIVE.


It almost took an Act of Congress to get me to the keyboard this sunny, temperate, breezy day in Old Virginnie, but since I know that my readers lives are just as Fun-Challenged as the Sage's, I don't feel so bad.  I guess we can all go out and have FUN when the rest of the populace is standing on the corner with tin cups held out and everyone trying to sell the same Chinese pencils for a crummy Buck each.  I will get no pleasure from the misery that will exist Stateside in the next decade, but maybe a smug sense of self-gratification that all of the hours I spent pounding out these ezines were not for naught.  Most evidence still supports the Sage of Wexford premise that the vast majority of Americans still do not have a clue as to the Trouble We Is In (TWIN) and the Dire Times That Are A Coming (DTTAAC).  I still state that less than 5% of just the Investing Public, not even the entire Adult American Population (which with the sieve function of our borders I can't keep up with tallying!!!!!!!), has purchased some form of gold/silver hedge in at least a 15% financial asset allocation.  And with the images that I am seeing in my crystal ball, lightly dusted on a regular basis, 15% Precious Metals Hedges will be a drop in the proverbial bucket in relation to the devastation that will occur on many levels across the global landscape in the months and years just ahead.

BUT I MUST GIVE CREDIT WHERE CREDIT IS DUE.  Just to show that I am not a Total Curmudgeon who spends his Saturdays ranting and raving, I want to congratulate all of my WCM previous and new clients for utilizing the recent pullback, a.k.a. correction, to add to their precious metals holdings.  (Now this has nothing to do with how this client behavior will assist my standard of living in Iceland in the year 2020!)  This means that when their eyes passed over this erudite text on many an occasion in the past and present that the gray matter within their skulls was actually firing on all synapses.  See.  I can't even give a wholehearted compliment without a back-handed jab.  Toss it up to having recently turned 57 and although I don't walk all hunched over yet, I am getting a little persnickety.   My aging disposition aside, BUYING THE DIPS HAS BEEN ONE OF MY CONSISTENT MANTRA'S FOR YEARS NOW REGARDING GOLD & SILVER, AND I AM REALLY PLEASED THAT MORE AND MORE INVESTORS ARE STEPPING UP TO THE PLATE DURING THESE CORRECTIVE PERIODS.

Crowd Behavior being what it is going back to our Tribal Ancestors' "safety in numbers" to attempt to avoid being eating by larger critters, THE ESTABLISHMENT OF AN UNEQUIVOCAL BULL MARKET IN THE PRECIOUS METALS over the last 5 years does much to lessen the hesitancy of investors to add to positions or initiate new positions.  There is also nothing like recent success to reinforce the validity of the fundamental premises for investing in tangible assets in the first place, in this shiny case, GOLD & SILVER.  When you already have a 50% to 100% plus gain in an asset, it is much easier getting the wifie's or hubbie's permission to spent next month's mortgage money on those heavy brown boxes from UPS and USPS.

Now I gave up being a Technician years ago (although I did change-out the CPU cooling fan on my self-built main computer this morning while the rest of you slackers were still snoozing and dreaming of doubles, triples, and quadruples in the stock and real estate markets!! ....... DREAMS INDEED), but I am going to thrill everyone today and put up some charts to support my points.  My main point, in case you want to run outside and play right now, in this exposition today is that you always have to look at the big picture of an asset at any given time in its price history TO KNOW WHAT TO DO AT THIS VERY MOMENT.  This is how I got to use the 25-cent word, "PERSPECTIVE", in my title today.  And perspective is essential at this moment for any bullion investors or want-ta-be's to see that the current PULLBACK in gold and silver and even the platinum group is as normal as the Sage being sarcastic and petty in his ezines.  It is always tough getting started to write these epistles, but once the verbal bile gets flowing, I sort of get into it.  I am not a sick person ......... just an increasingly "eccentric" one.

