Hot Damn!

Did you ever see a better buying opportunity than the last few days? Did you ever see a worse day for futures holders, many of whom were wiped out? Did you ever see a worse period for holders of the Dow, NASDAQ, et al, when the bottom fell out? Guess what again. The contents of my safe, and your safe, or wherever you keep your real money, didn't change a single iota. It still shines, gleams, and looks awfully great sitting in there, all paid for, and just real dough, keeping us out of FRN's (Federal Reserve Notes), which please note, are not from the U.S. Government, as the Constitution orders, but are from the privately owned un-Federal Reserve, which is not federal, and has no reserves.. Who owns it? No one really knows, but the surface titles supposedly are held by various banks. I mean Federal Banks. You know, those which call themselves the First National Bank, or First something or other, or Federal this and that. Maybe they own it, I don't know. I deal with a locally owned bank and it has no 'federal' in its name.

I am so glad that not a single client of mine voiced alarm at the recent correction in metals prices. Not one. They just used it as an opportunity to buy more. Did I know it was coming? If I had known I would have sold everything I own, and bought it back about now, and ended up with a lot more and at no cost to me. Hind sight is ALWAYS 20-20. No one knows what tomorrow will bring. As I say to some, "My crystal ball burned out yesterday, so I couldn't warn you of the correction." As one columnist said, 'when prices go up so quickly, they will go down as quickly.' Is that true? It wasn't in 1980, and it wasn't true other times as well.

I consider myself a true believer. I practice what I preach. As an example, I bought ten GU Maple Leafs (all gone now) when spot gold was $565, and I thought I was being smart and buying at the bottom of the correction. It went down to $560 minutes later, and today, as I write this (Thursday) it is up to $576.75, so maybe I was smart after all. I can't stand those doctors who don't take what they prescribe, or Ford salesmen who drive other brands, as an example. Do I buy platinum? No, because I consider it over-priced, but I may be wrong. Do I buy palladium? A little, but I still consider gold and silver historic as well as actual money. Do as you see fit.

Why did it correct? Maybe it was time to take some profits. Maybe a few had made so many dollars, that they decided to take their profits. Remember, prices always depend on supply and demand. When lots of people sell either futures or physical, but mostly futures, there is more supply than demand, and prices fall. When supply is short and everyone wants it, no matter what it is, prices rise. Take the hybrid cars now, as an example. I understand that it takes months to get one, and one has to place one's name on a list. Not me, because my Mercedes diesels outperform any hybrid and have but one simple battery. Especially my 1985 190, which gets 40 MPG on the road and over 30 in town. Still, a lot of people want them, they can only be made so fast, and therefore there is no jockeying for price.

I honestly believe that we will have $1,000 gold and $20-$25 silver by year's end. However, this is but a prediction, because no one knows. I honestly believe that huge numbers of people are flocking to gold and silver every day, because I get new clients every day, and only a few of these are coming to me from other suppliers. Maybe I lose to others, I don't know. From talking to my supplier, I know that volume is up. Up a lot! From all I can read and speculate about, I believe the sellers have finished.

Gold and silver aren't like housing. The housing market is going down, because of higher interest, a general decline in the economy, fools mortgaging themselves to their eyeballs, and ARM's coming due with higher interest, gas prices at $3 or thereabouts, and everything in general costing more in dollars, while wages have not kept up. They never do. Houses are a sort of permanent investment in which one can live. They can't be bought and sold like radishes in the summer, and aren't consumed like sweet corn. They are damned expensive as well, and as a matter of fact, far too expensive now in most cases. Gold may have been too expensive at $718, but we all know it will have to go back and further, because the presses won't stop printing those greenbacks, meaning that gold will go higher. Why won't houses go higher? Because they are in over-supply, aren't consumed, can't be stored in your safe or other safe place as a hedge against the ultimate inflation. When silver and gold are sold or used, it is rare for them to ever come back on the market other than to cash in when one needs dollars.

When they come back in, getting rid of them is simple and cheap. Getting rid of a house is very expensive, and one must have another to go to. The housing market is as far removed from gold and silver as is oil and water.

Sell your house, and you have to have another place to move into. Sell your gold, and you sleep in the same bed tonight. Sell your house, and you are either out in the cold or have to have another already bought or rented. Sell your house at a high price, and you will have to buy another at the same high price. Sell your house and rent another, hoping to buy another cheaper, and you are gambling with your abode, not your surplus assets. I admit it. I bought my home for $150,000, 15 years ago, and it is now worth $750,000. It isn't for sale, but if I did want to sell it, where would I go? I would have to buy another before I sold this one, and that wouldn't be cheap. Suppose I bought another and mine didn't sell? Suppose I couldn't get what I wanted for mine, and had already contracted for another? Real estate is for the birds, I believe. I am going to die in my 1887 Queen Anne, and I don't give a damn what happens to real estate. The thought of moving is absurd to me. They say that three moves is equal to one fire.

Homes have the personality of their occupants and owners, and these personalities, décor, etc may not please a possible buyer, making a sale difficult. Gold and silver have no décor or furnishings and are easily sold, moved, or transferred with no change in life style involved. Sure, a home is a hedge against inflation, and the interest on a mortgage is a deduction from your income taxes. I agree. But you have to live somewhere, and if one is smart, one buys a bargain in a stable neighborhood, pays a substantial down payment and gets the lowest interest possible. Some say that rent may not be saleable, but no lawns have to be cut, roofs repaired or replaced, no pipes fixed, and no furnaces to be cleaned. True, but I'd rather have a bunch of improvement bills paid, than a stack of rent receipts. When one rents, the landlord is supposedly making a profit. This can only mean it is costing you more to live in a rental than in a place you own.

Protect yourself by buying a wonderful home, and making it your own. Enjoy it and your neighbors. But when you have surplus assets, place them in tangible, easily bought and sold, and universally desired gold and silver, not pieces of paper with ink on them. How long will this correction last? I think it's over. We will see, won't we? Protect yourself.

June 15, 2006

Don Stott has been a precious metals dealer since 1977, has written five books, hundreds of columns, and his web site is www.coloradogold.com