But when you recall that one of the first moves by Lenin, Mussolini and Hitler was to outlaw individual ownership of gold, you begin to sense that there may be some connection between money, redeemable in gold, and the rare prize known as human liberty.
– Howard Buffett (Warren Buffett’s father and former U.S. Congressman)
The Biggest Sell the News Event in Stock Market History
The end game is accelerating toward us at an a frantic pace as we approach the midterm elections, the launch of QE2 and the complete collapse of the global monetary order as we now know it. Time itself seems to be experiencing a quickening as the quantity of major changes becomes increasingly compressed into shorter periods of human experience. The markets are now set up for complete and total chaos unlike anything we have seen since 2008. While I have many times before stated that the next crisis will make 2008 seem like a picnic it has been a waiting game…until now.
The U.S. Federal Reserve, which is in charge of the world’s reserve currency has gone completely and totally insane. Every time the stock market is down 2 points some maniac academic with a printing press delivers a speech about how much money they are going to print, basically daring anyone to short or sell the market. No one is smart enough to know how much QE is priced into the market, is it $500B? $1 trillion? $3 trillion? No one knows, but what we all do know is that the Fed through its non-stop yapping has now set up the ultimate moral hazard in financial markets. It doesn’t matter if all of the economic data miraculously comes in extraordinarily bullish over the next three weeks. The markets have put the Fed into the biggest box they have ever been in. They must do QE2 at this point and they probably have to do it big. The problem is, with the equity market up at the levels it is I don’t think ANY amount of QE2 will cause a rally. In fact, this might be the biggest “sell the news” event in the history of the stock market. If you are smart you will take appropriate actions while you can and sell to someone with less of a clue (believe me there are plenty out there).
QE1 Was a Failure and QE2 Will be a Disaster
The fact that so many people believe that stocks can’t go down because the Fed can print infinite sums of money is a reason in itself to sell them but there is more. Much more. There is this notion that QE1 was successful. Let’s take a step back and look at the facts. Yes, the economy had a phony sugar-high bounce from the lows but think about all of the other “stimulus” that occurred concurrently to QE1. There was the $787 billion stimulus package. There was “cash for clunkers.” There was the first-time homebuyers tax credit, which basically marked the return of 0% down home purchases. Then there was the inventory build associated with all of these artificial demand stimuli. This time the powers that be have one tool and one tool only. The printing press. Why do you think they are talking endlessly about QE2. It is because it is all they have got and I will tell you a little secret. It will not work. Wall Street has now been transformed from merely a chronic user of painkillers to a full-fledged crack head. When QE2 is ultimately announced it cannot possibly be good enough no matter how large it is. Wall Street will then whine to its pusher with a sell-off in an attempt to access more crack. The process that the Fed has started can never end. It is exactly what Rudolf Havenstein, president of the Reichsbank in Weimar Germany experienced. Once you go down this path you can never get off. The big difference here is that it has happened to the country with the reserve currency. It is the currency in which the supposed “wealth” of the world is stored. What do you think people will buy when they realize this? Physical gold or a round lot of Home Depot? QE2 will be more like the Titanic.
Oil is Screaming….STOP!!!
The oil market has come alive and it is signaling to those that will listen that there is a big problem. It is trying to tell the Fed to stop but of course they are much too sophisticated to pay attention to something as barbarous as crude or commodities in general. Wholesale gasoline prices are now up 12% in the last week alone. There is typically a week or two lag between prices at the wholesale level and those at the pump so consumers haven’t even seen what is headed their way yet. Then there is heating oil; take a look at that chart. It had better not be a cold winter. Meanwhile, I am completely convinced that just like in 2008, oil and other commodities will rise until they bust the money printing strategy. Asian Tapis closed at $91.67/b last night by the way. Oil is crying out to the markets to pay attention to it, yet there is only silence.
Howard Buffett and his Sad Sell-Out Son Warren
We are constantly programmed to worship leaders by the mainstream media. The methods to achieve this desired end are varied. To address the Wall Street crowd, stations like CNBC parade around idols like Warren Buffett who have at this point merely become government mouthpieces. We are instructed to listen to them because of the billions that they have made. We are supposed to stop thinking for ourselves. After all, isn’t it easier to just be told what to think? So this brings me to the quote at the top of my email from Howard Buffett, Warren Buffett’s father. It is from an article the Nebraskan Congressman wrote in 1948 and can be found here. http://www.fame.org/PDF/buffet3.pdf
So what happened to his son? When I first started in this business the one thing I remembered hearing about gold was Warren Buffett’s famous line that “Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.” So as an upstart coming into the financial services business the only thing I had ever heard about gold was a disparaging one from the greatest financial genius ever. So they say. Anyway, think about how this might brainwash someone like me unless I took the time to read into the history of gold and indeed the history of money and political control. Buffett’s father did not say gold was a good investment. Buffett’s father said a gold relationship to money was essential to human FREEDOM. In my extensive study over the past several years I have come to the conclusion that this is unequivocally true. Warren Buffett is a extraordinarily smart man, but he is a disingenuous deceiver. I wouldn’t listen to a word that exists this man’s mouth. If we want to start over in the years ahead and make the world a better place, we will resist all attempts at world government, world currency and world central banking. This is the direction that the powers that be want to take us in and it will without question result in total global feudalism.
In a similar vein, I saw this segment from Max Keiser’s recent show and I thought it was hilarious. Go six minutes in to the segment where Buffett’s right hand man Munger attacks gold. Then listen to Keiser as he calls this gremlin out as the equity pimp that he is. http://www.youtube.com/watch?v=00uCbUWG9aE&feature=player_embedded#!
Recent Market Action
Just a quick final concluding comment on recent market action. Tuesday’s huge gap higher in the U.S. stock markets had the feel of a rally that occurs the day after short selling is banned. People feel as if the Fed has banned short selling through their ability to print money. Just as those rallies materialize into nothing sustainable I believe we are very close to a major top. That is not to say that the market won’t stay here or rally further until the next Fed meeting. It may. However, every single indicator I look at points to a perfect storm for stocks and I have not been this concerned since 2008. As far as the actions in precious metals and the shares today, this looks like classic bull market action. A steep scary sell-off that shakes the weak longs out of their late and impulsive buys. It is days like today where macro funds should be adding to their longs in the metals equities and shorts in the broad market.
All the best,