For our first chart, a.k.a., the EKG of Investors, we will gaze upon the bull market period of 2000 to 2006, to date for Gold:

As the astute observer can notice from the above, the current bull market trend-line for gold starting around January, 2002 would have taken us to around the $465 level in gold at the "January '02 to September '05" rate of appreciation.  This was about $45 per ounce per year, steady as she goes, who could complain.  Well, something changed fundamentally in early September 2005 to accelerate the appreciation rate of gold to about $200 per ounce per year (rate of change or appreciation rate).  This virtual quadrupling in the appreciation rate can be attributed to many fundamental factors such as the realization that inflation was re-emerging, the Dollar was destined for the Reserve Currency Toilet, America's Fiscal Situation was dire & worsening ..... you get the picture.  Now most of us old time investing salts know from decades of experience that this type of parabolic or exponential price appreciation is not sustainable.  It is exciting, but not sustainable cause eventually the short-term traders in the Comex futures pits decide it is time to lock in profits and they end up doing so en mass.  There motto may be, "Trade Or Fade", but they are inherently an impatient lot.

Next chart please, this time the 2006 price behavior of gold:

Now even though gold did run up from early September, 2005 to mid-January, 2006, it did go into a multi-month consolidation around the $550 area before going exponential again from late March to early May of this year.  Okay, no revelations up to this point, but the question now becomes, what is the range of price that gold has to retrace within for the current correction.  Is it the recent $550 to $725 range, or is it the entire early September, 2005 to early May, 2006 move from $430 to $725.  ME THINKS IT IS THE FORMER RANGE AND NOT THE LATTER RANGE.

And I select the $550 to $725 price range as requiring "excess" work-off versus the entire major move of almost $300 because:  

A.)  The early 2006 price consolidation around $550 did much to work off the excesses from the early September, 2005 $430 move, 
AND  
B.) The fundamentals for owning gold (and silver) have exploded into view for all but the visually-challenged to recognize without equivocation.  The reasons for owning gold and silver are now both highly-visible AND compelling.

THERE IS NOW A RUSH TO BUY THE PRECIOUS METALS.  

AND AS THAT SAGE OF METALLIC WISDOM SAID BACK IN MID-FALL, 2005:  "The precious metals have entered Phase II of the secular bull market that began 3 years ago." October 25, 2005.  (I think I said it early than that but too lazy to toot my own horn or search through the Archives.)

Gosh, my mind jumps around like a Kangaroo.  The point, the point, the point.  The point being to all of this linear analysis is that a commodity usually retraces 60% of its recent up-move in a correction, and that 60% in this analysis of gold's recent rocket ride is $105 per ounce (60% of $175, the recent range).  So let's take off our shoes to count and that means that the $620 area in gold ($725 minus $105) should provide support, and the next consolidation zone for the soon-to-occur NEXT LEG UP.  

THAT IS ABOUT WHERE WE ARE NOW ($608), SO ....... THE END IS NEAR, for the correction, of course.  Commodities markets almost always overshoot these technical highs and lows, so don't be surprised or agitated if gold corrects to as low as $585.  But the thing to remember is that once the excesses of a recent parabolic or exponential move are wrung out, AND THE FUNDAMENTALS ARE STRENGTHENING BY THE DAY FOR THE ASSET AS THEY ARE FOR THE PRECIOUS METALS, the upward trend in the secular bull market will resume.  In fact, it will probably take off like a rocket again cause the train station has become 3 to 4 times as large as it was this time last year; that is, there are that many more people wanting to jump on board and it is an international train!

Now I am not going to use as much color ink on my discussion of Silver, cause I is getting tired and cranky as us Old Folk do, and let me just present the same charts and you tell me the answers:

Okay, same analytical approach for silver, but since I want to get outside and breath some fresh air before the sun sets, let's cut to the chase and look at the price range from around $9.15 to $14.85 silver, a whopping $5.70 range.  Now talk about a rocket-ship.  If we take 60% of the move as the correction target, that means we subtract $3.40 from the interim, 2006 high of around $14.85.  IF WE ALL HAVE THE SAME NUMBER OF TOES, THAT COMES TO A PROJECTED SUPPORT LEVEL OF $11.45 FOR SILVER.  So with Friday's close at $11.25, once again, and the Sage would appreciate some Cognac at Xmas ...... THE END IS NEAR, for the correction, of course.  Once again, and the Sage is really not a genius even though he was voted "Most Likely To Have An Original Thought" in high school, the wild and crazy guys in the futures pits may take us to the upper $10 level to scare the begeebees out of you out there that used your Mobil credit card to buy bullion when the spouse wasn't looking.

