12-7-09

Poor Tiger

Well, we can all sleep soundly now we know what that Tiger Woods car crash was all about. What a weight off my mind! Poor Tiger. But, if he wanted the media to stop being mean he only needed to say that Obama was in the car with him.

Seriously, have we got nothing better to talk about? The majority of the population is standing on the precipice of a financial abyss and they're worrying themselves over garbage stories like this. Clearly, we have a long way to go before the adjustment kicks in. For the growing number of unemployed Americans AND the many more who are frightened about joining them, stories like this dominating the media SHOULD be an insult.

Here's something of perhaps more interest:

"WASHINGTON (AP) -- He's the Nobel Peace Prize winner who just ordered 30,000 more troops to war. He's the laureate who says he doesn't deserve the award. He's not quite 11 months on the job and already in the company of Mother Teresa and the Dalai Lama.

This is President Barack Obama's Nobel moment, an immense honor shadowed by awkward timing.

When Obama leaves for Oslo, Norway, on Wednesday to be lauded for his style of international diplomacy, he goes knowing that the American people are more concerned about something else: peace of mind.

The economy has left millions of them hurting. The mood of the country is dispirited - more people than not think the nation is going in the wrong direction - and soothing news is tough to find. Unemployment is in double digits even as the bleeding of jobs has slowed.

Meanwhile, there is no hiding the contrast of war and peace.

The memory is only days' old of Obama's address at West Point, where he told cadets and the rest of the world that he was escalating the war in Afghanistan so he could stabilize it and then try to end it. Under his watch, the number of U.S. troops in Afghanistan has grown from 34,000 to around 70,000, and now, is on its way to about 100,000."

It's enough to make you want to throw a shoe at somebody. Politicians of all kind are an endless source of amusement to me, but they don't come much better than this.

Can anybody spell 'IRONY' anymore? No? Shame. People would find so much more comedy in the world if they understood this (somewhat advanced) concept, and laughter is after all, the best medicine.

 Help me start a campaign to change a common phrase: "Government Money". It's 'Peoples Money', not government money. Money doesn't appear out of thin air; it's produced by the sweat of people through payment of taxes.

Spread the word and let's see if we the people can reclaim some of the power we've so willingly given up.

"Patricks, I'm hearing a lot of talk about gold being in a bubble and I notice it had a big fall last Friday. After a good run in profit since your recommendation, shouldn't I sell now?"

First, let me address what is a growing chorus now of gold being in a so-called bubble. Hmmm, funny how when the real estate market and stock market went on an unfounded tear in 2006/7 nobody even mentioned the word 'bubble' but when gold so much as makes a relatively small move up, everyone does. Remember: gold is the antithesis to government and the media they control. Gold is truth. A bull market in gold represents a vote of 'no confidence' in government.

Governments the world over know that the paper money party is over and that's why central banks everywhere are now BUYING gold instead of selling.

Well, too bad. The bull market is happening anyway and in the most powerful way: a stealth bull market that's been steadily creeping up for nearly 10 years now. No bull market goes up in a straight line and the bull will do whatever he can to scare you away on the way up.

Let's put some figures to this. Since 1980, the USA inflation rate (CPI) is 177% higher (!) and the S+P500 is 892% higher. Since 1980, gold is 52% higher.

Now tell me gold is in a bubble compared to all the other nonsense going on out there. I'd say that actually, gold has some catching up to do, wouldn't you?

Gold isn't something to trade in and out of; it's insurance and it's for the long term. A bull market doesn't end until there's a mass frenzy. When a cab driver gives me a tip for a gold mining stock and I see long lines of people outside coin and bullion dealers, that's when I'll consider selling.

"Patricks, this prediction you're continuously making about the Dow Jones ultimately headed even lower than it was back in March is just plain scary and irresponsible. Do you have any idea how much I have invested in this market? My whole future!"

Frankly, I find this kind of email fascinating because it suggests I'm actually happy about the state of things. If you prefer, I could lie and tell you what you want to hear (just like the media did before the crash in 2008) or I can tell you how I see it.

Secondly, and I keep repeating this, you don't have to be invested in this market. In fact, you can make money when the market goes DOWN as well as up.

Please tell me, why are you married to a single theme: markets going up? There are other ways to trade. If you just want to hand over your hard-earned money to some fund manager and go to sleep, you deserve everything you get.

As and when stocks represent good values again, I'll be out there waving the flag to buy, buy, buy with unparalleled optimism. But when that time comes, you'll probably email to say I'm being irresponsible again because you'll think the world will be over.

But don't take it from me.

One of the few people I respect most is John Hussman; he's one of the finest traders out there. Here's a word from him recently below. Try to stay focused as the language gets a little in depth, but it's worth it:

"One of the fascinating aspects of the past few months is the lack of equilibrium thinking with respect to what happened to the trillions of dollars in government money that has been spent to defend the bondholders of mismanaged financial companies. Almost by definition, money given to corporations will show up most quickly as improvements in corporate earnings, and then slightly later, as executive compensation. A few pieces came across my desk last week, hailing the ability of the corporate sector to bounce back from the recent economic downturn even though revenues have continued to suffer and employment has been steeply cut. Why is this a surprise? Where else could the money have gone? Labor compensation? It is truly mind-numbing that a moment after a temporary surge of trillions of dollars, borrowed and tossed out of a helicopter (though to specific corporations and private beneficiaries), analysts would hail a subsequent improvement in corporate results as evidence of "resilience."

This is the essence of the latest big lie on Wall Street right now. They're celebrating an economic recovery based on corporate profits that have been generated essentially from Peoples' Money. The same people are buying into this (again).

I stand by my view that this is a bear market rally that will see another crash within the next 12 months. This in turn will renew the deflation scare and the money printing will really begin. The Dollar Carry Trade I wrote about recently here, will exacerbate this.

The good news is that new opportunities are slowly burning away and stand to make us rich if we watch closely. I've spoken about biotech and geothermal regularly here and you know my views on gold. And if you want to get the cash together to invest in these, consider making money from the market falling- take a look at last week's letter for some ideas there.

All the best...

Mark Patricks

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