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Freedom by Friday Archives
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2-23-09
For Financial Advice Listen To The
Market
The hardest thing about writing this
newsletter is that I KNOW you want
to hear good news. I KNOW that if I
don't deliver that (or at least put
a shiny spin on anything bad) I may
lose subscribers which is a bad
thing.
This conflicts with telling it how I
see it.
So please tell me, would you like
the truth or what you would prefer
to hear?
Having said that, let's start off
with a silver lining on all the bad
news...
You know all that terrible,
nauseating, non-descript 'music' you
hear in elevators, hotel lobbies,
family restaurants and shopping
plazas? Well, that drivel is
produced by a company called "Musak"
and the recession just made them go
bust.
That's the best news I've heard all
year!
Okay, that was the sweetener for
this week's letter. Let's move on to
the reality of what's happening out
there...
You don't need me to tell you that
there's a lot of opinions out there.
Just switch on the TV or read a
paper and almost everyone is now an
expert on the recession; who caused
it, who will fix it and how and when
the nightmare will be over. These
are often the same people who said
recessions were a thing of the past.
Who should you believe? Does anyone
really have all the answers??
Well, no ONE does, but a certain
entity DOES have some answers if
history is any guide...
That entity is the stock market
itself.
What is the stock market? In
essence, it is a living, breathing
expression of the economic world.
I've said this many times here, but
you do not need to be a direct
investor in the stock market to have
an interest in it. Your income,
retirement plan and property are all
tied to the health of the stock
market, like it or not. That's just
the way it is in a capitalist system
(it's either that or Communism).
Anyway, because of this, some people
let the market itself tell the story
and make all the predictions- what
better way in such a time of
uncertainty? The market is a cold,
unemotional weighing machine
ultimately.
Those people follow something called
'Dow Theory' (pioneered by Charles
Dow). Through careful use of stock
market charts and rules based on
historical precedent, they let the
market make predictions for the
future.
Though these predictions make it
hard to get the exact timing right,
the ultimate outcome is often
predicted with scary accuracy.
Last week (and before), I gave you
an insight into this world by
explaining that if the stock market
dipped below the November low, it
would be a very ominous sign for the
future according to Dow theory.
This week, the market gave us its
answer by dipping BELOW that level.
Now, maybe this week the market
rallies. But, the path is now clear
for a further, possibly dramatic
drop before this turns around.
Subscribers to this letter should
have been braced for this and would
have profited by selling short US
treasuries, buying gold etc.
Remember, there's always a bull
market somewhere. You just need to
take off the blinkers!
That's what
The League of Power
is all about. To prosper in any
situation. And this is totally
possible when you realize that
making money is not just about
buying something and hoping it will
go UP. Take
currencies for example.
You can
make money trading currencies
no matter what happens in the world
because they are always fluctuating.
You can make money from a collapsing
real estate market. You can have a
blooming home business by helping
people solve a real problem.
By the way, on the subject of
currency trading,
Europe is about to implode
financially- their banks are in even
more trouble than ours. If you
traded against the Euro, you could
prosper from this.
There's no getting away from it, the
news is bad for the world at large.
Things must get worse in order for
them to get better. And at The
League of Power, we look forward to
the conclusion of this mess; that's
when the balance will have been
restored and stocks will once again
be attractive propositions for
income and capital gain.
Keep the precious League of Power
documents- pass them down for
generations.
Some would ask, "Why are we being
punished. Why does God let things
like this happen?"
One of the most well-known Dow
theorists is Richard Russell. Here
is his answer to that question:
"The Founding Fathers and
creators of the Constitution must be
shaking their heads and smiling
wryly. The money system that they
had so carefully inserted into the
Constitution had been thwarted and
degraded. Now we must pay."
What Mr. Russell is saying here is
that the Constitution specifically
said that a paper (fiat) monetary
system should not exist. Money
should be, or be backed by, gold and
silver.
I perpetually hear Americans talk
about their Constitution as they
wave flags, but has anybody actually
read it?!
The Founding Fathers were wise men.
When power-hungry governments of the
20th century decided to
violate our Constitution in order to
gain votes from an ignorant
population set on fast and easy
credit, the timer was armed on the
monetary bomb.
It began in 1913 with the creation
of the Federal Reserve- a PRIVATE
organization formed by major banks
(led by J.P. Morgan) with no other
purpose than to create and control a
fiat money supply. Since then, the
dollar has lost over 90% of its
value.
Only one thing stood in defiance:
gold.
This week, gold continued its
aggressive rise and finished in
triple digits, over $1,000 an ounce.
From a technical point of view, just
as the stock market cleared a path
for an almost unlimited descent
ultimately, gold cleared a path for
a limitless rise ultimately. Now, in
the short term, gold may dip
possibly as much as 20%, but this
would be just a correction (and a
last chance to ride the bull).
This is NOT my opinion, it is what
the markets themselves are saying
according to Dow theory!
What the markets are saying is that
some point soon, the price of gold
and the price of the Dow Jones will
meet. Nobody can say where, but my
guess is both gold and the Dow meet
somewhere in the 2,000 to 4,000
mark. When? Sometime within the next
few years.
Large funds have now started buying
gold and gold mining stocks- the
same funds who recently derided
gold. The public is largely unwise
about gold. They see the headlines,
but don't really know what to make
of it. Decades of propaganda and
brain-washing about fiat money and
the power of the Federal Reserve
have made sure of that.
The public sees gold as a bit
'kooky'. Maybe you do?
If gold truly is a bit 'kooky' and
pointless though, consider these
figures below that show the TONNES
of gold each government carries as
it's 'citadel' final reserves and
the percentage gold makes up of it's
TOTAL reserves:
US -- owns 8,135 tonnes of
gold.......Gold makes up 64.4% of US
reserves.
Germany -- 3,412..........64.4%
IMF -- 3,217.........(1)
France -- 2,508.........58.7%
Italy -- 2,451..........61.9%
Switzerland -- 1,040..........23.8%
Japan -- 765.2..........1.9%
China -- 600.0..........0.9%
Russia -- 495. 9..........2.2%
Taiwan -- 422.2..........3.6%
India -- 357.7%..........3.0%
UK -- 310.3..........14.5%
Saudi Arabia -- 143.0..........11.4%
South Africa -- 124.4..........9.0%
Australia -- 79.8..........6.3%
Note: many of the countries at the
bottom of that list are now net
buyers of gold (while they run their
money printing presses around the
clock!).
If you want advice, listen to the
market.
Until next time,
Mark Patricks
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