Time is another component to a correction and we could be real sloppy in the precious metals for the next month or two, but just what if that financial institution, let's say one of those money machines in the Big Apple (like JP Morgan-Chase or Goldman-Sachs, Paulson's ATM) is hedged on the wrong side of the interest rate spectrum in some obscure derivative that is buried in a clerk's file cabinet!  Or just pick your own financial instrument landmine and calculate the odds of it not being tripped at any moment with the Dollar sinking and interest rates perking along with Oil and the Cost of Living. 

More to follow in my next SNIPPET update, but this old salt is tired, and I got rabbits eating everything that sprouts in my perennial garden.  Know of any good rabbit recipes where I can just leave the fur on.  I have hauled 9 of the rascals out of here in the last 9 months via a humane trap (relocated to local County park that is mysteriously losing its landscaping), but the pellet gun is locked and loaded.  As long as they don't give me that cuddly little rabbity look before I pull the trigger!

LOCK AND LOAD.  THE TRIGGER NEEDS TO BE PULLED FOR YOU TO HIT THE PRECIOUS METALS BULL'S EYE!

(Why is it Lock, then Load, cause I know that I first load the camber, then lock the round in???  Any NRA people out there? ANYBODY STILL AWAKE?!)


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June 24, 2006 SNIPPET:  The Sage Is Not Responsible for Knucklehead Speculators.


I am going to keep this short cause I is getting short-tempered with people that ask me where the metals are going in the next nanosecond, week, or month.  IF I KNEW I WOULD NOT HAVE TO WORK 70-HOUR WEEKS TO BUY MY OWN GEOTHERMAL SPRINGHOUSE IN ICELAND!  And if I knew and were a trading fool like those who push the precious metals around in the paper pits every day, I wouldn't tell you cause I want all the money for myself, ME, ME, ME, ME.  The "ME" generation seems to be quite prevalent in America today, but you got me strapped to the keyboard today to hear about the bullion markets and not my moralistic views on what is wrong with Americans today.

Now I know all of you rushed out and bought the metals right after my last dewdrop of wisdom on June 10th where I dissected the entrails of the chicken using my artful scalpel named TECHNICAL ANALYSIS.  Hey, it was just an educated guess, don't make me remote start my automobile every day from now on!  

The biggest mistake in my analysis, besides undertaking a guess at short-term bullion prices, was to use the post-First Quarter, 2006 price range for both metals and not the entire September-October, 2005 to early May, 2006 price range as the POTENTIAL CORRECTIVE RANGE.  Looking at the graphs in the June 10th epistle (we are saving energy by not rewriting the pixels!), we can see that the full move range for Gold was $295 from $430 to $725 and the full move range for Silver was $7.85 from around $7.00 to $14.85.  IF THE SAGE RUBS HIS RENTED CRYSTAL BALL (Waterford of course), HE NOW REALIZES THAT A 60% RETRACEMENT FOR EACH METAL REALLY MEANT:

1.  A price low "target" of $548 Gold ( 60% of $295 equals $177 which when subtracted from $725 equals $548 )  My God, the Sage hit the recent low practically on the button ........ In Hindsight, of course.

2.  A price low "target" of $10.15 Silver ( 60% of $7.88 equals $4.70 which when subtracted from $14.85 equals $10.15 )  Okay, so I ain't perfect.  Sue me.  How was I to know that the Paper Hangers on the Comex were going to try to give you all cardiac's and put the price toward $9.38.  My phone did ring quite a bit in the $9 range of yester-week, but not as much as it should have with such great prices showing up.  Silver is a less liquid market than gold, so always expect it to be more volatile; maybe a 70% retracement rule should apply to Silver.

