$SLV: Stage Four

Government Motors (GM) to Invest $691 Million in Mexico

GM announced on Wednesday that it will spend $691 million to build and expand its factories in Mexico.  Mexico President Ernest Hernandez said the move will boost Mexican employment and development.  (That is great for Mexico; however, I thought the United States bailed out GM, not Mexico.  And, by last count, the United States needs to boost its own employment.  In addition, American taxpayers have lost nearly $10 billion on the GM taxpayer-funded bailout.)

You Think Now is a Good Time to Buy That House Because Rates Are So Low -- Well, You Better Think Again!

Realtors love to claim that today's low interest rate environment is the best time to purchase your dream home. Well, I contend that propaganda from realtors will lead directly to your next nightmare.  So here is the economic reality from Wells Fargo, in which the national average 30-year Fixed Mortgage has gone from 3.40% on May 1, 2013 to 4.875%, as of today.  The matching affordability collapse (See the following graph.) has gone from $450,000 to $375,000, or a 16% equilibrium price drop in under two months! 

 

What this graph definitely illustrates, absent an increase in disposable income, is the average home affordability plunges as rates go up; and, of course, the value of your home declines!

Questions That American Taxpayers Would Like to Know the Answers

Why did the U.S. Government spend $2.6 million to train Chinese prostitutes to drink responsibly?  Why did the U.S. Government spend $175,587 "to determine if cocaine makes Japanese quail engage in sexually risky behavior?"  Why did the U.S. Government spend nearly a million dollars on a new soccer field for detainees being held at Guantanamo Bay?  Why is the U.S. Government going to be leaving $7 billion worth of military equipment behind in Afghanistan?  Why did the National Science Foundation give $384,949 to Yale University to do a study on “Sexual Conflict, Social Behavior and the Evolution of Waterfowl Genitalia?"  And, the questions go on and on.  As a matter of fact, there are 66 absurd spending programs put forth and, of course, funded by you Mr. and Mrs. U.S. Taxpayer.  For a detailed list of these programs, click-on "The Waste List: 66 Crazy Ways That The U.S. Government Is Wasting Your Hard-Earned Money." 

$SLV: Now What?

The Mandate of the Federal Reserve System

"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."  Now, stable is defined as not subject to sudden or extreme change or fluctuation.  With that definition in mind, let's see how the Federal Reserve System has performed since 1913 in regard to its goal of stable prices. 

A dollar in 1913 would be worth only four cents today, or it has lost 96% of its value.  (So much for stable prices!)  In other words, its performance on stable prices has been a complete disaster.  Why the comparison with 1913?  That is the year of the birth of the Federal Reserve System.  Therefore, my recommendation would be to eliminate the Federal Reserve System, which is based on a fiat currency, and replace it with a sound currency system, such as gold. See, the Federal Reserve System can inflate, create, as many dollars as they want without anything backing those dollars.  By the way, that is what we mean by monetary inflation, which must be distinguished from price inflation.  Price inflation is the rise in the prices we pay for goods and services. Price inflation is caused by monetary inflation, which is solely controlled by the Federal Reserve System.  That is why monetary inflation is so insidious, because it may take years before it shows up as price inflation.

Don't expect Congress to make the Federal Reserve System accountable for its utter failure to defend the stability of the dollar.  Why?  Because Congress is as complicit and culpable as the Federal Reserves System.  If it wasn't for the Federal Reserve System providing the trillions of dollars to finance the federal deficits year after year, Congress would not be able to deficit spend.  And, therein lies why Congress is complicit and culpable to the actions of the debasement of the dollar by the Federal Reserve System.

You've Lost That Loving Feeling

Back on September 13, 2012, my post, which was entitled, "And the Winner of the 2012 Presidential Election Is?" made the following statement: (Pay close attention to the last sentence.)

"Underlying social mood as manifested in the stock market remains positive going into the November election.  Therefore, the probability of President Obama being re-elected is high!  So, how can one use the above information against the backdrop that the next four years will usher in the largest economic/financial disaster known to man with the DJIA selling for 1,000?  (Yes, the coming economic downturn will be greater than the Great Depression of the 1930s.)  Given the scenario, I don’t consider who ever occupies the White House will win any popular contests.  Remember that over the next four years the expected social mood of this country will change from positive to very “bleak.”  Therefore, the man that occupies the Presidency will undoubtedly be highly despised."

Here we are eight months into President Obama's second term, and his popularity has drastically shifted against him.  CNN reports that for the first time in his presidency, half of the public doesn't think that Barack Obama is honest and trustworthy.  So far into his second term, we have had one scandal after another -- "Associated Press, IRS, Unwarranted Electronic Surveillance of U.S. Citizens, and Benghazi." And, this is after only eight months.  So, the trend change in social mood for President Obama and Wall Street is only going to get much worse.  In regard to Wall Street, the manipulation of financial assets (stocks and bonds) by the Federal Reserve System will end in disaster over the next three years, specially the date to watch is September 13, 2015.  (See my post of November 19, 2012 by clicking here for the reason why September 13, 2015 is significant.)

Forget Gold and Silver, Buy Ammo!

Since May 2012, 22 ammunition is up over 400%. It was approximately $21 to $23 per 500 rounds (full brick) in May 2012, and it is now $100 to $135 for 500 rounds, if you can find it. Over the same time period, gold and silver are down approximately 15% and 27%, respectively.  So what we have in place is a de-facto gun control in the United States.  That is, one can buy all the guns one wants; however, buying the ammo for those guns is another matter! Therefore, if one does not have the ammo for one's gun, what good is it?  

Too Good to be True, But This is True!

The Federal Reserve System and Wall Street, i.e, "Too Big to Fail Financial Institutions," have devised another real estate scam in which you, the American tax payer will be left holding the proverbial bag of toxic paper.  Their scam goes as follows: First, these financial institutions (Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley) buy a house, say for $100,000. Then sell the house to someone who has absolutely no money and only a marginal credit history, taking a loan of $120,000 in return.  In real estate terms, this is called a 120% LTV (loan-to-value).  Second, the Federal Reserve enters the picture to monetize the loan from the above mentioned financial institutions.  The Fed buys $45 billion of such mortgages at face value (LTV) every month.  These financial institutions just sell these mortgages in the example to the Fed for $120,000 and pocket a $20,000 profit, all with no risk.  The victim is the family who is paying interest on a 120% LTV loan on a house that may never be his unless the value appreciates by at least 20%. 

$SLV (Derivative for Silver) Update

Nothing has really changed on my outlook for $SLV.  My downside target is still in the $18 to $20 range.  From my "Stage Analysis Approach," $SLV continues at Stage Four, which is the selling phase, or that phase were supply is greater than demand.