"No warning can save people determined to grow suddently rich" - Lord Overstone

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Rodney C. Cook

Rodney C. Cook

Currently Rod is the founder and manager of Bull Trout Capital, a boutique investment company, and author of the FishWrapper, a private investment newsletter.

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Revolting

Watching the mainstream financial press sure feels good. Economic recovery is at hand. The stock market is doing fine, thank you. All aspects of the housing market are doing fine: sales, new starts, and prices. The dollar is rebounding and an endless stream of pundits is assuring us that a global recovery is at hand. This is better than drugs. Please sir may I have another fix.

Canned Goods and Shotguns

Now, don't get me wrong. There is nothing wrong with optimism. Unless it is blind. And even the negatives in our financial universe can be dealt with. If they are recognized. But there is considerable vitriol amongst the honest money crowd. They are hysterically recanting the irrefutable logic of their argument. That the monetary distortions are, once again, approaching extremes and that a reckoning is at hand. I hope they are right. But hope is not an effective strategy. And the markets are seldom logical. Particularly when desperate Keynesian Zombies are at the helm. Nor, for this reason, do the markets operate freely of late.

So the masses continue to dance like puppets. They inject themselves with debt, the ultimate narcotic. And there are still plenty of good veins left for the needle. So this rebound could likely continue for quite some time. Or an overdose could induce a heart attack, and sudden collapse. So what will it be? Regrettably this is not knowable. But under my false dawn hypothesis (False Dawn, 3/7/03), the height of this insanity will be marked by resignation in the honest money camp. And fewer appeals to common sense, and many fewer acts of defiance.

The honest money crowd will ultimately be right, of course. But most likely when a further extreme in sentiment is reached and many more have abandoned hope. When even some of my Austrian idols concede defeat to the economic fascists. And in resignation, sell their gold expecting confiscation.

Precious Money

So I continue to hold physical gold for long term savings. And silver for insurance. I am becoming increasingly enamored of silver. I am finally being convinced by the zealots that silver is completing the formation of an historic bottom. Not entirely convinced on the technicals and the timing, but it seems inevitable that silver will take on a monetary role. And if I had to write off a small purchase entirely, it would still be an extraordinarily cheap insurance policy given the risks to the global monetary system. Besides, it may do well as industrial sludge should the false dawn scenario continue to play out. And most likely perform obscenely as a monetary asset in the event of cardiac arrest. So for us debt slaves of modest means, the Underground Railroad may have silver rails.

Money as Weapon

In the current climate of uncertainty the long term risks in currencies, particularly the dollar, far outweigh the risks of precious metals. So, in my view, gold and silver are money. And since our fiat dollar is being used as a weapon of conquest, it is increasingly useful to view precious metals as a weapon. And at some not to distant point this prescient metaphor will assume pragmatic value.

"So when? " you say.

"That ones easy. When the bond markets roll over and liquidity flows to commodities, instead of stocks."

"So when is that?" you retort.

"When foreign investors stop buying yank bonds, or when joblessness pushes the spread between the wholesale cost of credit and the retail mortgage rate to the point where the liquidity provided by the GSE's wanes sufficiently to..."

"So when?" Your glare intensifies.

"Well it's happening as we speak."

"So buy gold and silver now?"

"Yes, I reply but don't be surprised if it languishes for another year or so."

"But you just said..."

"Well, you see, the Fed will buy mortgage backed securities to keep the liquidity flowing, and of course the foreign bond holders or unlikely to panic en masse because the Fed has clearly indicated that their chief unconventional weapon is to buy up the yield curve and have successfully induced the central bankers of the world to follow along."

By now you agree with the moniker obscene prophet. There is nothing prophetic in what I see. Only obscenity. A world gone mad. Where financial manipulations have replaced free markets. And logic is tortured into submission. And there is only one remaining defense. Golden armor and silver bullets.

Shooting Bullets

So build your hard money armory. And from a contrarian's view hope for the best: A rapid return to sanity. Where dishonesty and denial receive their just rewards. And precious metals soar. But plan for the worst. Continued insanity. And popular derision of honest money. Under my false dawn hypothesis early last March, I expected this secondary trend in the markets to last for six to eighteen months. So a reversal in this secondary trend, and a clear return to the bear could take place at any time in the next year. But I also expected that this secondary trend would appear as the new bull. And only the severity of the next leg down in financial assets would reveal this false dawn to be a secondary trend within the greater primary bear. And I still feel the same.

So take comfort that your gold and silver can ultimately be used to defend your tangible assets. Primarily your house and home. Or the means of production for the wealthy among our ranks. And as money, they are meant to be spent. In extremis the protection of or the purchase of tangible assets with gold and silver will be the financial equivalent of firing a bullet into the heart of the monetary fascists. But be humble and stealthy as you take this path.

Whack Jobs Are Revolting

Remember that gold bugs are viewed by most as whack jobs. And are revolting to the sensibilities of the masses. But take comfort that you may well be among the remnant. And the timely purchase and sale of precious metals is an act of revolution. You are, indeed, revolting.

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