Remember that the Sage did say that commodity markets tend to overshoot both to the upside AND THE DOWNSIDE.

Now this is where you get on the edge of your seat, CAUSE HERE IS WHAT THE ALL-KNOWING SAGE THINKS ABOUT THE CURRENT PRICE SITUATION:

Although I can't rule out a retest of the recent lows just to cover my butt regarding retaliation, I THINK WE HAVE SEEN THE LOWS FOR THIS CORRECTION. Interest rates keep working their way higher, giving the SadSack Dollar a very temporary reprieve, so pressure is building in the financial markets and system.  Kind of like the lava dome on a re-emerging volcano; doesn't seem like a threat until all Hell breaks lose.  I expect news to leak out of a major financial player's failure any day now.  And you know that the New York Times can't keep a secret!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!

One reason I make this bold assertion is that I have metals buyers stepping up to the plate left and right after many Comex traders went splat on the surrounding sidewalks, too fearful to face the Mrs. that the summer vacation this year would be in the Bronx.  Computer Black Boxes trading the same well-known technical points with button pushers who are leveraged 10x to 20x means stupendous volatility.  GET USED TO IT.  TAKE ADVANTAGE OF IT. HAVE CASH AVAILABLE FROM LIQUIDATING AS MANY PAPER ASSETS AS POSSIBLE TO STEP UP TO THE BULLION BUYER'S PLATE. 

Investors' psychology is one of the most potent tools an investor has in taking the temperature of any market, and I must say with glee and some satisfaction as a Sage, THAT INVESTORS ARE BUYING THE DIPS.  And I just don't mean nibbling like a lily-kneed Democrat trying to find a political platform to stand on, but putting some serious moola to work at these much lower prices.

AND ........... I GOT MY FIRST BOTTLE OF COGNAC THIS WEEK FROM ONE OF MY BEST CLIENTS, YOU SLACKERS!  We now have the Davinsky Cognac Indicator (DCI) that will rival the most expensive econometric trading model devised by Goldman-Sachs at a cost of $5 Million Big Ones.  When the Sage gets presents, you know that not only has he been right for the last 9 years, but that he has assisted in putting some major dough in his clients' pockets.

Now I could go on all day with self-praises (but a thunderstorm is a'coming so I don't want 20,000 volts going through the keyboard to what is left of my shrinking brain), but let me make some more salient points that you can take to the bank:

1.  GET LIQUID:  Dump every fricking stock, bond, second home, business property, sailboat, RV, mistress, and any other drain on cash or future net worth that you possibly can.  Don't ask me about mining stocks cause when the stock market tanks, 70% of all stocks go with it.  With banana republic despots nationalizing one natural resource industry after the other to divert the starving masses' attention from having ratty clothing and empty stomachs and negligible future prospects, that stock certificate could become very expensive wallpaper some day.  Paper is Paper is Paper is Paper, NOTHING MORE THAN A TENUOUS PROMISE TO PAY OR PERFORM.

2.  DIVERT 50% OF YOUR DISCRETIONARY CASHFLOW TO DEBT PAY-DOWN.  This is very important right now cause most Americans will not have a lot of discretionary dollars after living expenses in about 5 years.  Get the debt monkey off your back now while you are rolling in the dough created by Sages such as Wexford.  All right inflation is running at 7% to 8% for the Average Joe and Josephine, and some credit card offers are at less than 6%, but don't add to your debt at this time even if you are running to the phone to place an order with me!  WE ARE CURRENTLY IN AN INFLATIONARY PHASE WHERE THE COST OF DEBT SERVICE DECLINES WITH TIME DUE TO THE EFFECTS OF INFLATION, BUT WE WILL EVENTUALLY BE IN A DEFLATIONARY PHASE WHERE DEBT SERVICE IS GOING TO BITE YOU IN THE BUTT BIG TIME.  IN A DEFLATION, THE COST OF DEBT IN YEAR 2 IS GREATER THAN IN YEAR 1 BECAUSE THE VALUE OF CASH HAS INCREASED, NOT DECREASED.

3.  Please, Please, Please do not pay high premiums for Bullion Products.  Every fricking American Buffalo Gold Coin is by definition Un-Circulated because it was never meant for circulation, duh, and was never in circulation as a medium of exchange, duh, duh, duh.  If you buy any bullion coin sold by the one of the Sage's scumbag competitors in a PCGS or NGC or ABC holder saying it is MS69, BIG, BIG, BIG FRICKING DEAL!!!!!  They all are probably going to be at least investment grade or GEM condition of MS65 (they will hire Chelsea Clinton to catch them as they come out of the press; she will use her mother's mouth to do so), but any asset that is in that condition in the Tens of Thousands, Hundreds of Thousands, and even Millions, JUST AIN'T RARE BY ANY NUMISMATIC DEFINITION.

Buy Bullion Products For The Bullion Content, Period.  Don't unrealistically and unnecessarily complicate your investing.  When state of preservation becomes an issue with a bullion coin, you will inevitably see the premium-over-spot shrink as the time-past-the-promotion progresses and liquidity in the system shrinks for all but the most internationally liquid investments.  Be a global investor, cause you may be selling your precious metals or fancy colored diamonds in Zurich, Switzerland for Swiss Francs some day!

If you want some truly rare U.S. coins where only maybe 35 to 70 have survived in a given condition, i.e., Brilliant Uncirculated, Choice, or Gem, I can put you in touch with two of the most experienced, most skilled, 30-year veteran numismatists in the country who I purchase all of my RARE COINS from.  And I have used my own money in the $100's of Thousands to buy from the stinking stable of rare coin dealers out there who are so honest they could run for office.  My Guys are so picky at what they sell, they even drive me crazy waiting to find that just right coin! 

Just nothing rare about any of the gold or silver bullion coins produced by any sovereign mint, much less a private mint or refiner.  They only make money if they sell a zillion of 'em due to starvation margins (take pity on the Sage!), and you can rest assured many of the minters lie about how many of a given product they have actually produced in a given year.

4.  BE A LONG-TERM INVESTOR, RELAX .... EXHALE, ASCERTAIN THAT THE FUNDAMENTALS SUPPORT AND CONTINUE TO SUPPORT YOUR INITIAL SUPPOSITION FOR AN ASSET PURCHASE, AND GET A HOBBY.  I know some of you guys want a new Porsche in the driveway by Xmas, but trying to outsmart any asset market with price timing is an exercise in futility over the short-term and the long-term.  We all get depressed when we make a purchase toward an intermediate high or miss a buying opportunity toward an intermediate low.  So what.  Just look at your Average Cost per Ounce of Gold or Silver over the last 8 years that you have been dutifully reading this ezine, and take comfort.  If you are new to bullion investing, just look what you have to look forward to!  A super bull market that has many years to run and many multiples of price to assist you in surviving the America of 2015.

%%%%%%%%%%%%%%%%%%%%%%

Okay, I am done here.  First, I wanted to atone for my sin of missing the prognostication of the recent correction lows in both Gold and Silver (ha, ha, ha, you get what you pay for in a free ezine!!!).  Second, I wanted to make sure that you all had a plan for the not only the next 20 minutes, BUT NEXT 20 YEARS.  

Make hay while the sun shines, generate cash, reallocate your portfolio.  The storm clouds are already here, threatening to block out the sun.  If you think I exaggerate, wait until the news hits the Street how many hedge funds went technically belly up in the last 6 weeks!  ALL ASSET MARKETS DON'T GO DOWN AT THE SAME TIME UNLESS THERE IS ILLIQUIDITY SOMEWHERE IN THE SYSTEM AND MARKETS.  You can find the mailing address for WCM somewhere on this website for sending additional, congratulatory bottles of Courvoisier!  Thanks, Kevin!

This is what they look  like.

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